Under Special Agreements To Carry Particular Persons and Property. For All That

[No. 15122.
March 10, 1920.] The Attorney-General, in a carefully prepared brief, says: "The question is
THE UNITED STATES, plaintiff and appellee, vs. TAN PIACO, VENTURA whether the appellant, under the above facts, was a public utility under the foregoing
ESTUYA, PEDRO HOMERES, MAXIMINO GALSA and EMILIO definitions," and was therefore subject to the control and regulation of the Public
LEOPANDO, defendants. TAN PIACO, appellant. Utility Commission. "We have not found anything in the evidence showing that the
PUBLIC UTILITY, CONTROL BY PUBLIC UTILITY appellant operated the trucks in question for public use. These trucks, so f ar as
COMMISSION; CRIMINAL LlABILITY OF OWNER OF AUTOMOBILE indicated by the evidence and as far as the appellant is concerned, furnished service
TRUCK OPERATED UNDER SPECIAL CONTRACT AND NOT FOR under special agreements to carry particular persons and property.* * * For all that
GENERAL PUBLIC BUSINESS.—The owner of an automobile truck who we can deduce from the evidence, these passengers, or the owners of the freight, may
operates the same under a special contract for carrying passengers and freight, in have controlled the whole vehicles 'both as to contents, direction, and time of use/
each case, and has not held himself out to carry all passengers and freight which facts, under all the circumstances of the case, would, in our opinion, take away
for all persons who might offer, is not a public utility and is not criminally liable the defendant's business from the provisions of the Public Utility Act."
for his failure to obtain a license from the Public Utility Commissioner. If the use
is merely optional with the owner, or .the public benefit is merely accidental, it is In support of the conclusion of the Attorney-General, he cites the case
not a public use, authorizing the exercise of the jurisdiction of the public utility of Terminal Taxicab Co. vs. Kutz (241 U. S., 252). In that case the Terminal Taxicab
commission. The true criterion by which to judge of the character of the use is Co. furnished automobiles from its central garage on special orders and did not hold
whether the public may enjoy it by right or only by permission. itself out to accommodate any and all persons. The plaintiff reserved to itself the
APPEAL from a judgment of the Court of First Instance of Leyte. Lukban, J. right to refuse service. The Supreme Court of the United States, speaking through
854 Mr. Justice Holmes, said: "The bargains made by the plaintiff are individual, and
however much they may tend towards uniformity in price, probably have not the
854 PHILIPPINE REPORTS ANNOTATED
mechanical fixity of charges that attend the use of taxicabs from the stations to the
United States vs. Tan Piaco. hotels. The court is of the opinion that that part of the business is not to be regarded
The facts are stated in the opinion of the court. as a public utility. It is true that all business, and, for the matter of that, every life in
Recaredo Ma. Calvo for appellant. all its details, has a public aspect, some bearing upon the welfare of the country in
Attorney-General Paredes for appellee. which it is passed." The court held that by virtue of the fact that said company did
not hold itself out to serve any and all persons, it was not a public utility and was not
JOHNSON, J.: subject to the jurisdiction of the public utility commission.
Upon the facts adduced during the trial of the cause, and for the foregoing
Said defendants were charged with a violation of the Public Utility Law (Act No. reasons, the Attorney-General recommends that the sentence of the lower court be
2307 as amended by Acts Nos. 2362 and 2694), in that they were operating a public revoked and that the appellant be absolved from all liability under the complaint.
utility without permission from the Public Utility Commissioner. 856
Upon the complaint presented each of said defendants were arrested and brought 856 PHILIPPINE REPORTS ANNOTATED
to trial. After hearing the evidence the Honorable Cayetano Lukban, judge, found
that the evidence was insufficient to support the charges against Ventura Estuya, United States vs. Tan Piaco.
Pedro Homeres, Maximino Galsa and Emilio Leopando, and absolved them from all Section 14 of Act No. 2307, as amended by section 9 of Act No. 2694, provides that:
liability under the complaint and discharged them from the custody of the law. The "The Public Utility Commission or Commissioners shall have general supervision
lower court found the defendant Tan Piaco guilty of the crime charged in the and regulation of, jurisdiction and control over, all public utilities. * * * The term
complaint and sentence him to pay a fine of P100, and, in case of insolvency, to 'public utility' is hereby defined to include every individual, co-partnership,
suffer subsidiary imprisonment, and to pay onefifth part of the costs. From that association, corporation or joint stock company, etc., etc., that now or hereafter may
sentence Tan Piaco appealed to this court. own, operate, manage, or control any common carrier, railroad, street railway, etc.,
The facts proved during the trial of the cause may be stated as follows: etc., engaged in the transportation of passengers, cargo, etc., etc., for public use."
The appellant rented two automobile trucks and was using them upon the
highways of the Province of Leyte for the purpose of carrying some passengers and Under the provisions of said section, two things are necessary: (a) The
freight; that he carried passengers and freight under a special contract in each case; individual, co-partnership, etc., etc. ,must be a public utility; and (b) the business in
that he had not held himself out to carry all passengers and all freight for all persons which such individual, co-partnership, etc., etc., is engaged must be for public use.
who might offer passengers and freight. So long as the individual or copartnership, etc., etc., is engaged in a purely private
1
enterprise, without attempting to render service to all who may apply, he can in no
sense be considered a public utility, for public use.
"PUBLIC USE" means the same as "use by the public." The essential feature of
the public use is that it 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 of the character of the use is whether the public may
enjoy it by right or only by permission.
857
VOL. 40, MARCH 12, 1920. 857
Bargayo vs. Camumot.
For all of the foregoing reasons, we agree with the Attorney-General that the
appellant was not operating a public utility, for public use, and was not, therefore,
subject to the jurisdiction of the Public Utility Commission. G.R. No. 203865. March 13, 2019.*
Therefore, the sentence of the lower court is hereby revoked, and it is hereby
ordered and decreed that the complaint be dismissed and that the defendant be UNITRANS INTERNATIONAL FORWARDERS, INC., petitioner, vs.
absolved from all liability under the same, and that he be discharged from the INSURANCE COMPANY OF NORTH AMERICA, UNKNOWN
custody of the law, without any finding as to costs. So ordered. CHARTERER OF THE VESSEL M/S “DORIS WULLF” and TMS SHIP
Arellano, C. J., Torres, Araullo, Street, Malcolm, and Avanceña, JJ., concur. AGENCIES, respondents.
Judgment reversed, defendant acquitted. Question of Fact; A question of facts exists when the doubt or difference arises
as to the truth or falsehood of facts or when the query invites calibration of the
___________ whole evidence considering mainly the credibility of the witnesses, the existence and
relevancy of specific surrounding circumstances as well as their relation to each
other and
_______________
* SECOND DIVISION.

596
596 SUPREME COURT REPORTS ANNOTATED
Unitrans International Forwarders, Inc. vs. Insurance Company of North
America
to the whole, and the probability of the situation.—A question of fact exists
when the doubt or difference arises as to the truth or falsehood of facts or when the
2
query invites calibration of the whole evidence considering mainly the credibility of arose. Hence, it had to discharge the burden, by way of adequate proof, that it
the witnesses, the existence and relevancy of specific surrounding circumstances as exercised extraordinary diligence over the goods; it is not enough to show that some
well as their relation to each other and to the whole, and the probability of the other party might have been responsible for the damage. Unitrans failed to
situation. That is precisely what Unitrans is asking the Court to do — to reassess, discharge this burden. Hence, it cannot escape liability.
reexamine and recalibrate the evidence on record. A catena of cases has consistently PETITION for review on certiorari of the decision and resolution of the Court of
held that questions of fact cannot be raised in an appeal via certiorari before the Appeals.
Court and are not proper for its consideration. The Court is not a trier of facts. It is The facts are stated in the opinion of the Court.
not the Court’s function to examine and weigh all over again the evidence presented Villareal, Rosacia, Diño & Patag for petitioner.
in the proceedings below. Astorga & Repol Law Offices for respondent Insurance Company of North
Civil Law; Common Carriers; Extraordinary Diligence; Article 1735 of the America.
Civil Code states that if the goods are lost, destroyed or deteriorated, common Del Rosario & Del Rosario for respondents Unknown Charterer of the Vessel
carriers are presumed to have been at fault or to have acted negligently, unless they M/S “Doris Wull” and TMS Ship Agencies.
prove that they observed extraordinary diligence as required in Article 1733.—
Emphasis must be placed on the fact that Unitrans itself admitted, through its own CAGUIOA, J.:
witness and general manager, Del Rosario, that in handling the subject shipment and
making sure that it was delivered to the consignee’s premises in good condition as Before the Court is a Petition for Review on Certiorari1(Petition) under Rule 45
the delivery/forwarding agent, Unitrans was acting as a freight forwarding entity and of the Rules of Court filed by petitioner Unitrans International Forwarders, Inc.
an accredited non-vessel operating common carrier. Article 1735 of the Civil Code (Unitrans) against respondents Insurance Company of North America (ICNA), the
states that if the goods are lost, destroyed or deteriorated, common carriers unknown charterer of the vessel M/S “Doris Wullf” (un-
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. In
turn, Article 1733 states that common carriers, from the nature of their business and 1 Rollo, pp. 8-33.
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. 598
Same; Same; Same; Presumption of Negligence; Jurisprudence holds that a 598 SUPREME COURT REPORTS ANNOTATED
common carrier is presumed to have been negligent if it fails to prove that it
exercised extraordinary vigilance over the goods it transported.—Jurisprudence Unitrans International Forwarders, Inc. vs. Insurance Company of North
holds that a common carrier is presumed to have been negligent if it fails to prove America
that it exercised extraordinary vigilance over the goods it transported. When the known charterer of M/S Doris Wullf), and TMS Ship Agencies (TSA).
The instant Petition assails the Decision 2 dated October 27, 2011 (assailed
Decision) and Resolution3 dated October 12, 2012 (assailed Resolution) rendered by
597 the Court of Appeals4 (CA) in C.A.-G.R. CV No. 95367.
VOL. 896, MARCH 13, 2019 597
The Facts and Antecedent Proceedings
America As culled from the records of the case, the essential facts and antecedent
goods shipped are either lost or arrived in damaged condition, a presumption proceedings of the instant case are as follows:
arises against the carrier of its failure to observe that diligence, and there need not be On July 28, 2003, ICNA filed an Amended Complaint 5 for collection of sum of
an express finding of negligence to hold it liable. To overcome the presumption of money (Complaint) arising from marine insurance coverage on two (2) musical
negligence, the common carrier must establish by adequate proof that it instruments imported from Melbourne, Australia on April 22, 2002.
exercised extraordinary diligence over the goods. It must do more than merely The Complaint, which was filed before the Regional Trial Court of Makati City,
show that some other party could be responsible for the damage. In the instant Branch 139 (RTC), was instituted against South East Asia Container Line
case, considering that it is undisputed that the subject goods were severely damaged, (SEACOL) and the unknown owner/charterer of the vessel M/S Buxcrown, both
the presumption of negligence on the part of the common carrier, i.e., Unitrans, doing business in the Philippines through its local ship agent Unitrans, and against
3
the unknown charterer of M/S Doris Wullf, doing business in the Philippines through 4. Obviously, the damages sustained by the insured cargo were caused by
its local ship agent TSA, for the collection of the principal amount of Twenty-Two the fault and negligence of the [therein] defendants.
Thousand, Six Hundred Fifty-Seven Dollars and Eighty-Three Cents (US$22,657.83) _______________
with interests thereon
_______________ 6 Id., at p. 72.

2 Id., at pp. 35-46. Penned by Associate Justice Apolinario D. Bruselas, Jr., with
Associate Justices Mario L. Guariña III and Manuel M. Barrios, concurring. 600
3 Id., at pp. 48-50. Penned by Associate Justice Apolinario D. Bruselas, Jr., with 600 SUPREME COURT REPORTS ANNOTATED
Associate Justices Ricardo R. Rosario and Manuel M. Barrios, concurring.
4 Seventh Division and Special Former Seventh Division, respectively.
5 Rollo, pp. 65-69. America
5. Formal claims were filed against [the therein] defendants but they
refused and failed to pay the same without valid and legal grounds.
599 6. As cargo-insurer of the subject shipment and by virtue of the insurance
VOL. 896, MARCH 13, 2019 599 claim filed by the consignee, ICNA paid the sum of $22,657.83.
7. By reason of the said payment, ICNA was subrogated to consignee’s
Unitrans International Forwarders, Inc. vs. Insurance Company of North rights of recovery against [the] defendants [therein].
America 8. Due to the unjustified refusal of the defendants [therein] to pay its
and attorney’s fees. The case was docketed as Civil Case No. 03-505. claims, ICNA was constrained to engage the services of counsel. 7
ICNA alleged in its Complaint that:
In its Answer with Counterclaim 8 dated July 8, 2004, Unitrans denied being a
1. On or about 22 April 2002, in Melbourne, Australia, SEACOL[, a ship agent of SEACOL and the vessel M/S Buxcrown’s unknown owner or charter.
foreign company,] solicited and received shipment of pieces of STC According to Unitrans, BTI Logistics PTY LTD. (BTI Logistics), a foreign freight
musical instruments from the shipper Dominant Musical Instrument forwarder, engaged its services as delivery or receiving agent in connection to the
for transportation to and delivery at the port of Manila, complete and subject shipment. As such agent, Unitrans’ obligations were limited to receiving and
in good condition, as evidenced by Bill of Lading No. 502645. handling the bill of lading sent to it by BTI Logistics, prepare an inward cargo
SEACOL then loaded the insured shipment onboard M/S Buxcrown manifest, notify the party indicated of the arrival of the subject shipment, and release
for transportation from Melbourne Australia to Singapore. In the bill of lading upon order of the consignee or its representative so that the subject
Singapore, the shipment was transferred from M/S Buxcrown to M/S shipment could be withdrawn from the pier/customs. It further alleged that the
Doris Wullf for final transportation to the port of Manila. consignee, San Miguel, also engaged its services as customs broker for the subject
2. The aforesaid shipment was insured with ICNA against all risk under shipment. As such, Unitrans’ obligation was limited to paying on behalf of San
its Policy No. MOPA-06310 in favor of the consignee, San Miguel Miguel the necessary duties and kindred fees, file with the Bureau of Customs
Foundation for the Performing Arts (San Miguel). (BOC) the Import Entry Internal Revenue Declaration together with other pertinent
3. On 12 May 2002, M/S Doris Wullf arrived and docked at the Manila documents, as well as to pick up the shipment and then transport and deliver the
International Container Port, North Harbor, Manila. The container van said shipment to the consignee’s premises in good condition.
was discharged from the vessel[, was received by Unitrans,] and upon _______________
stripping the contents thereof, it was found that two of the cartons
containing the musical instruments were in bad order condition, per 7 Id., at pp. 36-37.
Turn Over Survey Report6dated 14 May 2002. Unitrans then delivered 8 Id., at pp. 84-90.
the subject shipment to the consignee. After further inspection, it was
found out that two units of musical instruments were damaged and
could no longer be used for their intended purpose, hence were 601
declared a total loss. VOL. 896, MARCH 13, 2019 601
4
Unitrans International Forwarders, Inc. vs. Insurance Company of North caused by the character of the goods, or [the] faulty nature of the packing or of the
containers, the common carrier must exercise due diligence to forestall or lessen the
America
loss.’ It appears that Unitrans, as common carrier, did not observe this requirement of
On its part, TSA and the unknown charterer of M/S Doris Wullf alleged in their the law.”12
Amended Answer with Compulsory Counterclaim 9 dated July 11, 2004 that while Feeling aggrieved, Unitrans appealed the RTC’s Decision before the CA.13
TSA is indeed the commercial agent of M/S Doris Wullf, both parties are not parties
whatsoever to the bill of lading and have no connection in any way with SEACOL, The Ruling of the CA
the unknown owner and/or charterer of the vessel M/S Buxcrown and Unitrans. It
was further alleged that the subject shipment was discharged from the vessel M/S In its assailed Decision, the CA denied Unitrans’ appeal for lack of merit. The
Doris Wullf complete and in the same condition as when it was loaded therein, dispositive portion of the assailed Decision reads:
which is a fact stated in the Turnover Survey Report. WHEREFORE, the appeal is DENIED and the Decision appealed from
is AFFIRMED.
The Ruling of the RTC IT IS SO ORDERED.14

In its Decision10 dated March 29, 2010, the RTC granted the Complaint and held In sum, the CA denied Unitrans’ argument that the failure of the Court to issue
Unitrans liable to ICNA for the sum of US$22,657.83 or its equivalent in Philippine summons and acquire jurisdiction with respect to SEACOL and the unknown
Peso, i.e., One Million, Forty-Two Thousand, Two Hundred Sixty Pesos and charterer/owner of M/S Buxcrown, which are based abroad, is tantamount to a failure
Eighteen Centavos (P1,042,260.18) with interest. The dispositive portion of the to include indispensable parties because Unitrans failed to
RTC’s Decision reads: _______________
WHEREFORE, in view of the foregoing considerations, the Court
hereby GRANTS in favor of the plaintiff against defendant Unitrans, hence 12 Id., at p. 61.
Unitrans is hereby ordered to pay plaintiff the sum of P1,042,260.18 13 The recital of facts and records of the case do not reveal if Unitrans filed a
(US$22,657.83XP46.00), with interest at six percent (6%) per annum from Motion for Reconsideration of the RTC’s Decision.
date hereof until finality, and twelve percent (12%) per annum from finality 14 Rollo, p. 45.
until fully paid plus cost of suit.
The complaint against TMS is hereby DISMISSED for insufficiency of
evidence including the counterclaim of TMS. 603
SO ORDERED.11
_______________ VOL. 896, MARCH 13, 2019 603
9 Id., at pp. 98-109. America
10 Id., at pp. 51-62. Penned by Presiding Judge Cesar O. Untalan. show that the aforesaid entities are indispensable parties. As observed by the CA,
11 Id., at pp. 61-62. “Unitrans merely concluded that the said parties were indispensable because they
were repeatedly impleaded by ICNA as defendants in its original complaint x x x.”15
Further, “[t]he contention of Unitrans, that the trial court x x x had no factual and
602 legal basis in holding it liable as a common carrier and agent of BTI Logistics is
602 SUPREME COURT REPORTS ANNOTATED sorely bereft of merit.”16
Unitrans International Forwarders, Inc. vs. Insurance Company of North Unitrans filed its Motion for Clarification and Reconsideration 17 of the assailed
Decision on November 17, 2011, which was denied by the CA in its assailed
America
Resolution.
The RTC found that the witness of Unitrans itself admitted in open court that Hence, the instant Petition.
“Unitrans is a non-vessel operating common carrier (NVOCC). Moreover, this TSA and the unknown charterer of M/S Doris Wullf filed their Comment (To
witness admitted that Unitrans is the delivery and collecting agent of BTI, who is Petitioner’s Petition for Review on Certiorari)18 on April 23, 2013. ICNA filed its
duty bound to [deliver] the subject shipment in good order and condition to San Comment19 on April 30, 2013. Unitrans filed its Consolidated Reply Brief 20 on
Miguel. Thus, Unitrans is a common carrier. Under Article 1742 of the New Civil February 12, 2014.
Code, it states: ‘Even if the loss, destruction, or deterioration of the goods should be
5
On October 7, 2016, TSA and the unknown charterer of M/S Doris Wullf filed was supposedly “totally left in the dark on how and why its co-defendants, except for
their Memorandum.21 ICNA filed its Memorandum22 on October 18, 2016. Unitrans [TSA], had been absolved.”27
filed its Memorandum23 on October 27, 2016. The instant Petition is bereft of merit.
_______________ First and foremost, Unitrans’ issue on how the RTC and CA allegedly
misapprehended the facts of the instant case
15 Id., at p. 43. _______________
16 Id.
17 Id., at pp. 163-175. 24 Id., at pp. 24-25.
18 Id., at pp. 213-225. 25 Id., at pp. 29-30.
19 Id., at pp. 233-241. 26 Id., at p. 24.
20 Id., at pp. 249-253. 27 Id., at p. 25.
21 Id., at pp. 278-301.
22 Id., at pp. 302-317.
23 Id., at pp. 318-342. 605
VOL. 896, MARCH 13, 2019 605

604
America
and failed to fully appreciate evidence on record is undoubtedly a question of fact,
Unitrans International Forwarders, Inc. vs. Insurance Company of North asking the Court to recalibrate, reassess and reexamine evidentiary matters.
America A question of fact exists when the doubt or difference arises as to the truth or
Issue falsehood of facts or when the query invites calibration of the whole evidence
considering mainly the credibility of the witnesses, the existence and relevancy of
The central question to be resolved by the Court is whether the CA was correct in specific surrounding circumstances as well as their relation to each other and to the
rendering the assailed Decision, which affirmed the RTC’s Decision holding whole, and the probability of the situation.28 That is precisely what Unitrans is asking
Unitrans liable to ICNA. the Court to do — to reassess, reexamine and recalibrate the evidence on record.
A catena of cases has consistently held that questions of fact cannot be raised in
The Court’s Ruling an appeal via certiorari before the Court and are not proper for its
consideration.29 The Court is not a trier of facts. It is not the Court’s function to
The instant Petition is centered on how “the RTC’s Decision only singled out examine and weigh all over again the evidence presented in the proceedings below. 30
herein petitioner [Unitrans] x x x [and] is completely silent on how the rest of the Upon careful review of the records of the instant case, the Court finds no cogent
defendants came to be absolved from any liability and/or exonerated from being held reason to reverse the RTC’s and CA’s factual findings and their appreciation of the
solidarity liable with herein petitioner, notwithstanding a prayer therefor in the evidence on record. The Court finds that the RTC’s and CA’s factual and legal
Complaint.”24 conclusion that Unitrans is liable to ICNA with respect to the damaged musical
In the main, Unitrans posits the view that the RTC’s finding of liability on the instruments is amply supported by the evidence on record.
part of Unitrans, as affirmed by the CA, supposedly amounts to a misapprehension of As found by the RTC in its Decision, and as affirmed by the CA in its assailed
the evidence and the facts.25 Decision, Unitrans’ own witness, Mr. Gerardo Estanislao Del Rosario (Del Rosario)
In the main, Unitrans posits the view that the RTC’s finding of liability on the himself testified in open court that Unitrans, as a freight forwarding entity
part of Unitrans, as affirmed by the CA, supposedly amounts to a misapprehension of _______________
the evidence and the facts.25
Unitrans even goes further by arguing that the RTC’s Decision is noncompliant 28 Republic v. Sandiganbayan, 426 Phil. 104, 110; 375 SCRA 145, 154 (2002).
with Section 14, Article VIII of the 1987 Constitution, which states that “[n]o 29 Bautista v. Puyat Vinyl Products, Inc., 416 Phil. 305, 309; 363 SCRA 794,
decision shall be rendered by any court without expressing therein clearly and 798 (2001).
distinctively the facts and the law on which it is based.” 26 Unitrans opines that the 30 Republic v. Sandiganbayan, supra.
RTC’s Decision transgressed the aforementioned constitutional provision because it
6
as the delivery/forwarding agent, Unitrans was acting as a freight forwarding entity
606 and an accredited non-vessel operating common carrier.
606 SUPREME COURT REPORTS ANNOTATED Article 1735 of the Civil Code states that 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
America as required in Article 1733.
and an accredited non-vessel operating common carrier, was the one engaged by In turn, Article 1733 states that common carriers, from the nature of their
BTI Logistics as its delivery agent in Manila. Del Rosario attested that BTI Logistics business and for reasons of public policy, are bound to observe extraordinary
was the forwarding agent in Australia who received the cargo shipment from the diligence in the vigilance over the goods and for the safety of the passengers
consignor for shipment to Manila. Del Rosario further testified that Unitrans acted as transported by them, according to all the circumstances of each case.
the delivery/forwarding agent of BTI Logistics with respect to the subject shipment. Hence, jurisprudence holds that a common carrier is presumed to have been
Del Rosario unequivocally testified that under its agreement with BTI negligent if it fails to prove that it exercised extraordinary vigilance over the goods it
Logistics, Unitrans engaged itself “to handle the cargo and to make sure that it transported. When the goods shipped are either lost or arrived in damaged condition,
was delivered to the consignee from the port of Manila to the consignee.” 31 As a presumption arises against the carrier of its failure to observe that diligence, and
noted by the CA, “Del Rosario also admitted that insofar as the subject shipment is there need not be an express finding of negligence to hold it liable. To overcome the
concerned, Unitrans acted as a local agent of BTI Logistics, which was duty bound to presumption of negligence, the common carrier must establish by adequate
deliver the same to the right party.”32 proof that it exercised extraordinary diligence over the goods. It must do more
Moreover, to reiterate, in its Answer with Counterclaim, Unitrans had already than merely show that some other party could be responsible for the damage.34
expressly admitted that San Miguel also engaged its services as customs broker for In the instant case, considering that it is undisputed that the subject goods were
the subject shipment; one of its obligations was to pick up the shipment and then severely damaged, the presumption of
transport and deliver the same to the consignee’s premises in good condition. _______________
Having been placed with the obligation to deliver the subject shipment from the
port of Manila to San Miguel’s premises in good condition, during the pretrial 34 Regional Container Lines (RCL) of Singapore v. Netherlands Insurance Co.
conference conducted on June 20, 2007, it was admitted by Unitrans that “[t]he (Philippines), Inc., 614 Phil. 485, 493; 598 SCRA 304, 313 (2009).
subject shipment was delivered by [petitioner] Unitrans.” 33 Yet, it is not disputed by
any party that the subject shipment, i.e., musical instruments, were severely damaged
beyond use and did not arrive in good condition at the premises of the consignee, San 608
Miguel. It is indubitably clear that Unitrans failed to fulfill its obligation to deliver 608 SUPREME COURT REPORTS ANNOTATED
the subject shipment in good condition.
_______________ Unitrans International Forwarders, Inc. vs. Insurance Company of North
America
31 Rollo, p. 41; emphasis supplied. negligence on the part of the common carrier, i.e., Unitrans, arose. Hence, it had to
32 Id., at p. 44. discharge the burden, by way of adequate proof, that it exercised extraordinary
33 Id., at p. 55. diligence over the goods; it is not enough to show that some other party might have
been responsible for the damage. Unitrans failed to discharge this burden. Hence,
it cannot escape liability.
607 With respect to Unitrans’ argument that it was unfair for it to be subjected to sole
VOL. 896, MARCH 13, 2019 607 liability, as aptly explained by the RTC in its Decision, Unitrans itself, through its
own witness, Del Rosario, “declared [that TSA] never had an occasion to handle this
subject cargo.”35 Hence, the RTC noted that “[t]he witness for [petitioner] Unitrans
America has practically exempted [respondent TSA] when he stated that the subject cargo
Emphasis must be placed on the fact that Unitrans itself admitted, through its [was] never in possession of [TSA]. Thus, [respondent TSA] could not be made
own witness and general manager, Del Rosario, that in handling the subject shipment liable for [this] obvious reason.”36
and making sure that it was delivered to the consignee’s premises in good condition Hence, for the reasons explained above, the Court is not convinced of Unitrans’
argument that the RTC’s Decision violated Section 14, Article VIII of the 1987
7
Constitution. To the contrary, the Court finds that the RTC’s Decision clearly and
distinctively narrated the facts and the applicable law; the RTC’s Decision clearly
explained the reason why Unitrans is the entity imposed with the liability.
WHEREFORE, premised considered, the instant Petition is hereby DENIED.
The Decision dated October 27, 2011 and Resolution dated October 12, 2012
rendered by the Court of Appeals in C.A.-G.R. CV No. 95367 are AFFIRMED with
MODIFICATION. The total of the amount adjudged against petitioner and the six
percent (6%) interest thereon computed by the RTC from its Decision until finality
shall earn interest at six percent (6%) per annum from finality of this Decision until
fully paid plus cost of suit.
SO ORDERED.
_______________
35 Rollo, p. 59.
36 Id., at p. 61.

