transpo 1st case

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Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. L-47822 December 22, 1988

PEDRO DE GUZMAN, petitioner,vs.

COURT OF APPEALS and ERNESTO

CENDANA, respondents.

Vicente D. Millora for petitioner.

Jacinto Callanta for private respondent.

FELICIANO,J.:

Respondent Ernesto Cendana, a junk dealer, wasengaged in buying up used bottles and scrap metal inPangasinan. Upon gathering sufficient quantities of suchscrap material, respondent would bring such material toManila for resale. He utilized two (2) six-wheeler truckswhich he owned for hauling the material to Manila. Onthe return trip to Pangasinan, respondent would load hisvehicles with cargo which various merchants wanteddelivered to differing establishments in Pangasinan. Forthat service, respondent charged freight rates whichwere commonly lower than regular commercial rates.

Sometime in November 1970, petitioner Pedro deGuzman a merchant and authorized dealer of GeneralMilk Company (Philippines), Inc. in Urdaneta,Pangasinan, contracted with respondent for the haulingof 750 cartons of Liberty filled milk from a warehouse ofGeneral Milk in Makati, Rizal, to petitioner'sestablishment in Urdaneta on or before 4 December1970. Accordingly, on 1 December 1970, respondentloaded in Makati the merchandise on to his trucks: 150cartons were loaded on a truck driven by respondenthimself, while 600 cartons were placed on board theother truck which was driven by Manuel Estrada,

respondent's driver and employee.

Only 150 boxes of Liberty filled milk were delivered topetitioner. The other 600 boxes never reachedpetitioner, since the truck which carried these boxes washijacked somewhere along the MacArthur Highway inPaniqui, Tarlac, by armed men who took with them thetruck, its driver, his helper and the cargo.

On 6 January 1971, petitioner commenced action againstprivate respondent in the Court of First Instance ofPangasinan, demanding payment of P 22,150.00, theclaimed value of the lost merchandise, plus damages andattorney's fees. Petitioner argued that privaterespondent, being a common carrier, and having failed toexercise the extraordinary diligence required of him by

the law, should be held liable for the value of theundelivered goods.

In his Answer, private respondent denied that he was acommon carrier and argued that he could not be heldresponsible for the value of the lost goods, such losshaving been due toforce majeure.

On 10 December 1975, the trial court rendered a

Decision 1 finding private respondent to be a commoncarrier and holding him liable for the value of theundelivered goods (P 22,150.00) as well as for P4,000.00 as damages and P 2,000.00 as attorney's fees.

On appeal before the Court of Appeals, respondent urgedthat the trial court had erred in considering him acommon carrier; in finding that he had habitually offeredtrucking services to the public; in not exempting himfrom liability on the ground offorce majeure;and inordering him to pay damages and attorney's fees.

The Court of Appeals reversed the judgment of the trialcourt and held that respondent had been engaged intransporting return loads of freight "as a casualoccupationa sideline to his scrap iron business" andnot as a common carrier. Petitioner came to this Court byway of a Petition for Review assigning as errors thefollowing conclusions of the Court of Appeals:

1. that private respondent was not acommon carrier;

2. that the hijacking of respondent's

truck wasforce majeure; and

3. that respondent was not liable for thevalue of the undelivered cargo. (Rollo, p.111)

We consider first the issue of whether or not privaterespondent Ernesto Cendana may, under the facts earlierset forth, be properly characterized as a common carrier.

The Civil Code defines "common carriers" in thefollowing terms:

Article 1732. Common carriers arepersons, corporations, firms orassociations engaged in the business ofcarrying or transporting passengers orgoods or both, by land, water, or air forcompensation, offering their services tothe public.

The above article makes no distinction between onewhoseprincipalbusiness activity is the carrying ofpersons or goods or both, and one who does suchcarrying only as an ancillaryactivity (in local Idiom as "asideline"). Article 1732 also carefully avoids making anydistinction between a person or enterprise offeringtransportation service on a regular or scheduledbasisand one offering such service on an occasional,


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episodic or unscheduled basis. Neither does Article 1732distinguish between a carrier offering its services to the"general public," i.e., the general community orpopulation, and one who offers services or solicitsbusiness only from a narrow segment of the generalpopulation. We think that Article 1733 deliberaommaking such distinctions.

So understood, the concept of "common carrier" under

Article 1732 may be seen to coincide neatly with thenotion of "public service," under the Public Service Act(Commonwealth Act No. 1416, as amended) which atleast partially supplements the law on common carriersset forth in the Civil Code. Under Section 13, paragraph(b) of the Public Service Act, "public service" includes:

... every person that now or hereaftermay own, operate, manage, or control inthe Philippines, for hire orcompensation, with general or limitedclientele, whether permanent, occasional

or accidental, and done for generalbusiness purposes, any common

carrier,railroad, street railway, tractionrailway, subway motor vehicle, eitherfor freight or passenger, or both, with orwithout fixed route and whatever maybe its classification, freight or carrierservice of any class, express service,steamboat, or steamship line, pontines,ferries and water craft, engaged in thetransportation of passengers or freightor both, shipyard, marine repair shop,wharf or dock, ice plant,

ice-refrigeration plant, canal, irrigationsystem, gas, electric light, heat andpower, water supply and powerpetroleum, sewerage system, wire orwireless communications systems, wireor wireless broadcasting stations andother similar public services. ...(Emphasis supplied)

It appears to the Court that private respondent isproperly characterized as a common carrier even thoughhe merely "back-hauled" goods for other merchants fromManila to Pangasinan, although such back-hauling wasdone on a periodic or occasional rather than regular orscheduled manner, and even though privaterespondent'sprincipal occupation was not the carriage ofgoods for others. There is no dispute that privaterespondent charged his customers a fee for hauling theirgoods; that fee frequently fell below commercial freightrates is not relevant here.

The Court of Appeals referred to the fact that privaterespondent held no certificate of public convenience, andconcluded he was not a common carrier. This is palpableerror. A certificate of public convenience is not a

requisite for the incurring of liability under the CivilCode provisions governing common carriers. Thatliability arises the moment a person or firm acts as acommon carrier, without regard to whether or not suchcarrier has also complied with the requirements of the

applicable regulatory statute and implementingregulations and has been granted a certificate of publicconvenience or other franchise. To exempt privaterespondent from the liabilities of a common carrierbecause he has not secured the necessary certificate ofpublic convenience, would be offensive to sound publicpolicy; that would be to reward private respondentprecisely for failing to comply with applicable statutoryrequirements. The business of a common carrier

impinges directly and intimately upon the safety andwell being and property of those members of the generalcommunity who happen to deal with such carrier. Thelaw imposes duties and liabilities upon common carriersfor the safety and protection of those who utilize theirservices and the law cannot allow a common carrier torender such duties and liabilities merely facultative bysimply failing to obtain the necessary permits andauthorizations.

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

Common carriers, "by the nature of their business andfor reasons of public policy" 2 are held to a very highdegree of care and diligence ("extraordinary diligence")in the carriage of goods as well as of passengers. Thespecific import of extraordinary diligence in the care ofgoods transported by a common carrier is, according toArticle 1733, "further expressed in Articles 1734,1735and 1745, numbers 5, 6 and 7" of the Civil Code.

Article 1734 establishes the general rule that commoncarriers are responsible for the loss, destruction ordeterioration of the goods which they carry, "unlessthe

same is due to any of the following causes only:

(1) Flood, storm,earthquake, lightningor other naturaldisaster or calamity;(2) Act of the publicenemy in war, whetherinternational or civil;(3) Act or omission ofthe shipper or ownerof the goods;

(4) The character-ofthe goods or defects inthe packing or-in thecontainers; and(5) Order or act ofcompetent publicauthority.

