transpo hw nov16 full case

8/14/2019 Transpo Hw Nov16 Full Case

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HOMEWORK NO. 1

ART 1732 CIVIL CODE- DEFINITION OF COMMON CARRIERS

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

1. DE GUZMAN V. CA

common carrier definition, exempting circumstances, exception to exempting circumstances

Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal inPangasinan. Upon gathering sufficient quantities of such scrap material, respondent would bring suchmaterial to Manila for resale. He utilized two (2) six-wheeler trucks which he owned for hauling thematerial to Manila. On the return trip to Pangasinan, respondent would load his vehicles with cargowhich various merchants wanted delivered to differing establishments in Pangasinan. For that service,

respondent charged freight rates which were commonly lower than regular commercial rates.

Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer ofGeneral Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent forthe hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk in Makati, Rizal,to petitioner's establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1 December1970, respondent loaded in Makati the merchandise on to his trucks: 150 cartons were loaded on atruck driven by respondent himself, while 600 cartons were placed on board the other truck whichwas driven by Manuel Estrada, respondent's driver and employee.

Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reachedpetitioner, since the truck which carried these boxes was hijacked somewhere along the MacArthur

Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and thecargo.

On 6 January 1971, petitioner commenced action against private respondent in the Court of FirstInstance of Pangasinan, demanding payment of P 22,150.00, the claimed value of the lostmerchandise, plus damages and attorney's fees. Petitioner argued that private respondent, being acommon carrier, and having failed to exercise the extraordinary diligence required of him by the law,should be held liable for the value of the undelivered goods.

In his Answer, private respondent denied that he was a common carrier and argued that he could notbe held responsible for the value of the lost goods, such loss having been due to force majeure.

On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to be acommon carrier and holding him liable for the value of the undelivered goods (P 22,150.00) as well asfor P 4,000.00 as damages and P 2,000.00 as attorney's fees.

On appeal before the Court of Appeals, respondent urged that the trial court had erred in consideringhim a common carrier; in finding that he had habitually offered trucking services to the public; in notexempting him from liability on the ground of force majeure; and in ordering him to pay damages andattorney's fees.

The Court of Appeals reversed the judgment of the trial court and held that respondent had beenengaged in transporting return loads of freight "as a casualoccupation a sideline to his scrap iron business" and not as a common carrier. Petitioner came tothis Court by way of a Petition for Review assigning as errors the following conclusions of the Courtof Appeals:


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HOMEWORK NO. 1

1. that private respondent was not a common carrier;

2. that the hijacking of respondent's truck was force majeure; and

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

We consider first the issue of whether or not private respondent Ernesto Cendana may, under the factsearlier set forth, be properly characterized as a common carrier.

The Civil Code defines "common carriers" in the following terms:

Article 1732. Common carriers are persons, corporations, firms or associations engaged in thebusiness of carrying or transporting passengers or goods or both, by land, water, or air forcompensation, offering their services to the public.

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

of persons or goods or both, and one who does such carrying only as an ancillary activity (in localIdiom as "a sideline"). Article 1732 also carefully avoids making any distinction between a person orenterprise offering transportation service on a regular or scheduled basis and one offering such serviceon an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between acarrier offering its services to the "general public," i.e., the general community or population, and onewho offers services or solicits business only from a narrow segment of the general population. Wethink that Article 1733 deliberaom making such distinctions.

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

... every person that now or hereafter may own, operate, manage, or control in the Philippines, for hireor compensation, with general or limited clientele, whether permanent, occasional or accidental, anddone for general business purposes, any common carrier, railroad, street railway, traction railway,subway motor vehicle, either for freight or passenger, or both, with or without fixed route andwhatever may be its classification, freight or carrier service of any class, express service, steamboat,or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers orfreight or both, shipyard, marine repair shop, wharf or dock, ice plant,ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply andpower petroleum, sewerage system, wire or wireless communications systems, wire or wirelessbroadcasting stations and other similar public services. ... (Emphasis supplied)

It appears to the Court that private respondent is properly characterized as a common carrier eventhough he merely "back-hauled" goods for other merchants from Manila to Pangasinan, although suchback-hauling was done on a periodic or occasional rather than regular or scheduled manner, and eventhough private respondent's principal occupation was not the carriage of goods for others. There is nodispute that private respondent charged his customers a fee for hauling their goods; that fee frequentlyfell below commercial freight rates is not relevant here.

The Court of Appeals referred to the fact that private respondent held no certificate of publicconvenience, and concluded he was not a common carrier. This is palpable error. A certificate ofpublic convenience is not a requisite for the incurring of liability under the Civil Code provisionsgoverning common carriers. That liability arises the moment a person or firm acts as a common

carrier, without regard to whether or not such carrier has also complied with the requirements of theapplicable regulatory statute and implementing regulations and has been granted a certificate of public


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HOMEWORK NO. 1

convenience or other franchise. To exempt private respondent from the liabilities of a common carrierbecause he has not secured the necessary certificate of public convenience, would be offensive tosound public policy; that would be to reward private respondent precisely for failing to comply withapplicable statutory requirements. The business of a common carrier impinges directly and intimatelyupon the safety and well being and property of those members of the general community who happento deal with such carrier. The law imposes duties and liabilities upon common carriers for the safetyand protection of those who utilize their services and the law cannot allow a common carrier to rendersuch duties and liabilities merely facultative by simply failing to obtain the necessary permits andauthorizations.