609
VOL. 896, MARCH 13, 2019 609
America
Carpio (Chairperson), Perlas-Bernabe, J. Reyes, Jr. and Lazaro-Javier, JJ.,
concur.
Petition denied, judgment and resolution affirmed with modification.
Notes.—Literally, res ipsa loquitur means the thing speaks for itself. It is the rule
that the fact of the occurrence of an injury, taken with the surrounding
circumstances, may permit an inference or raise a presumption of negligence, or
make out a plaintiff’s prima facie case, and present a question of fact for defendant
to meet with an explanation. (Cruz vs. Agas, Jr., 757 SCRA 549 [2015])
Article 1756 of the Civil Code provides that “[i]n case of death of or injuries to
passengers, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence as
prescribed in Articles 1733 and 1755.” (G.V. Florida Transport, Inc. vs. Heirs of
Romeo L. Battung, Jr., 772 SCRA 579 [2015])

——o0o——

8
freight rate or charges; and stipulates the rights and obligations assumed by the
parties.
Same; Same; Common Carriers; Negligence; Common carriers, as a general
G.R. No. 166250. July 26, 2010.* rule, are presumed to have been at fault or negligent if the goods they transported
UNSWORTH TRANSPORT INTERNATIONAL (PHILS.), INC., petitioner, vs. deteriorated or got lost or destroyed; Mere proof of delivery of the goods in good
COURT OF APPEALS and PIONEER INSURANCE AND SURETY order to a common carrier and of their arrival in bad order at their destination
CORPORATION, respondents. constitutes a prima facie case of fault or negligence against the carrier.—UTI is
Remedial Law; Appeals; Factual questions may not be raised in a petition for liable as a common carrier. Common carriers, as a general rule, are presumed to have
review on certiorari.—Well established is the rule that factual questions may not be been at fault or negligent if the goods they transported deteriorated or got lost or
raised in a petition for review on certiorari as clearly stated in Section 1, Rule 45 of destroyed. That is, unless they prove that they exercised extraordinary diligence in
the Rules of Court. transporting the goods. In order to avoid responsibility for any loss or damage,
Commercial Law; Carriage of Goods by Sea Act; Words and Phrases; therefore, they have the burden of proving that they observed such diligence. Mere
Meaning of “Freight Forwarder.”—Petitioner is a freight forwarder. The term proof of delivery of the goods in good order to a common carrier and of
“freight forwarder” refers to a firm holding itself out to the general public (other than 359
as a pipeline, rail, motor, or water carrier) to provide transportation of property for VOL. 625, JULY 26, 2010 359
compensation and, in the ordinary course of its business, (1) to assemble and
Unsworth Transport Internation (Pihils.), Inc. vs. Court of Appeals
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 their arrival in bad order at their destination constitutes a primafacie case of
assume responsibility for the transportation 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.
* SECOND DIVISION. Same; Same; Same; The Civil Code does not limit the liability of the common
358 carrier to a fixed amount per package; The Carriage of Goods by Sea Act (COGSA)
supplements the Civil Code by establishing a provision limiting the carrier’s liability
358 SUPREME COURT REPORTS ANNOTATED in the absence of a shipper’s declaration of a higher value in the bill of lading.—It is
Unsworth Transport Internation (Pihils.), Inc. vs. Court of Appeals to be noted that the Civil Code does not limit the liability of the common carrier to a
of goods from the place of receipt to the place of destination; and (3) to use for fixed amount per package. In all matters not regulated by the Civil Code, the rights
any part of the transportation a carrier subject to the federal law pertaining to and obligations of common carriers are governed by the Code of Commerce and
common carriers. special laws. Thus, the COGSA supplements the Civil Code by establishing a
Same; Same; Limitation of a Freight Forwarder’s Liability.—A freight provision limiting the carrier’s liability in the absence of a shipper’s declaration of a
forwarder’s liability is limited to damages arising from its own negligence, including higher value in the bill of lading.
negligence in choosing the carrier; however, where the forwarder contracts to deliver Same; Same; Same; Insertion of an invoice number does not in itself
goods to their destination instead of merely arranging for their transportation, it sufficiently and convincingly show that petitioner had knowledge of the value of the
becomes liable as a common carrier for loss or damage to goods. A freight forwarder cargo.—In the present case, the shipper did not declare a higher valuation of the
assumes the responsibility of a carrier, which actually executes the transport, even goods to be shipped. Contrary to the CA’s conclusion, the insertion of the words
though the forwarder does not carry the merchandise itself. “L/C No. LC No. 1-187-008394/NY 69867 covering shipment of raw materials for
Same; Same; Bill of Lading; Meaning of a Bill of Lading; A bill of lading pharmaceutical Mfg. x x x” cannot be the basis of petitioner’s liability. Furthermore,
operates both as receipts and as a contract.—A bill of lading is a written the insertion of an invoice number does not in itself sufficiently and convincingly
acknowledgement of the receipt of goods and an agreement to transport and to show that petitioner had knowledge of the value of the cargo.
deliver them at a specified place to a person named or on his or her order. It operates PETITION for review on certiorari of the decision and resolution of the Court of
both as a receipt and as a contract. It is a receipt for the goods shipped and a contract Appeals.
to transport and deliver the same as therein stipulated. As a receipt, it recites the date The facts are stated in the opinion of the Court.
and place of shipment, describes the goods as to quantity, weight, dimensions, Jerome T. Pampolina for petitioner.
identification marks, condition, quality, and value. As a contract, it names the Baltazar Y. Repol for private respondent.
contracting parties, which include the consignee; fixes the route, destination, and 360
9
360 SUPREME COURT REPORTS ANNOTATED Surveyors Corporation (OCMSC) conducted a stripping survey of the shipment
located in petitioner’s warehouse. The survey results stated:
2-pallets STC 40 bags Dried Yeast, both in good order condition and properly
NACHURA, J.: sealed
For review is the Court of Appeals (CA) Decision1 dated April 29, 2004 and 19-steel drums STC Vitamin B Complex Extract, all in good order condition and
Resolution2 dated November 26, 2004. The assailed Decision affirmed the Regional properly sealed
Trial Court (RTC) decision3 dated February 22, 2001; while the assailed Resolution 1-steel drum STC Vitamin B Complex Extra[ct] with cut/hole on side, with
denied petitioner Unsworth Transport International (Philippines), Inc., American approx. spilling of 1%11
President Lines, Ltd. (APL), and Unsworth Transport International, Inc.’s (UTI’s) On October 15, 1992, the arrastre Jardine Davies Transport Services, Inc.
motion for reconsideration. (Jardine) issued Gate Pass No. 761412 which stated that “22 drums13 Raw Materials
The facts of the case are: for Pharmaceutical Mfg.” were loaded on a truck with Plate No. PCK-434 facilitated
On August 31, 1992, the shipper Sylvex Purchasing Corporation delivered to by Champs for delivery to Unilab’s warehouse. The materials were noted to be
UTI a shipment of 27 drums of various raw materials for pharmaceutical complete and in good order in the gate pass.14 On the same day, the shipment arrived
manufacturing, consisting of: in
“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.” 4UTI issued Bill of 8 Rollo, p. 81.
Lading No. C320/C15991-2,5 covering the aforesaid shipment. The subject shipment 9 Exh. “3-APL” and Exh. “5-Unsworth”; Records, p. 378.
was insured with private respondent Pioneer Insurance and Surety Corporation in 10 Rollo, p. 81.
favor of Unilab against all risks in the amount of P1,779,664.77 under and by virtue 11 Exh. “G-2”; Records, p. 249.
of Marine Risk Note Number MC RM UL 0627 92 6 and Open Cargo Policy No. HO- 12 Exh. “1-APL” and Exh. “1-Unsworth”; id., at p. 372.
022-RIU.7 13 As opposed to 27 drums as stated in the Bill of Lading.
_______________ 14 Rollo, p. 82.
362
1 Penned by Associate Justice Mariano C. Del Castillo (now a member of this
Court), with Associate Justices Marina L. Buzon and Magdangal M. De Leon, 362 SUPREME COURT REPORTS ANNOTATED
concurring; Rollo, pp. 79-98. Unsworth Transport Internation (Pihils.), Inc. vs. Court of Appeals
2 Id., at p. 129. Unilab’s warehouse and was immediately surveyed by an independent surveyor, J.G.
3 Penned by Presiding Judge Ignacio M. Capulong; Records, pp. 443-456. Bernas Adjusters & Surveyors, Inc. (J.G. Bernas). The Report stated:
4 Rollo, p. 80. 1-p/bag torn on side contents partly spilled
5 Exh. “C” and “C1”; Records, pp. 242-243. 1-s/drum #7 punctured and retaped on bottom side content lacking
6 Exh. “B”; id., at p. 234. 5-drums shortship/short delivery15
7 Exh. “B-1” to “B-7”; id., at pp. 235-241. On October 23 and 28, 1992, the same independent surveyor conducted final
361 inspection surveys which yielded the same results. Consequently, Unilab’s quality
VOL. 625, JULY 26, 2010 361 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
On the same day that the bill of lading was issued, the shipment was loaded in a private respondent and UTI. On November 20, 1992, UTI denied liability on the
sealed 1x40 container van, with no. APLU-982012, boarded on APL’s vessel M/V basis of the gate pass issued by Jardine that the goods were in complete and good
“Pres. Jackson,” Voyage 42, and transshipped to APL’s M/V “Pres. Taft”8 for condition; while private respondent paid the claimed amount on March 23, 1993. By
delivery to petitioner in favor of the consignee United Laboratories, Inc. (Unilab). virtue of the Loss and Subrogation Receipt 18 issued by Unilab in favor of private
On September 30, 1992, the shipment arrived at the port of Manila. On October respondent, the latter filed a complaint for Damages against APL, UTI and petitioner
6, 1992, petitioner received the said shipment in its warehouse after it stamped the with the RTC of Makati.19 The case was docketed as Civil Case No. 93-3473 and was
Permit to Deliver Imported Goods9 procured by the Champs Customs raffled to Branch 134.
Brokerage.10 Three days thereafter, or on October 9, 1992, Oceanica Cargo Marine
10
After the termination of the pre-trial conference, trial on the merits ensued. On 21 Rollo, pp. 85-97.
February 22, 2001, the RTC decided in favor of private respondent and against APL, 364
UTI and petitioner, the dispositive portion of which reads: 364 SUPREME COURT REPORTS ANNOTATED
“WHEREFORE, judgment is hereby rendered in favor of plaintif PIONEER
INSURANCE & SURETY CORPORATION and
_______________ Unsatisfied, petitioner comes to us in this petition for review on certiorari,
raising the following issues:
15 Exh. “H”; Records, p. 250. 1. WHETHER OR NOT THE HONORABLE COURT OF APPEALS
16 Rollo, p. 83. COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
17 Exh. “A”; Records, p. 233. EXCESS OF JURISDICTION IN UPHOLDING THE DECISION OF THE
18 Exh. “K”; id., at pp. 255. REGIONAL TRIAL COURT DATED 22 FEBRUARY 2001, AWARDING THE
19 Records, pp. 1-4. SUM OF SEVENTY SIX THOUSAND TWO HUNDRED THIRTY ONE AND
363 27/100 PESOS (PHP76,231.27) WITH LEGAL INTEREST AT 6% PER
ANNUM AS ACTUAL DAMAGES AND 25% AS ATTORNEY’S FEES.
VOL. 625, JULY 26, 2010 363 2. WHETHER OR NOT PETITIONER UTI IS A COMMON CARRIER.
Unsworth Transport Internation (Pihils.), Inc. vs. Court of Appeals 3. WHETHER OR NOT PETITIONER UTI EXERCISED THE REQUIRED
against the defendants AMERICAN PRESIDENT LINES and UNSWORTH ORDINARY DILIGENCE.
TRANSPORT INTERNATIONAL (PHILS.), INC. (now known as JUGRO 4. WHETHER OR NOT THE PRIVATE RESPONDENT SUFFICIENTLY
TRANSPORT INT’L., PHILS.), ordering the latter to pay, jointly and severally, the ESTABLISHED THE ALLEGED DAMAGE TO ITS CARGO.22
former the following amounts: Petitioner admits that it is a forwarder but disagrees with the CA’s conclusion
1. The sum of SEVENTY SIX THOUSAND TWO HUNDRED THIRTY ONE that it is a common carrier. It also questions the appellate court’s findings that it
and 27/100 (Php76,231.27) with interest at the legal rate of 6% per annum to be failed to establish that it exercised extraordinary or ordinary diligence in the
computed starting from September 30, 1993 until fully paid, for and as actual vigilance over the subject shipment. As to the damages allegedly suffered by private
damages; respondent, petitioner counters that they were not sufficiently proven. Lastly, it
2. The amount equivalent to 25% of the total sum as attorney’s fees; insists that its liability, in any event, should be limited to $500 pursuant to the
3. Cost of this litigation. package limitation rule. Indeed, petitioner wants us to review the factual findings of
SO ORDERED.”20 the RTC and the CA and to evaluate anew the evidence presented by the parties.
On appeal, the CA affirmed the RTC decision on April 29, 2004. The CA The petition is partly meritorious.
rejected UTI’s defense that it was merely a forwarder, declaring instead that it was a Well established is the rule that factual questions may not be raised in a petition
common carrier. The appellate court added that by issuing the Bill of Lading, UTI for review on certiorari as clearly stated in Section 1, Rule 45 of the Rules of
acknowledged receipt of the goods and agreed to transport and deliver them at a Court, viz.:
specific place to a person named or his order. The court further concluded that upon _______________
the delivery of the subject shipment to petitioner’s warehouse, its liability became
similar to that of a depositary. As such, it ought to have exercised ordinary diligence 22 Id., at p. 399.
in the care of the goods. And as found by the RTC, the CA agreed that petitioner 365
failed to exercise the required diligence. The CA also rejected petitioner’s claim that VOL. 625, JULY 26, 2010 365
its liability should be limited to $500 per package pursuant to the Carriage of Goods
by Sea Act (COGSA) considering that the value of the shipment was declared
pursuant to the letter of credit and the pro forma invoice. As to APL, the court “Section 1. Filing of petition with Supreme Court.—A party desiring to appeal
considered it as a common carrier notwithstanding the non-issuance of a bill of by certiorari from a judgment or final order or resolution of the Court of Appeals,
lading inasmuch as a bill of lading is not indispensable for the execution of a contract the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by
of carriage.21 law, may file with the Supreme Court a verified petition for review on certiorari.
_______________ The petition shall raise only questions of law which must be distinctly set forth.”
Admittedly, petitioner is a freight forwarder. The term “freight forwarder” refers
20 Id., at pp. 455-456. 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
11
ordinary course of its business, (1) to assemble and consolidate, or to provide for 25 V. Rivera S. En C. v. Texas & N.O.R. Co., 211 La. 969, 31 So. 2d 180, 172
assembling and consolidating, shipments, and to perform or provide for break-bulk A.L.R. 791 (1947).
and distribution operations of the shipments; (2) to assume responsibility for the 26 Iron Bulk Shipping Phil. Co., Ltd. v. Remington Industrial Sales Corporation,
transportation of goods from the place of receipt to the place of destination; and (3) 462 Phil. 694, 704; 417 SCRA 229, 234-235 (2003), citing Phoenix Assurance Co.,
to use for any part of the transportation a carrier subject to the federal law pertaining Ltd. v. United States Lines, No. L-24033, February 22, 1968, 22 SCRA 674, 678.
to common carriers.23 27 Belgian Overseas Chartering and Shipping N.V. v. Philippine First Insurance
A freight forwarder’s liability is limited to damages arising from its own Co., Inc., 432 Phil. 567, 579; 383 SCRA 23, 36 (2002).
negligence, including negligence in choosing the carrier; however, where the 28 Id., at p. 580; p. 37.
forwarder contracts to deliver goods to their destination instead of merely arranging 367
for their transportation, it becomes liable as a common carrier for loss or damage to VOL. 625, JULY 26, 2010 367
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 Though it is not our function to evaluate anew the evidence presented, we refer
It is undisputed that UTI issued a bill of lading in favor of Unilab. Pursuant to the records of the case to show that, as correctly found by the RTC and the CA,
thereto, petitioner undertook to transport, petitioner failed to rebut the prima facie presumption of negligence in the carriage of
_______________ the subject shipment.
First, as stated in the bill of lading, the subject shipment was received by UTI in
23 Chemsource, Inc. v. Hub Group, Inc., 106 F. 3d 1358, C.A. 7 (Ill.) (1997). apparent good order and condition in New York, United States of America. Second,
24 Motorola, Inc. v. Federal Exp. Corp., 308 F. 3d 995, C.A. 9 (Cal.) (2002). the OCMSC Survey Report stated that one steel drum STC Vitamin B Complex
366 Extract was discovered to be with a cut/hole on the side, with approximate spilling of
1%. Third, though Gate Pass No. 7614, issued by Jardine, noted that the subject
366 SUPREME COURT REPORTS ANNOTATED shipment was in good order and condition, it was specifically stated that there were
Unsworth Transport Internation (Pihils.), Inc. vs. Court of Appeals 22 (should be 27 drums per Bill of Lading No. C320/C15991-2) drums of raw
ship, and deliver the 27 drums of raw materials for pharmaceutical manufacturing to materials for pharmaceutical manufacturing. Last, J.G. Bernas’ Survey Report stated
the consignee. that “1-s/drum was punctured and retaped on the bottom side and the content was
A bill of lading is a written acknowledgement of the receipt of goods and an lacking, and there was a short delivery of 5-drums.”
agreement to transport and to deliver them at a specified place to a person named or All these conclusively prove the fact of shipment in good order and condition,
on his or her order.25 It operates both as a receipt and as a contract. It is a receipt for and the consequent damage to one steel drum of Vitamin B Complex Extract while
the goods shipped and a contract to transport and deliver the same as therein in the possession of petitioner which failed to explain the reason for the damage.
stipulated. As a receipt, it recites the date and place of shipment, describes the goods Further, petitioner failed to prove that it observed the extraordinary diligence and
as to quantity, weight, dimensions, identification marks, condition, quality, and precaution which the law requires a common carrier to exercise and to follow in
value. As a contract, it names the contracting parties, which include the consignee; order to avoid damage to or destruction of the goods entrusted to it for safe carriage
fixes the route, destination, and freight rate or charges; and stipulates the rights and and delivery.29
obligations assumed by the parties.26 However, we affirm the applicability of the Package Limitation Rule under the
Undoubtedly, UTI is liable as a common carrier. Common carriers, as a general COGSA, contrary to the RTC and the CA’s findings.
rule, are presumed to have been at fault or negligent if the goods they transported It is to be noted that the Civil Code does not limit the liability of the common
deteriorated or got lost or destroyed. That is, unless they prove that they exercised carrier to a fixed amount per package.
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 29 Id., at p. 582; p. 37.
carrier and of their arrival in bad order at their destination constitutes a prima facie 368
case of fault or negligence against the carrier. If no adequate explanation is given as 368 SUPREME COURT REPORTS ANNOTATED
to how the deterioration, loss, or destruction of the goods happened, the transporter
shall be held responsible.28
_______________ In all matters not regulated by the Civil Code, the rights and obligations of common
carriers are governed by the Code of Commerce and special laws. Thus, the COGSA
12
supplements the Civil Code by establishing a provision limiting the carrier’s liability Insurance Corporation vs. Neptune Orient Lines/Overseas Agency Services, Inc.,
in the absence of a shipper’s declaration of a higher value in the bill of 554 SCRA 335 [2008])
lading.30 Section 4(5) of the COGSA provides: ——o0o——
“(5) Neither the carrier nor the ship shall in any event be or become liable for
any loss or damage to or in connection with the transportation of goods in an amount G.R. No. 168151. September 4, 2009.*
exceeding $500 per package of lawful money of the United States, or in case of REGIONAL CONTAINER LINES (RCL) OF SINGAPORE and EDSA
goods not shipped in packages, per customary freight unit, or the equivalent of that SHIPPING AGENCY, petitioners, vs. THE NETHERLANDS INSURANCE
sum in other currency, unless the nature and value of such goods have been declared CO. (PHILIPPINES), INC., respondent.
by the shipper before shipment and inserted in the bill of lading. This declaration, if Maritime Law; Common Carriers; Negligence; Rules for Liability of Common
embodied in the bill of lading, shall be prima facie evidence, but shall not be Carriers for Lost or Damaged Cargo.—In Central Shipping Company, Inc. v.
conclusive on the carrier.” Insurance Company of North America, 438 SCRA 511 (2004), we reiterated the
In the present case, the shipper did not declare a higher valuation of the goods to rules for the liability of a common carrier for lost or damaged cargo as follows: (1)
be shipped. Contrary to the CA’s conclusion, the insertion of the words “L/C No. LC Common carriers are bound to observe extraordinary diligence over the goods they
No. 1-187-008394/NY 69867 covering shipment of raw materials for pharmaceutical transport, according to all the circumstances of each case; (2) In the event of loss,
Mfg. x x x” cannot be the basis of petitioner’s liability. 31 Furthermore, the insertion destruction, or deterioration of the insured goods, common carriers are responsible,
of an invoice number does not in itself sufficiently and convincingly show that unless they can prove that such loss, destruction, or deterioration was brought about
petitioner had knowledge of the value of the cargo.32 by, among others, “flood, storm, earthquake, lightning, or other natural disaster or
In light of the foregoing, petitioner’s liability should be limited to $500 per steel calamity”; and (3) In all other cases not specified under Article 1734 of the Civil
drum. In this case, as there was only one drum lost, private respondent is entitled to Code, common carriers are presumed to have been at fault or to have acted
receive only $500 as damages for the loss. In addition to said amount, as aptly held negligently, unless they observed extraordinary diligence.
by the trial court, an interest rate of 6% per annum should also be imposed, plus 25% Same; Same; Same; To overcome the presumption of negligence, the common
of the total sum as attorney’s fees. carrier must establish by adequate proof that it exercised extraordinary diligence
_______________ over the goods—it must do more than merely show that some other party could be
responsible for the damage.—A common carrier is presumed to have been negligent
30 Id., at p. 587; p. 40. if it fails to prove that it exercised extraordinary vigilance over the goods it
31 Id. transported. When the goods shipped are either lost or arrived in damaged condition,
32 See Everett Steamship Corp. v. Court of Appeals, 358 Phil. 129; 297 SCRA a presumption arises against the carrier of its failure to observe that diligence, and
496 (1998). there need not be an express finding of negligence to hold it liable. To overcome the
369 presumption of negligence, the common carrier must establish by adequate
VOL. 625, JULY 26, 2010 369 proof that it exercised extraordinary diligence over the goods. It must do more
than merely show that some other party could be responsible for the damage.
WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. _______________
The Court of Appeals Decision dated April 29, 2004 and Resolution dated November
26, 2004 are AFFIRMED with MODIFICATION by reducing the principal amount * SECOND DIVISION.
due private respondent Pioneer Insurance and Surety Corporation from P76,231.27 to 305
$500, with interest of 6% per annum from date of demand, and 25% of the amount Same; Same; Same; It is settled in maritime law jurisprudence that cargoes
due as attorney’s fees. while being unloaded generally remain under the custody of the carrier.—In the
The other aspects of the assailed Decision and Resolution STAND. present case, RCL and EDSA Shipping failed to prove that they did exercise that
SO ORDERED. degree of diligence required by law over the goods they transported. Indeed, there is
Carpio (Chairperson), Peralta, Abad and Mendoza, JJ.,concur. sufficient evidence showing that the fluctuation of the temperature in the refrigerated
Petition partially granted, judgment and resolution affirmed with modification. container van, as recorded in the temperature chart, occurred after the cargo had been
Note.—Stipulation in the bill of lading limiting respondent’s liability for the loss discharged from the vessel and was already under the custody of the arrastre
of the subject cargoes is allowed under Article 1749 of the Civil Code, and Sec. 4, operator, ICTSI. This evidence, however, does not disprove that the condenser fan—
paragraph (5) of the Carriage of Goods by Sea Act (COGSA). (Philippine Charter which caused the fluctuation of the temperature in the refrigerated container—was
13
not damaged while the cargo was being unloaded from the ship. It is settled in On October 20, 1995, 405 cartons of Epoxy Molding Compound were consigned
maritime law jurisprudence that cargoes while being unloaded generally remain to be shipped from Singapore to Manila for Temic Telefunken Microelectronics
under the custody of the carrier; RCL and EDSA Shipping failed to dispute this. Philippines (Temic). U-
Demurrer to Evidence; Pleadings and Practice; A dismissal based on a
demurrer to evidence bars the defendant from presenting evidence supporting its _______________
allegations.—RCL and EDSA Shipping could have offered evidence before the trial
court to show that the damage to the condenser fan did not occur: (1) while the cargo 1 Penned by Associate Justice Arcangelita M. Romilla-Lontok, and concurred in
was in transit; (2) while they were in the act of discharging it from the vessel; or (3) by Associate Justice Martin S. Villarama, Jr., and Associate Justice Danilo B. Pine
while they were delivering it actually or constructively to the consignee. They could (retired); Rollo, pp. 40, 45-53.
have presented proof to show that they exercised extraordinary care and diligence in 2 Id., pp. 44-54.
the handling of the goods, but they opted to file a demurrer to evidence. As the 307Freight Singapore PTE Ltd.3 (U-Freight Singapore), a forwarding agent based in
order granting their demurrer was reversed on appeal, the CA correctly ruled Singapore, contracted the services of Pacific Eagle Lines PTE. Ltd. (Pacific Eagle)
that they are deemed to have waived their right to present evidence, and the to transport the subject cargo. The cargo was packed, stored, and sealed by Pacific
presumption of negligence must stand. It is for this reason as well that we find Eagle in its Refrigerated Container No. 6105660 with Seal No. 13223. As the cargo
RCL and EDSA Shipping’s claim that the loss or damage to the cargo was caused by was highly perishable, the inside of the container had to be kept at a temperature of
a defect in the packing or in the containers. To exculpate itself from liability for the 0º Celsius. Pacific Eagle then loaded the refrigerated container on board the M/V
loss/damage to the cargo under any of the causes, the common carrier is burdened to Piya Bhum, a vessel owned by RCL, with which Pacific Eagle had a slot charter
prove any of the causes in Article 1734 of the Civil Code claimed by it by a agreement. RCL duly issued its own Bill of Lading in favor of Pacific Eagle.
preponderance of evidence. If the carrier succeeds, the burden of evidence is shifted To insure the cargo against loss and damage, Netherlands Insurance issued a
to the shipper to prove that the carrier is negligent. RCL and EDSA Shipping, Marine Open Policy in favor of Temic, as shown by MPO-21-05081-94 and Marine
however, failed to satisfy this standard of evidence and in fact offered no evidence at Risk Note MRN-21 14022, to cover all losses/damages to the shipment.
all on this point; a reversal of a dismissal based on a demurrer to evidence bars the On October 25, 1995, the M/V Piya Bhum docked in Manila. After unloading the
defendant from presenting evidence supporting its allegations. refrigerated container, it was plugged to the power terminal of the pier to keep its
306 temperature constant. Fidel Rocha (Rocha), Vice-President for Operations of
PETITION for review on certiorari of the decision and resolution of the Court of Marines Adjustment Corporation, accompanied by two surveyors, conducted a
Appeals. protective survey of the cargo. They found that based on the temperature chart, the
The facts are stated in the opinion of the Court. temperature reading was constant from October 18, 1995 to October 25, 1995 at 0º
Melgar, Tria & Associates for petitioners. Celsius. However, at midnight of October 25, 1995—when the cargo had already
Leaño, Leaño and Leaño III Law Office for respondent. been unloaded from the ship—the temperature fluctuated with a reading of 33º
BRION, J.: Celsius. Rocha believed the fluctuation was caused by the burnt condenser fan motor
For our resolution is the petition for review on certiorarifiled by petitioners of the refrigerated container.
Regional Container Lines of Singapore (RCL) and EDSA Shipping Agency (EDSA On November 9, 1995, Temic received the shipment. It found the cargo
Shipping) to annul and set aside the decision 1 and resolution2 of the Court of Appeals completely damaged. Temic filed a claim for cargo loss against Netherlands
(CA) dated May 26, 2004 and May 10, 2005, respectively, in CA-G.R. CV No. Insurance, with supporting claims documents. The Netherlands Insurance paid Temic
76690. the sum of P1,036,497.00 under the terms of the Marine Open
RCL is a foreign corporation based in Singapore. It does business in the
Philippines through its agent, EDSA Shipping, a domestic corporation organized and _______________
existing under Philippine laws. Respondent Netherlands Insurance Company
(Philippines), Inc. (Netherlands Insurance) is likewise a domestic corporation 3 U-Freight issued its own Bill of Lading No. SINMNL 048/10/95 covering the
engaged in the marine underwriting business. cargo.
308Policy. Temic then executed a loss and subrogation receipt in favor of
Factual Antecedents Netherlands Insurance.
Seven months from delivery of the cargo or on June 4, 1996, Netherlands
The pertinent facts, based on the records are summarized below. Insurance filed a complaint for subrogation of insurance settlement with the Regional
Trial Court, Branch 5, Manila, against “the unknown owner of M/V Piya Bhum” and
14
TMS Ship Agencies (TMS), the latter thought to be the local agent of M/V Piya 33 of the 1997 Rules of Civil Procedure, defendants Regional Container Lines and
Bhum’s unknown owner.4 The complaint was docketed as Civil Case No. 96-78612. EDSA Shipping Agency are deemed to have waived the right to present evidence.
Netherlands Insurance amended the complaint on January 17, 1997 to implead As such, defendants Regional Container Lines and EDSA Shipping Agency
EDSA Shipping, RCL, Eagle Liner Shipping Agencies, U-Freight Singapore, and U- are ordered to reimburse plaintiff in the sum of P1,036,497.00 with interest from
Ocean (Phils.), Inc. (U-Ocean), as additional defendants. A third amended complaint date hereof until fully paid.
was later made, impleading Pacific Eagle in substitution of Eagle Liner Shipping No costs.
Agencies. SO ORDERED.” [Emphasis supplied.]
TMS filed its answer to the original complaint. RCL and EDSA Shipping filed 310The CA dismissed Netherland Insurance’s complaint against the other defendants
their answers with cross-claim and compulsory counterclaim to the second amended after finding that the claim had already been barred by prescription.5
complaint. U-Ocean likewise filed an answer with compulsory counterclaim and Having been found liable for the damage to the cargo, RCL and EDSA Shipping
cross-claim. During the pendency of the case, U-Ocean, jointly with U-Freight filed a motion for reconsideration, but the CA maintained its original conclusions.
Singapore, filed another answer with compulsory counterclaim. Only Pacific Eagle The sole issue for our resolution is whether the CA correctly held RCL and
and TMS filed their answers to the third amended complaint. EDSA Shipping liable as common carriers under the theory of presumption of
The defendants all disclaimed liability for the damage caused to the cargo, citing negligence.
several reasons why Netherland Insurance’s claims must be rejected. Specifically,
RCL and EDSA Shipping denied negligence in the transport of the cargo; they The Court’s Ruling
attributed any negligence that may have caused the loss of the shipment to their co-
defendants. They likewise asserted that no valid subrogation exists, as the payment The present case is governed by the following provisions of the Civil Code:
made by Netherlands Insurance to the consignee was invalid. By way of affirmative “ART. 1733. Common carriers, from the nature of their business and for
defenses, RCL and EDSA Shipping averred that the Netherlands Insurance has no reasons of public policy, are bound to observe extraordinary diligence in the
cause of ac- vigilance over the goods and for the safety of the passengers transported by them
according to all the circumstances of each case.
_______________ Such extraordinary diligence in the vigilance over the goods is further expressed
in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence
4 TMS was actually the local agent of Pacific Eagle. for the safety of the passengers is further set forth in articles1755 and 1756.
309tion, and is not the real party-in-interest, and that the claim is barred by ART. 1734. Common carriers are responsible for the loss, destruction, or
laches/prescription. deterioration of the goods, unless the same is due to any of the following causes
After Netherlands Insurance had made its formal offer of evidence, the only:
defendants including RCL and EDSA Shipping sought leave of court to file their 1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
respective motions to dismiss based on demurrer to evidence. 2) Act of the public enemy in war, whether international or civil;
RCL and EDSA Shipping, in their motion, insisted that Netherlands Insurance
had (1) failed to prove any valid subrogation, and (2) failed to establish that any _______________
negligence on their part or that the loss was sustained while the cargo was in their
custody. 5 The bill of lading issued by U-Freight provided that its liability shall be
On May 22, 2002, the trial court handed down an Order dismissing Civil Case discharged “unless a suit is brought in the proper forum and written notice thereof
No. 96-78612 on demurrer to evidence. The trial court ruled that while there was received by the carrier within nine (9) months after the delivery of the goods.” By the
valid subrogation, the defendants could not be held liable for the loss or damage, as time U-Freight, U-Ocean, and Pacific Eagle were impleaded in the amended
their respective liabilities ended at the time of the discharge of the cargo from the complaints, the period to file claims had already lapsed.
ship at the Port of Manila. 311
Netherlands Insurance seasonably appealed the order of dismissal to the CA. 3) Act of omission of the shipper or owner of the goods;
On May 26, 2004, the CA disposed of the appeal as follows: 4) The character of the goods or defects in the packing or in the containers;
“WHEREFORE, in view of the foregoing, the dismissal of the complaint 5) Order or act of competent public authority.
against defendants Regional Container Lines and Its local agent, EDSA ART. 1735. In all cases other that those mentioned in Nos. 1, 2, 3, 4 and 5 of
Shipping Agency, is REVERSED and SET ASIDE. The dismissal of the the preceding article, if the goods are lost, destroyed, or deteriorated, common
complaint against the other defendants is AFFIRMED. Pursuant to Section 1, Rule carriers are presumed to have been at fault or to have acted negligently, unless
15
they prove that they observed extraordinary diligence as required by article of the goods or defects in the packing or in the containers. Thus, RCL and EDSA
1733. Shipping seek to lay the blame at the feet of other parties.
ART. 1736. The extraordinary responsibility of the common carrier lasts We do not find the arguments of RCL and EDSA Shipping meritorious.
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, without prejudice to the provisions of articles 1738. 7 Ibid., citing Asia Lighterage and Shipping, Inc. v. Court of Appeal, 409 SCRA
ART. 1738. The extraordinary liability of the common carrier continues to be 340 (2003), and Delsan Transport Lines, Inc. v. Court of Appeals, 369 SCRA 24
operative even during the time the goods are stored in a warehouse of the carrier at (2001).
the place of destination, until the consignee has been advised of the arrival of the 313
goods and has had reasonable opportunity thereafter to remove them or otherwise A common carrier is presumed to have been negligent if it fails to prove that it
dispose of them. exercised extraordinary vigilance over the goods it transported. 8 When the goods
ART. 1742. Even if the loss, destruction, or deterioration of the goods should shipped are either lost or arrived in damaged condition, a presumption arises against
be caused by the character of the goods, or the faulty nature of the packing or of the carrier of its failure to observe that diligence, and there need not be an express
the containers, the common carrier must exercise due diligence to forestall or finding of negligence to hold it liable.9
lessen the loss.” To overcome the presumption of negligence, the common carrier must
In Central Shipping Company, Inc. v. Insurance Company of North America,6 we establish by adequate proof that it exercised extraordinary diligence over the
reiterated the rules for the liability of a common carrier for lost or damaged cargo as goods. It must do more than merely show that some other party could be
follows: responsible for the damage.10
(1) Common carriers are bound to observe extraordinary diligence over In the present case, RCL and EDSA Shipping failed to prove that they did
the goods they transport, according to all the circumstances of each case; exercise that degree of diligence required by law over the goods they transported.
Indeed, there is sufficient evidence showing that the fluctuation of the temperature in
_______________ the refrigerated container van, as recorded in the temperature chart,
occurred after the cargo had been discharged from the vessel and was already under
6 G.R. No. 150751, September 20, 2004, 438 SCRA 511. the custody of the arrastre operator, ICTSI. This evidence, however, does not
312 disprove that the condenser fan—which caused the fluctuation of the temperature in
(2) In the event of loss, destruction, or deterioration of the insured the refrigerated container—was not damaged while the cargo was being unloaded
goods, common carriers are responsible, unless they can prove that such loss, from the ship. It is settled in maritime law jurisprudence that cargoes while being
destruction, or deterioration was brought about by, among others, “flood, unloaded generally remain under the cus-
storm, earthquake, lightning, or other natural disaster or calamity”; and
(3) In all other cases not specified under Article 1734 of the Civil Code, _______________
common carriers are presumed to have been at fault or to have acted
negligently, unless they observed extraordinary diligence. 7 8 Edgar Cokaliong Shipping Lines, Inc. v. UCPB General Insurance Company,
In the present case, RCL and EDSA Shipping disclaim any responsibility for the Inc., G.R. No. 146018, June 25, 2003, 404 SCRA 706.
loss or damage to the goods in question. They contend that the cause of the damage 9 DSR-Senator Lines v. Federal Phoenix Assurance Co., Inc., G.R. No. 135377,
to the cargo was the “fluctuation of the temperature in the reefer van,” which October 7, 2003, 413 SCRA 14, citing Eastern Shipping Lines, Inc. v. Court of
fluctuation occurred after the cargo had already been discharged from the vessel; no Appeals, 234 SCRA 78 (1994) and cases cited therein.
fluctuation, they point out, arose when the cargo was still on board M/V Piya 10 Aboitiz Shipping Corporation v. Insurance Company of North America, G.R.
Bhum. As the cause of the damage to the cargo occurred after the same was already No. 168402, August 6, 2008, 561 SCRA 262; Calvo v. UCPB General Insurance
discharged from the vessel and was under the custody of the arrastre operator Co., Inc., G.R. No. 148896, March 19, 2002, 379 SCRA 510.
(International Container Terminal Services, Inc. or ICTSI), RCL and EDSA Shipping 314tody of the carrier;11 RCL and EDSA Shipping failed to dispute this.
posit that the presumption of negligence provided in Article 1735 of the Civil Code RCL and EDSA Shipping could have offered evidence before the trial court to
should not apply. What applies in this case is Article 1734, particularly paragraphs 3 show that the damage to the condenser fan did not occur: (1) while the cargo was in
and 4 thereof, which exempts the carrier from liability for loss or damage to the transit; (2) while they were in the act of discharging it from the vessel; or (3) while
cargo when it is caused either by an act or omission of the shipper or by the character they were delivering it actually or constructively to the consignee. They could have
16
presented proof to show that they exercised extraordinary care and diligence in the
handling of the goods, but they opted to file a demurrer to evidence. As the order
granting their demurrer was reversed on appeal, the CA correctly ruled that
they are deemed to have waived their right to present evidence, 12 and the
presumption of negligence must stand.
It is for this reason as well that we find RCL and EDSA Shipping’s claim that the
loss or damage to the cargo was caused by a defect in the packing or in the
containers. To exculpate itself from liability for the loss/damage to the cargo under
any of the causes, the common carrier is burdened to prove any of the causes in
Article 1734 of the Civil Code claimed by it by a preponderance of evidence. If the
carrier succeeds, the burden of evidence is shifted to the shipper to prove that the
carrier is negligent.13 RCL and EDSA Shipping, however, failed to satisfy this
standard of evidence and in fact offered no evidence at all on this point; a reversal of
a dismissal based on a demurrer to evidence bars the defendant from presenting
evidence supporting its allegations.
WHEREFORE, we DENY the petition for review on certiorari filed by the Regional
Container Lines of Singapore and EDSA Shipping Agency. The decision of the
Court of Appeals dated May 26, 2004 in CA-G.R. CV No. 76690 is AFFIRMED IN
TOTO. Costs against the petitioners.
SO ORDERED.
G.R. No. 101503. September 15, 1993.*