It is important to point out that the above list of causes ofloss, destruction or deterioration which exempt thecommon carrier for responsibility therefor, is a closedlist. Causes falling outside the foregoing list, even if theyappear to constitute a species of force majeure fall

within the scope of Article 1735, which provides asfollows:


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In all cases other than those mentioned

in numbers 1, 2, 3, 4 and 5 of the

preceding article, if the goods are lost,

destroyed or deteriorated, common

carriers are presumed to have been at

fault or to have acted negligently, unless

they prove that they observed

extraordinary diligenceas required inArticle 1733. (Emphasis supplied)

Applying the above-quoted Articles 1734 and 1735, wenote firstly that the specific cause alleged in the instantcase the hijacking of the carrier's truck does notfall within any of the five (5) categories of exemptingcauses listed in Article 1734. It would follow, therefore,that the hijacking of the carrier's vehicle must be dealtwith under the provisions of Article 1735, in otherwords, that the private respondent as common carrier ispresumed to have been at fault or to have actednegligently. This presumption, however, may beoverthrown by proof of extraordinary diligence on thepart of private respondent.

Petitioner insists that private respondent had notobserved extraordinary diligence in the care ofpetitioner's goods. Petitioner argues that in thecircumstances of this case, private respondent shouldhave hired a security guard presumably to ride with thetruck carrying the 600 cartons of Liberty filled milk. Wedo not believe, however, that in the instant case, thestandard of extraordinary diligence required privaterespondent to retain a security guard to ride with thetruck and to engage brigands in a firelight at the risk ofhis own life and the lives of the driver and his helper.

The precise issue that we address here relates to thespecific requirements of the duty of extraordinarydiligence in the vigilance over the goods carried in thespecific context of hijacking or armed robbery.

As noted earlier, the duty of extraordinary diligence inthe vigilance over goods is, under Article 1733, givenadditional specification not only by Articles 1734 and1735 but also by Article 1745, numbers 4, 5 and 6,Article 1745 provides in relevant part:

Any of the following or similarstipulations shall be consideredunreasonable, unjust and contrary topublic policy:

xxx xxx xxx

(5) that the commoncarrier shall not beresponsible for theacts or omissions of hisor its employees;

(6) that the commoncarrier's liability foracts committed bythieves, or of

robberswho donotactwithgrave orirresistiblethreat,violence or force, isdispensed with ordiminished; and

(7) that the commoncarrier shall not

responsible for theloss, destruction ordeterioration of goodson account of thedefective condition ofthe car vehicle, ship,airplane or otherequipment used in thecontract of carriage.(Emphasis supplied)

Under Article 1745 (6) above, a common carrier is held

responsible

and will not be allowed to divest or todiminish such responsibilityeven for acts of strangerslike thieves or robbers, exceptwhere such thieves orrobbers in fact acted "with grave or irresistible threat,violence or force." We believe and so hold that the limitsof the duty of extraordinary diligence in the vigilanceover the goods carried are reached where the goods arelost as a result of a robbery which is attended by "graveor irresistible threat, violence or force."

In the instant case, armed men held up the second truckowned by private respondent which carried petitioner'scargo. The record shows that an information for robbery

in band was filed in the Court of First Instance of Tarlac,Branch 2, in Criminal Case No. 198 entitled "People of thePhilippines v. Felipe Boncorno, Napoleon Presno, Armando

Mesina, Oscar Oria and one John Doe." There, the accusedwere charged with willfully and unlawfully taking andcarrying away with them the second truck, driven byManuel Estrada and loaded with the 600 cartons ofLiberty filled milk destined for delivery at petitioner'sstore in Urdaneta, Pangasinan. The decision of the trialcourt shows that the accused acted with grave, if notirresistible, threat, violence or force. 3 Three (3) of thefive (5) hold-uppers were armed with firearms. Therobbers not only took away the truck and its cargo butalso kidnapped the driver and his helper, detaining themfor several days and later releasing them in anotherprovince (in Zambales). The hijacked truck wassubsequently found by the police in Quezon City. TheCourt of First Instance convicted all the accused ofrobbery, though not of robbery in band.4

In these circumstances, we hold that the occurrence ofthe loss must reasonably be regarded as quite beyondthe control of the common carrier and properly regardedas a fortuitous event. It is necessary to recall that evencommon carriers are not made absolute insurers against

all risks of travel and of transport of goods, and are notheld liable for acts or events which cannot be foreseen orare inevitable, provided that they shall have compliedwith the rigorous standard of extraordinary diligence.


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We, therefore, agree with the result reached by the Courtof Appeals that private respondent Cendana is not liablefor the value of the undelivered merchandise which waslost because of an event entirely beyond privaterespondent's control.

ACCORDINGLY, the Petition for Review on certiorari ishereby DENIED and the Decision of the Court of Appealsdated 3 August 1977 is AFFIRMED. No pronouncement

as to costs.

SO ORDERED.

SECOND DIVISION

[G.R. No. 125948. December 29, 1998]

FIRST PHILIPPINE INDUSTRIAL

CORPORATION,petitioner, vs.COURT OF

APPEALS, HONORABLE PATERNO V. TAC-AN,BATANGAS CITY and ADORACION C.

ARELLANO, in her official capacity as City

Treasurer of Batangas, respondents.

D E C I S I O N

MARTINEZ,J.:

This petition for review on certiorariassails theDecision of the Court of Appeals dated November 29,1995, in CA-G.R. SP No. 36801, affirming the decision ofthe Regional Trial Court of Batangas City, Branch 84, in

Civil Case No. 4293, which dismissed petitioners'complaint for a business tax refund imposed by the Cityof Batangas.

Petitioner is a grantee of a pipeline concessionunder Republic Act No. 387, as amended, to contract,install and operate oil pipelines. The original pipelineconcession was granted in 1967[1] and renewed by theEnergy Regulatory Board in 1992.[2]

Sometime in January 1995, petitioner applied for amayor's permit with the Office of the Mayor of BatangasCity. However, before the mayor's permit could beissued, the respondent City Treasurer requiredpetitioner to pay a local tax based on its gross receiptsfor the fiscal year 1993 pursuant to the LocalGovernment Code.[3]The respondent City Treasurerassessed a business tax on the petitioner amountingto P956,076.04 payable in four installments based on thegross receipts for products pumped at GPS-1 for thefiscal year 1993 which amounted to P181,681,151.00. Inorder not to hamper its operations, petitioner paid thetax under protest in the amount of P239,019.01 for thefirst quarter of 1993.

On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City Treasurer, thepertinent portion of which reads:

"Please note that our Company (FPIC) is a pipelineoperator with a government concession granted under

the Petroleum Act. It is engaged in the business oftransporting petroleum products from the Batangasrefineries, via pipeline, to Sucat and JTF PandacanTerminals. As such, our Company is exempt from payingtax on gross receipts under Section 133 of the LocalGovernment Code of 1991 x x x x

"Moreover, Transportation contractors are not includedin the enumeration of contractors under Section 131,

Paragraph (h) of the Local Government Code. Therefore,the authority to impose tax 'on contractors and otherindependent contractors' under Section 143, Paragraph(e) of the Local Government Code does not include thepower to levy on transportation contractors.