PLANTERS PRODUCTS, INC., petitioner, vs. COURT OF APPEALS,
SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI
KAISHA, respondents.
Words and Phrases; Shipping; “Charter Party” defined.—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 the vessel only, either
for a determinate period of time or for a single or consecutive voyage, the shipowner
17
to supply the ship’s stores, pay for the wages of the master and the crew, and defray This is a risk the shipper or the owner of the goods has to face. Clearly, respondent
the expenses for the maintenance of the ship. carrier has sufficiently proved the inherent character of the goods which makes it
Same; Same; “Common Carrier” defined.—Upon the other hand, the term highly vulnerable to deterioration; as well as the inadequacy of its packaging which
“common or public carrier” is defined in Art. 1732 of the Civil Code. The definition further contributed to the loss. On the other hand, no proof was adduced by the
extends to carriers either by land, air or water which hold themselves out as ready to petitioner showing that the carrier was remiss in the exercise of due diligence in
engage in carrying goods or transporting passengers or both for compensation as a order to minimize the loss or damage to the goods it carried.
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 PETITION for review of the decision of the Court of Appeals.
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 facts are stated in the opinion of the Court.
the person or corporation offering such service is a private carrier. Gonzales, Sinense, Jimenez & Associates for petitioner.
Shipping; Transportation; Evidence; Common carriers required to observe Siguion Reyna, Montecillo & Ongsiako Law Office for pri-
extraordinary diligence and presumed at fault; no such 478
_______________ 478 SUPREME COURT REPORTS ANNOTATED
*
FIRST DIVISION. Planters Products, Inc. vs. Court of Appeals
477 vate respondents.
VOL. 226, SEPTEMBER 15, 1993 477
Planters Products, Inc. vs. Court of Appeals BELLOSILLO, J.:
presumption applies to private carriers.—Article 1733 of the New Civil Code
mandates that common carriers, by reason of the nature of their business, should
Does a charter-party1 between a shipowner and a charterer transform a common
observe extraordinary diligence in the vigilance over the goods they carry. In the
carrier into a private one as to negate the civil law presumption of negligence in case
case of private carriers, however, the exercise of ordinary diligence in the carriage of
of loss or damage to its cargo?
goods will suffice. Moreover, in case of loss, destruction or deterioration of the
goods, common carriers are presumed to have been at fault or to have acted
negligently, and the burden of proving otherwise rests on them. On the contrary, no Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation
such presumption applies to private carriers, for whosoever alleges damage to or (MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46%
deterioration of the goods carried has the onus of proving that the cause was the fertilizer which the latter shipped in bulk on 16 June 1974 aboard the cargo vessel
negligence of the carrier. M/V "Sun Plum" owned by private respondent Kyosei Kisen Kabushiki Kaisha
Same; Same; Same; In a time or voyage charter, in contrast to a bareboat (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union,
charter, the ship remains a common or public carrier.—It is therefore imperative that Philippines, as evidenced by Bill of Lading No. KP-1 signed by the master of the
a public carrier shall remain as such, notwithstanding the charter of the whole or vessel and issued on the date of departure.
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 On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun
includes both the vessel and its crew, as in a bareboat or demise that a common Plum" pursuant to the Uniform General Charter2 was entered into between
carrier becomes private, at least insofar as the particular voyage covering the charter- Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan. 3 Riders to
party is concerned. Indubitably, a shipowner in a time or voyage charter retains the aforesaid charter-party starting from par. 16 to 40 were attached to the pre-
possession and control of the ship, although her holds may, for the moment, be the printed agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party were also
property of the charterer. subsequently entered into on the 18th, 20th, 21st and 27th of May 1974, respectively.
Same; Same; Same; In the common carriage of highly soluble goods, like
fertilizer, it is the shipper or owner of the goods that commonly face risk of loss or Before loading the fertilizer aboard the vessel, four (4) of her holds4 were all
damage.—Indeed, we agree with respondent carrier that bulk shipment of highly presumably inspected by the charterer's representative and found fit to take a load of
soluble goods like fertilizer carries with it the risk of loss or damage. More so, with a urea in bulk pursuant to par. 16 of the charter-party which reads:
variable weather condition prevalent during its unloading, as was the case at bar.
18
16. . . . At loading port, notice of readiness to be accomplished by Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont
certificate from National Cargo Bureau inspector or substitute Steamship Agencies (SSA), the resident agent of the carrier, KKKK, for P245,969.31
appointed by charterers for his account certifying the vessel's representing the cost of the alleged shortage in the goods shipped and the diminution
readiness to receive cargo spaces. The vessel's hold to be properly in value of that portion said to have been contaminated with dirt. 13
swept, cleaned and dried at the vessel's expense and the vessel to
be presented clean for use in bulk to the satisfaction of the Respondent SSA explained that they were not able to respond to the consignee's
inspector before daytime commences. (emphasis supplied) claim for payment because, according to them, what they received was just a request
for shortlanded certificate and not a formal claim, and that this "request" was denied
After the Urea fertilizer was loaded in bulk by stevedores hired by and under the by them because they "had nothing to do with the discharge of the
supervision of the shipper, the steel hatches were closed with heavy iron lids, shipment." 14 Hence, on 18 July 1975, PPI filed an action for damages with the Court
covered with three (3) layers of tarpaulin, then tied with steel bonds. The hatches of First Instance of Manila. The defendant carrier argued that the strict public policy
remained closed and tightly sealed throughout the entire voyage.5 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
Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches quo however sustained the claim of the plaintiff against the defendant carrier for the
were opened with the use of the vessel's boom. Petitioner unloaded the cargo from value of the goods lost or damaged when it ruled thus: 15
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 . . . Prescinding from the provision of the law that a common
charter-partly (which provided for an F.I.O.S. clause).6 The hatches remained open carrier is presumed negligent in case of loss or damage of the
throughout the duration of the discharge.7 goods it contracts to transport, all that a shipper has to do in a suit
to recover for loss or damage is to show receipt by the carrier of
Each time a dump truck was filled up, its load of Urea was covered with tarpaulin the goods and to delivery by it of less than what it received. After
before it was transported to the consignee's warehouse located some fifty (50) meters that, the burden of proving that the loss or damage was due to any
from the wharf. Midway to the warehouse, the trucks were made to pass through a of the causes which exempt him from liability is shipted to the
weighing scale where they were individually weighed for the purpose of ascertaining carrier, common or private he may be. Even if the provisions of
the net weight of the cargo. The port area was windy, certain portions of the route to the charter-party aforequoted are deemed valid, and the defendants
the warehouse were sandy and the weather was variable, raining occasionally while considered private carriers, it was still incumbent upon them to
the discharge was in progress.8 The petitioner's warehouse was made of corrugated prove that the shortage or contamination sustained by the cargo is
galvanized iron (GI) sheets, with an opening at the front where the dump trucks attributable to the fault or negligence on the part of the shipper or
entered and unloaded the fertilizer on the warehouse floor. Tarpaulins and GI sheets consignee in the loading, stowing, trimming and discharge of the
were placed in-between and alongside the trucks to contain spillages of the ferilizer. 9 cargo. This they failed to do. By this omission, coupled with their
failure to destroy the presumption of negligence against them, the
It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 defendants are liable (emphasis supplied).
(except July 12th, 14th and 18th).10A private marine and cargo surveyor, Cargo
Superintendents Company Inc. (CSCI), was hired by PPI to determine the "outturn" On appeal, respondent Court of Appeals reversed the lower court and absolved the
of the cargo shipped, by taking draft readings of the vessel prior to and after carrier from liability for the value of the cargo that was lost or damaged. 16 Relying
discharge. 11 The survey report submitted by CSCI to the consignee (PPI) dated 19 on the 1968 case of Home Insurance Co. v. American Steamship Agencies, Inc.,17 the
July 1974 revealed a shortage in the cargo of 106.726 M/T and that a portion of the appellate court ruled that the cargo vessel M/V "Sun Plum" owned by private
Urea fertilizer approximating 18 M/T was contaminated with dirt. The same results respondent KKKK was a private carrier and not a common carrier by reason of the
were contained in a Certificate of Shortage/Damaged Cargo dated 18 July 1974 time charterer-party. Accordingly, the Civil Code provisions on common carriers
prepared by PPI which showed that the cargo delivered was indeed short of 94.839 which set forth a presumption of negligence do not find application in the case at bar.
M/T and about 23 M/T were rendered unfit for commerce, having been polluted with Thus —
sand, rust and
dirt. 12 . . . In the absence of such presumption, it was incumbent upon the
plaintiff-appellee to adduce sufficient evidence to prove the
19
negligence of the defendant carrier as alleged in its complaint. It is or a part of her to a merchant or other person for the conveyance of goods, on a
an old and well settled rule that if the plaintiff, upon whom rests particular voyage, in consideration of the payment of freight; 21 Charter parties are of
the burden of proving his cause of action, fails to show in a two types: (a) contract of affreightment which involves the use of shipping space on
satisfactory manner the facts upon which he bases his claim, the vessels leased by the owner in part or as a whole, to carry goods for others; and, (b)
defendant is under no obligation to prove his exception or defense charter by demise or bareboat charter, by the terms of which the whole vessel is let to
(Moran, Commentaries on the Rules of Court, Volume 6, p. 2, the charterer with a transfer to him of its entire command and possession and
citing Belen v. Belen, 13 Phil. 202). 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
But, the record shows that the plaintiff-appellee dismally failed to is leased to the charterer for a fixed period of time, or voyage charter, wherein the
prove the basis of its cause of action, i.e. the alleged negligence of ship is leased for a single voyage. 22 In both cases, the charter-party provides for the
defendant carrier. It appears that the plaintiff was under the hire of vessel only, either for a determinate period of time or for a single or
impression that it did not have to establish defendant's negligence. consecutive voyage, the shipowner to supply the ship's stores, pay for the wages of
Be that as it may, contrary to the trial court's finding, the record of the master and the crew, and defray the expenses for the maintenance of the ship.
the instant case discloses ample evidence showing that defendant
carrier was not negligent in performing its Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of
obligation . . . 18 (emphasis supplied). the Civil Code. 23 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
Petitioner PPI appeals to us by way of a petition for review assailing the decision of or both for compensation as a public employment and not as a casual occupation.
the Court of Appeals. Petitioner theorizes that the Home Insurance case has no The distinction between a "common or public carrier" and a "private or special
bearing on the present controversy because the issue raised therein is the validity of a carrier" lies in the character of the business, such that if the undertaking is a single
stipulation in the charter-party delimiting the liability of the shipowner for loss or transaction, not a part of the general business or occupation, although involving the
damage to goods cause by want of due deligence on its part or that of its manager to carriage of goods for a fee, the person or corporation offering such service is a
make the vessel seaworthy in all respects, and not whether the presumption of private carrier. 24
negligence provided under the Civil Code applies only to common carriers and not to
private carriers. 19 Petitioner further argues that since the possession and control of Article 1733 of the New Civil Code mandates that common carriers, by reason of the
the vessel remain with the shipowner, absent any stipulation to the contrary, such nature of their business, should observe extraordinary diligence in the vigilance over
shipowner should made liable for the negligence of the captain and crew. In fine, PPI the goods they carry.25 In the case of private carriers, however, the exercise of
faults the appellate court in not applying the presumption of negligence against ordinary diligence in the carriage of goods will suffice. Moreover, in the case of loss,
respondent carrier, and instead shifting the onus probandi on the shipper to show destruction or deterioration of the goods, common carriers are presumed to have
want of due deligence on the part of the carrier, when he was not even at hand to been at fault or to have acted negligently, and the burden of proving otherwise rests
witness what transpired during the entire voyage. on them.26 On the contrary, no such presumption applies to private carriers, for
whosoever alleges damage to or deterioration of the goods carried has the onus of
As earlier stated, the primordial issue here is whether a common carrier becomes a proving that the cause was the negligence of the carrier.
private carrier by reason of a charter-party; in the negative, whether the shipowner in
the instant case was able to prove that he had exercised that degree of diligence It is not disputed that respondent carrier, in the ordinary course of business, operates
required of him under the law. 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
It is said that etymology is the basis of reliable judicial decisions in commercial compliment were under the employ of the shipowner and therefore continued to be
cases. This being so, we find it fitting to first define important terms which are under its direct supervision and control. Hardly then can we charge the charterer, a
relevant to our discussion. 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
A "charter-party" is defined as a contract by which an entire ship, or some principal present case considering that the steering of the ship, the manning of the decks, the
part thereof, is let by the owner to another person for a specified time or use; 20 a determination of the course of the voyage and other technical incidents of maritime
contract of affreightment by which the owner of a ship or other vessel lets the whole
20
navigation were all consigned to the officers and crew who were screened, chosen deterioration of the cargo was due to fortuitous event, or some other circumstances
and hired by the shipowner. 27 inconsistent with its liability. 31
It is therefore imperative that a public carrier shall remain as such, notwithstanding To our mind, respondent carrier has sufficiently overcome, by clear and convincing
the charter of the whole or portion of a vessel by one or more persons, provided the proof, the prima faciepresumption of negligence.
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 The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19
demise that a common carrier becomes private, at least insofar as the particular April 1977 before the Philippine Consul and Legal Attache in the Philippine
voyage covering the charter-party is concerned. Indubitably, a shipowner in a time or Embassy in Tokyo, Japan, testified that before the fertilizer was loaded, the four (4)
voyage charter retains possession and control of the ship, although her holds may, for hatches of the vessel were cleaned, dried and fumigated. After completing the
the moment, be the property of the charterer. 28 loading of the cargo in bulk in the ship's holds, the steel pontoon hatches were closed
and sealed with iron lids, then covered with three (3) layers of serviceable tarpaulins
Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American which were tied with steel bonds. The hatches remained close and tightly sealed
Steamship Agencies, supra, is misplaced for the reason that the meat of the while the ship was in transit as the weight of the steel covers made it impossible for a
controversy therein was the validity of a stipulation in the charter-party exempting person to open without the use of the ship's boom. 32
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 It was also shown during the trial that the hull of the vessel was in good condition,
States that a ship chartered by a single shipper to carry special cargo is not a common foreclosing the possibility of spillage of the cargo into the sea or seepage of water
carrier, 29 does not find application in our jurisdiction, for we have observed that the inside the hull of the vessel. 33 When M/V "Sun Plum" docked at its berthing place,
growing concern for safety in the transportation of passengers and /or carriage of representatives of the consignee boarded, and in the presence of a representative of
goods by sea requires a more exacting interpretation of admiralty laws, more the shipowner, the foreman, the stevedores, and a cargo surveyor representing CSCI,
particularly, the rules governing common carriers. opened the hatches and inspected the condition of the hull of the vessel. The
stevedores unloaded the cargo under the watchful eyes of the shipmates who were
We quote with approval the observations of Raoul Colinvaux, the learned barrister- overseeing the whole operation on rotation basis. 34
at-law 30 —
Verily, the presumption of negligence on the part of the respondent carrier has been
As a matter of principle, it is difficult to find a valid distinction efficaciously overcome by the showing of extraordinary zeal and assiduity exercised
between cases in which a ship is used to convey the goods of one by the carrier in the care of the cargo. This was confirmed by respondent appellate
and of several persons. Where the ship herself is let to a charterer, court thus —
so that he takes over the charge and control of her, the case is
different; the shipowner is not then a carrier. But where her . . . Be that as it may, contrary to the trial court's finding, the
services only are let, the same grounds for imposing a strict record of the instant case discloses ample evidence showing that
responsibility exist, whether he is employed by one or many. The defendant carrier was not negligent in performing its obligations.
master and the crew are in each case his servants, the freighter in Particularly, the following testimonies of plaintiff-appellee's own
each case is usually without any representative on board the ship; witnesses clearly show absence of negligence by the defendant
the same opportunities for fraud or collusion occur; and the same carrier; that the hull of the vessel at the time of the discharge of the
difficulty in discovering the truth as to what has taken place arises . cargo was sealed and nobody could open the same except in the
.. presence of the owner of the cargo and the representatives of the
vessel (TSN, 20 July 1977, p. 14); that the cover of the hatches was
In an action for recovery of damages against a common carrier on the goods shipped, made of steel and it was overlaid with tarpaulins, three layers of
the shipper or consignee should first prove the fact of shipment and its consequent tarpaulins and therefore their contents were protected from the
loss or damage while the same was in the possession, actual or constructive, of the weather (TSN, 5 April 1978, p. 24); and, that to open these
carrier. Thereafter, the burden of proof shifts to respondent to prove that he has hatches, the seals would have to be broken, all the seals were found
exercised extraordinary diligence required by law or that the loss, damage or to be intact (TSN, 20 July 1977, pp. 15-16) (emphasis supplied).
21
The period during which private respondent was to observe the degree of diligence The probability of the cargo being damaged or getting mixed or contaminated with
required of it as a public carrier began from the time the cargo was unconditionally foreign particles was made greater by the fact that the fertilizer was transported in
placed in its charge after the vessel's holds were duly inspected and passed scrutiny "bulk," thereby exposing it to the inimical effects of the elements and the grimy
by the shipper, up to and until the vessel reached its destination and its hull was condition of the various pieces of equipment used in transporting and hauling it.
reexamined by the consignee, but prior to unloading. This is clear from the limitation
clause agreed upon by the parties in the Addendum to the standard "GENCON" time The evidence of respondent carrier also showed that it was highly improbable for sea
charter-party which provided for an F.I.O.S., meaning, that the loading, stowing, water to seep into the vessel's holds during the voyage since the hull of the vessel
trimming and discharge of the cargo was to be done by the charterer, free from all was in good condition and her hatches were tightly closed and firmly sealed, making
risk and expense to the carrier. 35 Moreover, a shipowner is liable for damage to the the M/V "Sun Plum" in all respects seaworthy to carry the cargo she was chartered
cargo resulting from improper stowage only when the stowing is done by stevedores for. If there was loss or contamination of the cargo, it was more likely to have
employed by him, and therefore under his control and supervision, not when the occurred while the same was being transported from the ship to the dump trucks and
same is done by the consignee or stevedores under the employ of the latter. 36 finally to the consignee's warehouse. This may be gleaned from the testimony of the
marine and cargo surveyor of CSCI who supervised the unloading. He explained that
Article 1734 of the New Civil Code provides that common carriers are not the 18 M/T of alleged "bar order cargo" as contained in their report to PPI was just
responsible for the loss, destruction or deterioration of the goods if caused by the an approximation or estimate made by them after the fertilizer was discharged from
charterer of the goods or defects in the packaging or in the containers. The Code of the vessel and segregated from the rest of the cargo.
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 The Court notes that it was in the month of July when the vessel arrived port and
defect of the goods, shall be for the account and risk of the shipper, and that proof of unloaded her cargo. It rained from time to time at the harbor area while the cargo
these accidents is incumbent upon the carrier. 37 The carrier, nonetheless, shall be was being discharged according to the supply officer of PPI, who also testified that it
liable for the loss and damage resulting from the preceding causes if it is proved, as was windy at the waterfront and along the shoreline where the dump trucks passed
against him, that they arose through his negligence or by reason of his having failed enroute to the consignee's warehouse.
to take the precautions which usage has established among careful persons. 38
Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods
Respondent carrier presented a witness who testified on the characteristics of the like fertilizer carries with it the risk of loss or damage. More so, with a variable
fertilizer shipped and the expected risks of bulk shipping. Mr. Estanislao Chupungco, weather condition prevalent during its unloading, as was the case at bar. This is a risk
a chemical engineer working with Atlas Fertilizer, described Urea as a chemical the shipper or the owner of the goods has to face. Clearly, respondent carrier has
compound consisting mostly of ammonia and carbon monoxide compounds which sufficiently proved the inherent character of the goods which makes it highly
are used as fertilizer. Urea also contains 46% nitrogen and is highly soluble in water. vulnerable to deterioration; as well as the inadequacy of its packaging which further
However, during storage, nitrogen and ammonia do not normally evaporate even on contributed to the loss. On the other hand, no proof was adduced by the petitioner
a long voyage, provided that the temperature inside the hull does not exceed eighty showing that the carrier was remise in the exercise of due diligence in order to
(80) degrees centigrade. Mr. Chupungco further added that in unloading fertilizer in minimize the loss or damage to the goods it carried.
bulk with the use of a clamped shell, losses due to spillage during such operation
amounting to one percent (1%) against the bill of lading is deemed "normal" or WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of
"tolerable." The primary cause of these spillages is the clamped shell which does not Appeals, which reversed the trial court, is AFFIRMED. Consequently, Civil Case
seal very tightly. Also, the wind tends to blow away some of the materials during the No. 98623 of the then Court of the First Instance, now Regional Trial Court, of
unloading process. Manila should be, as it is hereby DISMISSED.
The dissipation of quantities of fertilizer, or its daterioration in value, is caused either Costs against petitioner.
by an extremely high temperature in its place of storage, or when it comes in contact
with water. When Urea is drenched in water, either fresh or saline, some of its
particles dissolve. But the salvaged portion which is in liquid form still remains SO ORDERED.
potent and usable although no longer saleable in its original market value.
22
G.R. No. 165647 March 26, 2009 damaged and bad order condition. Upon inspection, it was discovered that 63,065.00
kilograms of the shipment had sustained unrecovered spillages, while 58,235.00
PHILIPPINES FIRST INSURANCE CO., INC., Petitioner, kilograms had been exposed and contaminated, resulting in losses due to
vs. depreciation and downgrading.11
WALLEM PHILS. SHIPPING, INC., UNKNOWN OWNER AND/OR
UNKNOWN CHARTERER OF THE VESSEL M/S "OFFSHORE MASTER" On 29 April 1996, the consignee filed a formal claim with Wallem for the value of
AND "SHANGHAI FAREAST SHIP BUSINESS COMPANY," Respondents. the damaged shipment, to no avail. Since the shipment was insured with petitioner
Philippines First Insurance Co., Inc. against all risks in the amount of
DECISION ₱2,470,213.50,12 the consignee filed a formal claim13 with petitioner for the damage
and losses sustained by the shipment. After evaluating the invoices, the turn-over
TINGA, J.: survey, the bad order certificate and other documents,14petitioner found the claim to
be in order and compensable under the marine insurance policy. Consequently,
petitioner paid the consignee the sum of ₱397,879.69 and the latter signed a
Before us is a Rule 45 petition1 which seeks the reversal of the Decision2 and
subrogation receipt.
Resolution3 of the Court of Appeals in CA-G.R. No. 61885. The Court of Appeals
reversed the Decision4 of the Regional Trial Court (RTC) of Manila, Branch 55 in
Civil Case No. 96-80298, dismissing the complaint for sum of money. Petitioner, in the exercise of its right of subrogation, sent a demand letter to Wallem
for the recovery of the amount paid by petitioner to the consignee. However, despite
receipt of the letter, Wallem did not settle nor even send a response to petitioner’s
The facts of the case follow.5
claim.15
On or about 2 October 1995, Anhui Chemicals Import & Export Corporation loaded
Consequently, petitioner instituted an action before the RTC for damages against
on board M/S Offshore Master a shipment consisting of 10,000 bags of sodium
respondents for the recovery of ₱397,879.69 representing the actual damages
sulphate anhydrous 99 PCT Min. (shipment), complete and in good order for
suffered by petitioner plus legal interest thereon computed from the time of the filing
transportation to and delivery at the port of Manila for consignee, L.G. Atkimson
of the complaint until fully paid and attorney’s fees equivalent to 25% of the
Import-Export, Inc. (consignee), covered by a Clean Bill of Lading. The Bill of
principal claim plus costs of suit.
Lading reflects the gross weight of the total cargo at 500,200 kilograms.6 The Owner
and/or Charterer of M/V Offshore Master is unknown while the shipper of the
shipment is Shanghai Fareast Ship Business Company. Both are foreign firms doing In a decision16 dated 3 November 1998, the RTC ordered respondents to pay
business in the Philippines, thru its local ship agent, respondent Wallem Philippines petitioner ₱397,879.69 with 6% interest plus attorney’s fees and costs of the suit. It
Shipping, Inc. (Wallem).7 attributed the damage and losses sustained by the shipment to the arrastre operator’s
mishandling in the discharge of the shipment. Citing Eastern Shipping Lines, Inc. v.
On or about 16 October 1995, the shipment arrived at the port of Manila on board the Court of Appeals,17 the RTC held the shipping company and the arrastre operator
vessel M/S Offshore Master from which it was subsequently discharged. It was solidarily liable since both the arrastre operator and the carrier are charged with and
disclosed during the discharge of the shipment from the carrier that 2,426 poly bags obligated to deliver the goods in good order condition to the consignee. It also ruled
(bags) were in bad order and condition, having sustained various degrees of spillages that the ship functioned as a common carrier and was obliged to observe the degree
and losses. This is evidenced by the Turn Over Survey of Bad Order Cargoes (turn- of care required of a common carrier in handling cargoes. Further, it held that a
over survey) of the arrastre operator, Asian Terminals, Inc. (arrastre operator). 8 The notice of loss or damage in writing is not required in this case because said goods
bad state of the bags is also evinced by the arrastre operator’s Request for Bad Order already underwent a joint inspection or survey at the time of receipt thereof by the
Survey.9 consignee, which dispensed with the notice requirement.
Asia Star Freight Services, Inc. undertook the delivery of the subject shipment from The Court of Appeals reversed and set aside the RTC’s decision.18 According to the
the pier to the consignee’s warehouse in Quezon City,10 while the final inspection appellate court, there is no solidary liability between the carrier and the arrastre
was conducted jointly by the consignee’s representative and the cargo surveyor. operator because it was clearly established by the court a quo that the damage and
During the unloading, it was found and noted that the bags had been discharged in losses of the shipment were attributed to the mishandling by the arrastre operator in
23
the discharge of the shipment. The appellate court ruled that the instant case falls losses and damage to the cargo were caused by the mishandling of the arrastre
under an exception recognized in Eastern operator. Specifically, that the torn cargo bags resulted from the use of steel
hooks/spikes in piling the cargo bags to the pallet board and in pushing the bags by
Shipping Lines.19 Hence, the arrastre operator was held solely liable to the consignee. the stevedores of the arrastre operator to the tug boats then to the ports.25 The
appellate court affirmed the finding of mishandling in the discharge of cargo and it
Petitioner raises the following issues: served as its basis for exculpating respondents from liability, rationalizing that with
the fault of the arrastre operator in the unloading of the cargo established it should
bear sole liability for the cost of the damaged/lost cargo.
1. Whether or not the Court of Appeals erred in not holding that as a
common carrier, the carrier’s duties extend to the obligation to safely
discharge the cargo from the vessel; While it is established that damage or losses were incurred by the
shipment during the unloading, it is disputed who should be liable for the damage
incurred at that point of transport. To address this issue, the pertinent laws and
2. Whether or not the carrier should be held liable for the cost of the jurisprudence are examined.
damaged shipment;
Common carriers, from the nature of their business and for reasons of public policy,
3. Whether or not Wallem’s failure to answer the extra judicial demand by are bound to observe extraordinary diligence in the vigilance over the goods
petitioner for the cost of the lost/damaged shipment is an implied admission transported by them.26 Subject to certain exceptions enumerated under Article
of the former’s liability for said goods; 173427 of the Civil Code, common carriers are responsible for the loss, destruction,
or deterioration of the goods. The extraordinary responsibility of the common carrier
4. Whether or not the courts below erred in giving credence to the testimony lasts from the time the goods are unconditionally placed in the possession of, and
of Mr. Talens. 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
It is beyond question that respondent’s vessel is a common carrier. 20 Thus, the receive them.28
standards for determining the existence or absence of the respondent’s liability will
be gauged on the degree of diligence required of a common carrier. Moreover, as the For marine vessels, Article 619 of the Code of Commerce provides that the ship
shipment was an exercise of international trade, the provisions of the Carriage of captain is liable for the cargo from the time it is turned over to him at the dock or
Goods 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.
by Sea Act21 (COGSA), together with the Civil Code and the Code of Commerce, In Standard Oil Co. of New York v. Lopez Castelo,29 the Court interpreted the ship
shall apply.22 captain’s liability as ultimately that of the shipowner by regarding the captain as the
representative of the ship owner.
The first and second issues raised in the petition will be resolved concurrently since
they are interrelated. 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,
It is undisputed that the shipment was damaged prior to its receipt by the insured custody, care, and discharge of such goods, shall be subject to the responsibilities
consignee. The damage to the shipment was documented by the turn-over and liabilities and entitled to the rights and immunities set forth in the Act. 30 Section
survey23 and Request for Bad Order Survey.24 The turn-over survey, in particular, 3 (2) thereof then states that among the carriers’ responsibilities are to properly and
expressly stipulates that 2,426 bags of the shipment were received by the arrastre carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.
operator in damaged condition. With these documents, petitioner insists that the
shipment incurred damage or losses while still in the care and responsibility of The above doctrines are in fact expressly incorporated in the bill of lading between
Wallem and before it was turned over and delivered to the arrastre operator. the shipper Shanghai Fareast Business Co., and the consignee, to wit:
The trial court, however, found through the testimony of Mr. Maximino Velasquez
Talens, a cargo surveyor of Oceanica Cargo Marine Surveyors Corporation, that the
24
4. PERIOD OF RESPONSIBILITY. The responsibility of the carrier shall vessel. Article 619 of the Code of Commerce holds a ship captain liable for the cargo
commence from the time when the goods are loaded on board the vessel and shall from the time it is turned over to him until its delivery at the port of unloading.
cease when they are discharged from the vessel.
In a case decided by a U.S. Circuit Court, Nichimen Company v. M./V. Farland,37 it
The Carrier shall not be liable of loss of or damage to the goods before loading and was ruled that like the duty of seaworthiness, the duty of care of the cargo is non-
after discharging from the vessel, howsoever such loss or damage arises.31 delegable,38 and the carrier is accordingly responsible for the acts of the master, the
crew, the stevedore, and his other agents. It has also been held that it is ordinarily the
On the other hand, the functions of an arrastre operator involve the handling of cargo duty of the master of a vessel to unload the cargo and place it in readiness for
deposited on the wharf or between the establishment of the consignee or shipper and delivery to the consignee, and there is an implied obligation that this shall be
the ship's tackle.32 Being the custodian of the goods discharged from a vessel, an accomplished with sound machinery, competent hands, and in such manner that no
arrastre operator's duty is to take good care of the goods and to turn them over to the unnecessary injury shall be done thereto.39 And the fact that a consignee is required
party entitled to their possession.33 to furnish persons to assist in unloading a shipment may not relieve the carrier of its
duty as to such unloading.40
Handling cargo is mainly the arrastre operator's principal work so its
drivers/operators or employees should observe the standards and measures necessary The exercise of the carrier’s custody and responsibility over the subject shipment
to prevent losses and damage to shipments under its custody.34 during the unloading actually transpired in the instant case during the unloading of
the shipment as testified by Mr. Talens, the cargo surveyor, to quote:
In Fireman’s Fund Insurance Co. v. Metro Port Service, Inc.35 the Court explained
the relationship and responsibility of an arrastre operator to a consignee of a cargo, to Atty. Repol:
quote:
- Do you agree with me that Wallem Philippines is a shipping [company]?
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 A Yes, sir.
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 Q And, who hired the services of the stevedores?
and to deliver them in good condition to the consignee, such responsibility also
devolves upon the CARRIER. Both the ARRASTRE and the CARRIER are A The checker of the vessel of Wallem, sir.41
therefore charged with and obligated to deliver the goods in good condition to the
consignee.(Emphasis supplied) (Citations omitted)
xxx
The liability of the arrastre operator was reiterated in Eastern Shipping Lines, Inc. v.
Court of Appeals36 with the clarification that the arrastre operator and the carrier are Q Mr. Witness, during the discharging operation of this cargo, where was
not always and necessarily solidarily liable as the facts of a case may vary the rule. the master of the vessel?
Thus, in this case the appellate court is correct insofar as it ruled that an arrastre A On board the vessel, supervising, sir.
operator and a carrier may not be held solidarily liable at all times. But the precise
question is which entity had custody of the shipment during its unloading from the Q And, observed the discharging operation?
vessel?
A Yes, sir.
The aforementioned Section 3(2) of the COGSA states that among the carriers’
responsibilities are to properly and carefully load, care for and discharge the goods Q And, what did the master of the vessel do when the cargo was being
carried. The bill of lading covering the subject shipment likewise stipulates that the unloaded from the vessel?
carrier’s liability for loss or damage to the goods ceases after its discharge from the
25
A He would report to the head checker, sir. plainly overlooked certain facts of substance and value which, if considered, might
affect the result of the case, his assessment on credibility must be respected. 46
Q He did not send the stevedores to what manner in the discharging of the
cargo from the vessel? Contrary to petitioner’s stance on the third issue, Wallem’s failure to respond to its
demand letter does not constitute an implied admission of liability. To borrow the
A And head checker po and siyang nagpapatakbo ng trabaho sa loob ng words of Mr. Justice Oliver Wendell Holmes, thus:
barko, sir.42
A man cannot make evidence for himself by writing a letter containing the
xxx statements that he wishes to prove. He does not make the letter evidence by sending
it to the party against whom he wishes to prove the facts [stated therein]. He no more
Q Is he [the head checker] an employee of the company? can impose a duty to answer a charge than he can impose a duty to pay by sending
goods. Therefore a failure to answer such adverse assertions in the absence of further
circumstances making an answer requisite or natural has no effect as an admission.47
A He is a contractor/checker of Wallem Philippines, sir.43
With respect to the attorney’s fees, it is evident that petitioner was compelled to
Moreover, the liability of Wallem is highlighted by Mr. Talen’s notes in the Bad litigate this matter to protect its interest. The RTC’s award of ₱20,000.00 as
Order Inspection, to wit: attorney’s fees is reasonable.
"The bad order torn bags, was due to stevedores[‘] utilizing steel hooks/spikes in WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals
piling the cargo to [the] pallet board at the vessel’s cargo holds and at the pier dated 22 June 2004 and its Resolution dated 11 October 2004 are REVERSED and
designated area before and after discharged that cause the bags to torn
SET ASIDE. Wallem is ordered to pay petitioner the sum of ₱397,879.69, with
[sic]."44 (Emphasis supplied)
interest thereon at 6% per annum from the filing of the complaint on 7 October 1996
until the judgment becomes final and executory. Thereafter, an interest rate of 12%
The records are replete with evidence which show that the damage to the bags per annum shall be imposed.48Respondents are also ordered to pay petitioner the
happened before and after their discharge45 and it was caused by the stevedores of the amount of ₱20,000.00 for and as attorney’s fees, together with the costs of the suit.
arrastre operator who were then under the supervision of Wallem.1awphi1.net
SO ORDERED.
It is settled in maritime law jurisprudence that cargoes while being unloaded
generally remain under the custody of the carrier. In the instant case, the damage or
losses were incurred during the discharge of the shipment while under the
supervision of the carrier. Consequently, the carrier is liable for the damage or losses
caused to the shipment. As the cost of the actual damage to the subject shipment has
long been settled, the trial court’s finding of actual damages in the amount of
₱397,879.69 has to be sustained.
On the credibility of Mr. Talens which is the fourth issue, the general rule in
assessing credibility of witnesses is well-settled:
x x x the trial court's evaluation as to the credibility of witnesses is viewed as correct