"The imposition and assessment cannot be categorizedas a mere fee authorized under Section 147 of the LocalGovernment Code. The said section limits the impositionof fees and charges on business to such amounts as maybe commensurate to the cost of regulation, inspection,and licensing. Hence, assuming arguendo that FPIC is

liable for the license fee, the imposition thereof based ongross receipts is violative of the aforecited provision. Theamount of P956,076.04 (P239,019.01 per quarter) is notcommensurate to the cost of regulation, inspection andlicensing. The fee is already a revenue raising measure,and not a mere regulatory imposition."[4]

On March 8, 1994, the respondent City Treasurerdenied the protest contending that petitioner cannot beconsidered engaged in transportation business, thus itcannot claim exemption under Section 133 (j) of theLocal Government Code.[5]

On June 15, 1994, petitioner filed with the RegionalTrial Court of Batangas City a complaint[6] for tax refundwith prayer for a writ of preliminary injunction againstrespondents City of Batangas and Adoracion Arellano inher capacity as City Treasurer. In its complaint,petitioner alleged, inter alia, that: (1) the imposition andcollection of the business tax on its gross receiptsviolates Section 133 of the Local Government Code; (2)the authority of cities to impose and collect a tax on thegross receipts of "contractors and independentcontractors" under Sec. 141 (e) and 151 does not includethe authority to collect such taxes on transportationcontractors for, as defined under Sec. 131 (h), the term

"contractors" excludes transportation contractors; and,(3) the City Treasurer illegally and erroneously imposedand collected the said tax, thus meriting the immediaterefund of the tax paid.[7]

Traversing the complaint, the respondents arguedthat petitioner cannot be exempt from taxes underSection 133 (j) of the Local Government Code as saidexemption applies only to "transportation contractorsand persons engaged in the transportation by hire andcommon carriers by air, land and water." Respondentsassert that pipelines are not included in the term"common carrier" which refers solely to ordinary

carriers such as trucks, trains, ships and thelike. Respondents further posit that the term "commoncarrier" under the said code pertains to the mode ormanner by which a product is delivered to itsdestination.[8]
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On October 3, 1994, the trial court rendered adecision dismissing the complaint, ruling in this wise:

"xxx Plaintiff is either a contractor or other independentcontractor.

xxx the exemption to tax claimed by the plaintiff hasbecome unclear. It is a rule that tax exemptions are to bestrictly construed against the taxpayer, taxes being the

lifeblood of the government. Exemption may thereforebe granted only by clear and unequivocal provisions oflaw.

"Plaintiff claims that it is a grantee of a pipelineconcession under Republic Act 387, (Exhibit A) whoseconcession was lately renewed by the Energy RegulatoryBoard (Exhibit B). Yet neither said law nor the deed ofconcession grant any tax exemption upon the plaintiff.

"Even the Local Government Code imposes a tax onfranchise holders under Sec. 137 of the Local Tax

Code. Such being the situation obtained in this case(exemption being unclear and equivocal) resort todistinctions or other considerations may be of help:

1. That the exemption granted under Sec.133 (j) encompassesonly common carriers so as notto overburden the riding publicor commuters withtaxes. Plaintiff is not a commoncarrier, but a special carrierextending its services andfacilities to a single specific or"special customer" under a"special contract."

2. The Local Tax Code of 1992 wasbasically enacted to give moreand effective local autonomy tolocal governments than theprevious enactments, to makethem economically andfinancially viable to serve thepeople and discharge theirfunctions with a concomitant

obligation to accept certaindevolution of powers, x x x So,consistent with this policy evenfranchise grantees are taxed(Sec. 137) and contractors arealso taxed under Sec. 143 (e)and 151 of the Code."[9]

Petitioner assailed the aforesaid decision beforethis Court viaa petition for review. On February 27,1995, we referred the case to the respondent Court ofAppeals for consideration and adjudication.[10]On

November 29, 1995, the respondent court rendered adecision[11] affirming the trial court's dismissal ofpetitioner's complaint. Petitioner's motion forreconsideration was denied on July 18, 1996.[12]

Hence, this petition. At first, the petition was denieddue course in a Resolution dated November 11,1996.[13]Petitioner moved for a reconsideration whichwas granted by this Court in a Resolution[14]of January20, 1997. Thus, the petition was reinstated.

Petitioner claims that the respondent Court ofAppeals erred in holding that (1) the petitioner is not acommon carrier or a transportation contractor, and (2)the exemption sought for by petitioner is not clear underthe law.

There is merit in the petition.

A "common carrier" may be defined, broadly, as onewho holds himself out to the public as engaged in thebusiness of transporting persons or property from placeto place, for compensation, offering his services to thepublic generally.

Article 1732 of the Civil Code defines a "commoncarrier" as "any person, corporation, firm or associationengaged in the business of carrying or transporting

passengers or goods or both, by land, water, or air, forcompensation, offering their services to the public."

The test for determining whether a party is acommon carrier of goods is:

1. He must be engaged in the business ofcarrying goods for others as a publicemployment, and must hold himself outas ready to engage in the transportationof goods for person generally as abusiness and not as a casual occupation;

2. He must undertake to carry goods of thekind to which his business is confined;

3. He must undertake to carry by the methodby which his business is conducted andover his established roads; and

4. The transportation must be for hire.[15]

Based on the above definitions and requirements,there is no doubt that petitioner is a common carrier. Itis engaged in the business of transporting or carrying

goods, i.e.petroleum products, for hire as a publicemployment. It undertakes to carry for all personsindifferently, that is, to all persons who choose to employits services, and transports the goods by land and forcompensation. The fact that petitioner has a limitedclientele does not exclude it from the definition of acommon carrier. In De Guzman vs. Court of Appeals[16]weruled that:

"The above article (Art. 1732, Civil Code) makes nodistinction between one whose principal businessactivity is the carrying of persons or goods or both, andone who does such carrying only as an ancillary activity(in local idiom, as a 'sideline'). Article 1732 x x x avoidsmaking any distinction between a person or

enterprise offering transportation service on

a regular or scheduled basisand one offering such
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service on an occasional, episodic or unscheduled

basis. Neither does Article 1732 distinguish between

a carrier offering its services to the 'general public,'

i.e., the general community or population, and one

who offers services or solicits business only from a

narrowsegmentof the general population. We think

that Article 1877 deliberately refrained from making

such distinctions.

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

'every person that now or hereafter may own, operate,manage, or control in the Philippines, for hire orcompensation, with general or limited clientele, whether

permanent, occasional or accidental, and done for general

business purposes, any common carrier, railroad, streetrailway, traction railway, subway motor vehicle, eitherfor freight or passenger, or both, with or without fixedroute and whatever may be its classification, freight orcarrier service of any class, express service, steamboat,or steamship line, pontines, ferries and watercraft, engaged in the transportation ofpassengers orfreight or both, shipyard, marine repair shop, wharf ordock, ice plant, ice-refrigeration plant, canal, irrigationsystem gas, electric light heat and power, water supplyand power petroleum, sewerage system, wire orwireless communications systems, wire or wirelessbroadcasting stations and other similar public services.'

"(Underscoring Supplied)

Also, respondent's argument that the term"common carrier" as used in Section 133 (j) of the LocalGovernment Code refers only to common carrierstransporting goods and passengers through movingvehicles or vessels either by land, sea or water, iserroneous.

As correctly pointed out by petitioner, thedefinition of "common carriers" in the Civil Code makesno distinction as to the means of transporting, as long asit is by land, water or air. It does not provide that the

transportation of the passengers or goods should be bymotor vehicle. In fact, in the United States, oil pipe lineoperators are considered common carriers.[17]

Under the Petroleum Act of the Philippines(Republic Act 387), petitioner is considered a "commoncarrier." Thus, Article 86 thereof provides that:

"Art. 86. Pipe line concessionaire as a commoncarrier.- A pipe line shall have the preferential right toutilize installations for the transportation of petroleumowned by him, but is obligated to utilize the remainingtransportation capacity pro rata for the transportation of

such other petroleum as may be offered by others fortransport, and to charge without discrimination suchrates as may have been approved by the Secretary ofAgriculture and Natural Resources."