and entitled to the highest respect because it is more competent to so conclude,
having had the opportunity to observe the witnesses' demeanor and deportment on
the stand, and the manner in which they gave their testimonies. The trial judge
therefore can better determine if such witnesses were telling the truth, being in the
ideal position to weigh conflicting testimonies. Therefore, unless the trial judge
26
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. 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. The 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.Contracts
______________________________
* FIRST DIVISION.
1 In the title of the case, the petitioner’s name appears as Teodoro Pereña, but he
signed his name as Teodorico Pereña in the verification/certification of the petition
for review on certiorari.
209
VOL. 679, AUGUST 29, 2012 209
Pereña vs. Zarate
of common carriage are governed by the provisions on common carriers of
the Civil Code, the Public Service Act, 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.
Same; Same; 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.―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
G.R. No. 157917. August 29, 2012.* by any secret intention or mental reservation it may entertain or assert when charged
SPOUSES TEODORO1 and NANETTE PEREÑA, petitioners, vs. SPOUSES with the duties and obligations that the law imposes.
NICOLAS and TERESITA L. ZARATE, PHILIPPINE NATIONAL Same; Same; School Buses; Despite catering to a limited clientèle, the Pereñas
RAILWAYS, and the COURT OF APPEALS, respondents. operated as a common carrier because they held themselves out as a ready
Civil Law; Common Carriers; Words and Phrases; A carrier is a person or transportation indiscriminately to the students of a particular school living within or
corporation who undertakes to transport or convey goods or persons from one place near where they operated the service and for a fee.―Applying these considerations
to another, gratuitously or for hire.―A carrier is a person or corporation who to the case before us, there is no question that the Pereñas as the operators of a school
27
bus service were: (a) engaged in transporting passengers generally as a business, not could be held jointly and severally liable by virtue of their respective negligence
just as a casual occupation; (b) undertaking to carry passengers over established combining to cause the death of Aaron.―At any rate, the lower
roads by the method by which the business was conducted; and (c) transporting 211
students for a fee. Despite catering to a limited clientèle, the Pereñas operated as a VOL. 679, AUGUST 29, 2012 211
common carrier because they held themselves out as a ready transportation
Pereña vs. Zarate
indiscriminately to the students of a particular school living within or near where
they operated the service and for a fee. courts correctly held both the Pereñas and the PNR “jointly and severally”
Same; Same; Extraordinary Diligence; The common carrier is bound to liable for damages arising from the death of Aaron. They had been impleaded in the
observe extraordinary diligence in the vigilance over the same complaint as defendants against whom the Zarates had the right to relief,
210 whether jointly, severally, or in the alternative, in respect to or arising out of the
accident and questions of fact and of law were common as to the Zarates. Although
210 SUPREME COURT REPORTS ANNOTATED the basis of the right to relief of the Zarates (i.e., breach of contract of carriage)
Pereña vs. Zarate against the Pereñas was distinct from the basis of the Zarates’ right to relief against
goods and for the safety of the passengers transported by them, according to the PNR (i.e., quasi-delict under Article 2176, Civil Code), they nonetheless could be
all the circumstances of each case.―The common carrier’s standard of care and held jointly and severally liable by virtue of their respective negligence combining to
vigilance as to the safety of the passengers is defined by law. Given the nature of the cause the death of Aaron. As to the PNR, the RTC rightly found the PNR also guilty
business and for reasons of public policy, the common carrier is bound “to observe of negligence despite the school van of the Pereñas traversing the railroad tracks at a
extraordinary diligence in the vigilance over the goods and for the safety of the point not dedicated by the PNR as a railroad crossing for pedestrians and motorists,
passengers transported by them, according to all the circumstances of each case.” because the PNR did not ensure the safety of others through the placing of crossbars,
Article 1755 of the Civil Code specifies that the common carrier should “carry the signal lights, warning signs, and other permanent safety barriers to prevent vehicles
passengers safely as far as human care and foresight can provide, using the utmost or pedestrians from crossing there. The RTC observed that the fact that a crossing
diligence of very cautious persons, with a due regard for all the circumstances .” To guard had been assigned to man that point from 7 a.m. to 5 p.m. was a
successfully fend off liability in an action upon the death or injury to a passenger, the good indicium that the PNR was aware of the risks to others as well as the need to
common carrier must prove his or its observance of that extraordinary diligence; control the vehicular and other traffic there. Verily, the Pereñas and the PNR were
otherwise, the legal presumption that he or it was at fault or acted negligently would joint tortfeasors.
stand. No device, whether by stipulation, posting of notices, statements on tickets, or Same; Same; Loss of Earning Capacity; The basis for the computation of
otherwise, may dispense with or lessen the responsibility of the common carrier as Aaron’s earning capacity was not what he would have become or what he would
defined under Article 1755 of the Civil Code. have wanted to be if not for his untimely death, but the minimum wage in effect at the
Same; Same; Negligence; Words and Phrases; Negligence is the omission to time of his death.―The RTC awarded indemnity for loss of Aaron’s earning
do something which a reasonable man, guided by those considerations which capacity. Although agreeing with the RTC on the liability, the CA modified the
ordinarily regulate the conduct of human affairs, would do, or the doing of amount. Both lower courts took into consideration that Aaron, while only a high
something which a prudent and reasonable man would not do.―The omissions of school student, had been enrolled in one of the reputable schools in the Philippines
care on the part of the van driver constituted negligence, which, according and that he had been a normal and able-bodied child prior to his death. The basis for
to Layugan v. Intermediate Appellate Court, 167 SCRA 363 (1988), is “the omission the computation of Aaron’s earning capacity was not what he would have become or
to do something which a reasonable man, guided by those considerations which what he would have wanted to be if not for his untimely death, but the minimum
ordinarily regulate the conduct of human affairs, would do, or the doing of wage in effect at the time of his death. Moreover, the RTC’s computation of Aaron’s
something which a prudent and reasonable man would not do, or as Judge Cooley life expectancy rate was not reckoned from his age of 15 years at the time of his
defines it, ‘(t)he failure to observe for the protection of the interests of another death, but on 21 years, his age when he would have graduated from college. We find
person, that degree of care, precaution, and vigilance which the circumstances justly the consid-
demand, whereby such other person suffers injury.’ ” 212
Same; Same; Joint and Solidary Liability; Although the basis of the right to 212 SUPREME COURT REPORTS ANNOTATED
relief of the Zarates (i.e., breach of contract of carriage) against the Pereñas was
Pereña vs. Zarate
distinct from the basis of the Zarates’ right to relief against the Philippine National
Railways (PNR) (i.e., quasi-delict under Article 2176, Civil Code), they nonetheless erations taken into account by the lower courts to be reasonable and fully
warranted.
28
Same; Same; Same; Our law itself states that the loss of the earning capacity Donato, Zarate & Rodriguez for respondent Sps. Zarate.
of the deceased shall be the liability of the guilty party in favor of the heirs of the Ramos, Rojo, Estrada, Licayu, Reyes and Bayot for respondent Philippine
deceased, and shall in every case be assessed and awarded by the court “unless the National Railways.
deceased on account of permanent physical disability not caused by the defendant, BERSAMIN, J.:
had no earning capacity at the time of his death.―The fact that Aaron was then The operator of a school bus service is a common carrier in the eyes of the law.
without a history of earnings should not be taken against his parents and in favor of He is bound to observe extraordinary diligence in the conduct of his business. He is
the defendants whose negligence not only cost Aaron his life and his right to work presumed to be negligent when death occurs to a passenger. His liability may include
and earn money, but also deprived his parents of their right to his presence and his indemnity for loss of earning capacity even if the deceased passenger may only be an
services as well. Our law itself states that the loss of the earning capacity of the unemployed high school student at the time of the accident.
deceased shall be the liability of the guilty party in favor of the heirs of the deceased,
and shall in every case be assessed and awarded by the court “unless the deceased on The Case
account of permanent physical disability not caused by the defendant, had no earning
capacity at the time of his death.” Accordingly, we emphatically hold in favor of the By petition for review on certiorari, Spouses Teodoro and Nanette Pereña
indemnification for Aaron’s loss of earning capacity despite him having been (Pereñas) appeal the adverse decision promulgated on November 13, 2002, by which
unemployed, because compensation of this nature is awarded not for loss of time or the Court of Appeals
earnings but for loss of the deceased’s power or ability to earn money. 214
Same; Same; Damages; Moral Damages; The moral damages of 214 SUPREME COURT REPORTS ANNOTATED
P2,500,000.00 were really just and reasonable under the established circumstances
of this case because they were intended by the law to assuage the Zarates’ deep Pereña vs. Zarate
mental anguish over their son’s unexpected and violent death, and their moral shock (CA) affirmed with modification the decision rendered on December 3, 1999 by the
over the senseless accident.―The moral damages of P2,500,000.00 were really just Regional Trial Court (RTC), Branch 260, in Parañaque City that had decreed them
and reasonable under the established circumstances of this case because they were jointly and severally liable with Philippine National Railways (PNR), their co-
intended by the law to assuage the Zarates’ deep mental anguish over their son’s defendant, to Spouses Nicolas and Teresita Zarate (Zarates) for the death of their 15-
unexpected and violent death, and their moral shock over the senseless accident. That year old son, Aaron John L. Zarate (Aaron), then a high school student of Don Bosco
amount would not be too much, considering that it would help the Zarates obtain the Technical Institute (Don Bosco).
means, diversions or amusements that would alleviate their suffering for the loss of
their child. At any rate, reducing the amount as excessive might prove to be an Antecedents
injustice, given the passage of a long time from when their mental anguish was
inflicted on them on August 22, 1996.213 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,
VOL. 679, AUGUST 29, 2012 213
and back. In their business, the Pereñas used a KIA Ceres Van (van) with Plate No.
Pereña vs. Zarate PYA 896, which had the capacity to transport 14 students at a time, two of whom
Same; Same; Damages; Exemplary Damages; Anent the P1,000,000.00 would be seated in the front beside the driver, and the others in the rear, with six
allowed as exemplary damages, we should not reduce the amount if only to render students on either side. They employed Clemente Alfaro (Alfaro) as driver of the
effective the desired example for the public good.―Anent the P1,000,000.00 allowed van.
as exemplary damages, we should not reduce the amount if only to render effective In June 1996, the Zarates contracted the Pereñas to transport Aaron to and from
the desired example for the public good. As a common carrier, the Pereñas needed to Don Bosco. On August 22, 1996, as on previous school days, the van picked Aaron
be vigorously reminded to observe their duty to exercise extraordinary diligence to up around 6:00 a.m. from the Zarates’ residence. Aaron took his place on the left side
prevent a similarly senseless accident from happening again. Only by an award of of the van near the rear door. The van, with its air-conditioning unit turned on and
exemplary damages in that amount would suffice to instill in them and others the stereo playing loudly, ultimately carried all the 14 student riders on their way to
similarly situated like them the ever-present need for greater and constant vigilance Don Bosco. Considering that the students were due at Don Bosco by 7:15 a.m., and
in the conduct of a business imbued with public interest. that they were already running late because of the heavy vehicular traffic on the
PETITION for review on certiorari of a decision of the Court of Appeals. South Superhighway, Alfaro took the van to an alternate route at about 6:45 a.m. by
The facts are stated in the opinion of the Court. traversing the narrow path underneath the Magallanes Interchange that was then
Saguisag and Associates for petitioners. commonly used by Makati-bound vehicles as a short cut into Makati. At the time, the
29
narrow path was marked by piles of construction materials and parked passenger within the vicinity of the Magallanes Interchange in Makati City, Metro
jeepneys, and the railroad crossing in the narrow path had no railroad warning signs, Manila, Philippines;
or (4) At the time of the vehicular/train collision, the subject site of the
215 vehicular/train collision was a railroad crossing used by motorists for
VOL. 679, AUGUST 29, 2012 215 crossing the railroad tracks;
(5) During the said time of the vehicular/train collision, there were no
Pereña vs. Zarate
appropriate and safety warning signs and railings at the site commonly used
watchmen, or other responsible persons manning the crossing. In fact, the for railroad crossing;
bamboo barandilla was up, leaving the railroad crossing open to traversing (6) At the material time, countless number of Makati bound public utility and
motorists. private vehicles used on a daily basis the site of the collision as an alternative
At about the time the van was to traverse the railroad crossing, PNR Commuter route and short-cut to Makati;
No. 302 (train), operated by Jhonny Alano (Alano), was in the vicinity of the (7) The train driver or operator left the scene of the incident on board the
Magallanes Interchange travelling northbound. As the train neared the railroad commuter train involved without waiting for the police investigator;
crossing, Alfaro drove the van eastward across the railroad tracks, closely tailing a (8) The site commonly used for railroad crossing by motorists was not in fact
large passenger bus. His view of the oncoming train was blocked because he intended by the railroad operator for railroad crossing at the time of the
overtook the passenger bus on its left side. The train blew its horn to warn motorists vehicular collision;
of its approach. When the train was about 50 meters away from the passenger bus (9) PNR received the demand letter of the spouses Zarate;
and the van, Alano applied the ordinary brakes of the train. He applied the (10) PNR refused to acknowledge any liability for the vehicular/train collision;
emergency brakes only when he saw that a collision was imminent. The passenger (11) The eventual closure of the railroad crossing alleged by PNR was an
bus successfully crossed the railroad tracks, but the van driven by Alfaro did not. The internal arrangement between the former and its project contractor; and217
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 VOL. 679, AUGUST 29, 2012 217
dragged his body and severed his head, instantaneously killing him. Alano fled the Pereña vs. Zarate
scene on board the train, and did not wait for the police investigator to arrive. (12) The site of the vehicular/train collision was within the vicinity or less than
Devastated by the early and unexpected death of Aaron, the Zarates commenced 100 meters from the Magallanes station of PNR.
this action for damages against Alfaro, the Pereñas, PNR and Alano. The Pereñas B. ISSUES
and PNR filed their respective answers, with cross-claims against each other, but (1) Whether or not defendant-driver of the van is, in the performance of his
Alfaro could not be served with summons. functions, liable for negligence constituting the proximate cause of the
At the pre-trial, the parties stipulated on the facts and issues, viz.: vehicular collision, which resulted in the death of plaintiff spouses’ son;
A. FACTS: (2) Whether or not the defendant spouses Pereña being the employer of
(1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate; defendant Alfaro are liable for any negligence which may be attributed to
(2) Spouses Zarate engaged the services of spouses Pereña for the adequate and defendant Alfaro;
safe transportation carriage of the (3) Whether or not defendant Philippine National Railways being the operator
216 of the railroad system is liable for negligence in failing to provide adequate
216 SUPREME COURT REPORTS ANNOTATED safety warning signs and railings in the area commonly used by motorists for
railroad crossings, constituting the proximate cause of the vehicular collision
Pereña vs. Zarate
which resulted in the death of the plaintiff spouses’ son;
former spouses’ son from their residence in Parañaque to his school at the Don (4) Whether or not defendant spouses Pereña are liable for breach of the
Bosco Technical Institute in Makati City; contract of carriage with plaintiff-spouses in failing to provide adequate and
(3) During the effectivity of the contract of carriage and in the implementation safe transportation for the latter’s son;
thereof, Aaron, the minor son of spouses Zarate died in connection with a (5) Whether or not defendants spouses are liable for actual, moral damages,
vehicular/train collision which occurred while Aaron was riding the exemplary damages, and attorney’s fees;
contracted carrier Kia Ceres van of spouses Pereña, then driven and operated (6) Whether or not defendants spouses Teodorico and Nanette Pereña observed
by the latter’s employee/authorized driver Clemente Alfaro, which van the diligence of employers and school bus operators;
collided with the train of PNR, at around 6:45 A.M. of August 22, 1996,
30
(7) Whether or not defendant-spouses are civilly liable for the accidental death
of Aaron John Zarate; (1) (for) the death of Aaron – Php50,000.00;
(8) Whether or not defendant PNR was grossly negligent in operating the (2) Actual damages in the amount of Php100,000.00;
commuter train involved in the accident, in allowing or tolerating the (3) For the loss of earning capacity – Php2,109,071.00;
motoring public to cross, and its failure to install safety devices or equipment (4) Moral damages in the amount of (Php)4,000,000.00;
at the site of the accident for the protection of the public; (5) Exemplary damages in the amount of Php1,000,000.00;
(9) Whether or not defendant PNR should be made to reimburse defendant (6) Attorney’s fees in the amount of Php200,000.00; and
spouses for any and whatever amount (7) Cost of suit.
218 SO ORDERED.
218 SUPREME COURT REPORTS ANNOTATED On June 29, 2000, the RTC denied the Pereñas’ motion for
reconsideration,4 reiterating that the cooperative gross negligence of the Pereñas and
Pereña vs. Zarate
PNR had caused the collision that led to the death of Aaron; and that the damages
the latter may be held answerable or which they may be ordered to pay in favor of awarded to the Zarates were not excessive, but based on the established
plaintiffs by reason of the action; circumstances.
(10) Whether or not defendant PNR should pay plaintiffs directly and fully on
the amounts claimed by the latter in their Complaint by reason of its gross The CA’s Ruling
negligence;
(11) Whether or not defendant PNR is liable to defendants spouses for actual,
Both the Pereñas and PNR appealed (CA-G.R. CV No. 68916).
moral and exemplary damages and attorney’s fees.2
PNR assigned the following errors, to wit:5
The Zarates’ claim against the Pereñas was upon breach of the contract of
The Court a quo erred in:
carriage for the safe transport of Aaron; but that against PNR was based on quasi-
1. In finding the defendant-appellant Philippine National Railways jointly and
delict under Article 2176, Civil Code.
severally liable together with defendant-appellants spouses Teodorico and
In their defense, the Pereñas adduced evidence to show that they had exercised
Nanette Pereña and defendant-appellant Clemente Alfaro to pay plaintiffs-
the diligence of a good father of the family in the selection and supervision of Alfaro,
appellees for the death of Aaron Zarate and damages.
by making sure that Alfaro had been issued a driver’s license and had not been
______________________________
involved in any vehicular accident prior to the collision; that their own son had taken
4 Id., at p. 142.
the van daily; and that Teodoro Pereña had sometimes accompanied Alfaro in the
5 Id., at pp. 25-46.
van’s trips transporting the students to school.
220
For its part, PNR tended to show that the proximate cause of the collision had
been the reckless crossing of the van whose driver had not first stopped, looked and 220 SUPREME COURT REPORTS ANNOTATED
listened; and that the narrow path traversed by the van had not been intended to be a Pereña vs. Zarate
railroad crossing for motorists. 2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees
witnesses despite overwhelming documentary evidence on record, supporting
Ruling of the RTC the case of defendants-appellants Philippine National Railways.
The Pereñas ascribed the following errors to the RTC, namely:
On December 3, 1999, the RTC rendered its decision,3disposing: The trial court erred in finding defendants-appellants jointly and severally liable for
______________________________ actual, moral and exemplary damages and attorney’s fees with the other defendants.
2 CA Rollo, pp. 47-49. The trial court erred in dismissing the cross-claim of the appellants Pereñas against
3 Id., at pp. 47-55. the Philippine National Railways and in not holding the latter and its train driver
219 primarily responsible for the incident.
VOL. 679, AUGUST 29, 2012 219 The trial court erred in awarding excessive damages and attorney’s fees.
The trial court erred in awarding damages in the form of deceased’s loss of
Pereña vs. Zarate
earning capacity in the absence of sufficient basis for such an award.
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
plaintiff and against the defendants ordering them to jointly and severally pay the
plaintiffs as follows:
31
On November 13, 2002, the CA promulgated its decision, affirming the findings 222
of the RTC, but limited the moral damages to P2,500,000.00; and deleted the 222 SUPREME COURT REPORTS ANNOTATED
attorney’s fees because the RTC did not state the factual and legal bases, to wit:6
Pereña vs. Zarate
WHEREFORE, premises considered, the assailed Decision of the Regional
Trial Court, Branch 260 of Parañaque City is AFFIRMED with I. The lower court erred when it upheld the trial court’s decision holding the
the modification that the award of Actual Damages is reduced to P59,502.76; petitioners jointly and severally liable to pay damages with Philippine
Moral Damages is reduced to P2,500,000.00; and the award for Attorney’s Fees National Railways and dismissing their cross-claim against the latter.
is Deleted. II. The lower court erred in affirming the trial court’s decision awarding
SO ORDERED. damages for loss of earning capacity of a minor who was only a high school
The CA upheld the award for the loss of Aaron’s earning capacity, taking student at the time of his death in the absence of sufficient basis for such an
cognizance of the ruling in Cariaga v. La- award.
______________________________ III. The lower court erred in not reducing further the amount of damages
awarded, assuming petitioners are liable at all.
6 Rollo, pp. 70-80.
221 Ruling
VOL. 679, AUGUST 29, 2012 221 The petition has no merit.
Pereña vs. Zarate
guna Tayabas Bus Company and Manila Railroad Company,7 wherein the Court 1.
gave the heirs of Cariaga a sum representing the loss of the deceased’s earning Were the Pereñas and PNR jointly
capacity despite Cariaga being only a medical student at the time of the fatal
incident. Applying the formula adopted in the American Expectancy Table of and severally liable for damages?
Mortality:― The Zarates brought this action for recovery of damages against both the
2/3 x (80 - age at the time of death) = life expectancy Pereñas and the PNR, basing their claim against the Pereñas on breach of contract of
the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning carriage and against the PNR on quasi-delict.
his life expectancy from age of 21 (the age when he would have graduated from The RTC found the Pereñas and the PNR negligent. The CA affirmed the
college and started working for his own livelihood) instead of 15 years (his age when findings.
he died). Considering that the nature of his work and his salary at the time of Aaron’s We concur with the CA.
death were unknown, it used the prevailing minimum wage of P280.00/day to To start with, the Pereñas’ defense was that they exercised the diligence of a
compute Aaron’s gross annual salary to be P110,716.65, inclusive of the thirteenth good father of the family in the selection and supervision of Alfaro, the van driver,
month pay. Multiplying this annual salary by Aaron’s life expectancy of 39.3 years, by seeing to it that Alfaro had a driver’s license and that he had not been involved in
his gross income would aggregate to P4,351,164.30, from which his estimated any vehicular accident prior to the fatal collision with the train; that they even had
expenses in the sum of P2,189,664.30 was deducted to finally arrive at their own son travel to and from school on a daily basis; and that Teodoro Pereña
P2,161,500.00 as net income. Due to Aaron’s computed net income turning out to be himself sometimes accompanied Alfaro in transporting the passengers
higher than the amount claimed by the Zarates, only P2,109,071.00, the amount 223
expressly prayed for by them, was granted. VOL. 679, AUGUST 29, 2012 223
On April 4, 2003, the CA denied the Pereñas’ motion for reconsideration.8
Pereña vs. Zarate
Issues to and from school. The RTC gave scant consideration to such defense by regarding
such defense as inappropriate in an action for breach of contract of carriage.
In this appeal, the Pereñas list the following as the errors committed by the CA, We find no adequate cause to differ from the conclusions of the lower courts that
to wit: 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.
7 110 Phil. 346 (1960). Although in this jurisdiction the operator of a school bus service has been usually
8 Id., at p. 82. 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
32
for public use, the exact nature of the operation of a school bus service has not been Article 1732. Common carriers are persons, corporations, firms or
finally settled. This is the occasion to lay the matter to rest. associations engaged in the business of carrying or transporting passengers or goods
A carrier is a person or corporation who undertakes to transport or convey goods or both, by land, water, or air, for compensation, offering their services to the public.
or persons from one place to another, gratuitously or for hire. The carrier is classified 13 Commonwealth Act No. 146, as amended, particularly by PD No. 1,
either as a private/special carrier or as a common/public carrier. 10 A private carrier is Integrated Reorganization Plan and E.O. 546.
one who, without making the activity a vocation, or without holding himself or itself 14 Article 1756 of the Civil Code reads:
out to the public as ready to act for all who may desire his or its services, Article 1756. In case of death of or injuries to passengers, common carriers
undertakes, by special agreement in a particular instance only, to transport goods or are presumed to have been at fault or to have acted negligently, unless they prove
persons from one place to another either gratuitously or for hire. 11 The provisions on that they observed extraordinary diligence as prescribed in articles 1733 and 1755.
ordinary contracts of the Civil Code govern the contract of private carriage. The 15 40 Phil. 853, 856 (1920).
diligence required of a private carrier is only ordinary, that is, the diligence of a good 225
father of the family. In contrast, a common carrier is a person, corporation, firm or VOL. 679, AUGUST 29, 2012 225
association engaged in the business of carrying or transporting passengers or goods
Pereña vs. Zarate
or both, by land, water, or air, for compensation,
______________________________ In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the
9 Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the Civil Code avoided any distinction between a person or an enterprise offering
Philippines, 1993 Edition, at p. 7. transportation on a regular or an isolated basis; and has not distinguished a carrier
10 Id., at p. 4. offering his services to the general public, that is, the general community or
11 Perez, Transportation Laws and Public Service Act, 2001 Edition, p. 6. population, from one offering his services only to a narrow segment of the general
224 population.
Nonetheless, the concept of a common carrier embodied in Article 1732 of
224 SUPREME COURT REPORTS ANNOTATED the Civil Code coincides neatly with the notion of public service under the Public
Pereña vs. Zarate Service Act, which supplements the law on common carriers found in the Civil Code.
offering such services to the public.12 Contracts of common carriage are governed Public service, according to Section 13, paragraph (b) of the Public Service Act,
by the provisions on common carriers of the Civil Code, the Public Service Act,13and includes:
other special laws relating to transportation. A common carrier is required to observe x x x every person that now or hereafter may own, operate, manage, or control
extraordinary diligence, and is presumed to be at fault or to have acted negligently in in the Philippines, for hire or compensation, with general or limited clientèle,
case of the loss of the effects of passengers, or the death or injuries to passengers. 14 whether permanent or occasional, and done for the general business purposes,
In relation to common carriers, the Court defined public use in the following any common carrier, railroad, street railway, traction railway, subway motor vehicle,
terms in United States v. Tan Piaco,15viz.: either for freight or passenger, or both, with or without fixed route and whatever may
“Public use” is the same as “use by the public.” The essential feature of the be its classification, freight or carrier service of any class, express service, steamboat,
public use is not confined to privileged individuals, but is open to the indefinite or steamship line, pontines, ferries and water craft, engaged in the transportation of
public. It is this indefinite or unrestricted quality that gives it its public character. In passengers or freight or both, shipyard, marine repair shop, ice-refrigeration plant,
determining whether a use is public, we must look not only to the character of the canal, irrigation system, gas, electric light, heat and power, water supply and power
business to be done, but also to the proposed mode of doing it. If the use is merely petroleum, sewerage system, wire or wireless communications systems, wire or
optional with the owners, or the public benefit is merely incidental, it is not a public wireless broadcasting stations and other similar public services. x x x.17
use, authorizing the exercise of the jurisdiction of the public utility commission. Given the breadth of the aforequoted characterization of a common carrier, the
There must be, in general, a right which the law compels the owner to give to the Court has considered as common carriers
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 16 G.R. No. L-47822, December 22, 1988, 168 SCRA 612, 617-618.
judge the character of the use is whether the public may enjoy it by right or only by 17 Public Service Act.
permission. 226
______________________________ 226 SUPREME COURT REPORTS ANNOTATED
12 Article 1732 of the Civil Code states:
Pereña vs. Zarate
33
pipeline operators,18 custom brokers and warehousemen,19and barge operators20 even notices, statements on tickets, or otherwise, may dispense with or lessen the
if they had limited clientèle. responsibility of the common carrier as defined under Article 1755 of the Civil
As all the foregoing indicate, the true test for a common carrier is not the Code.24
quantity or extent of the business actually transacted, or the number and character of And, secondly, the Pereñas have not presented any compelling defense or reason
the conveyances used in the activity, but whether the undertaking is a part of the by which the Court might now reverse the CA’s findings on their liability. On the
activity engaged in by the carrier that he has held out to the general public as his contrary, an examination of the records shows that the evidence fully supported the
business or occupation. If the undertaking is a single transaction, not a part of the findings of the CA.
general business or occupation engaged in, as advertised and held out to the general As earlier stated, the Pereñas, acting as a common carrier, were already
public, the individual or the entity rendering such service is a private, not a common, presumed to be negligent at the time of the accident because death had occurred to
carrier. The question must be determined by the character of the business actually their passenger.25 The presumption of negligence, being a presumption of law, laid
carried on by the carrier, not by any secret intention or mental reservation it may the burden of evidence on their shoulders to establish that they had not been
entertain or assert when charged with the duties and obligations that the law negligent.26 It was the law no less that
imposes.21 ______________________________
Applying these considerations to the case before us, there is no question that the 22 Article 1733, Civil Code.
Pereñas as the operators of a school bus service were: (a) engaged in transporting 23 Article 1756, Civil Code.
passengers generally as a business, not just as a casual occupation; (b) undertaking to 24 Article 1757, Civil Code.
carry passengers over established roads by the method by which the business was 25 Supra, note 13.
conducted; and (c) transporting students for a fee. Despite catering to a limited 26 31A CJS, Evidence §134, citing State Tax Commission v. Phelps Dodge
clientèle, the Pereñas operated as a common carrier because they held themselves out Corporation, 157 P. 2d 693, 62 Ariz. 320; Kott v. Hilton, 114 P. 2d 666, 45 C.A. 2d
as a ready transportation indiscriminately to the students of a particular school living 548;Lindley v. Mowell, Civ. Ap. 232 S.W. 2d 256.
within or near where they operated the service and for a fee. 228
The common carrier’s standard of care and vigilance as to the safety of the 228 SUPREME COURT REPORTS ANNOTATED
passengers is defined by law. Given the na-
Pereña vs. Zarate
______________________________
18 First Philippine Industrial Corporation v. Court of Appeals, G.R. No. required them to prove their observance of extraordinary diligence in seeing to the
125948, December 29, 1998, 300 SCRA 661, 670. safe and secure carriage of the passengers to their destination. Until they did so in a
19 Calvo v. UCPB General Insurance Co., G.R. No. 148496, March 19, 2002, credible manner, they stood to be held legally responsible for the death of Aaron and
379 SCRA 510, 516. thus to be held liable for all the natural consequences of such death.
20 Asia Lighterage and Shipping, Inc. v. Court of Appeals, G.R. No. 147246, There is no question that the Pereñas did not overturn the presumption of their
August 9, 2003, 409 SCRA 340. negligence by credible evidence. Their defense of having observed the diligence of a
21 Agbayani, supra, note 9, pp. 7-8. good father of a family in the selection and supervision of their driver was not legally
227 sufficient. According to Article 1759 of the Civil Code, their liability as a common
carrier did not cease upon proof that they exercised all the diligence of a good father
VOL. 679, AUGUST 29, 2012 227 of a family in the selection and supervision of their employee. This was the reason