Republic Act 387 also regards petroleum operationas a public utility. Pertinent portion of Article 7 thereofprovides:

"that everything relating to the exploration for andexploitation of petroleum x x and everything relating tothe manufacture, refining, storage, or transportation byspecial methods of petroleum,is hereby declared to bea public utility." (Underscoring Supplied)

The Bureau of Internal Revenue likewise considersthe petitioner a "common carrier." In BIR Ruling No.069-83, it declared:

"x x x since [petitioner] is a pipeline concessionaire thatis engaged only in transporting petroleum products, it isconsidered a common carrier under Republic Act No.387 x x x. Such being the case, it is not subject towithholding tax prescribed by Revenue Regulations No.13-78, as amended."

From the foregoing disquisition, there is no doubtthat petitioner is a "common carrier" and, therefore,exempt from the business tax as provided for in Section133 (j), of the Local Government Code, to wit:

"Section 133. Common Limitations on the Taxing Powersof Local Government Units.- Unless otherwise providedherein, the exercise of the taxing powers of provinces,cities, municipalities, and barangays shall not extend tothe levy of the following :

x x x x x x x x x

(j) Taxes on the gross receipts oftransportation contractors and personsengaged in the transportation ofpassengers or freight by hire andcommon carriers by air, land or water,except as provided in this Code."

The deliberations conducted in the House ofRepresentatives on the Local Government Code of 1991are illuminating:

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

Mr. Speaker, we would like to proceed to page 95, line 1.It states : "SEC.121 [now Sec. 131]. Common Limitationson the Taxing Powers of Local Government Units." x x x

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

Still on page 95, subparagraph 5, on taxes on thebusiness of transportation. This appears to be one ofthose being deemed to be exempted from the taxingpowers of the local government units. May we know the

reason why the transportation business is beingexcluded from the taxing powers of the local

government units?
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MR. JAVIER (E.). Mr. Speaker, there is an exceptioncontained in Section 121 (now Sec. 131), line 16,paragraph 5. It states that local government units maynot impose taxes on the business of transportation,except as otherwise provided in this code.

Now, Mr. Speaker, if the Gentleman would care to go topage 98 of Book II, one can see there that provinces havethe power to impose a tax on business enjoying a

franchise at the rate of not more than one-half of 1percent of the gross annual receipts. So, transportationcontractors who are enjoying a franchise would besubject to tax by the province. That is the exception, Mr.Speaker.

What we want to guard against here, Mr. Speaker, is

the imposition of taxes by local government units on

the carrier business.Local government units mayimpose taxes on top of what is already being imposed bythe National Internal Revenue Code which is the so-called "common carriers tax." We do not want a

duplication of this tax, so we just provided for anexceptionunder Section 125 [now Sec. 137] that aprovince may impose this tax at a specific rate.

MR. AQUINO (A.). Thank you for that clarification, Mr.Speaker.x x x[18]

It is clear that the legislative intent in excludingfrom the taxing power of the local government unit theimposition of business tax against common carriers is toprevent a duplication of the so-called "common carrier'stax."

Petitioner is already paying three (3%) percentcommon carrier's tax on its gross sales/earnings underthe National Internal Revenue Code.[19]To tax petitioneragain on its gross receipts in its transportation ofpetroleum business would defeat the purpose of theLocal Government Code.

WHEREFORE, the petition is hereby GRANTED. Thedecision of the respondent Court of Appeals datedNovember 29, 1995 in CA-G.R. SP No. 36801 isREVERSED and SET ASIDE.

SO ORDERED.

THIRD DIVISION[G.R. No. 147246. August 19, 2003]

ASIA LIGHTERAGE AND SHIPPING, INC.,petitioner, vs.

COURT OF APPEALS and PRUDENTIAL

GUARANTEE AND ASSURANCE,

INC., respondents.

D E C I S I O N

PUNO,J.:

On appeal is the Court of Appeals May 11, 2000Decision[1]in CA-G.R. CV No. 49195 and February 21,2001 Resolution[2]affirming with modification the April6, 1994 Decision[3]of the Regional Trial Court of Manilawhich found petitioner liable to pay private respondentthe amount of indemnity and attorney's fees.

First, the facts.

On June 13, 1990, 3,150 metric tons of Better

Western White Wheat in bulk, valued atUS$423,192.35[4]was shipped by Marubeni AmericanCorporation of Portland, Oregon on board the vesselM/V NEO CYMBIDIUM V-26 for delivery to theconsignee, General Milling Corporation in Manila,evidenced by Bill of Lading No. PTD/Man-4.[5]Theshipment was insured by the private respondentPrudential Guarantee and Assurance, Inc. against loss ordamage for P14,621,771.75 under Marine Cargo RiskNote RN 11859/90.[6]

On July 25, 1990, the carrying vessel arrived inManila and the cargo was transferred to the custody of

the petitioner Asia Lighterage and Shipping, Inc. Thepetitioner was contracted by the consignee as carrier todeliver the cargo to consignee's warehouse at Bo. Ugong,Pasig City.

On August 15, 1990, 900 metric tons of theshipment was loaded on barge PSTSI III, evidenced byLighterage Receipt No. 0364[7]for delivery toconsignee. The cargo did not reach its destination.

It appears that on August 17, 1990, the transport ofsaid cargo was suspended due to a warning of anincoming typhoon. On August 22, 1990, the petitioner

proceeded to pull the barge to Engineering Island offBaseco to seek shelter from the approachingtyphoon. PSTSI III was tied down to other barges whicharrived ahead of it while weathering out the storm thatnight.A few days after, the barge developed a list becauseof a hole it sustained after hitting an unseenprotuberance underneath the water. The petitioner fileda Marine Protest on August 28, 1990.[8]It likewisesecured the services of Gaspar Salvaging Corporationwhich refloated the barge.[9]The hole was then patchedwith clay and cement.

The barge was then towed to ISLOFF terminal

before it finally headed towards the consignee's wharfon September 5, 1990. Upon reaching the Sta. Mesaspillways, the barge again ran aground due to strongcurrent. To avoid the complete sinking of the barge, aportion of the goods was transferred to three otherbarges.[10]

The next day, September 6, 1990, the towing bits ofthe barge broke. It sank completely, resulting in the totalloss of the remaining cargo.[11]A second Marine Protestwas filed on September 7, 1990.[12]

On September 14, 1990, a bidding was conducted todispose of the damaged wheat retrieved and loaded on

the three other barges.[13]The total proceeds from thesale of the salvaged cargo was P201,379.75.[14]

On the same date, September 14, 1990, consigneesent a claim letter to the petitioner, and another letter
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dated September 18, 1990 to the private respondent forthe value of the lost cargo.

On January 30, 1991, the private respondentindemnified the consignee in the amountof P4,104,654.22.[15]Thereafter, as subrogee, it soughtrecovery of said amount from the petitioner, but to noavail.