Pereña vs. Zarate why the RTC treated this defense of the Pereñas as inappropriate in this action for
ture of the business and for reasons of public policy, the common carrier is bound “to breach of contract of carriage.
observe extraordinary diligence in the vigilance over the goods and for the safety of The Pereñas were liable for the death of Aaron despite the fact that their driver
the passengers transported by them, according to all the circumstances of each might have acted beyond the scope of his authority or even in violation of the orders
case.”22 Article 1755 of the Civil Codespecifies that the common carrier should of the common carrier.27 In this connection, the records showed their driver’s actual
“carry the passengers safely as far as human care and foresight can provide, using negligence. There was a showing, to begin with, that their driver traversed the
the utmost diligence of very cautious persons, with a due regard for all the railroad tracks at a point at which the PNR did not permit motorists going into the
circumstances.” To successfully fend off liability in an action upon the death or Makati area to cross the railroad tracks. Although that point had been used by
injury to a passenger, the common carrier must prove his or its observance of that motorists as a shortcut into the Makati area, that fact alone did not excuse their driver
extraordinary diligence; otherwise, the legal presumption that he or it was at fault or into taking that route. On the other hand, with his familiarity with that shortcut, their
acted negligently would stand.23 No device, whether by stipulation, posting of driver was fully aware of the risks to his passengers but he still disregarded the risks.
34
Compounding his lack of care was that loud music was playing inside the air- narily regulate the conduct of human affairs, would do, or the doing of something
conditioned van at the time of the accident. The loudness most probably reduced his which a prudent and reasonable man would not do, 32 or as Judge Cooley defines it,
ability to hear the warning horns of the oncoming train to allow him to correctly ‘(t)he failure to observe for the protection of the interests of another person, that
appreciate the lurking dangers on the degree of care, precaution, and vigilance which the circumstances justly demand,
______________________________ whereby such other person suffers injury.’ ”33
27 Article 1759, Civil Code. The test by which to determine the existence of negligence in a particular case
229 has been aptly stated in the leading case of Picart v. Smith,34 thuswise:
VOL. 679, AUGUST 29, 2012 229 The test by which to determine the existence of negligence in a particular case
may be stated as follows: Did the defendant in doing the alleged negligent act use
Pereña vs. Zarate
that reasonable care and caution which an ordinarily prudent person would
railroad tracks. Also, he sought to overtake a passenger bus on the left side as both have used in the same situation? If not, then he is guilty of negligence. The law
vehicles traversed the railroad tracks. In so doing, he lost his view of the train that here in effect adopts the standard supposed to be supplied by the imaginary conduct
was then coming from the opposite side of the passenger bus, leading him to of the discreet paterfamiliasof the Roman law. The existence of negligence in a
miscalculate his chances of beating the bus in their race, and of getting clear of the given case is not determined by reference to the personal judgment of the actor in the
train. As a result, the bus avoided a collision with the train but the van got slammed situation before him. The law considers what would be reckless, blameworthy, or
at its rear, causing the fatality. Lastly, he did not slow down or go to a full stop negligent in the man of ordinary intelligence and prudence and determines
before traversing the railroad tracks despite knowing that his slackening of speed and liability by that.
going to a full stop were in observance of the right of way at railroad tracks as The question as to what would constitute the conduct of a prudent man in a
defined by the traffic laws and regulations. 28 He thereby violated a specific traffic given situation must of course be always determined in the light of human
regulation on right of way, by virtue of which he was immediately presumed to be experience and in view of the facts involved in the particular case. Abstract
negligent.29 speculation cannot here be of much value but this much can be profitably
The omissions of care on the part of the van driver constituted said: Reasonable men govern their conduct by the circumstances which are
negligence,30 which, according to Layugan v. Intermediate Appellate Court,31 is “the before them or known to them. They are not, and are not supposed to be,
omission to do something which a reasonable man, guided by those considerations omniscient of the future. Hence they can be expected to take care only when
which ordi- there is something before them to suggest or warn of danger. Could a prudent
______________________________ man, in the case under consideration, foresee harm as a result of the course actually
28 E.g., Section 42(d) of Republic Act No. 4136 (Land Transportation and pursued? If so, it was the duty of the actor to take
Traffic Code), which pertinently provides: ______________________________
Section 42. Right of way.―xxx 32 Citing Black Law Dictionary, Fifth Edition, p. 930.
xxx 33 Citing Cooley on Torts, Fourth Edition, Volume 3, p. 265.
(d) The driver of a vehicle upon a highway shall bring to a full stop such 34 37 Phil. 809 (1918).
vehicle before traversing any “through highway” or railroad crossing:provided, 231
that when it is apparent that no hazard exists, the vehicle may be slowed down
to five miles per hour instead of bringing it to a full stop. VOL. 679, AUGUST 29, 2012 231
29 Article 2185 of the Civil Code provides: Pereña vs. Zarate
Article 2185. Unless there is proof to the contrary, it is presumed that a precautions to guard against that harm. Reasonable foresight of harm, followed by
person driving a motor vehicle has been negligent if at the time of the the ignoring of the suggestion born of this prevision, is always necessary before
mishap, he was violating any traffic regulation. (n) negligence can be held to exist. Stated in these terms, the proper criterion for
See also BLT Bus Company v. Intermediate Appellate Court, Nos. L-74387-90, determining the existence of negligence in a given case is this: Conduct is said to be
November 14, 1988, 167 SCRA 379. negligent when a prudent man in the position of the tortfeasor would have
30 Yamada v. Manila Railroad Co., No. 10073, 33 Phil. 8, 11 (1915). foreseen that an effect harmful to another was sufficiently probable to warrant
31 G.R. No. L-73998, November 14, 1988, 167 SCRA 363. his foregoing the conduct or guarding against its consequences. (Emphasis
230 supplied)
230 SUPREME COURT REPORTS ANNOTATED Pursuant to the Picart v. Smith test of negligence, the Pereñas’ driver was
entirely negligent when he traversed the railroad tracks at a point not allowed for a
Pereña vs. Zarate
35
motorist’s crossing despite being fully aware of the grave harm to be thereby caused Section 6. Permissive joinder of parties.―All persons in whom or against
to his passengers; and when he disregarded the foresight of harm to his passengers by whom any right to relief in respect to or arising out of the same transaction or series
overtaking the bus on the left side as to leave himself blind to the approach of the of transactions is alleged to exist, whether jointly, severally, or in the alternative,
oncoming train that he knew was on the opposite side of the bus. may, except as otherwise provided in these Rules, join as plaintiffs or be joined as
Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate Appellate defendants in one complaint, where any question of law or fact common to all such
Court,35 where the Court held the PNR solely liable for the damages caused to a plaintiffs or to all such defendants may arise in the action; but the court may make
passenger bus and its passengers when its train hit the rear end of the bus that was such orders as may be just to prevent any plaintiff or defendant from being
then traversing the railroad crossing. But the circumstances of that case and this one embarrassed or put to expense in connection with any proceedings in which he may
share no similarities. In Philippine National Railways v. Intermediate Appellate have no interest. (6)
Court, no evidence of contributory negligence was adduced against the owner of the 233
bus. Instead, it was the owner of the bus who proved the exercise of extraordinary VOL. 679, AUGUST 29, 2012 233
diligence by preponderant evidence. Also, the records are replete with the showing of
Pereña vs. Zarate
negligence on the part of both the Pereñas and the PNR. Another distinction is that
the passenger bus in Philippine National Railways v. Intermediate Appellate the vehicular and other traffic there. Verily, the Pereñas and the PNR were joint
Court was traversing the dedicated railroad crossing when it was hit by the train, but tortfeasors.
the Pereñas’ school van traversed the railroad tracks at a point not intended for that
purpose. 2.
______________________________ Was the indemnity for loss of
35 G.R. No. 70547, January 22, 1993, 217 SCRA 401.
232 Aaron’s earning capacity proper?
The RTC awarded indemnity for loss of Aaron’s earning capacity. Although
agreeing with the RTC on the liability, the CA modified the amount. Both lower
Pereña vs. Zarate courts took into consideration that Aaron, while only a high school student, had been
At any rate, the lower courts correctly held both the Pereñas and the PNR enrolled in one of the reputable schools in the Philippines and that he had been a
“jointly and severally” liable for damages arising from the death of Aaron. They had normal and able-bodied child prior to his death. The basis for the computation of
been impleaded in the same complaint as defendants against whom the Zarates had Aaron’s earning capacity was not what he would have become or what he would
the right to relief, whether jointly, severally, or in the alternative, in respect to or have wanted to be if not for his untimely death, but the minimum wage in effect at
arising out of the accident and questions of fact and of law were common as to the the time of his death. Moreover, the RTC’s computation of Aaron’s life expectancy
Zarates.36 Although the basis of the right to relief of the Zarates (i.e., breach of rate was not reckoned from his age of 15 years at the time of his death, but on 21
contract of carriage) against the Pereñas was distinct from the basis of the Zarates’ years, his age when he would have graduated from college.
right to relief against the PNR (i.e., quasi-delict under Article 2176, Civil Code), they We find the considerations taken into account by the lower courts to be
nonetheless could be held jointly and severally liable by virtue of their respective reasonable and fully warranted.
negligence combining to cause the death of Aaron. As to the PNR, the RTC rightly Yet, the Pereñas submit that the indemnity for loss of earning capacity was
found the PNR also guilty of negligence despite the school van of the Pereñas speculative and unfounded. They cited People v. Teehankee, Jr.,37 where the Court
traversing the railroad tracks at a point not dedicated by the PNR as a railroad deleted the indemnity for victim Jussi Leino’s loss of earning capacity as a pilot for
crossing for pedestrians and motorists, because the PNR did not ensure the safety of being speculative due to his having graduated from high school at the International
others through the placing of crossbars, signal lights, warning signs, and other School in Manila only two years before the shooting, and was at the time of the
permanent safety barriers to prevent vehicles or pedestrians from crossing there. The shooting only enrolled in the first semester at the Manila Aero Club to pursue his
RTC observed that the fact that a crossing guard had been assigned to man that point ambition to become a professional pilot. That meant, according to the Court, that he
from 7 a.m. to 5 p.m. was a good indicium that the PNR was aware of the risks to was for all intents and purposes only a high school graduate.
others as well as the need to control ______________________________
______________________________ 37 G.R. Nos. 111206-08, October 6, 1995, 249 SCRA 54.
36 The rule on permissive joinder of parties is Section 6, Rule 3, of the Rules of 234
Court, to wit: 234 SUPREME COURT REPORTS ANNOTATED
Pereña vs. Zarate
36
We reject the Pereñas’ submission. of the Philippines in Los Baños, the country’s leading educational institution in
First of all, a careful perusal of the Teehankee, Jr. case shows that the situation agriculture.
there of Jussi Leino was not akin to that of Aaron here. The CA and the RTC were
not speculating that Aaron would be some highly-paid professional, like a pilot (or, 3.
for that matter, an engineer, a physician, or a lawyer). Instead, the computation of Were the amounts of damages excessive?
Aaron’s earning capacity was premised on him being a lowly minimum wage earner
despite his being then enrolled at a prestigious high school like Don Bosco in The Pereñas plead for the reduction of the moral and exemplary damages
Makati, a fact that would have likely ensured his success in his later years in life and awarded to the Zarates in the respective amounts of P2,500,000.00 and
at work. P1,000,000.00 on the ground that such amounts were excessive.
And, secondly, the fact that Aaron was then without a history of earnings should The plea is unwarranted.
not be taken against his parents and in favor of the defendants whose negligence not The moral damages of P2,500,000.00 were really just and reasonable under the
only cost Aaron his life and his right to work and earn money, but also deprived his established circumstances of this case because they were intended by the law to
parents of their right to his presence and his services as well. Our law itself states assuage the Zarates’ deep mental anguish over their son’s unexpected and violent
that the loss of the earning capacity of the deceased shall be the liability of the guilty death, and their moral shock over the senseless accident. That amount would not be
party in favor of the heirs of the deceased, and shall in every case be assessed and too much, considering that it would help the Zarates obtain the means, diversions or
awarded by the court “unless the deceased on account of permanent physical amusements that would alleviate their suffering for the loss of their child. At any
disability not caused by the defendant, had no earning capacity at the time of his rate, reducing the amount as excessive
death.”38 Accordingly, we emphatically hold in favor of the indemnification for ______________________________
Aaron’s loss of earning capacity despite him having been unemployed, because 41 G.R. Nos. 121039-121045, October 18, 2001, 367 SCRA 520.
compensation of this nature is awarded not for loss of time or earnings but for loss of 236
the deceased’s power or ability to earn money.39 236 SUPREME COURT REPORTS ANNOTATED
This favorable treatment of the Zarates’ claim is not unprecedented. In Cariaga
v. Laguna Tayabas Bus Company and Manila Railroad Company,40 fourth-year Pereña vs. Zarate
medical student Edgardo Carriaga’s earning capacity, although he survived might prove to be an injustice, given the passage of a long time from when their
______________________________ mental anguish was inflicted on them on August 22, 1996.
38 Article 2206 (1), Civil Code. Anent the P1,000,000.00 allowed as exemplary damages, we should not reduce
39 People v. Teehankee, Jr., supra, note 37, at p. 207. See also 25 the amount if only to render effective the desired example for the public good. As a
CJS, Damages, §40. common carrier, the Pereñas needed to be vigorously reminded to observe their duty
40 No. L-11037, 110 Phil. 346 (1960). to exercise extraordinary diligence to prevent a similarly senseless accident from
235 happening again. Only by an award of exemplary damages in that amount would
suffice to instill in them and others similarly situated like them the ever-present need
VOL. 679, AUGUST 29, 2012 235
for greater and constant vigilance in the conduct of a business imbued with public
Pereña vs. Zarate interest.
the accident but his injuries rendered him permanently incapacitated was computed WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the
to be that of the physician that he dreamed to become. The Court considered his decision promulgated on November 13, 2002; and ORDER the petitioners to pay the
scholastic record sufficient to justify the assumption that he could have finished the costs of suit.
medical course and would have passed the medical board examinations in due time, SO ORDERED.
and that he could have possibly earned a modest income as a medical practitioner. Sereno (C.J.), Leonardo-De Castro, Villarama, Jr. and Reyes, JJ., concur.
Also, in People v. Sanchez,41 the Court opined that murder and rape victim Eileen Petition denied, judgment affirmed.
Sarmienta and murder victim Allan Gomez could have easily landed good-paying Notes.―Common carriers, like petitioner bus company, from the nature of their
jobs had they graduated in due time, and that their jobs would probably pay them business and for reasons of public policy, are bound to observe extraordinary
high monthly salaries from P10,000.00 to P15,000.00 upon their graduation. Their diligence for the safety of the passengers transported by them, according to all the
earning capacities were computed at rates higher than the minimum wage at the time circumstances of each case. (R Transport Corporation vs. Pante, 599 SCRA 747
of their deaths due to their being already senior agriculture students of the University [2009])
37
Common carriers are liable for the death or injury to passengers through the
negligence or willful 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 409
common carriers. (Id.) VOL. 766, AUGUST 12, 2015 409
――o0o――
Marina Port Services, Inc. vs. American Home Assurance Corporation
Mercantile Law; Common Carriers; Warehouse Receipts Act; Arrastre
Operators; An arrastre operator should adhere to the same degree of diligence as
that legally expected of a warehouseman or a common carrier as set forth in Section
3[b] of the Warehouse Receipts Act and Article 1733 of the Civil Code.—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
G.R. No. 201822. August 12, 2015.* a common carrier as 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
MARINA PORT SERVICES, INC.,** petitioner, vs. AMERICAN HOME vessel, the arrastre operator must take good care of the same and turn it over to the
ASSURANCE CORPORATION, respondent. party entitled to its possession.
Remedial Law; Civil Procedure; Appeals; Petition for Review on Certiorari; It Same; Same; Same; Same; In case of claim for loss filed by a consignee or the
is evident that the resolution of the instant case requires the scrutiny of factual issues insurer as subrogee, it is the arrastre operator that carries the burden of proving
which are, however, outside the scope of the present petition filed pursuant to Rule compliance with the obligation to deliver the goods to the appropriate party.—In
45 of the Rules of Court.—At the outset, it is evident that the resolution of the instant case of claim for loss filed by a consignee or the insurer as subrogee, it is the arrastre
case requires the scrutiny of factual issues which are, however, outside the scope of operator that carries the burden of proving compliance with the obligation to deliver
the present petition filed pursuant to Rule 45 of the Rules of Court. However, the the goods to the appropriate party. It must show that the losses were not due to its
Court held in Asian Terminals, Inc. v. Philam Insurance Co., Inc., 702 SCRA 88 negligence or that of its employees. It must establish that it observed the required
(2013), that: But while it is not our duty to review, examine and evaluate or weigh all diligence in handling the shipment. Otherwise, it shall be presumed that the loss was
over again the probative value of the evidence presented, the Court may nonetheless due to its fault. In the same manner, an arrastre operator shall be liable for damages if
resolve questions of fact when the case falls under any of the following exceptions: the seal and lock of the goods deposited and delivered to it as closed and sealed, be
(1) when the findings are grounded entirely on speculation, surmises, or conjectures; broken through its fault. Such fault on the part of the arrastre operator is likewise
(2) when the inference made is manifestly mistaken, absurd, or impossible; (3) when presumed unless there is proof to the contrary.
there is grave abuse of discretion; (4) when the judgment is based on a Same; Same; Same; Same; As held in International Container Terminal
misapprehension of facts; (5) when the findings of fact are conflicting; (6) when in Services, Inc. v. Prudential Guarantee & Assurance Co., Inc., 320 SCRA 244
making its findings the Court of Appeals went beyond the issues of the case, or its (1999), the signature of the consignee’s representative on the gate pass is evidence
findings are contrary to the admissions of both the appellant and the appellee; (7) of receipt of the shipment in good order and condition.—As held in International
when the findings are contrary to those of the trial court; (8) when the findings are Container Terminal Services, Inc. v. Prudential Guarantee & Assurance Co., Inc.,
conclusions without citation of specific evidence on which they are based; (9) when 320 SCRA 244 (1999), the signature of the consignee’s representative on the gate
the facts set forth in the petition as well as in the petitioner’s main and reply briefs pass is evidence of receipt of the shipment in good order and condition. Also, that
are not disputed by the respondent; and (10) when the findings of fact are premised MPSI delivered the subject shipment to MSC’s representative in good and complete
on the supposed absence of evidence and contradicted by the evidence on record. condition and with lock and
The Court finds that the instant case falls under the aforementioned second, fourth,
fifth, and seventh exceptions. Hence, it shall proceed to delve into factual matters
essential to the proper determination of the merits of this case. 410
_______________
* SECOND DIVISION. Marina Port Services, Inc. vs. American Home Assurance Corporation
** Now known as Asian Terminals, Inc.
38
seals intact is established by the testimonies of MPSI’s employees who were cargo was at the shipper’s load and count. The arrastre operator was expected to
directly involved in the processing of the subject shipment. Mr. Ponciano De Leon deliver to the consignee only the container received from the carrier.”
testified that as MPSI’s delivery checker, he personally examined the subject PETITION for review on certiorari of the decision and resolution of the Court of
container vans and issued the corresponding gate passes that were, in turn, Appeals.
countersigned by the consignee’s representative. MPSI’s other witness, Chief Claims The facts are stated in the opinion of the Court.
Officer Sergio Icasiano (Icasiano), testified that the broker, as the consignee’s Poblador, Bautista and Reyes for petitioner.
representative, neither registered any complaints nor requested for an inspection. Leaño, Leaño and Leaño III Law Office for respondent.
Remedial Law; Evidence; Hearsay Evidence Rule; It is a basic rule that DEL CASTILLO, J.:
evidence, whether oral or documentary, is hearsay, if its probative value is not based
on the personal knowledge of the witness but on the knowledge of another person This Petition for Review on Certiorari1 filed pursuant to Rule 45 of the Rules of
who is not on the witness stand.—The person who prepared the said report was not Court assails the December 29, 2011 Decision 2 and May 8, 2012 Resolution3 of the
presented in court to testify on the same. Thus, the said survey report has no Court of Appeals (CA) in C.A.-G.R. CV No. 88321, which granted the appeal filed
probative value for being hearsay. “It is a basic rule that evidence, whether oral or therein by respondent American Home Assurance Corporation (AHAC) and reversed
documentary, is hearsay, if its probative value is not based on the personal and set aside the October 17, 2006 Decision 4 of the Regional Trial Court (RTC),
knowledge of the witness but on the knowledge of another person who is not on the Pasig City, Branch 271 dismissing AHAC’s Complaint 5 for Damages against
witness stand.” Moreover, “an unverified and unidentified private document cannot petitioner Marina Port Services, Inc. (MPSI).
be accorded probative value. It is precluded because the party against whom it is _______________
presented is deprived of the right and opportunity to cross-examine the person to
whom the statements or writings are attributed. Its executor or author should be 1 Rollo, pp. 23-185, inclusive of Annexes “A” to “U.”
presented as a witness to provide the other party to the litigation the opportunity to 2 CA Rollo, pp. 86-95; penned by Associate Justice Manuel M. Barrios and
question its contents. Being mere hearsay evidence, failure to present the author of concurred in by Associate Justices Juan Q. Enriquez, Jr. and Apolinario D. Bruselas,
the letter renders its contents suspect and of no probative value.” Jr.
Mercantile Law; Common Carriers; Shipper’s Load and Count; Marina Port 3 Id., at pp. 121-122.
Services, Inc. (MPSI) cannot just the same be held liable for the missing bags of 4 Records, pp. 257-279; penned by Assisting Judge Paz Esperanza M. Cortes.
flour since the consigned goods were shipped under “Shipper’s Load and Count” 5 Id., at pp. 1-2.
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.—MPSI 412
cannot just the same be held liable for the missing bags of flour since the consigned 412 SUPREME COURT REPORTS ANNOTATED
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 Marina Port Services, Inc. vs. American Home Assurance Corporation
carrier was oblivious to the contents of the shipment. Protection against pilferage of Factual Antecedents
the ship- On September 21, 1989, Countercorp Trading PTE., Ltd., shipped from
Singapore to the Philippines 10 container vans of soft wheat flour with seals intact
onboard the vessel M/V Uni Fortune. The shipment was insured against all risks by
411 AHAC and consigned to MSC Distributor (MSC).
Upon arrival at the Manila South Harbor on September 25, 1989, the shipment
VOL. 766, AUGUST 12, 2015 411 was discharged in good and complete order condition and with safety seals in place
Marina Port Services, Inc. vs. American Home Assurance Corporation to the custody of the arrastre operator, MPSI. After unloading and prior to hauling,
ment was the consignee’s lookout. The arrastre operator was, like any ordinary agents of the Bureau of Customs officially broke the seals, opened the container
depositary, duty-bound to take good care of the goods received from the vessel and vans, and examined the shipment for tax evaluation in the presence of MSC’s broker
to turn the same over to the party entitled to their possession, subject to such and checker. Thereafter, the customs inspector closed the container vans and
qualifications as may have validly been imposed in the contract between the parties. refastened them with safety wire seals while MSC’s broker padlocked the same.
The arrastre operator was not required to verify the contents of the container received MPSI then placed the said container vans in a back-to-back arrangement at the
and to compare them with those declared by the shipper because, as earlier stated, the
39
delivery area of the harbor’s container yard where they were watched over by the 6 Id.
security guards of MPSI and of the Philippine Ports Authority. 7 Id., at pp. 12-17.
On October 10, 1989, MSC’s representative, AD’s Customs Services (ACS), 8 Id., at pp. 257-279.
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 414
warehouse, MSC discovered substantial shortages in the number of bags of flour 414 SUPREME COURT REPORTS ANNOTATED
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 WHEREFORE, premises considered, the complaint is hereby DISMISSED.
delivered them to MSC. Upon receipt, MSC once more discovered substantial SO ORDERED.9
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 Ruling of the Court of Appeals
P257,083.00.
Aggrieved, AHAC appealed to the CA.
In its Decision10 dated December 29, 2011, the CA stressed that in a claim for
413 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
VOL. 766, AUGUST 12, 2015 413 operator. In consonance with this, a presumption of fault or negligence for the loss of
Marina Port Services, Inc. vs. American Home Assurance Corporation the goods arises against the arrastre operator pursuant to Articles 1265 11 and
MPSI denied both claims of MSC. As a result, MSC sought insurance indemnity 198112 of the Civil Code. In this case, the CA found that MPSI failed to discharge
for the lost cargoes from AHAC. AHAC paid MSC the value of the missing bags of such burden and to rebut the aforementioned presumption.
flour after finding the latter’s claim in order. In turn, MSC issued a subrogation _______________
receipt in favor of AHAC.
Thereafter, AHAC filed a Complaint6 for damages against MPSI before the RTC. 9 Id., at p. 279.
10 CA Rollo, pp. 86-95.
Ruling of the Regional Trial Court 11 Article 1265. Whenever the thing is lost in the possession of the debtor, it
shall be presumed that the loss was due to his fault, unless there is proof to the
AHAC averred in its Complaint that the partial loss of the bags of flour was due contrary, and without prejudice to the provisions of Article 1165. This presumption
to the fault or negligence of MPSI since the loss happened while the shipment was does not apply in case of earthquake, flood, storm, or other natural calamity.
still in MPSI’s custody. 12 Article 1981. When the thing deposited is delivered closed and sealed, the
MPSI, on the other hand, disclaimed any liability. It essentally maintained in its depositary must return it in the same condition, and he shall be liable for damages
Answer7 that the bags of flour were inside sealed container vans when it received the should the seal or lock be broken through his fault.
same; that it handled the subject shipment with the diligence required of it; and that Fault on the part of the depositary is presumed, unless there is proof to the
the container vans were turned over by it to MSC in the same condition that they contrary.
were in at the time of their discharge from the vessel. MPSI likewise countered that As regards the value of the thing deposited, the statement of the depositor shall
the failure of MSC to request for a bad order survey belied the latter’s claim for loss. be accepted, when the forcible opening is imputable to the depositary, should there
Trial then ensued. be no proof to the contrary. However, the courts may pass upon the credibility of the
On October 17, 2006, the RTC rendered a Decision8dismissing AHAC’s depositor with respect to the value claimed by him.
Complaint. It held that while there was indeed a shortage of 1,650 sacks of soft When the seal or lock is broken, with or without the depositary’s fault, he shall
wheat flour, AHAC’s evidence failed to clearly show that the loss happened while keep the secret of the deposit.
the subject shipment was still under MPSI’s responsibility. Hence, the dispositive
portion of the RTC Decision:
_______________ 415
VOL. 766, AUGUST 12, 2015 415
40
Thus, it was held liable to AHAC for the value of the missing bags of flour, viz.: The core issue to be resolved in this case is whether MPSI is liable for the loss of
We conclude that x x x MPSI was negligent in the handling and safekeeping of the bags of flour.
the subject shipment. It did not create and implement a more defined, concrete and
effective measure to detect, curb and prevent the loss or pilferage of cargoes in its Our Ruling
custody. This is manifested by the fact that [MPSI] never took any action to address
such complaint even after it received the formal claim of loss in the first five (5) There is merit in the Petition.
vans. As a consequence, more bags of flour were eventually lost or pilfered in the
remaining container vans that were still in [MPSI’s] custody at that time. Case law Albeit involving factual questions,
tells us that negligence is that conduct which creates undue risk of harm to another, the Court shall proceed to resolve
the failure to observe that degree of care, precaution and vigilance which the this case since it falls under sev-
circumstance[s] justly demand, whereby that other person suffers injury. Clearly, eral exceptions to the rule that
[MPSI] breached its arrastre obligations to the consignee for it failed to deliver said only questions of law are proper in
bags in good and complete condition. a petition for review on certiorari.
In view of MPSI’s failure to exercise that degree of diligence, precaution and
care the law [requires] of arrastre operators in the performance of their duties to the At the outset, it is evident that the resolution of the instant case requires the
consignee, [MPSI] is legally bound to reimburse [AHAC] for the value of the scrutiny of factual issues which are, however, outside the scope of the present
missing bags of flour that it paid to MSC pursuant to the insurance policy.13 petition filed pursuant to Rule 45 of the Rules of Court. However, the Court held
in Asian Terminals, Inc. v. Philam Insurance Co., Inc.16 that:
In view of the same, the said court disposed of the appeal in this wise: _______________
WHEREFORE, premises considered, the appeal is GRANTED. The Decision of
the Regional Trial Court of Pasig City, Branch 271 dated 17 October 2006 is 14 Id., at p. 94.
REVERSED and SET ASIDE. Appellee Marina Port Services, Inc. is ORDERED to 15 Id., at pp. 121-122.
pay appellant, American Home Assurance Corporation, the sum of Two Hundred 16 G.R. Nos. 181163, 181262, & 181319, July 24, 2013, 702 SCRA 88.
Fifty-Seven Thousand and Eighty-Three Pesos (Php257,083.00) with
_______________
417
13 CA Rollo, pp. 93-94. VOL. 766, AUGUST 12, 2015 417
But while it is not our duty to review, examine and evaluate or weigh all over again
416 the probative value of the evidence presented, the Court may nonetheless resolve
416 SUPREME COURT REPORTS ANNOTATED questions of fact when the case falls under any of the following exceptions:
Marina Port Services, Inc. vs. American Home Assurance Corporation (1) when the findings are grounded entirely on speculation, surmises, or
interest thereon at six percent (6%) [per annum] from the filing of this complaint on conjectures; (2) when the inference made is manifestly mistaken, absurd, or
24 September 1990 until the decision becomes final and executory, and thereafter, at impossible; (3) when there is grave abuse of discretion; (4) when the
the rate of twelve (12) percent [per annum] until fully paid, and additionally, to pay judgment is based on a misapprehension of facts; (5) when the findings of
the x x x sum of Fifty Thousand Pesos (Php50,000.00) as attorney’s fees. fact are conflicting; (6) when in making its findings the Court of Appeals
SO ORDERED.14 went beyond the issues of the case, or its findings are contrary to the
admissions of both the appellant and the appellee; (7) when the findings are
MPSI moved for reconsideration but the CA denied the same in its contrary to those of the trial court; (8) when the findings are conclusions
Resolution15 dated May 8, 2012. without citation of specific evidence on which they are based; (9) when the
Hence, the present recourse. facts set forth in the petition as well as in the petitioner’s main and reply
briefs are not disputed by the respondent; and (10) when the findings of fact
Issue
41
are premised on the supposed absence of evidence and contradicted by the vigilance over the goods and for the safety of the passengers transported by them,
evidence on record.17 according to all the circumstances of each case.
x x x x
The Court finds that the instant case falls under the aforementioned second, 22 Asian Terminals, Inc. v. First Lepanto-Taisho Insurance
fourth, fifth, and seventh exceptions. Hence, it shall proceed to delve into factual Corporation, supra at p. 428.
matters essential to the proper determination of the merits of this case. 23 Civil Code, Art. 1303. Subrogation transfers to the persons subrogated the
credit with all the rights thereto appertaining, either against the debtor or against
Several well-entrenched legal prin- third person, be they guarantors or possessors of mortgages, subject to stipulation in
ciples govern the relationship of an a conventional subrogation.
arrastre operator and a consignee.
_______________
419
17 Id., at pp. 102-103, citing Insurance Company of North America v. Asian VOL. 766, AUGUST 12, 2015 419
Terminals, Inc., G.R. No. 180784, February 15, 2012, 666 SCRA 226, 236-237.

den of proving compliance with the obligation to deliver the goods to the appropriate
418 party.24 It must show that the losses were not due to its negligence or that of its
employees.25 It must establish that it observed the required diligence in handling the
418 SUPREME COURT REPORTS ANNOTATED shipment.26 Otherwise, it shall be presumed that the loss was due to its fault. 27 In the
Marina Port Services, Inc. vs. American Home Assurance Corporation same manner, an arrastre operator shall be liable for damages if the seal and lock of
The relationship between an arrastre operator and a consignee is similar to that the goods deposited and delivered to it as closed and sealed, be broken through its
between a warehouseman and a depositor, or to that between a common carrier and fault.28 Such fault on the part of the arrastre operator is likewise presumed unless
the consignee and/or the owner of the shipped goods.18 Thus, an arrastre operator there is proof to the contrary.29
should adhere to the same degree of diligence as that legally expected of a
warehouseman or a common carrier 19 as set forth in Section 3[b] of the Warehouse MPSI was able to prove delivery of
Receipts [Act]20 and Article 1733 of the Civil Code. 21 As custodian of the shipment the shipment to MSC in good and
discharged from the vessel, the arrastre operator must take good care of the same and complete condition and with locks
turn it over to the party entitled to its possession.22 and seals intact.
In case of claim for loss filed by a consignee or the insurer as subrogee, 23 it is the
arrastre operator that carries the bur- 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 marked as Exhibits 4
to 13.30 Each of these gate passes bore the duly identified signature 31 of MSC’s
18 Asian Terminals, Inc. v. First Lepanto-Taisho Insurance Corporation, G.R. representative which serves, among others, as an acknowledgment that:
No. 185964, June 16, 2014, 726 SCRA 415, 427. Issuance of [the] Gate Pass constitutes delivery to and receipt by consignee of the
19 Id., at pp. 427-428. goods as described above in good order and condition, unless an accompanying B.O.
20 Act No. 2137 (February 5, 1912). _______________
Section 3. Form of Receipts; What Terms May Be Inserted.—A warehouseman
may insert in a receipt, issued by him, any other terms and conditions: Provided, 24 Asian Terminals, Inc. v. First Lepanto-Taisho Insurance
That such terms and conditions shall not: Corporation, supra note 18 at p. 428.
x x x x 25 Id.
(b) In any wise impair his obligation to exercise that degree of care in the safe- 26 Id.
keeping of the goods entrusted to him which a reasonably careful man would 27 Civil Code, Art. 1265.
exercise in regard to similar goods of his own. 28 Civil Code, Art. 1981.
21 Article 1733. Common carriers, from the nature of their business and for 29 Id.
reasons of public policy, are bound to observe extraordinary diligence in the 30 Records, pp. 188-197.
42
31 Id.; marked as Exhibits 4-A to 13-A. x x x x
RECROSS EXAMINATION:
Atty. Laino
420 q [B]ut did you not say that in the gate pass it is stated there as to the external
420 SUPREME COURT REPORTS ANNOTATED appearance of the container van?
a [T]here was no indication of any inspection of the container van x x x
meaning the container vans were all in good condition, sir.
certificate duly issued and noted on the face of [the] Gate Pass appears. 32 q [Y]ou said a [while] ago that you did not receive any complaint for broken
seals, is it not?
As held in International Container Terminal Services, Inc. v. Prudential a [Y]es, sir.
Guarantee & Assurance Co., Inc.,33 the signature of the consignee’s representative q [B]ut the complaint that you received indicates that there were losses.
on the gate pass is evidence of receipt of the shipment in good order and condition.34 a [W]e did not receive any complaint from the broker, sir.
Also, that MPSI delivered the subject shipment to MSC’s representative in good q [I]f the broker will complain they have to file a request for inspection of the
and complete condition and with lock and seals intact is established by the cargo so that they will know if there [are] shortages x x x.
testimonies of MPSI’s employees who were directly involved in the processing of a [Y]es, sir.
the subject shipment. Mr. Ponciano De Leon testified that as MPSI’s delivery [C]ourt
checker, he personally examined the subject container vans and issued the q [A]nd if the broker would notice or detect [something] peculiar, the way the
corresponding gate passes that were, in turn, countersigned by the consignee’s door of the container van appears whether close[d] or not, they have to
representative. MPSI’s other witness, Chief Claims Officer Sergio Icasiano request for an inspection[?]
(Icasiano), testified that the broker, as the consignee’s representative, neither a [Y]es, your honor.
registered any complaints nor requested for an inspection, to wit: q [O]r in the absence of the padlock or wirings, the broker will request for an
REDIRECT EXAMINATION: inspection[?]
Atty. Laurente a [Y]es, your honor[;] they can require for the examination of the cargo.
x x x x _______________
Q [A]fter receipt by the broker of the container van containing the cargo, do
you require the broker to issue you a report or certification as to the 35 TSN, November 6, 1992, pp. 17-18.
appearance of the container van?
A [W]e only rely on the gate pass.
Q [A]nd you don’t place there “the padlock is still intact or the wirings still 422
intact?”
A [I]t is stated in the gate pass, your Honor. 422 SUPREME COURT REPORTS ANNOTATED
x x x x Marina Port Services, Inc. vs. American Home Assurance Corporation
_______________ q [B]ut there was no request at all by the broker?
a [T]here was none, your Honor.36
32 Id.
33 377 Phil. 1082; 320 SCRA 244 (1999). Verily, the testimonies of the aforementioned employees of MPSI confirm that
34 Id., at p. 1091; p. 250. 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.
421 AHAC justifies the failure of ACS to immediately protest the alleged loss or
VOL. 766, AUGUST 12, 2015 421 pilferage upon initial pickup of the first batch of container vans. According to it,
ACS could not have discovered the loss at that moment since the stripping of
container vans in the pier area is not allowed. The Court cannot, however, accept
Q [A]nd the findings [are counter-signed] by the representative of the broker such excuse. For one, AHAC’s claim that stripping of the container vans is not
also on the same date? allowed in the pier area is a mere allegation without proof. It is settled that “[m]ere
A [Y]es, your honor.35
43
allegations do not suffice; they must be substantiated by clear and convincing locks and seals were broken for the
proof.”37 For another, even assuming that stripping of the container vans is indeed second time.
not allowed at the pier area, it is hard to believe that MSC or its representative ACS
has no precautionary measures to protect itself from any eventuality of loss or Indeed, Article 1981 of the Civil Code also mandates a presumption of fault on
pilferage. To recall, ACS’s representative signed the gate passes without any the part of the arrastre operator as follows:
qualifications. This is despite the fact that such signature serves as an _______________
acknowledgment of ACS’s receipt of the goods in good order and condition. If MSC
was keen enough in protecting its interest, it (through ACS) should have at least 38 Records, p. 276.
qualified the receipt of the goods as subject to inspection, and thereafter arrange for 39 Bankers & Manufacturers Assurance Corporation v. Court of Appeals, G.R.
such an inspection in an area where the same is allowed to be done. However, no No. 80256, October 2, 1992, 214 SCRA 433, 436.
such action or other similar measure was shown to have been undertaken by MSC. 40 Id., at pp. 436-437.
What is clear is that ACS accepted the container vans on its behalf without any
qualification. As aptly observed by the RTC:
_______________ 424
36 Id., at pp. 18-19.
37 Aoanan, Sr. v. Aoanan, Jr., 550 Phil. 726, 738; 522 SCRA 631, 643 (2007).
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
423 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
VOL. 766, AUGUST 12, 2015 423 contrary.
Marina Port Services, Inc. vs. American Home Assurance Corporation As regards the value of the thing deposited, the statement of the depositor shall
During [the] period of turnover of goods from the arrastre to [ACS], there had be accepted, when the forcible opening is imputable to the depositary, should there
been no protest on anything on the part of consignee’s representative x x x. be no proof to the contrary. However, the courts may pass upon the credibility of the
Otherwise, the complaint would have been shown [on] the gate passes. In fact, each depositor with respect to the value claimed by him.
gate pass showed the date of delivery, the location of delivery, the truck number of When the seal or lock is broken, with or without the depositary’s fault, he shall
the truck used in the delivery, the actual quantity of goods delivered, the numbers of keep the secret of the deposit.
the safety wires and padlocks of the vans and the signatures of the receiver. More
importantly, the gate passes bared the fact that the shipments were turned over by However, no such presumption arises in this case considering that it was not
[MPSI] to [ACS] on the same dates of customs inspections and turnovers. 38 sufficiently shown that the container vans were reopened or that their locks and seals
were broken for the second time. As may be recalled, the container vans were opened
There being no exception as to bad order, the subject shipment, therefore, by a customs official for examination of the subject shipment and were thereafter
appears to have been accepted by MSC, through ACS, in good order. 39 “It logically resealed with safety wires. While this fact is not disputed by both parties, AHAC
follows [then] that the case at bar presents no occasion for the necessity of discussing alleges that the container vans were reopened and this gave way to the alleged
the diligence required of an [arrastre operator] or of the theory of [its] prima pilferage. The Court notes, however, that AHAC based such allegation solely on the
facieliability x x x, for from all indications, the shipment did not suffer loss or survey report of the Manila Adjuster & Surveyors Company (MASCO). As observed
damage while it was under the care x x x of the arrastre operator x x x.”40 by the RTC:
AHAC x x x claim[s] that there were two instances when the seals were broken.
[First], when the customs officer examined the shipment and had it resealed with
Even in the light of Article 1981, no safety wires. [Second], when the surveyor and consignee’s broker visually inspected
presumption of fault on the part of the shipment and allegedly found the safety wires of the customs officer to have been
MPSI arises since it was not suffic- detached and missing which they then replaced. This second instance is only upon
iently shown that the container their say so as there is no
vans were reopened or that their
44
arrangement. “This means that the shipper was solely responsible for the loading of
425 the container, while the carrier was oblivious to the contents of the shipment.
VOL. 766, AUGUST 12, 2015 425 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
x x x documentary or testimonial proof on the matter [other] than the [MASCO] their possession, subject to such qualifications as may have validly been imposed in
survey report.41 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
However, the person who prepared the said report was not presented in court to shipper because, as earlier stated, the cargo was at the shipper’s load and count. The
testify on the same. Thus, the said survey report has no probative value for being arrastre operator was expected to deliver to the consignee only the container received
hearsay. “It is a basic rule that evidence, whether oral or documentary, is hearsay, if from the carrier.”44
its probative value is not based on the personal knowledge of the witness but on the All told, the Court holds that MPSI is not liable for the loss of the bags of flour.
knowledge of another person who is not on the witness stand.” 42Moreover, “an WHEREFORE, the Petition is GRANTED. The Decision dated December 29,
unverified and unidentified private document cannot be accorded probative value. It 2011 and Resolution dated May 8, 2012 of the Court of Appeals in C.A.-G.R. CV
is precluded because the party against whom it is presented is deprived of the right No. 88321 are REVERSED and SET ASIDE. The Decision dated October 17, 2006
and opportunity to cross-examine the person to whom the statements or writings are of the Regional Trial Court, Branch 271, Pasig City in Civil Case No. 90-54517
attributed. Its executor or author should be presented as a witness to provide the is REINSTATED and the Complaint in the said case is DISMISSED.
other party to the litigation the opportunity to question its contents. Being mere SO ORDERED.
hearsay evidence, failure to present the author of the letter renders its contents Carpio (Chairperson), Brion, Mendoza and Leonen, JJ., concur.
suspect and of no probative value.”43 Petition granted, judgment and resolution reversed and set aside.
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 44 International Container Terminal Services, Inc. (ICTSI) v. Prudential
1981 of the Civil Code. Guarantee & Assurance Co., Inc., supra note 33 at pp. 1093-1094; pp. 252-253.