On July 3, 1991, the private respondent filed a

complaint against the petitioner for recovery of theamount of indemnity, attorney's fees and cost ofsuit.[16]Petitioner filed its answer with counterclaim.[17]

The Regional Trial Court ruled in favor of theprivate respondent. The dispositive portion of itsDecision states:

WHEREFORE, premises considered, judgment is herebyrendered ordering defendant Asia Lighterage &Shipping, Inc. liable to pay plaintiff Prudential Guarantee& Assurance Co., Inc. the sum ofP4,104,654.22 withinterest from the date complaint was filed on July 3,

1991 until fully satisfied plus 10% of the amountawarded as and for attorney's fees. Defendant'scounterclaim is hereby DISMISSED.With costs againstdefendant.[18]

Petitioner appealed to the Court of Appealsinsisting that it is not a common carrier. The appellatecourt affirmed the decision of the trial court withmodification. The dispositive portion of its decisionreads:

WHEREFORE, the decision appealed from is hereby

AFFIRMED with modification in the sense that thesalvage value of P201,379.75 shall be deducted from theamount of P4,104,654.22. Costs against appellant.

SO ORDERED.

Petitioners Motion for Reconsideration dated June3, 2000 was likewise denied by the appellate court in aResolution promulgated on February 21, 2001.

Hence, this petition. Petitioner submits thefollowing errors allegedly committed by the appellatecourt, viz:[19]

(1) THE COURT OF APPEALS DECIDED THECASEA QUOIN A WAY NOT IN ACCORDWITH LAW AND/OR WITH THEAPPLICABLE DECISIONS OF THESUPREME COURT WHEN IT HELD THATPETITIONER IS A COMMON CARRIER.

(2) THE COURT OF APPEALS DECIDED THECASEA QUOIN A WAY NOT IN ACCORDWITH LAW AND/OR WITH THEAPPLICABLE DECISIONS OF THESUPREME COURT WHEN IT AFFIRMED

THE FINDING OF THE LOWER COURTAQUOTHAT ON THE BASIS OF THEPROVISIONS OF THE CIVIL CODEAPPLICABLE TO COMMONCARRIERS, THE LOSS OF THE CARGO IS,

THEREFORE, BORNE BY THE CARRIER IN

ALL CASES EXCEPT IN THE FIVE (5)

CASES ENUMERATED.

(3) THE COURT OF APPEALS DECIDED THECASEA QUOIN A WAY NOT IN ACCORDWITH LAW AND/OR WITH THEAPPLICABLE DECISIONS OF THESUPREME COURT WHEN ITEFFECTIVELY CONCLUDED THATPETITIONER FAILED TO EXERCISE DUEDILIGENCE AND/OR WAS NEGLIGENTIN ITS CARE AND CUSTODY OF THECONSIGNEES CARGO.

The issues to be resolved are:

(1) Whether the petitioner is a common carrier;and,

(2) Assuming the petitioner is a common carrier,whether it exercised extraordinary diligence in its careand custody of the consignees cargo.

On the first issue, we rule that petitioner is acommon carrier.

Article 1732 of the Civil Code defines commoncarriers as persons, corporations, firms or associationsengaged in the business of carrying or transportingpassengers or goods or both, by land, water, or air, forcompensation, offering their services to the public.

Petitioner contends that it is not a common carrierbut a private carrier. Allegedly, it has no fixed andpublicly known route, maintains no terminals, and issuesno tickets. It points out that it is not obliged to carry

indiscriminately for any person. It is not bound to carrygoods unless it consents. In short, it does not hold out itsservices to the general public.[20]

We disagree.

In De Guzman vs. Court of Appeals,[21]we heldthat the definition of common carriersin Article 1732 ofthe Civil Code makes no distinction between one whoseprincipal business activity is the carrying of persons orgoods or both, and one who does such carrying only asan ancillary activity. We also did not distinguish betweena person or enterprise offering transportation service ona regular or scheduled basis and one offering suchservice on an occasional, episodic or unscheduledbasis. Further, we ruled that Article 1732 does notdistinguish between a carrier offering its services tothegeneral public, and one who offers services or solicitsbusiness only from a narrow segment of the generalpopulation.

In the case at bar, the principal business of thepetitioner is that of lighterage and drayage[22]and itoffers its barges to the public for carrying ortransporting goods by water forcompensation. Petitioner is clearly a commoncarrier. In De Guzman,supra,[23]we considered privaterespondent Ernesto Cendaa to be a common carrier evenif his principal occupation was not the carriage of goodsfor others, but that of buying used bottles and scrapmetal in Pangasinan and selling these items in Manila.
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We therefore hold that petitioner is a commoncarrier whether its carrying of goods is done on anirregular rather than scheduled manner, and with anonly limited clientele. A common carrier need not havefixed and publicly known routes. Neither does it have tomaintain terminals or issue tickets.

To be sure, petitioner fits the test of a commoncarrier as laid down in Bascos vs. Court of

Appeals.[24]The test to determine a common carrier iswhether the given undertaking is a part of the businessengaged in by the carrier which he has held out to thegeneral public as his occupation rather than the quantityor extent of the business transacted.[25]In the case at bar,the petitioner admitted that it is engaged in the businessof shipping and lighterage,[26]offering its barges to thepublic, despite its limited clientele for carrying ortransporting goods by water for compensation.[27]

On the second issue, we uphold the findings of thelower courts that petitioner failed to exerciseextraordinary diligence in its care and custody of theconsignees goods.

Common carriers are bound to observeextraordinary diligence in the vigilance over the goodstransported by them.[28]They are presumed to have beenat fault or to have acted negligently if the goods are lost,destroyed or deteriorated.[29]To overcome thepresumption of negligence in the case of loss,destruction or deterioration of the goods, the commoncarrier must prove that it exercised extraordinarydiligence. There are, however, exceptions to thisrule. Article 1734 of the Civil Code enumerates theinstances when the presumption of negligence does notattach:

Art. 1734. Common carriers are responsible for the loss,destruction, or deterioration of the goods, unless thesame is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning, orother natural disaster orcalamity;

(2) Act of the public enemy in war,whether international or civil;

(3) Act or omission of the shipper orowner of the goods;

(4) The character of the goods or defectsin the packing or in thecontainers;

(5) Order or act of competent publicauthority.

In the case at bar, the barge completely sank afterits towing bits broke, resulting in the total loss of itscargo. Petitioner claims that this was caused by atyphoon, hence, it should not be held liable for the loss ofthe cargo. However, petitioner failed to prove that thetyphoon is the proximate and only cause of the loss of

the goods, and that it has exercised due diligence before,during and after the occurrence of the typhoon toprevent or minimize the loss.[30]The evidence show that,even before the towing bits of the barge broke, it hadalready previously sustained damage when it hit asunken object while docked at the Engineering Island. Iteven suffered a hole. Clearly, this could not be solelyattributed to the typhoon. The partly-submerged vesselwas refloated but its hole was patched with only clay and

cement. The patch work was merely a provisionalremedy, not enough for the barge to sail safely. Thus,when petitioner persisted to proceed with the voyage, itrecklessly exposed the cargo to further damage. Aportion of the cross-examination of Alfredo Cunanan,cargo-surveyor of Tan-Gatue Adjustment Co., Inc., states:

CROSS-EXAMINATION BY ATTY. DONN LEE:[31]

x x x x x x x x x

q - Can you tell us what else transpired afterthat incident?

a - After the first accident, through theinitiative of the barge owners, they triedto pull out the barge from the place of theaccident, and bring it to the anchorterminal for safety, then after deciding ifthe vessel is stabilized, they tried to pull itto the consignees warehouse, now whileon route another accident occurred, nowthis time the barge totally hittingsomething in the course.

q - You said there was another accident, can

you tell the court the nature of the secondaccident?

a - The sinking, sir.

q - Can you tell the nature . . . can you tell thecourt, if you know what caused thesinking?

a - Mostly it was related to the first accidentbecause there was already awhole (sic)on the bottom part of thebarge.