At any rate, the goods were
shipped under “Shipper’s Load
and Count” arrangement. Thus, 427
protection against pilferage of
the subject shipment was the VOL. 766, AUGUST 12, 2015 427
consignee’s lookout. Marina Port Services, Inc. vs. American Home Assurance Corporation
_______________ Notes.—Hearsay evidence is admissible in determining probable cause in a
preliminary investigation because such investigation is merely preliminary, and does
41 Records, p. 274. not finally adjudicate rights and obligations of parties. (Estrada vs. Office of the
42 Dela Llana v. Biong, G.R. No. 182356, December 4, 2013, 711 SCRA 522, Ombudsman, 748 SCRA 1 [2015])
535. The legal relationship between an arrastre operator and a consignee is akin to that
43 Huang v. Philippine Hoteliers, Inc., G.R. No. 180440, December 5, 2012, between a warehouseman and a depositor. (Unknown Owner of the
687 SCRA 162, 203-204. Vessel M/V China Joy vs. Asian Terminals, Inc., 752 SCRA 642 [2015])

426 ——o0o——
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”
45
The facts are stated in the opinion of the Court.
Ramon Sotelo for appellant.
Kincaid & Hartigan for appellee.
FiSHER, J.:
At the time of the occurrence which gave rise to this litigation the plaintiff, Jose
Cangco, was in the employment of the Manila Railroad Company in the capacity of
clerk,
769
VOL. 38, OCTOBER 14, 1918. 769
Cangco vs. Manila Railroad Co.
with a monthly wage of P25. He lived in the pueblo of San Mateo, in the province of
Rizal, which is located upon the line of the defendant railroad company; and in
coming daily by train to the company's office in the city of Manila where he worked,
he used a pass, supplied by the company, which entitled him to ride upon the
company's trains free of charge. Upon the occasion in question, January 20, 1915, the
plaintiff was returning home by rail from his daily labors; and as the train drew up to
the station in San Mateo the plaintiff arose from his seat in the second class-car
where he was riding and, making his exit through the door, took his position upon
the steps of the coach, seizing the upright guardrail with his right hand for support.
On the side of the train where passengers alight at the San Mateo station there is
a cement platform which begins to rise with a moderate gradient some distance away
from the company's office and extends along in front of said office for a distance
sufficient to cover the length of several coaches. As the train slowed down another
[No. 12191. October 14, 1918.]
passenger, named Emilio Zufiiga, also an employee of the railroad company, got off
JOSE CANGCO, plaintiff and appellant, vs. MANILA RAILROAD Co.,
the same car, alighting safely at the point where the platform begins to rise from the
defendant and appellee.
level of the ground. When the train had proceeded a little farther the plaintiff Jose
Cangco stepped off also, but one or both of his feet came in contact with a sack of
1. 1.MASTER AND SERVANT; CONTRACT; NEGLIGENCE..—Failure to watermelons with the result that his feet slipped from under him. and he fell violently
perform a contract cannot be excused upon the ground that the breach was on the platform. His body at once rolled from the platform and was drawn under the
due to the negligence of a servant of the obligor, and that the latter moving car, where his right arm was badly crushed and lacerated. It appears that
exercised due diligence in the selection and control of the servant. after the plaintiff alighted from the train the car moved forward possibly six meters
before it came to a full stop.
1. 2.CONTRACTS; NEGLIGENCE; CULPA AQUILIANA; CULPA The accident occurred between 7 and 8 o'clock on a dark night, and as the
CONTRACTUAL.—The distinction between negligence as the source of railroad station was lighted dimly by a single light located some distance away,
an obligation (culpa aquiliana) and negligence in the performance of a objects on the
contract (culpa contractual) pointed out. 770
770 PHILIPPINE REPORTS ANNOTATED
1. 3.CARRIERS; PASSENGERS; NEGLIGENCE; ALIGHTING FROM
MOVING TRAIN.—It is not negligence per se for a traveler to alight
platform where the accident occurred were difficult to discern, especially to a person
from a slowly moving train.
emerging from a lighted car.
The explanation of the presence of a sack of melons on the platform where the
APPEAL from a judgment of the Court of First Instance of Manila. Del Rosario, J. plaintiff alighted is found in the fact that it was the customary season for harvesting
46
these melons and a large lot had been brought to the station for shipment to the plaintiff has suffered arises, if at all, from the breach of that contract by reason of the
market. They were contained in numerous tow sacks which had been piled on the failure of defendant to exercise due care in its performance. That is to say, its
platform in a row one upon another. The testimony shows that this row of sacks was liability is direct and immediate, differing essentially, in the legal viewpoint from
so placed that there was a space of only about two feet between the sacks of melons that presumptive responsibility for the negligence of its servants, imposed by article
and the edge of the platform; and it is clear that the fall of the plaintiff was due to the 1903 of the Civil Code, which can be rebutted by proof of the exercise of due care in
fact that his foot alighted upon one of these melons at the moment he stepped upon their selection and supervision. Article 1903 of the Civil Code is not applicable to
the platform. His statement that he failed to see these objects in the darkness is obligations arising ex contractu, but only to extra-contractual obligations—or to use
readily to be credited. the technical form of expression, that article relates only to culpa aquiliana and not
The plaintiff was drawn from under the car in an unconscious condition, and it to culpa contractual.
appeared that the injuries which he had received were very serious. He was therefore 772
brought at once to a certain hospital in the city of Manila where an examination was 772 PHILIPPINE REPORTS ANNOTATED
made and his arm was amputated. The result of this operation was unsatisfactory,
and the plaintiff was then carried to another hospital where a second operation was
performed and the member was again amputated higher up near the shoulder. It Manresa (vol. 8, p. 67) in his commentaries upon articles 1103 and 1104 of the Civil
appears in evidence that the plaintiff expended the sum of P790.25 in the form of Code, clearly points out this distinction, which was also recognized by this Court in
medical and surgical fees and for other expenses in connection with the process of its decision in the case of Rakes vs. Atlantic, Gulf and Pacific Co. (7 Phil. Rep., 359).
his curation. In commenting upon article 1093 (vol. 8, p. 30) Manresa clearly points out the
Upon August 31, 1915, he instituted this proceeding in the Court of First difference between "culpa, substantive and independent, which of itself constitutes
Instanee of the city of Manila to recover damages of the defendant company, the source of an obligation between persons not formerly connected by any legal tie"
founding his action upon the negligence of the servants and employees of the and culpaconsidered as an "accident in the performance of an obligation already
defendant in placing the sacks of melons upon the platform and in leaving them so existing * * *."
placed as to be a menace to the security of passenger alighting from the company's In the Rakes case (supra) the decision of this court was made to rest squarely
trains. At the hearing in the Court of First Instance, his Honor, the trial judge, found upon the proposition that article 1903 of the Civil Code is not applicable to acts of
the facts substantially as above negligence which constitute the breach of a contract.
771 Upon this point the Court said:
"The acts to which these articles [1902 and 1903 of the Civil Code] are
VOL. 38, OCTOBER 14, 1918. 771 applicable are understood to be those not growing out of pre-existing duties of the
Cangco vs. Manila Railroad Co. parties to one another But where relations already formed give rise to duties, whether
stated, and drew therefrom his conclusion to the effect that, although negligence was springing from contract or quasi-contract, then breaches of those duties are subject to
attributable to the defendant by reason of the fact that the sacks of melons were so articles 1101, 1103 and 1104 of the same code." (Rakes vs. Atlantic, Gulf and Pacific
placed as to obstruct passengers passing to and from the cars, nevertheless, the Co., 7 Phil. Rep., 359 at p. 365.)
plaintiff himself had failed to use due caution in alighting from the coach and was This distinction is of the utmost importance. The liabilitv which, under the
therefore precluded from recovering. Judgment was accordingly entered in favor of Spanish law, is, in certain cases imposed upon employers with respect to damages
the defendant company, and the plaintiff appealed. occasioned by the negligence of their employees to persons to whom they are not
It can not be doubted that the employees of the railroad company were guilty of bound by contract, is not based, as in the Endish Common Law, upon the principle
negligence in piling these sacks on the platform in the manner above stated; that their of respondentSt-Tit were, the master would be liable in every case and
presence caused the plaintiff to fall as he alighted from the train; and that they unconditionally-but upon the principle announced inLwl 1902 of the Civil Code,
therefore constituted an effective legal cause of the injuries sustained by the plaintiff. which imposes upon all Bersons who by their fault or negligence, do injury to ano he
It necessarily follows that the defendant company is liable for the damage thereby , The obUgation of making good the damage caused.
occasioned unless recovery is barred by the plaintiff's own contributory negligence. 773
In resolving this problem it is necessary that each of these conceptions of liability, VOL. 38, OCTOBER 14, 1918. 773
to-wit, the primary responsibility of the defendant company and the contributory
negligence of the plaintiff should be separately examined.
It is important to note that the foundation of the legal liability of the defendant is gence which makes him liable for all the consequences of his imprudence. The
the contract of carriage, and that the obligation to respond for the damage which obligation to make good the damage arises at the very instant that the unskillful
servant, while acting within the scope of his employment, causes the injury. The
47
liability of the master is personal and direct. But, if the master has not been guilty of the Spanish law of negligence. It is, of course, in striking contrast to the American
any negligence whatever in the selection and. direction of the servant, he is not liable doctrine that, in relations with strangers, the negligence of the serVant is
for the acts of the latter, whether done within the scope of his employment or not, if conclusively the negligence of the master."
the damage done by the servant does not amount to a breach of the contract between The opinion there expressed by this Court, to the effect that in case of extra-
the master and the person injured. contractual culpa based upon negligence, it is necessary that there shall have been
It is not accurate to say that proof of diligence and care in the selection and some fault attributable to the defendant personally, and that the last paragraph of
control of the servant relieves the master from liability for the latter's acts—on the article 1903 merely establishes a rebuttable presumption, is in complete accord with
contrary, that proof shows that the responsibility has never existed. As Manresa says the authoritative opinion of Manresa, who says (vol. 12, p. 611) that the liability
(vol. 8, p. 68) the liability arising from extra-contractual culpa is always based upon created by article 1903 is imposed by reason of the breach of the duties inherent in
a voluntaryact or omission which, without willful intent, but by mere negligence or the special relations of authority or superiority existing between the person called
inattention, has caused damage to another. A master who exercises all possible care 775
in the selection of his servant, taking into consideration the qualifications they should VOL. 38, OCTOBER 14, 1918. 775
possess for the discharge of the duties which it is his purpose to confide to them, and
directs them with equal diligence, thereby performs his duty to third persons to
whom he is bound by no contractual ties, and he incurs no liability whatever if, by upon to repair the damage and the one who, by his act or omission, was the cause of
reason of the negligence of his servants, even within the scope of their employment, it.
such third persons suffer damage. True it is that under article 1903 of the Civil Code On the other hand, the liability of masters and employers for the negligent acts or
the law creates a presumption that he has been negligent in the selection or direction omissions of their servants or agents, when such acts or omissions cause damages
of his servant, but the presumption is rebuttable and yields to proof of due care and which amount to the breach of a contract, is not based upon a mere presumption of
diligence in this respect. the master's negligence in their selection or control, and proof of exercise of the
The supreme court of Porto Rico, in interpreting identical provisions, as found in utmost diligence and care in this regard does not relieve the master of his liability for
the Porto Rican Civil Code, has held that these articles are applicable to cases of the breach of his contract.
extra-contractual culpa exclusively. (Carmona vs. Cuesta, 20 Porto Rico Reports, Every legal obligation must of necessity be extra-contractual or contractual.
215.) Extra-contractual obligation has its source in the breach or omission of those mutual
774 duties which civilized society imposes upon its members, or which arise from these
relations, other than contractual, of certain members of society to others, generally
774 PHILIPPINE REPORTS ANNOTATED embraced in the concept of status. The legal rights of each member of society
Cangco vs. Manila Railroad Co. constitute the measure of the corresponding legal duties, mainly negative in
This distinction was again made patent by this Court in its decision in the case character, which the existence of those rights imposes upon all other members of
of Bahia vs. Litonjua and Leynes, (30 Phil. Rep., 624), which was an action brought society. The breach of these general duties whether due to willful intent or to mere
upon the theory of the extra-contractual liability of the defendant to respond for the inattention, if productive of injury, gives rise to an obligation to indemnify the
damage caused by the carelessness of his employee while acting within the scope of injured party. The fundamental distinction between obligations of this character and
his employment. The Court, after citing the last paragraph of article 1903 of the Civil those which arise from contract, rests upon the fact that in cases of non-contractual
Code, said: obligation it is the wrongful or negligent act or omission itself which creates
"From this article two things are apparent: (1) That when an injury is caused by the vinculum juris, whereas in contractual relations the vinculum exists
the negligence of a servant or employee there instantly arises a presumption of law independently of the breach of the voluntary duty assumed by the parties when
that there was negligence on the part of the master or employer either in the selection entering into the contractual relation.
of the servant or employee, or in supervision over him, after the selection, or both; With respect to extra-contractual obligation arising from negligence, whether of
and (2) that that presumption is juris tantum and not juris et de jure, and act or omission, it is competent for the legislature to elect—and our Legislature has
consequently, may be rebutted. It follows necessarily that if the employer shows to so elected—to limit such liability to cases in which the person upon whom such an
the satisfaction of the court that in selection and supervision he has exercised the care obligation is imposed is morally culpable or, on the contrary, for reasons of public
and diligence of a good f ather of a f amily, the presumption is overcome and he is policy, to extend
relieved from liability. 776
"This theory bases the responsibility of the master ultimately on 776 PHILIPPINE REPORTS ANNOTATED
his own negligence and not on that of his servant. This is the notable peculiarity of
48
that liability, without regard to the lack of moral culpability, so as to include would enjoy practically complete immunity from damages arising from the breach of
responsibility for the negligence of those persons whose acts or omissions are their contracts if caused by negligent acts of omission or commission on the part of
imputable, by a legal fiction, to others who are in a position to exercise an absolute their servants, as such juridical persons can of necessity only act through agents or
or limited control over them. The legislature which adopted our Civil Code has servants, and it would no doubt be true in most instances that reasonable care had
elected to limit extracontractual liability—with certain well-defined exceptions—to been taken in the selection and direction of such servants. If one delivers securities to
cases in which moral culpability can be directly imputed to the persons to be a banking corporation as collateral, and they are lost by reason of the negligence of
charged. This moral responsibility may consist in having failed to exercise due care .some clerk employed by the bank, would it be just and reasonable to permit the bank
in one's own acts, or in having failed to exercise due care in the selection and control to relieve itself of Hability for the breach of its contract to return the collateral upon
of one's agents or servants, or in the control of persons who, by reason of their status, the payment of the debt by proving that due care had been exercised in the selection
occupy a position of dependency with respect to the person made liable for their and direction of the clerk?
conduct. This distinction between culpa aquiliana, as the source
The position of a natural or juridical person who has undertaken by contract to 778
render service to another, is wholly different from -that to which article 1903 relates. 778 PHILIPPINE REPORTS ANNQTATED
When the source of the obligation upon which plaintiff's cause of action depends is a
negligent act or omission, the burden of proof rests upon plaintiff to prove the
negligence if he does not his action 'fails. But when the facts averred show a of an obligation, and culpa contractual as a mere incident to the performance of a
contractual undertaking by defendant for the benefit of plaintiff, and it is alleged that contract has frequently been recognized by the supreme court of
plaintiff has failed or refused to perform the contract, it is not necessary for plaintiff Spain. (Sentencias of June 27, 1894; November 20, 1896; and December 13, 1896.)
to specify in his pleadings whether the breach of the contract is due to wilful fault or In the decision of November 20, 1896, it appeared that plaintiff's action arose ex
to negligence on the part of the defendant, or of his ,servants or agents. Proof of the contractu, but that defendant sought to avail himself of the provisions of article 1902
contract and of its nonperf ormance is sufficient prima facie to warrant a recovery. of the Civil Code as a defense. The Spanish Supreme Court rejected defendant's
"As a general rule * * * it is logical that in case of extra-contractual culpa, a contention, saying:
suing creditor should assume the burden of proof of its existence, as the only fact "These are not cases of injury caused, without any preexisting obligation, by
upon which his action is based; while on the contrary, in a case of negligence which fault or negligence, such as those to which article 1902 of the Civil Code relates, but
presupposes the existence of a contractual obligation, if the creditor shows that it of damages caused by the defendant's failure to carry out the undertakings imposed
exists and that it has been broken, it is not necessary for him to prove the by the contracts * * *."
negligence." (Manresa, vol. 8, p. 71 [1907 ed., p. 76].) A brief review of the earlier decision of this court involving the liability of
777 employers for damage done by the negligent acts of their servants will show that in
no case has the court ever decided that the negligence of the defendant's servants
VOL. 38, OCTOBER 14. 1918. 777 [has] been held to constitute a defense to an action for damages for breach of
Cangco vs, Manila Railroad Co. contract.
As it is not necessary for the plaintiff in an action for the breach of a contract to show In the case of Johnson vs. David (5 Phil. Rep., 663), the court held that the owner
that the breach was due to the negligent conduct of defendant or of his servants, even of a carriage was not liable for the damages caused by the negligence of his driver. In
though such be in f act the actual cause of the breach, it is obvious that proof on the that case the court commented on the fact that no evidence had been adduced in the
part of defendant that the negligence or omission of his servants or agents caused the trial court that the defendant had been negligent in the employment of' the driver, or
breach of the contract would not constitute a defense to the action. If the negligence that he had any knowledge of his lack of skill or carefulness.
of servants or agents could be invoked as a means of discharging the liability arising In the case of Baer Senior & Co.'s Successors vs.Compania Maritima (6 Phil.
from contract, the anomalous result would be that persons acting through the Rep., 215), the plaintiff sued the defendant for damages caused by the loss of a barge
medium of agents or servants in the performance of their contracts, would be in a belonging to plaintiff which was allowed to get adrift by the negligence of
better position than those .acting in person. If one delivers a valuable watch to a defendant's servants in the course of the performance of a contract of towage. The
watchmaker who contracts to repair it, and the bailee, by a personal negligent act court held, citing Manresa (vol 8, pp. 29, 69) that if the "obligation of the defendant
causes its destruction, he is unquestionably liable. Would it be logical to free him grew out of a contract made between it and the plaintiff * * we do not think that the
from his liability for the breach of his contract, which involves the duty to exercise provisions of articles 1902 and 1903 are applicable to the case."
due care in the preservation of the watch, if he shows that it was his servant whose 779
negligence caused the injury? If such a theory could be accepted, juridical persons VOL. 38, OCTOBER 14, 1918. 779
49
Cangco vs. Manila Railroad Co. Therefore, it follows that it is not to be inferred, because the court held in the
In the case of Chapman vs. Underwood (27 Phil. Rep., 374), plaintiff sued the Yamada case that the defendant was liable for the damages negligently caused by its
defendant to recover damages for personal injuries caused by the negligence of servant to a person to whom it was bound by contract, and made reference to the fact
defendant's chauffeur while driving defendant's automobile in which defendant was that the defendant was negligent in the selection and control of its servants, that in
riding at the time. The court found that the damages were caused by the negligence such a case the court would have held that it would have been a good defense to the
of the driver of the automobile, but held that the master was not liable, although he action, if presented squarely upon the theory of the breach of the contract, for
was present at the time, saying: defendant to have proved that it did in fact exercise care in the selection and control
"* * * unless the negligent acts of the driver are continued for such a length of of the servant.
time as to give the owner a reasonable opportunity to observe them and to direct the The true explanation of such cases is to be found by directing the attention to the
driver to desist therefrom. * * * The act complained of must be continued in the relative spheres of contractual and extra-contractual obligations. The field of
presence of the owner for such a length of time that the owner by his acquiescence, noncontractual obligation is much more broader than that of contractual obligation,
makes the driver's acts his own." comprising, as it does, the whole extent of juridical human relations. These two
In the case of Yamada vs. Manila Railroad Co. and Bachrach Garage & Taxicab fields, figuratively speaking, concentric; that is to say, the mere
Co. (33 Phil. Rep., 8), it is true that the court rested its conclusion as to the liability 781
of the defendant upon article 1903, although the facts disclosed that the injury VOL. 38, OCTOBER 14, 1918. 781
complained of by plaintiff constituted a breach of the duty to him arising out of the Cangco vs. Manila Railroad Co.
contract of transportation. The express ground of the decision in this case was that fact that a person is bound to another by contract does not relieve him from extra-
article 1903, in dealing with the liability of a master for the negligent acts of his contractual liability to such person. When such a contractual relation exists the
servants "makes the distinction between private individuals and public enterprise;" obligor may break the contract under such conditions that the same act which
that as to the latter the law creates a rebuttable presumption of negligence in the constitutes a breach of the contract would have constituted the source of an extra-
selection or direction of the servants; and that in the particular case the presumption contractual obligation had no contract existed between the parties.
of negligence had not been overcome. The contract of defendant to transport plaintiff carried with it, by implication, the
It is evident, therefore, that in its decision in the Yamada case, the court treated duty to carry him in safety and to provide safe means of entering and leaving its
plaintiff's action as though founded in tort rather than as based upon the breach of the trains (Civil Code, article 1258). That duty, being contractual, was direct and
contract of carriage, and an examination of the pleadings and of the briefs shows that immediate, and its non-performance could not be excused by proof that the fault was
the questions of law were in fact discussed upon this theory. Viewed from the morally imputable to defendant's servants.
standpoint of the defendant the practical result must have been the same in any event. The railroad company's defense involves the assumption that even granting that
The proof disclosed beyond doubt that the defendant's servant was grossly negligent the negligent conduct of its servants in placing an obstruction upon the platform was
and that a -breach of its contractual obligation to maintain safe means of approaching and
780 leaving its trains, the direct and proximate cause of the injury suffered by plaintiff
780 PHILIPPINE REPORTS ANNOTATED was his own contributory negligence in failing to wait until the train had come to a
Cangco vs. Manila, Railroad Co. complete stop before alighting. Under the doctrine of comparative negligence
his negligence was the proximate cause of plaintiff's injury. It also affirmatively announced in the Rakes case (supra), if the accident was caused by plaintiff's own
appeared that defendant had been guilty of negligence in its failure to exercise proper negligence, no liability is imposed upon defendant, whereas if the accident was
discretion in the direction of the servant. Defendant was, therefore, liable for the caused by defendant's negligence and plaintiff's negligence merely contributed to his
injury suffered by plaintiff, whether the breach of the duty were to be regarded as injury, the damages should be apportioned. It is, therefore, important to ascertain if
constituting culpa aquilina or culpa contractual. As Manresa points out (vol. 8, pp. defendant was in fact guilty of negligence.
29 and 69) whether negligence occurs as an incident in the course of the performance It may be admitted that had plaintiff waited until the train had come to a full stop
of a contractual undertaking or is itself the source of an extra-contractual obligation, before alighting, the particular injury suffered by him could not have occurred.
its essential characteristics are identical. There is always an act or omission Defendant contends, and cites many authorities in support of the contention, that it is
productive of damage due to carelessness or inattention on the part of the defendant. negligence per se for a passenger to alight from a moving train. We are not disposed
Consequently, when the court holds that a defendant is liable in damages for having to
failed to exercise due care, either directly, or in failing to exercise proper care in the 782
selection and direction of his servants, the practical result is identical in either case. 782 PHILIPPINE REPORTS ANNOTATED
50
Cangco vs. Manila Railroad Co. passengers, the placing of them in that position gave rise to the duty to light the
subscribe to this doctrine in its absolute form. We are of the opinion that this premises adequately so that their presence would be revealed.
proposition is too broadly stated and is at variance with the experience of everyday As pertinent to the question of contributory negligence on the part of the plaintiff
life. In this particular instance, that the train was barely moving when plaintiff in this case the following circumstances are to be noted: The company's platform was
alighted is shown conclusively by the fact that it came to stop within six meters from constructed upon a level higher than that of the roadbed and the surrounding ground.
the place where he stepped from it. Thousands of persons alight from trains under The distance from the steps of the car to the spot where the alighting passenger
these conditions every day of the year, and sustain no injury where the company has would place his feet on the platform was thus reduced, thereby decreasing the risk
kept its platform free from dangerous obstructions. There is no reason to believe that incident to stepping off. The nature of the platform, constructed as it was of cement
plaintiff would have suffered any injury whatever in alighting as he did had it not material, also assured to the passenger a stable and even surface on which to alight.
been for defendant's negligent failure to perform its duty to provide a safe alighting Furthermore, the plaintiff was possessed of the vigor and agility of young manhood,
place. and it was by no means so risky for him to get off while the train was
We are of the opinion that the correct doctrine relating to this subject is that 784
expressed in Thompson's work on Negligence (vol. 3, sec. 3010) as follows: 784 PHILIPPINE REPORTS ANNOTATED
"The test by which to determine whether the passenger has been guilty of Cangco vs. Manila Railroad Co.
negligence in attempting to alight from a moving railway train, is that of ordinary or yet moving as the same act would have been in an aged or feeble person. In
reasonable care. It is to be considered whether an ordinarily prudent person, of the determining the question of contributory negligence in performing such act—that is
age, sex and condition of the passenger, would have acted as the passenger acted to say, whether the passenger acted prudently or recklessly—the age, sex, and
under the circumstances disclosed by the evidence. This care has been defined to be, physical condition of the passenger are circumstances necessarily affecting the safety
not the care which may or should be used by the prudent man generally, but the care of the passenger, and should be considered. Women, it has been observed, as a
which a man of ordinary prudence would use under similar circumstances, to avoid general rule, are less capable than men of alighting with safety under such
injury." (Thompson, Commentaries on Negligence, vol. 3, sec. 3010.) conditions, as the nature of their wearing apparel obstructs the free movement of the
Or, if we prefer to adopt the mode of exposition used by this' court limbs. Again, it may be noted that the place was perfectly familiar to the plaintiff, as
in Picart vs. Smith (37 Phil. Rep., 809), we may say that the test is this; Was there it was his daily custom to get on and off the train at this station. There could,
anything in the circumstances surrounding the plaintiff at the time he alighted from therefore, be no uncertainty in his mind with regard either to the length of the step
the train which would have admonished a person of average prudence that to get off which he was required to take or the character of the platform where he was
the train under the conditions then existing was dangerous? If so, the alighting. Our conclusion is that the conduct of the plaintiff in undertaking to alight
783 while the train was yet slightly under way was not characterized by imprudence and
VOL. 38, OCTOBER 14, 1918. 783 that therefore he was not guilty of contributory negligence.
Cangco vs. Manila Railroad Co. The evidence shows that the plaintiff, at the time of the accident, was earning
plaintiff should have desisted from alighting; and his failure so to desist was P25 a month as a copyist clerk, and that the injuries he has suffered have
contributory negligence. permanently disabled him from continuing that employment. Defendant has not
As the case now before us presents itself, the only fact from which a conclusion shown that any other gainful occupation is open to plaintiff. His expectancy of life,
can be drawn to the effect that the plaintiff was guilty of contributory negligence is according to the standard mortality tables, is approximately thirty-three years. We
that he stepped off the car without being able to discern clearly the condition of the are of the opinion that a fair compensation for the damage suffered by him for his
platform and while the train was yet slowly moving. In considering the situation thus permanent disability is the sum of P2,500, and that he is also entitled to recover of
presented, it should not be overlooked that the plaintifF was, as we find, ignorant of defendant the additional sum of P790.25 for medical attention, hospital services, and
the fact that the obstruction which was caused by the sacks of melons piled on the other incidental expenditures connected with the treatment of his injuries.
platform existed; and as the defendant was bound by reason of its duty as a public The decision of the lower court is reversed, and judgment is hereby rendered
carrier to afford to its passengers facilities for safe egress from its trains, the plaintiff plaintiff for the sum of P3,290.25, and for the costs of both instances. So ordered.
had a right to assume, in the absence of some circumstance to warn him to the Arellano, C. J., Torres, Street, and Avancena, JJ.,concur.
contrary, that the platform was clear. The place, as we have already stated, was dark,
or dimly lighted, and-this also is proof of a failure upon the part of the defendant in
the performance of a duty owing by it to the plaintiff; f or if it were by any
possibility conceded that it had a right to pile these sacks in the path of alighting
51
* THIRD DIVISION.

139
VOL. 787, MARCH 9, 2016 139
Designer Baskets, Inc. vs. Air Sea Transport, Inc.
ment to transport and to deliver them at a specified place to a person named or
on his order.” It may also be defined as “an instrument in writing, signed by a carrier
or his agent, describing the freight so as to identify it, stating the name of the
consignor, the terms of the contract of carriage, and agreeing or directing that the
freight be delivered to bearer, to order or to a specified person at a specified place.
Same; Same; Common Carriers; Under Article 350 of the Code of Commerce,
“the shipper as well as the carrier of the merchandise or goods may mutually
demand that a bill of lading be made.”—Under Article 350 of the Code of
Commerce, “the shipper as well as the carrier of the merchandise or goods may
mutually demand that a bill of lading be made.” A bill of lading, when issued by the
carrier to the shipper, is the legal evidence of the contract of carriage between the
former and the latter. It defines the rights and liabilities of the parties in reference to
the contract of carriage. The stipulations in the bill of lading are valid and binding
unless they are contrary to law, morals, customs, public order or public policy.
Same; Same; Same; A carrier is allowed by law to release the goods to the
consignee even without the latter’s surrender of the bill of lading.—A carrier is
allowed by law to release the goods to the consignee even without the latter’s
surrender of the bill of lading. The third paragraph of Article 353 of the Code of
Commerce is enlightening: Article 353. The legal evidence of the contract between
the shipper and the carrier shall be the bills of lading, by the contents of which the
disputes which may arise regarding their execution and performance shall be
decided, no exceptions being admissible other than those of falsity and material error
in the drafting. After the contract has been complied with, the bill of lading which
the carrier has issued shall be returned to him, and by virtue of the exchange of this
title with the thing transported, the respective obligations and actions shall be
considered cancelled, unless in the same act the claim which the parties may wish to
reserve be reduced to writing, with the exception of that provided for in Article
366. In case the consignee, upon receiving the goods, cannot return the bill of
G.R. No. 184513. March 9, 2016.* lading subscribed by the carrier, because of its loss or any other cause, he must
give the latter a receipt for the goods delivered, this receipt producing the same
DESIGNER BASKETS, INC., petitioner, vs. AIR SEA TRANSPORT, INC. and effects as the return of the bill of lading.
ASIA CARGO CONTAINER LINES, INC., respondents.
Mercantile Law; Bill of Lading; Words and Phrases; A bill of lading is defined
as “a written acknowledgment of the receipt of goods and an agreement to transport 140
and to deliver them at a specified place to a person named or on his order.”—A bill 140 SUPREME COURT REPORTS ANNOTATED
of lading is defined as “a written acknowledgment of the receipt of goods and an Designer Baskets, Inc. vs. Air Sea Transport, Inc.
agree- Same; Same; Same; The general rule is that upon receipt of the goods, the
_______________ consignee surrenders the bill of lading to the carrier and their respective obligations
52
are considered canceled; Exceptions.—The general rule is that upon receipt of the This is a Petition for Review on Certiorari1 of the August 16, 2007
goods, the consignee surrenders the bill of lading to the carrier and their respective Decision2 and September 2, 2008 Resolution 3 of the Court of Appeals (CA) in C.A.-
obligations are considered canceled. The law, however, provides two exceptions G.R. CV No. 79790, absolving respondents Air Sea Transport, Inc. (ASTI) and Asia
where the goods may be released without the surrender of the bill of lading because Cargo Container Lines, Inc. (ACCLI) from liability in the complaint for sum of
the consignee can no longer return it. These exceptions are when the bill of lading money and damages filed by petitioner Designer Baskets, Inc. (DBI).
gets lost or for other cause. In either case, the consignee must issue a receipt to the
carrier upon the release of the goods. Such receipt shall produce the same effect as The Facts
the surrender of the bill of lading.
Same; Same; Same; The non-surrender of the original bill of lading does not DBI is a domestic corporation engaged in the production of housewares and
violate the carrier’s duty of extraordinary diligence over the goods.—We have handicraft items for export.4 Sometime in October 1995, Ambiente, a foreign-based
already ruled that the non-surrender of the original bill of lading does not violate the company, ordered from DBI5 223 cartons of assorted wooden items (the ship-
carrier’s duty of extraordinary diligence over the goods. In Republic v. Lorenzo _______________
Shipping Corporation, 450 SCRA 550 (2005), we found that the carrier exercised
extraordinary diligence when it released the shipment to the consignee, not upon the 1 Dated November 3, 2008 and filed under Rule 45 of the Rules of
surrender of the original bill of lading, but upon signing the delivery receipts and Court. Rollo, pp. 9-26.
surrender of the certified true copies of the bills of lading. Thus, we held that the 2 Penned by Associate Justice Mariflor P. Punzalan-Castillo, with Associate
surrender of the original bill of lading is not a condition precedent for a common Justices Marina L. Buzon and Rosmari D. Carandang, concurring. Id., at pp. 27-45.
carrier to be discharged of its contractual obligation. 3 Id., at pp. 46-49.
Same; Same; Same; Law and jurisprudence is settled that the surrender of the 4 Complaint, Records, p. 1.
original bill of lading is not absolute; that in case of loss or any other cause, a 5 DBI received Import Purchase Order No. 23597A dated September 28,
common carrier may release the goods to the consignee even without it.—Clearly, 1995 via fax from Ambiente, id., at p. 2.
law and jurisprudence is settled that the surrender of the original bill of lading is not
absolute; that in case of loss or any other cause, a common carrier may release the
goods to the consignee even without it. Here, Ambiente could not produce the bill of 142
lading covering the shipment not because it was lost, but for another cause: the bill of 142 SUPREME COURT REPORTS ANNOTATED
lading was retained by DBI pending Ambiente’s full payment of the shipment.
Ambiente and ASTI then entered into an Indemnity Agreement, wherein the former Designer Baskets, Inc. vs. Air Sea Transport, Inc.
asked the latter to release the shipment even without the surrender of the bill of ment).6 The shipment was worth Twelve Thousand Five Hundred Ninety and
lading. The execution of this Agreement, and the undisputed fact that the shipment Eighty-Seven Dollars (US$12,590.87) and payable through telegraphic
was released to Ambiente pursu- transfer.7 Ambiente designated ACCLI as the forwarding agent that will ship out its
order from the Philippines to the United States (US). ACCLI is a domestic
corporation acting as agent of ASTI, a US-based corporation engaged in carrier
141 transport business, in the Philippines.8
On January 7, 1996, DBI delivered the shipment to ACCLI for sea transport from
VOL. 787, MARCH 9, 2016 141 Manila and delivery to Ambiente at 8306 Wilshire Blvd., Suite 1239, Beverly Hills,
Designer Baskets, Inc. vs. Air Sea Transport, Inc. California. To acknowledge receipt and to serve as the contract of sea carriage,
ant to it, to our mind, operates as a receipt in substantial compliance with the ACCLI issued to DBI triplicate copies of ASTI Bill of Lading No.
last paragraph of Article 353 of the Code of Commerce. AC/MLLA601317.9 DBI retained possession of the originals of the bills of lading
PETITION for review on certiorari of the decision and resolution of the Court of pending the payment of the goods by Ambiente.10
Appeals. On January 23, 1996, Ambiente and ASTI entered into an Indemnity Agreement
The facts are stated in the opinion of the Court. (Agreement).11 Under the Agreement, Ambiente obligated ASTI to deliver the
Riguera & Riguera Law Office for petitioner. shipment to it or to its order “without the surrender of the relevant bill(s) of lading
Sto. Tomas & Serrano for respondents. due to the non-arrival or loss thereof.” 12 In exchange, Ambiente undertook to
JARDELEZA, J.: indemnify and hold ASTI and its agent free from any liability as a result of the
release of the shipment.13 Thereafter, ASTI released the shipment to Ambiente
53
without the knowledge of DBI, and without it receiving payment for the total cost of 15 The incorporators-stockholders sued are the following: Marlon Gaya,
the shipment.14 Richard Sim Ng, Ng Tiam Tiong, Fortunata Sim Ng, Ng Uy Sim, Tina Orleans Ng
_______________ and Analy R. Borbon. Original Complaint, Records, p. 1.
16 Id., at pp. 1-5.
6 Id. 17 Id., at p. 3.
7 Per Invoice Number 497 dated January 6, 1996, id., at p. 11. 18 Records, pp. 3-4.
8 Id., at pp. 1-2. 19 Id., at pp. 23-26.
9 Id., at pp. 46-48.
10 CA Decision, Rollo, p. 28.
11 Id., at p. 81. 144
12 Id. 144 SUPREME COURT REPORTS ANNOTATED
13 Id.
14 Id., at pp. 28-29.
the shipment is released without the surrender of the bill of lading; and (d) the
Original Complaint did not attach a certificate of non-forum shopping.20
143 DBI filed an Opposition to the Motion to Dismiss, 21asserting that ASTI and
ACCLI failed to exercise the required extraordinary diligence when they allowed the
VOL. 787, MARCH 9, 2016 143 cargoes to be withdrawn by the consignee without the surrender of the original bill of
Designer Baskets, Inc. vs. Air Sea Transport, Inc. lading. ASTI, ACCLI, and ACCLI’s incorporators-stockholders countered that it is
DBI then made several demands to Ambiente for the payment of the shipment, DBI who failed to exercise extraordinary diligence in protecting its own interest.
but to no avail. Thus, on October 7, 1996, DBI filed the Original Complaint against They averred that whether or not the buyer-consignee pays the seller is already
ASTI, ACCLI and ACCLI’s incorporators-stockholders15 for the payment of the outside of their concern.22
value of the shipment in the amount of US$12,590.87 or Three Hundred Thirty- Before the trial court could resolve the motion to dismiss, DBI filed an Amended
Three Thousand and Six Hundred Fifty-Eight Pesos (P333,658.00), plus interest at Complaint23 impleading Ambiente as a new defendant and praying that it be held
the legal rate from January 22, 1996, exemplary damages, attorney’s fees and cost of solidarily liable with ASTI, ACCLI, and ACCLI’s incorporators-stockholders for the
suit.16 payment of the value of the shipment. DBI alleged that it received reliable
In its Original Complaint, DBI claimed that under Bill of Lading Number information that the shipment was released merely on the basis of a company
AC/MLLA601317, ASTI and/or ACCLI is “to release and deliver the guaranty of Ambiente.24 Further, DBI asserted that ACCLI’s incorporators-
cargo/shipment to the consignee, x x x, only after the original copy or copies of [the] stockholders have not yet fully paid their stock subscriptions; thus, “under the
Bill of Lading is or are surrendered to them; otherwise, they become liable to the circumstance of [the] case,” they should be held liable to the extent of the balance of
shipper for the value of the shipment.”17 DBI also averred that ACCLI should be their subscriptions.25
jointly and severally liable with its codefendants because ACCLI failed to register In their Answer,26 ASTI, ACCLI, and ACCLI’s incorporators-stockholders
ASTI as a foreign corporation doing business in the Philippines. In addition, ACCLI countered that DBI has no cause of action against ACCLI and its incorporators-
failed to secure a license to act as agent of ASTI.18 stockholders because the Amended Complaint, on its face, is for collection of sum of
On February 20, 1997, ASTI, ACCLI, and ACCLI’s incorporators-stockholders money by an unpaid seller against a buyer. DBI did not allege
filed a Motion to Dismiss.19They argued that: (a) they are not the real parties-in- _______________
interest in the action because the cargo was delivered and accepted by Ambiente. The
case, therefore, was a simple case of nonpayment of the buyer; (b) relative to the 20 Id., at pp. 23-25.
incorporators-stockholders of ACCLI, piercing the corporate veil is misplaced; (c) 21 Id., at pp. 30-36.
contrary to the allegation of DBI, the bill of lading covering the shipment does not 22 Id., at pp. 65-68.
contain a proviso exposing ASTI to liability in case 23 Rollo, pp. 50-57.
_______________ 24 Id., at p. 53.
25 Id., at p. 54.
26 Id., at pp. 58-65.

54
145 3. [P]47,000.00 as and for attorney’s fees; and
VOL. 787, MARCH 9, 2016 145 4. [P]10,000.00 as cost of suit.35
any act of the incorporators-stockholders which would constitute as a ground for The trial court declared that the liability of Ambiente is “very clear.” As the
piercing the veil of corporate fiction.27 ACCLI also reiterated that there is no buyer, it has an obligation to pay for the value of the shipment. The trial court noted
stipulation in the bill of lading restrictively subjecting the release of the cargo only that “[the case] is a simple sale transaction which had been perfected especially since
upon the presentation of the original bill of lading. 28 It regarded the issue of ASTI’s delivery had already been effected and with only the payment for the shipment
lack of license to do business in the Philippines as “entirely foreign and irrelevant to remaining left to be done.”36
the issue of liability for breach of contract” between DBI and Ambiente. It stated that With respect to ASTI, the trial court held that as a common carrier, ASTI is
the purpose of requiring a license (to do business in the Philippines) is to subject the bound to observe extraordinary diligence in the vigilance over the goods. However,
foreign corporation to the jurisdiction of Philippine courts.29 ASTI was remiss in its duty when it allowed the unwarranted release of the shipment
On July 22, 1997, the trial court directed the service of summons to Ambiente to Ambiente.37 The trial court found that the damages suffered by DBI was due to
through the Department of Trade and Industry.30 The summons was served on ASTI’s release of the merchandise despite the non-presentation of the bill of lading.
October 6, 199731 and December 18, 1997.32 Ambiente failed to file an Answer. That ASTI entered into an Agreement with Ambiente to release the shipment without
Hence, DBI moved to declare Ambiente in default, which the trial court granted in its the surrender of the bill of lading is of no moment. 38 The Agreement cannot save
Order dated September 15, 1998.33 ASTI from liability because in entering into such, it violated the law, the terms of the
bill of lading and the right of DBI over the goods.39
The trial court also added that the Agreement only involved Ambiente and ASTI.
Since DBI is not privy to the Agreement, it is not bound by its terms.40
The Ruling of the Trial Court
The trial court found that ACCLI “has not done enough to prevent the defendants

Ambiente and [ASTI] from agreeing among themselves the release of the goods in
In a Decision34 dated July 25, 2003, the trial court found ASTI, ACCLI, and
total disregard of [DBI’s] rights and in contravention of the country’s civil
Ambiente solidarily liable to DBI for the value of the shipment. It awarded DBI the
_______________
following:
35 Id., at p. 92.
36 Id., at p. 89.
1. US$12,590.87, or the equivalent of [P]333,658.00 at the time of the 37 Id.
shipment, plus 12% interest per annum from 07 January 1996 until the same 38 Id.
is fully paid; 39 Id., at p. 90.
2. [P]50,000.00 in exemplary damages; 40 Id., at p. 89.
_______________

27 Id., at pp. 60-61. 147
28 Id., at p. 61.
VOL. 787, MARCH 9, 2016 147
29 Id., at p. 62.
30 Records, p. 92. Designer Baskets, Inc. vs. Air Sea Transport, Inc.
31 Id., at pp. 96, 107-108. and commercial laws.”41 As the forwarding agent, ACCLI was “well aware that
32 Id., at p. 115. the goods cannot be delivered to the defendant Ambiente since [DBI] retained
33 Id., at pp. 168-169. possession of the originals of the bill of lading.” 42 Consequently, the trial court held
34 Penned by Judge Raul Bautista Villanueva. Rollo, pp. 82-92. ACCLI solidarily liable with ASTI.
As regards ACCLI’s incorporators-stockholders, the trial court absolved them
from liability. The trial court ruled that the participation of ACCLI’s incorporators-
146 stockholders in the release of the cargo is not as direct as that of ACCLI.43
55
DBI, ASTI and ACCLI appealed to the CA. On one hand, DBI took issue with The clear import of the above article is that the surrender of the bill of
the order of the trial court awarding the value of the shipment in Philippine Pesos lading is not an absolute and mandatory requirement for the release of the
instead of US Dollars. It also alleged that even assuming that the shipment may be goods to the consignee. The fact that the carrier is given the alternative
paid in Philippine Pesos, the trial court erred in pegging its value at the exchange rate option to simply require a receipt for the goods delivered suggests that
prevailing at the time of the shipment, rather than at the exchange rate prevailing at the surrender of the bill of lading may be dispensed with when it cannot
the time of payment.44 be produced by the consignee for whatever cause.46 (Emphasis supplied)
On the other hand, ASTI and ACCLI questioned the trial court’s decision finding
them solidarily liable with DBI for the value of the shipment. They also assailed the The CA stressed that DBI failed to present evidence to prove its assertion that the
trial court’s award of interest, exemplary damages, attorney’s fees and cost of suit in surrender of the bill of lading upon delivery of the goods is a common mercantile
DBI’s favor.45 practice.47 Further, even assuming that such practice exists, it cannot prevail over law
and jurisprudence.48
_______________
The Ruling of the Court of Appeals
46 Id., at p. 34.
The CA affirmed the trial court’s finding that Ambiente is liable to DBI, but 47 Id., at pp. 36-37.
absolved ASTI and ACCLI from liability. The CA found that the pivotal issue is 48 Id.
whether the law requires that the bill of lading be surrendered by the buyer/
consignee before the carrier can release the goods to the former. It then answered the
question in the negative, thus: 149
_______________ VOL. 787, MARCH 9, 2016 149
41 Id., at p. 90. As for ASTI, the CA explained that its only obligation as a common carrier was
42 Id. to deliver the shipment in good condition. It did not include looking beyond the
43 Id., at p. 92. details of the transaction between the seller and the consignee, or more particularly,
44 Brief for the Plaintiff-Appellant, id., at pp. 137-147. ascertaining the payment of the goods by the buyer Ambiente.49
45 Id., at pp. 97-119. Since the agency between ASTI and ACCLI was established and not disputed by
any of the parties, neither can ACCLI, as a mere agent of ASTI, be held liable. This
must be so in the absence of evidence that the agent exceeded its authority.50
148 The CA, thus, ruled:
Designer Baskets, Inc. vs. Air Sea Transport, Inc. WHEREFORE, in view of the foregoing, the Decision dated July 25,
There is nothing in the applicable laws that require the surrender of 2003 of Branch 255 of the Regional Trial court of Las [Piñas] City in Civil
bills of lading before the goods may be released to the buyer/consignee. Case No. LP-96-0235 is hereby AFFIRMED with the
In fact, Article 353 of the Code of Commerce suggests a contrary following MODIFICATIONS:
conclusion, viz. — 1. Defendants-appellants Air Sea Transport, Inc. and Asia Cargo
“Art. 353. After the contract has been complied with, the bill of Container Lines, Inc. are hereby ABSOLVED from all liabilities;
lading which the carrier has issued shall be returned to him, and by 2. The actual damages to be paid by defendant Ambiente shall be
virtue of the exchange of this title with the thing transported, the in the amount of US$12,590.87. Defendant Ambiente’s liability may
respective obligations shall be considered canceled. x x x In case the be paid in Philippine currency, computed at the exchange rate
consignee, upon receiving the goods, cannot return the bill of lading prevailing at the time of payment;51 and
subscribed by the carrier because of its loss or of any other cause, he _______________
must give the latter a receipt for the goods delivered, this receipt
producing the same effects as the return of the bill of lading.” 49 Id., at p. 36.
50 Id., at p. 37.
56
51 The CA, citing C.F. Sharp & Co., Inc. v. Northwest Airlines, Inc., G.R. No. 151
133498, April 18, 2002, 381 SCRA 314, 319-320, stated that Republic Act No. 8183 VOL. 787, MARCH 9, 2016 151
allows the parties to agree upon payment in another currency other than the
Philippine Peso. Hence, the obligation of Ambiente may be paid at the currency
agreed upon by the parties or its peso equivalent at the time of payment. identify it, stating the name of the consignor, the terms of the contract of
carriage, and agreeing or directing that the freight be delivered to bearer, to order or
to a specified person at a specified place. 54
150 Under Article 350 of the Code of Commerce, “the shipper as well as the carrier
of the merchandise or goods may mutually demand that a bill of lading be made.” A
150 SUPREME COURT REPORTS ANNOTATED bill of lading, when issued by the carrier to the shipper, is the legal evidence of the
Designer Baskets, Inc. vs. Air Sea Transport, Inc. contract of carriage between the former and the latter. It defines the rights and
3. The rate of interest to be imposed on the total amount of liabilities of the parties in reference to the contract of carriage. The stipulations in the
US$12,590.87 shall be 6% per annum computed from the filing of the bill of lading are valid and binding unless they are contrary to law, morals, customs,
complaint on October 7, 1996 until the finality of this decision. After public order or public policy.55
this decision becomes final and executory, the applicable rate shall be Here, ACCLI, as agent of ASTI, issued Bill of Lading No. AC/MLLA601317 to
12% per annum until its full satisfaction. DBI. This bill of lading governs the rights, obligations and liabilities of DBI and
SO ORDERED.52 ASTI. DBI claims that Bill of Lading No. AC/MLLA601317 contains a provision
stating that ASTI and ACCLI are “to release and deliver the cargo/shipment to the
Hence, this petition for review, which raises the sole issue of whether ASTI and consignee, x x x, only after the original copy or copies of the said Bill of Lading is or
ACCLI may be held solidarily liable to DBI for the value of the shipment. are surrendered to them; otherwise they become liable to [DBI] for the value of the
shipment.”56 Quite tellingly, however, DBI does not point or refer to any specific
Our Ruling clause or provision on the bill of lading supporting this claim. The language of the
bill of lading shows no such requirement. What the bill of lading provides on its face
We deny the petition. is:
A common carrier may release the

goods to the consignee even without Received by the Carrier in apparent good order and condition unless
the surrender of the bill of lading. otherwise indicated hereon, the Container(s) and/or goods hereinafter
mentioned to be transported and/or otherwise forwarded from the Place of
This case presents an instance where an unpaid seller sues not only the buyer, but Re-
the carrier and the carrier’s agent as well, for the payment of the value of the goods _______________
sold. The basis for ASTI and ACCLI’s liability, as pleaded by DBI, is the bill of
lading covering the shipment. 54 Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the
A bill of lading is defined as “a written acknowledgment of the receipt of goods Philippines, id.; citing Black’s Law Dictionary.
and an agreement to transport and to deliver them at a specified place to a person 55 Provident Insurance Corp. v. Court of Appeals, G.R. No. 118030, January
named or on his order.”53 It may also be defined as “an instrument in writing, signed 15, 2004, 419 SCRA 480, 483.
by a carrier or his agent, describing the freight so as to 56 Amended Complaint, Rollo, p. 52.
_______________

52 Rollo, pp. 43-44. 152
53 Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the
Philippines, Vol. IV, p. 133, 1993 ed.; citing Interprovincial Autobus Co., Inc. v.
Collector of Internal Revenue, 98 Phil. 290, 293 (1956), citing 9 Am. Jur. 662. Designer Baskets, Inc. vs. Air Sea Transport, Inc.
ceipt to the intended Place of Delivery upon and [subject] to all the terms and
conditions appearing on the face and back of this Bill of Lading. If required
57
by the Carrier this Bill of Lading duly endorsed must be surrendered in the original bill of lading, but upon signing the delivery receipts and surrender of the
exchange for the Goods of delivery order.57 (Emphasis supplied) certified true copies of the bills of lading. Thus, we held that the surrender of the
original bill of lading is not a condition precedent for a common carrier to be
There is no obligation, therefore, on the part of ASTI and ACCLI to release the discharged of its contractual obligation.
goods only upon the surrender of the original bill of lading. Under special circumstances, we did not even require presentation of any form of
Further, a carrier is allowed by law to release the goods to the consignee even receipt by the consignee, in lieu of the original bill of lading, for the release of the
without the latter’s surrender of the bill of lading. The third paragraph of Article 353 goods. In Macam v. Court of Appeals,60 we absolved the carrier from liability for
of the Code of Commerce is enlightening: releasing the goods to the consignee without the bills of lading despite this provision
on the bills of lading:
Article 353. The legal evidence of the contract between the shipper and _______________
the carrier shall be the bills of lading, by the contents of which the disputes
which may arise regarding their execution and performance shall be decided, 58 See Republic v. Lorenzo Shipping Corporation, G.R. No. 153563, February
no exceptions being admissible other than those of falsity and material error 7, 2005, 450 SCRA 550, 556; as cited by the CA, Rollo, pp. 34-35.
in the drafting. 59 Republic v. Lorenzo Shipping Corporation, id.
After the contract has been complied with, the bill of lading which the 60 G.R. No. 125524, August 25, 1999, 313 SCRA 77.
carrier has issued shall be returned to him, and by virtue of the exchange of
this title with the thing transported, the respective obligations and actions
shall be considered cancelled, unless in the same act the claim which the 154
parties may wish to reserve be reduced to writing, with the exception of that 154 SUPREME COURT REPORTS ANNOTATED
provided for in Article 366.
In case the consignee, upon receiving the goods, cannot return the bill Designer Baskets, Inc. vs. Air Sea Transport, Inc.
of lading subscribed by the carrier, because of its loss or any other cause, “One of the Bills of Lading must be surrendered duly endorsed in
he must give the latter a receipt for the goods delivered, this receipt exchange for the goods or delivery order.”61 (Citations omitted)
producing the same effects as the return of the bill of lading. (Emphasis
supplied) In clearing the carrier from liability, we took into consideration that the shipper
_______________ sent a telex to the carrier after the goods were shipped. The telex instructed the
carrier to deliver the goods without need of presenting the bill of lading and bank
57 Id., at pp. 70-72. guarantee per the shipper’s request since “for prepaid shipt ofrt charges already fully
paid our end x x x.”62 We also noted the usual practice of the shipper to request the
shipping lines to immediately release perishable cargoes through telephone calls.
153 Also, in Eastern Shipping Lines, Inc. v. Court of Appeals,63 we absolved the
carrier from liability for releasing the goods to the supposed consignee, Consolidated
VOL. 787, MARCH 9, 2016 153 Mines, Inc. (CMI), on the basis of an Undertaking for Delivery of Cargo but without
Designer Baskets, Inc. vs. Air Sea Transport, Inc. the surrender of the original bill of lading presented by CMI. Similar to the factual
The general rule is that upon receipt of the goods, the consignee surrenders the circumstance in this case, the Undertaking in Eastern Shipping Lines guaranteed to
bill of lading to the carrier and their respective obligations are considered canceled. hold the carrier “harmless from all demands, claiming liabilities, actions and
The law, however, provides two exceptions where the goods may be released without expenses.”64 Though the central issue in that case was who the consignee was in the
the surrender of the bill of lading because the consignee can no longer return it. bill of lading, it is noteworthy how we gave weight to the Undertaking in ruling in
These exceptions are when the bill of lading gets lost or for other cause. In either favor of the carrier:
case, the consignee must issue a receipt to the carrier upon the release of the goods.
Such receipt shall produce the same effect as the surrender of the bill of lading.
We have already ruled that the non-surrender of the original bill of lading does But assuming that CMI may not be considered consignee, the petitioner
not violate the carrier’s duty of extraordinary diligence over the goods. 58 In Republic cannot be faulted for releasing the goods to CMI under the circumstances,
v. Lorenzo Shipping Corporation,59 we found that the carrier exercised extraordinary due to its lack of knowledge as to who was the real consignee in view of
diligence when it released the shipment to the consignee, not upon the surrender of
58
CMI’s strong representations and letter of undertaking wherein it stated that
the bill of lading would be pre-
_______________ 156
61 Id., at p. 78.
62 Id., at p. 79.
63 G.R. No. 80936, October 17, 1990, 190 SCRA 512; as cited by the nary diligence in the vigilance over the goods pursuant to Articles 1733, 1734,
CA, Rollo, pp. 35-36. and 1735 of the Civil Code.66
64 Id., at p. 515. DBI is mistaken.

Articles 1733, 1734, and 1735 of the Civil Code are not applicable in this
155 case. The Articles state:
Article 1733. Common carriers, from the nature of their business and
VOL. 787, MARCH 9, 2016 155 for reasons of public policy, are bound to observe extraordinary diligence in
Designer Baskets, Inc. vs. Air Sea Transport, Inc. the vigilance over the goods and for the safety of the passengers transported
sented later. This is precisely the situation covered by the last paragraph of Art. by them, according to all the circumstances of each case.
353 of the [Code of Commerce] to wit: Such extraordinary diligence in vigilance over the goods is further
expressed in Articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the
“If in case of loss or for any other reason whatsoever, the consignee extraordinary diligence for the safety of the passengers is further set forth in
cannot return upon receiving the merchandise the bill of lading subscribed by Articles 1755 and 1756.
the carrier, he shall give said carrier a receipt of the goods delivered this Article 1734. Common carriers are responsible for the loss, destruction,
receipt producing the same effects as the return of the bill of lading.”65 or deterioration of the goods, unless the same is due to any of the following
causes only:
Clearly, law and jurisprudence is settled that the surrender of the original bill of (1) Flood, storm, earthquake, lightning, or other natural disaster or
lading is not absolute; that in case of loss or any other cause, a common carrier may calamity;
release the goods to the consignee even without it. (2) Act of the public enemy in war, whether international or civil;
Here, Ambiente could not produce the bill of lading covering the shipment not (3) Act or omission of the shipper or owner of the goods;
because it was lost, but for another cause: the bill of lading was retained by DBI (4) The character of the goods or defects in the packing or in the
pending Ambiente’s full payment of the shipment. Ambiente and ASTI then entered containers;
into an Indemnity Agreement, wherein the former asked the latter to release the (5) Order or act of competent public authority.
shipment even without the surrender of the bill of lading. The execution of this Article 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4,
Agreement, and the undisputed fact that the shipment was released to Ambiente and 5 of the preceding article, if the goods are lost, destroyed or deteriorated,
pursuant to it, to our mind, operates as a receipt in substantial compliance with the common carriers are presumed to have been at fault or to have acted
last paragraph of Article 353 of the Code of Commerce. negligently, unless they prove that they observed extraordinary diligence as
required in Article 1733.
Articles 1733, 1734, and 1735 of the _______________
Civil Code are not applicable.
66 Opposition to Motion to Dismiss, Records, pp. 31-32.
DBI, however, challenges the Agreement, arguing that the carrier released the
goods pursuant to it, notwithstanding the carrier’s knowledge that the bill of lading
should first be surrendered. As such, DBI claims that ASTI and ACCLI are liable for 157
damages because they failed to exercise extraordi- VOL. 787, MARCH 9, 2016 157
_______________
65 Id., at p. 522. Articles 1733, 1734, and 1735 speak of the common carrier’s responsibility over
the goods. They refer to the general liability of common carriers in case
59
of loss, destruction or deterioration of goods and the presumption of negligence Article 1523. Where, in pursuance of a contract of sale, the seller is
against them. This responsibility or duty of the common carrier lasts from the time authorized or required to send the goods to the buyer, delivery of the goods to a
the goods are unconditionally placed in the possession of, and received by the carrier carrier, whether named by the buyer or not, for the purpose of transmission to
for transportation, until the same are delivered, actually or constructively, by the the buyer is deemed to be a delivery of the goods to the buyer, except in the
carrier to the consignee, or to the person who has a right to receive them. 67 It is, in cases provided for in Articles 1503, first, second and third paragraphs, or unless
fact, undisputed that the goods were timely delivered to the proper consignee or to a contrary intent appears.
the one who was authorized to receive them. DBI’s only cause of action against Unless otherwise authorized by the buyer, the seller must make such contract
ASTI and ACCLI is the release of the goods to Ambiente without the surrender of with the carrier on behalf of the buyer as may be reasonable, having regard to the
the bill of lading, purportedly in violation of the terms of the bill of lading. We have nature of the goods and the other circumstances of the case. If the seller omit so to
already found that Bill of Lading No. AC/MLLA601317 does not contain such do, and the goods are lost or damaged in the course of transit, the buyer may decline
express prohibition. Without any prohibition, therefore, the carrier had no obligation to treat the delivery to the carrier as a delivery to himself, or may hold the seller
to withhold release of the goods. Articles 1733, 1734, and 1735 do not give ASTI responsible in damages.
any such obligation. Unless otherwise agreed, where goods are sent by the seller to the buyer under
The applicable provision instead is Article 353 of the Code of Commerce, which circumstances in which the seller knows or ought to know that it is usual to insure,
we have previously discussed. To reiterate, the Article allows the release of the _______________
goods to the consignee even without his surrender of the original bill of lading. In
such case, the duty of the carrier to exercise extraordinary diligence is not violated. 68 Rollo, pp. 17-18.
Nothing, therefore, prevented the consignee and the carrier to enter into an indemnity 69 Id., at p. 17.
agreement of the same nature as the one they entered here. No law or public policy is
contravened upon its execution.
159
Article 1503 of the Civil Code VOL. 787, MARCH 9, 2016 159
does not apply to contracts
for carriage of goods. Designer Baskets, Inc. vs. Air Sea Transport, Inc.
_______________ the seller must give such notice to the buyer as may enable him to insure
them during their transit, and, if the seller fails to do so, the goods shall be
67 Civil Code, Art. 1736. deemed to be at his risk during such transit. (Emphasis supplied)

Article 1503, on the other hand, provides:
158
Article 1503. When there is a contract of sale of specific goods, the
158 SUPREME COURT REPORTS ANNOTATED seller may, by the terms of the contract, reserve the right of possession or
Designer Baskets, Inc. vs. Air Sea Transport, Inc. ownership in the goods until certain conditions have been fulfilled. The right
In its petition, DBI continues to assert the wrong application of Article 353 of the of possession or ownership may be thus reserved notwithstanding the
Code of Commerce to its Amended Complaint. It alleges that the third paragraph of delivery of the goods to the buyer or to a carrier or other bailee for the
Article 1503 of the Civil Code is the applicable provision because: (a) Article 1503 is purpose of transmission to the buyer.
a special provision that deals particularly with the situation of the seller retaining the Where goods are shipped, and by the bill of lading the goods are
bill of lading; and (b) Article 1503 is a law which is later in point of time to Article deliverable to the seller or his agent, or to the order of the seller or of his
353 of the Code of Commerce. 68 DBI posits that being a special provision, Article agent, the seller thereby reserves the ownership in the goods. But, if except
1503 of the Civil Code should prevail over Article 353 of the Code of Commerce, a for the form of the bill of lading, the ownership would have passed to the
general provision that makes no reference to the seller retaining the bill of lading.69 buyer on shipment of the goods, the seller’s property in the goods shall be
DBI’s assertion is untenable. Article 1503 is an exception to the general deemed to be only for the purpose of securing performance by the buyer of
presumption provided in the first paragraph of Article 1523, which reads: his obligations under the contract.
Where goods are shipped, and by the bill of lading the goods are
deliverable to order of the buyer or of his agent, but possession of the bill
60
of lading is retained by the seller or his agent, the seller thereby reserves
a right to the possession of the goods as against the buyer. 161
Where the seller of goods draws on the buyer for the price and transmits VOL. 787, MARCH 9, 2016 161
the bill of exchange and bill of lading together to the buyer to secure
acceptance or payment of the bill of exchange, the buyer is bound to return
the bill of lading if he does not honor the bill of exchange, and if he goods are delivered on time and in good condition. In the case
wrongfully retains the bill of lading he acquires no added right thereby. If, [Macam v. Court of Appeals], the Supreme Court emphasized that “the
however, the bill of lading provides that the goods are deliverable to the extraordinary responsibility of the common carriers lasts until actual or
buyer or to the order of the buyer, or is indorsed in blank, or to the buyer by constructive delivery of the cargoes to the consignee or to the person who has
the consignee named therein, one who the right to receive them.” x x x
It is therefore clear that the moment the carrier has delivered the
subject goods, its responsibility ceases to exist and it is thereby freed
160 from all the liabilities arising from the transaction. Any question
regarding the payment of the buyer to the seller is no longer the concern
160 SUPREME COURT REPORTS ANNOTATED of the carrier. This easily debunks plaintiff’s theory of joint liability. 70 x x x
Designer Baskets, Inc. vs. Air Sea Transport, Inc. (Emphasis supplied; citations omitted)
purchases in good faith, for value, the bill of lading, or goods from the
buyer will obtain the ownership in the goods, although the bill of exchange The contract between DBI and ASTI is a contract of carriage of goods; hence,
has not been honored, provided that such purchaser has received delivery of ASTI’s liability should be pursuant to that contract and the law on transportation of
the bill of lading indorsed by the consignee named therein, or of the goods, goods. Not being a party to the contract of sale between DBI and Ambiente, ASTI
without notice of the facts making the transfer wrongful. (Emphasis supplied) cannot be held liable for the payment of the value of the goods sold. In this regard,
we cite Loadstar Shipping Company, Incorporated v. Malayan Insurance Company,
Articles 1523 and 1503, therefore, refer to a contract of sale between a seller and Incorporated,71 thus:
a buyer. In particular, they refer to who between the seller and the buyer has the right
of possession or ownership over the goods subject of the sale. Articles 1523 and
1503 do not apply to a contract of carriage between the shipper and the common Malayan opposed the petitioners’ invocation of the Philex-PASAR
carrier. The third paragraph of Article 1503, upon which DBI relies, does not oblige purchase agreement, stating that the contract involved in this case is a
the common carrier to withhold delivery of the goods in the event that the bill of contract of affreightment between the petitioners and PASAR, not the
lading is retained by the seller. Rather, it only gives the seller a better right to the agreement between Philex and PASAR, which was a contract for the sale of
possession of the goods as against the mere inchoate right of the buyer. Thus, copper concentrates.
Articles 1523 and 1503 find no application here. The case before us does not involve On this score, the Court agrees with Malayan that contrary to the trial
an action where the seller asserts ownership over the goods as against the buyer. court’s disquisition, the petitioners cannot validly invoke the penalty clause
Instead, we are confronted with a complaint for sum of money and damages filed by under the Philex-PASAR purchase agreement, where penalties are to be
the seller against the buyer and the common carrier due to the non-payment of the imposed by the buyer PASAR against the seller Philex if some elements
goods by the buyer, and the release of the goods by the carrier despite non-surrender exceeding the agreed limitations
of the bill of lading. A contract of sale is separate and distinct from a contract of _______________
carriage. They involve different parties, different rights, different obligations and
liabilities. Thus, we quote with approval the ruling of the CA, to wit: 70 CA Decision, Rollo, pp. 39-40.
71 G.R. No. 185565, November 26, 2014, 742 SCRA 627.
On the third assigned error, [w]e rule for the defendants-appellants [ASTI
and ACCLI]. They are correct in arguing that the nature of their
obligation with plaintiff [DBI] is separate and distinct from the 162
transaction of the latter with defendant Ambiente. As carrier of the
goods transported by plaintiff, its obligation is simply to ensure that such
61
are found on the copper concentrates upon delivery. The petitioners are
not privy to the contract of sale of the copper concentrates. The contract
between PASAR and the petitioners is a contract of carriage of goods
and not a contract of sale. Therefore, the petitioners and PASAR are
bound by the laws on transportation of goods and their contract of
affreightment. Since the Contract of Affreightment between the petitioners
and PASAR is silent as regards the computation of damages, whereas the bill
of lading presented before the trial court is undecipherable, the New Civil
Code and the Code of Commerce shall govern the contract between the
parties.72 (Emphasis supplied; citations omitted)

In view of the foregoing, we hold that under Bill of Lading No.
AC/MLLA601317 and the pertinent law and jurisprudence, ASTI and ACCLI are not
liable to DBI. We sustain the finding of the CA that only Ambiente, as the buyer of
the goods, has the obligation to pay for the value of the shipment. However, in view
of our ruling in Nacar v. Gallery Frames,73 we modify the legal rate of interest
imposed by the CA. Instead of 12% per annum from the finality of this judgment
until its full satisfaction, the rate of interest shall only be 6% per annum.
WHEREFORE, the petition is DENIED for lack of merit. The August 16, 2007
Decision and the September 2, 2008 Resolution of the Court of Appeals in C.A.-G.R.
CV No. 79790 are hereby AFFIRMED with the MODIFICATION that from the
finality of this decision until its full satisfaction, the applicable rate of interest shall
be 6% per annum.
SO ORDERED.
Velasco, Jr. (Chairperson), Peralta, Perez and Reyes, JJ., concur.
_______________
72 Id., at p. 637.
73 G.R. No. 189871, August 13, 2013, 703 SCRA 439.

163
VOL. 787, MARCH 9, 2016 163
Petition denied, judgment and resolution affirmed with modification.
Notes.—In maritime transportation, a bill of lading is issued by a common
carrier as a contract, receipt and symbol of the goods covered by it. (Eastern
Shipping Lines, Inc. vs. BPI/MS Insurance Corp., 745 SCRA 98 [2015])
The bills of lading represent the formal expression of the parties’ rights, duties
and obligations. (Id.)

——o0o——
62

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[No. 15122.

G.R. No. 101503. September 15, 1993.*

x x x the trial court's evaluation as to the credibility of witnesses is viewed as correct

A common carrier may release the

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