x x x x x x x x xThis is not all. Petitioner still headed to the

consignees wharf despite knowledge of an incomingtyphoon. During the time that the barge was headingtowards the consignee's wharf on September 5, 1990,typhoon Loleng has already entered the Philippine areaof responsibility.[32]A part of the testimony of RobertBoyd, Cargo Operations Supervisor of the petitioner,reveals:

DIRECT-EXAMINATION BY ATTY. LEE:[33]

x x x x x x x x x

q - Now, Mr. Witness, did it not occur to you itmight be safer to just allow the Barge tolie where she was instead of towing it?
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a - Since that time that the Barge wasrefloated, GMC (General MillingCorporation, the consignee) as I have saidwas in a hurry for their goods to bedelivered at their Wharf since theyneeded badly the wheat that was loadedin PSTSI-3. It was needed badly by theconsignee.

q - And this is the reason why you towed theBarge as you did?

a - Yes, sir.

x x x x x x x x x

CROSS-EXAMINATION BY ATTY. IGNACIO:[34]

x x x x x x x x x

q - And then from ISLOFF Terminal youproceeded to the premises of the

GMC? Am I correct?

a - The next day, in the morning, we hired foradditional two (2) tugboats as I havestated.

q - Despite of the threats of an incomingtyphoon as you testified a while ago?

a - It is already in an inner portion of PasigRiver. The typhoon would be comingand it would be dangerous if we are in

the vicinity of Manila Bay.

q - But the fact is, the typhoon wasincoming? Yes or no?

a - Yes.

q - And yet as a standard operating procedureof your Company, you have to secure asort of Certification to determine theweather condition, am I correct?

a - Yes, sir.

q - So, more or less, you had the knowledge ofthe incoming typhoon, right?

a - Yes, sir.

q - And yet you proceeded to the premises ofthe GMC?

a - ISLOFF Terminal is far from Manila Bay andanytime even with the typhoon if you

are already inside the vicinity or insidePasig entrance, it is a safe place to towupstream.

Accordingly, the petitioner cannot invoke theoccurrence of the typhoon as force majeure to escapeliability for the loss sustained by the privaterespondent. Surely, meeting a typhoon head-on fallsshort of due diligence required from a commoncarrier. More importantly, the officers/employeesthemselves of petitioner admitted that when the towingbits of the vessel broke that caused its sinking and thetotal loss of the cargo upon reaching the Pasig River, it

was no longer affected by the typhoon. The typhoon thenis not the proximate cause of the loss of the cargo; ahuman factor, i.e., negligence had intervened.

IN VIEW THEREOF, the petition is DENIED. TheDecision of the Court of Appeals in CA-G.R. CV No. 49195dated May 11, 2000 and its Resolution dated February21, 2001 are hereby AFFIRMED. Costs against petitioner.

SO ORDERED.

SECOND DIVISION

[G.R. No. 148496. March 19, 2002]

VIRGINES CALVO doing business under the name and

style TRANSORIENT CONTAINER TERMINAL

SERVICES, INC., petitioner, vs. UCPB GENERAL

INSURANCE CO., INC. (formerly Allied

Guarantee Ins. Co., Inc.)respondent.

D E C I S I O N

MENDOZA,J.:

This is a petition for review of the decision,[1]datedMay 31, 2001, of the Court of Appeals, affirming thedecision[2]of the Regional Trial Court, Makati City,Branch 148, which ordered petitioner to pay respondent,as subrogee, the amount of P93,112.00 with legalinterest, representing the value of damaged cargohandled by petitioner, 25% thereof as attorneys fees,and the cost of the suit.

The facts are as follows:

Petitioner Virgines Calvo is the owner ofTransorient Container Terminal Services, Inc. (TCTSI), asole proprietorship customs broker. At the time materialto this case, petitioner entered into a contract with SanMiguel Corporation (SMC) for the transfer of 114 reels ofsemi-chemical fluting paper and 124 reels of kraft linerboard from the Port Area in Manila to SMCs warehouseat the Tabacalera Compound, Romualdez St., Ermita,Manila. The cargo was insured by respondent UCPBGeneral Insurance Co., Inc.

On July 14, 1990, the shipment in question,contained in 30 metal vans, arrived in Manila on board

M/V Hayakawa Maru and, after 24 hours, were unloadedfrom the vessel to the custody of the arrastre operator,Manila Port Services, Inc. From July 23 to July 25, 1990,petitioner, pursuant to her contract with SMC, withdrew
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the cargo from the arrastre operator and delivered it toSMCs warehouse in Ermita, Manila. On July 25, 1990, thegoods were inspected by Marine Cargo Surveyors, whofound that 15 reels of the semi-chemical fluting paperwere wet/stained/torn and 3 reels of kraft liner boardwere likewise torn. The damage was placedat P93,112.00.

SMC collected payment from respondent UCPBunder its insurance contract for the aforementionedamount. In turn, respondent, as subrogee of SMC,brought suit against petitioner in the Regional TrialCourt, Branch 148, Makati City, which, on December 20,1995, rendered judgment finding petitioner liable torespondent for the damage to the shipment.

The trial court held:

It cannot be denied . . . that the subject cargoes sustaineddamage while in the custody of defendants. Evidencesuch as the Warehouse Entry Slip (Exh. E); the DamageReport (Exh. F) with entries appearing therein, classified

as TED and TSN, which the claims processor, Ms. AgrifinaDe Luna, claimed to be tearrage at the end and tearrageat the middle of the subject damaged cargoesrespectively, coupled with the Marine Cargo SurveyReport (Exh. H - H-4-A) confirms the fact of the damagedcondition of the subject cargoes. The surveyor[s] report(Exh. H-4-A) in particular, which provides among othersthat:

. . . we opine that damages sustained by shipment isattributable to improper handling in transit presumablywhilst in the custody of the broker . . . .

is a finding which cannot be traversed and overturned.

The evidence adduced by the defendants is not enoughto sustain [her] defense that [she is] are notliable. Defendant by reason of the nature of [her]business should have devised ways and means in orderto prevent the damage to the cargoes which it is underobligation to take custody of and to forthwith deliver tothe consignee. Defendant did not present any evidenceon what precaution [she] performed to prevent [the]said incident, hence the presumption is that the momentthe defendant accepts the cargo [she] shall perform such

extraordinary diligence because of the nature of thecargo.

. . . .

Generally speaking under Article 1735 of the Civil Code,if the goods are proved to have been lost, destroyed ordeteriorated, common carriers are presumed to havebeen at fault or to have acted negligently, unless theyprove that they have observed the extraordinarydiligence required by law. The burden of the plaintiff,therefore, is to prove merely that the goods he

transported have been lost, destroyed ordeteriorated. Thereafter, the burden is shifted to thecarrier to prove that he has exercised the extraordinarydiligence required by law. Thus, it has been held that themere proof of delivery of goods in good order to a

carrier, and of their arrival at the place of destination inbad order, makes out a prima facie case against thecarrier, so that if no explanation is given as to how theinjury occurred, the carrier must be held responsible. Itis incumbent upon the carrier to prove that the loss wasdue to accident or some other circumstancesinconsistent with its liability. (cited in Commercial Lawsof the Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.)

Defendant, being a customs brother, warehouseman andat the same time a common carrier is supposed [to]exercise [the] extraordinary diligence required by law,hence the extraordinary responsibility lasts from thetime the goods are unconditionally placed in thepossession of and received by the carrier fortransportation until the same are delivered actually orconstructively by the carrier to the consignee or to theperson who has the right to receive the same.[3]

Accordingly, the trial court ordered petitioner topay the following amounts

1. The sum of P93,112.00 plus interest;

2. 25% thereof as lawyers fee;

3. Costs of suit.[4]

The decision was affirmed by the Court of Appealson appeal. Hence this petition for review on certiorari.

Petitioner contends that:

I. THE COURT OF APPEALS COMMITTED

SERIOUS AND REVERSIBLE ERROR [IN]DECIDING THE CASE NOT ON THEEVIDENCE PRESENTED BUT ON PURESURMISES, SPECULATIONS ANDMANIFESTLY MISTAKEN INFERENCE.

II. THE COURT OF APPEALS COMMITTEDSERIOUS AND REVERSIBLE ERROR INCLASSIFYING THE PETITIONER AS ACOMMON CARRIER AND NOT AS PRIVATEOR SPECIAL CARRIER WHO DID NOT HOLDITS SERVICES TO THE PUBLIC.[5]

It will be convenient to deal with these contentionsin the inverse order, for if petitioner is not a commoncarrier, although both the trial court and the Court ofAppeals held otherwise, then she is indeed not liablebeyond what ordinary diligence in the vigilance over thegoods transported by her, wouldrequire.[6]Consequently, any damage to the cargo sheagrees to transport cannot be presumed to have beendue to her fault or negligence.

Petitioner contends that contrary to the findings ofthe trial court and the Court of Appeals, she is not acommon carrier but a private carrier because, as acustoms broker and warehouseman, she does notindiscriminately hold her services out to the public butonly offers the same to select parties with whom shemay contract in the conduct of her business.
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The contention has no merit. In De Guzman v. Courtof Appeals,[7]the Court dismissed a similar contentionand held the party to be a common carrier, thus

The Civil Code defines common carriers in the followingterms:

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

business of carrying or transporting passengers or goodsor both, by land, water, or air for compensation, offeringtheir services to the public.

The above article makes no distinction between onewhoseprincipalbusiness activity is the carrying ofpersons or goods or both, and one who does suchcarrying only as an ancillaryactivity . . . Article 1732 alsocarefully avoids making any distinction between aperson or enterprise offering transportation service ona regular or scheduled basis and one offering such serviceon an occasional, episodic or unscheduled basis. Neither

does Article 1732 distinguish between a carrier offeringits services to thegeneral public,i.e., the generalcommunity or population, and one who offers services orsolicits business only from a narrow segmentof thegeneral population. We think that Article 1732deliberately refrained from making such distinctions.

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

x x x every person that now or hereafter may own,operate, manage, or control in the Philippines, for hire orcompensation, with general or limited clientele, whether

permanent, occasional or accidental, and done for general

business purposes, any common carrier, railroad, streetrailway, traction railway, subway motor vehicle, eitherfor freight or passenger, or both, with or without fixedroute and whatever may be its classification, freight orcarrier service of any class, express service, steamboat,or steamship line, pontines, ferries and water craft,

engaged in the transportation of passengers or freight orboth, shipyard, marine repair shop, wharf or dock, iceplant, ice-refrigeration plant, canal, irrigation system,gas, electric light, heat and power, water supply andpower petroleum, sewerage system, wire or wirelesscommunications systems, wire or wireless broadcastingstations and other similar public services. x x x[8]

There is greater reason for holding petitioner to bea common carrier because the transportation of goods isan integral part of her business. To uphold petitionerscontention would be to deprive those with whom shecontracts the protection which the law affordsthem notwithstanding the fact that the obligation tocarry goods for her customers, as already noted, is partand parcel of petitioners business.

Now, as to petitioners liability, Art. 1733 of the CivilCode provides:

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

In Compania Maritima v. Court of Appeals,[9]themeaning of extraordinary diligence in the vigilance overgoods was explained thus:

The extraordinary diligence in the vigilance over thegoods tendered for shipment requires the commoncarrier to know and to follow the required precaution foravoiding damage to, or destruction of the goodsentrusted to it for sale, carriage and delivery. It requirescommon carriers to render service with the greatest skilland foresight and to use all reasonable means toascertain the nature and characteristic of goods

tendered for shipment, and to exercise due care in thehandling and stowage, including such methods as theirnature requires.

In the case at bar, petitioner denies liability for thedamage to the cargo. She claims that the spoilage orwettage took place while the goods were in the custodyof either the carrying vessel M/V Hayakawa Maru, whichtransported the cargo to Manila, or the arrastre operator,to whom the goods were unloaded and who allegedlykept them in open air for nine days from July 14 to July23, 1998 notwithstanding the fact that some of thecontainers were deformed, cracked, or otherwisedamaged, as noted in the Marine Survey Report (Exh. H),to wit:

MAXU-2062880 - rain gutter deformed/cracked

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

PERU-204209-4 - with pinholes on roof panel rightportion

TOLU-213674-3 - wood flooring we[t] and/orwith signs ofwater soaked

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

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

In addition, petitioner claims that Marine CargoSurveyor Ernesto Tolentino testified that he has nopersonal knowledge on whether the container vans werefirst stored in petitioners warehouse prior to theirdelivery to the consignee. She likewise claims that afterwithdrawing the container vans from the arrastreoperator, her driver, Ricardo Nazarro, immediatelydelivered the cargo to SMCs warehouse in Ermita,
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Manila, which is a mere thirty-minute drive from thePort Area where the cargo came from. Thus, the damageto the cargo could not have taken place while these werein her custody.[11]

Contrary to petitioners assertion, the Survey Report(Exh. H) of the Marine Cargo Surveyors indicates thatwhen the shipper transferred the cargo in question tothe arrastre operator, these were covered by cleanEquipment Interchange Report (EIR) and, whenpetitioners employees withdrew the cargo from thearrastre operator, they did so without exception orprotest either with regard to the condition of containervans or their contents. The Survey Report pertinentlyreads

Details of Discharge:

Shipment, provided with our protective supervision wasnoted discharged ex vessel to dock of Pier #13 SouthHarbor, Manila on 14 July 1990, containerized onto 30 x20 secure metal vans, covered by clean EIRs. Except for

slight dents and paint scratches on side and roof panels,these containers were deemed to have [been] received ingood condition.

. . . .

Transfer/Delivery:

On July 23, 1990, shipment housed onto 30 x 20 cargocontainers was [withdrawn] by Transorient ContainerServices, Inc. . . . without exception.

[The cargo] was finally delivered to the consigneesstorage warehouse located at Tabacalera Compound,Romualdez Street, Ermita, Manila from July 23/25,1990.[12]

As found by the Court of Appeals:

From the [Survey Report], it [is] clear that the shipmentwas discharged from the vessel to the arrastre, MarinaPort Services Inc., in good order and condition asevidenced by clean Equipment Interchange Reports(EIRs). Had there been any damage to the shipment,

there would have been a report to that effect made bythe arrastre operator. The cargoes were withdrawn bythe defendant-appellant from the arrastre still in goodorder and condition as the same were received by theformer without exception, that is, without any report ofdamage or loss. Surely, if the container vans weredeformed, cracked, distorted or dented, the defendant-appellant would report it immediately to the consigneeor make an exception on the delivery receipt or note thesame in the Warehouse Entry Slip (WES). None of thesetook place. To put it simply, the defendant-appellantreceived the shipment in good order and condition anddelivered the same to the consignee damaged. We canonly conclude that the damages to the cargo occurredwhile it was in the possession of the defendant-appellant. Whenever the thing is lost (or damaged) in thepossession of the debtor (or obligor), it shall be

presumed that the loss (or damage) was due to his fault,unless there is proof to the contrary. No proof wasproffered to rebut this legal presumption and thepresumption of negligence attached to a common carrierin case of loss or damage to the goods.[13]

Anent petitioners insistence that the cargo couldnot have been damaged while in her custody as sheimmediately delivered the containers to SMCs

compound, suffice it to say that to prove the exercise ofextraordinary diligence, petitioner must do more thanmerely show the possibility that some other party couldbe responsible for the damage. It must prove that it usedall reasonable means to ascertain the nature andcharacteristic of goods tendered for [transport] and that[it] exercise[d] due care in the handling[thereof]. Petitioner failed to do this.

Nor is there basis to exempt petitioner from liabilityunder Art. 1734(4), which provides

Common carriers are responsible for the loss,

destruction, or deterioration of the goods, unless thesame is due to any of the following causes only:

. . . .

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

. . . .

For this provision to apply, the rule is that if theimproper packing or, in this case, the defect/s in thecontainer, is/are known to the carrier or his employeesor apparent upon ordinary observation, but henevertheless accepts the same without protest orexception notwithstanding such condition, he is notrelieved of liability for damage resulting therefrom.[14]Inthis case, petitioner accepted the cargo withoutexception despite the apparent defects in some of thecontainer vans. Hence, for failure of petitioner to provethat she exercised extraordinary diligence in the carriageof goods in this case or that she is exempt from liability,the presumption of negligence as provided under Art.1735[15]holds.

WHEREFORE, the decision of the Court of Appeals,dated May 31, 2001, is AFFIRMED.

SO ORDERED.

THIRD DIVISION

[G.R. No. 150255. April 22, 2005]

SCHMITZ TRANSPORT & BROKERAGE

CORPORATION, petitioner, vs. TRANSPORT

VENTURE, INC., INDUSTRIAL INSURANCE COMPANY,LTD., and BLACK SEA SHIPPING AND DODWELL now

INCHCAPE SHIPPING SERVICES, respondents.

D E C I S I O N
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CARPIO-MORALES,J.:

On petition for review is the June 27, 2001Decision[1]of the Court of Appeals, as well as itsResolution[2]dated September 28, 2001 denying themotion for reconsideration, which affirmed that ofBranch 21 of the Regional Trial Court (RTC) of Manila inCivil Case No. 92-63132[3]holding petitioner SchmitzTransport Brokerage Corporation (Schmitz Transport),

together with Black Sea Shipping Corporation (BlackSea), represented by its ship agent Inchcape ShippingInc. (Inchcape), and Transport Venture (TVI), solidarilyliable for the loss of 37 hot rolled steel sheets in coil thatwere washed overboard a barge.

On September 25, 1991, SYTCO Pte Ltd. Singaporeshipped from the port of Ilyichevsk, Russia on boardM/V Alexander Saveliev (a vessel of Russian registry andowned by Black Sea) 545 hot rolled steel sheets in coilweighing 6,992,450 metric tons.

The cargoes, which were to be discharged at the

port of Manila in favor of the consignee, Little Giant SteelPipe Corporation (Little Giant),[4]were insured againstall risks with Industrial Insurance Company Ltd.(Industrial Insurance) under Marine Policy No. M-91-3747-TIS.[5]

The vessel arrived at the port of Manila on October24, 1991 and the Philippine Ports Authority (PPA)assigned it a place of berth at the outside breakwater atthe Manila South Harbor.[6]

Schmitz Transport, whose services the consigneeengaged to secure the requisite clearances, to receive thecargoes from the shipside, and to deliver them to its (the

consignees) warehouse at Cainta, Rizal,[7]in turnengaged the services of TVI to send a barge and tugboatat shipside.

On October 26, 1991, around 4:30 p.m., TVIstugboat Lailani towed the barge Erika V to shipside.[8]

By 7:00 p.m. also of October 26, 1991, the tugboat,after positioning the barge alongside the vessel, left andreturned to the port terminal.[9]At 9:00 p.m., arrastreoperator Ocean Terminal Services Inc. commenced tounload 37 of the 545 coils from the vessel unto thebarge.

By 12:30 a.m. of October 27, 1991 during which theweather condition had become inclement due to anapproaching storm, the unloading unto the barge of the37 coils was accomplished.[10]No tugboat pulled thebarge back to the pier, however.

At around 5:30 a.m. of October 27, 1991, due tostrong waves,[11]the crew of the barge abandoned it andtransferred to the vessel. The barge pitched and rolledwith the waves and eventually capsized, washing the 37coils into the sea.[12]At 7:00 a.m., a tugboat finallyarrived to pull the already empty and damaged bargeback to the pier.[13]

Earnest efforts on the part of both the consigneeLittle Giant and Industrial Insurance to recover the lostcargoes proved futile.[14]

Little Giant thus filed a formal claim againstIndustrial Insurance which paid it the amountof P5,246,113.11. Little Giant thereupon executed asubrogation receipt[15]in favor of Industrial Insurance.

Industrial Insurance later filed a complaint againstSchmitz Transport, TVI, and Black Sea through itsrepresentative Inchcape (the defendants) before the RTCof Manila, for the recovery of the amount it paid to LittleGiant plus adjustment fees, attorneys fees, and litigationexpenses.[16]

Industrial Insurance faulted the defendants forundertaking the unloading of the cargoes while typhoonsignal No. 1 was raised in Metro Manila.[17]

By Decision of November 24, 1997, Branch 21 ofthe RTC held all the defendants negligent for unloadingthe cargoes outside of the breakwater notwithstandingthe storm signal.[18]The dispositive portion of thedecision reads:

WHEREFORE, premises considered, the Court renders

judgment in favor of the plaintiff, ordering thedefendants to pay plaintiff jointly and severally the sumof P5,246,113.11 with interest from the date thecomplaint was filed until fully satisfied, as well as thesum of P5,000.00 representing the adjustment fee plusthe sum of 20% of the amount recoverable from thedefendants as attorneys fees plus the costs of suit. Thecounterclaims and cross claims of defendants are herebyDISMISSED for lack of [m]erit.[19]

To the trial courts decision, the defendants SchmitzTransport and TVI filed a joint motion for

reconsideration assailing the finding that they arecommon carriers and the award of excessive attorneysfees of more than P1,000,000. And they argued that theywere not motivated by gross or evident bad faith andthat the incident was caused by a fortuitous event.[20]

By resolution of February 4, 1998, the trial courtdenied the motion for reconsideration.[21]

All the defendants appealed to the Court of Appealswhich, by decision of June 27, 2001, affirmed in toto thedecision of the trial court,[22]it finding that all thedefendants were common carriers Black Sea and TVI forengaging in the transport of goods and cargoes over theseas as a regular business and not as an isolatedtransaction,[23]and Schmitz Transport for entering into acontract with Little Giant to transport the cargoes fromship to port for a fee.[24]

In holding all the defendants solidarily liable, theappellate court ruled that each one was essential suchthat without each others contributory negligence theincident would not have happened and so much so thatthe person principally liable cannot be distinguishedwith sufficient accuracy.[25]

In discrediting the defense of fortuitous event, the

appellate court held that although defendants obviouslyhad nothing to do with the force of nature, they howeverhad control of where to anchor the vessel, wheredischarge will take place and even when the dischargingwill commence.[26]
http://sc.judiciary.gov.ph/jurisprudence/2005/apr2005/150255.htm#_ftn1http://sc.judiciary.gov.ph/jurisprudence/2005/apr2005/150255.htm#_ftn1http://sc.judiciary.gov.ph/jurisprudence/2005/apr2005/150255.htm#_ftn2http://sc.judiciary.gov.ph/jurisprudence/2005/apr2005/150255.htm#_ftn2http://sc.judicia

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