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

Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to avery high degree of care and diligence ("extraordinary diligence") in the carriage of goods as well asof passengers. The specific import of extraordinary diligence in the care of goods transported by acommon carrier is, according to Article 1733, "further expressed in Articles 1734,1735 and 1745,numbers 5, 6 and 7" of the Civil Code.

Article 1734 establishes the general rule that common carriers are responsible for the loss, destructionor deterioration of the goods which they carry, "unless the same is due to any of the following causesonly:

(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;(2) Act of the public enemy in war, whether international or civil;(3) Act or omission of the shipper or owner of the goods;(4) The character-of the goods or defects in the packing or-in the containers; and(5) Order or act of competent public authority.

It is important to point out that the above list of causes of loss, destruction or deterioration which

exempt the common carrier for responsibility therefor, is a closed list. Causes falling outside theforegoing list, even if they appear to constitute a species of force majeure fall within the scope ofArticle 1735, which provides as follows:

In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article, if thegoods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or tohave acted negligently, unless they prove that they observed extraordinary diligence as required inArticle 1733. (Emphasis supplied)

Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged inthe instant case the hijacking of the carrier's truck does not fall within any of the five (5)categories of exempting causes listed in Article 1734. It would follow, therefore, that the hijacking ofthe carrier's vehicle must be dealt with under the provisions of Article 1735, in other words, that theprivate respondent as common carrier is presumed to have been at fault or to have acted negligently.This presumption, however, may be overthrown by proof of extraordinary diligence on the part ofprivate respondent.

Petitioner insists that private respondent had not observed extraordinary diligence in the care ofpetitioner's goods. Petitioner argues that in the circumstances of this case, private respondent shouldhave hired a security guard presumably to ride with the truck carrying the 600 cartons of Liberty filledmilk. We do not believe, however, that in the instant case, the standard of extraordinary diligencerequired private respondent to retain a security guard to ride with the truck and to engage brigands ina firelight at the risk of his own life and the lives of the driver and his helper.


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HOMEWORK NO. 1

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

As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article1733, given additional specification not only by Articles 1734 and 1735 but also by Article 1745,numbers 4, 5 and 6, Article 1745 provides in relevant part:

Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary topublic policy:

xxx xxx xxx

(5) that the common carrier shall not be responsible for the acts or omissions of his or itsemployees;

(6) that the common carrier's liability for acts committed by thieves, or of robbers who do not actwith grave or irresistible threat, violence or force, is dispensed with or diminished; and

(7) that the common carrier shall not responsible for the loss, destruction or deterioration ofgoods on account of the defective condition of the car vehicle, ship, airplane or other equipment usedin the contract of carriage. (Emphasis supplied)

Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed todivest or to diminish such responsibility even for acts of strangers like thieves or robbers, exceptwhere such thieves or robbers in fact acted "with grave or irresistible threat, violence or force." Webelieve and so hold that the limits of the duty of extraordinary diligence in the vigilance over thegoods carried are reached where the goods are lost 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 truck owned by private respondent which carriedpetitioner's cargo. The record shows that an information for robbery in band was filed in the Court ofFirst Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the Philippines v.Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe." There, theaccused were charged with willfully and unlawfully taking and carrying away with them the secondtruck, driven by Manuel Estrada and loaded with the 600 cartons of Liberty filled milk destined fordelivery at petitioner's store in Urdaneta, Pangasinan. The decision of the trial court shows that theaccused acted with grave, if not irresistible, threat, violence or force. 3 Three (3) of the five (5) hold-uppers were armed with firearms. The robbers not only took away the truck and its cargo but alsokidnapped the driver and his helper, detaining them for several days and later releasing them inanother province (in Zambales). The hijacked truck was subsequently found by the police in QuezonCity. The Court of First Instance convicted all the accused of robbery, though not of robbery in band.4

In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as quitebeyond the control of the common carrier and properly regarded as a fortuitous event. It is necessaryto recall that even common carriers are not made absolute insurers against all risks of travel and oftransport of goods, and are not held liable for acts or events which cannot be foreseen or areinevitable, provided that they shall have complied with the rigorous standard of extraordinarydiligence.

We, therefore, agree with the result reached by the Court of Appeals that private respondent Cendanais not liable for the value of the undelivered merchandise which was lost because of an event entirely

beyond private respondent's control.


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HOMEWORK NO. 1

ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of theCourt of Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.

SO ORDERED.

2. CRUZ V. SUN HOLIDAYS JUNE 29 2010-definition of common carrier

Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 20011 against SunHolidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City for damages arisingfrom the death of their son Ruelito C. Cruz (Ruelito) who perished with his wife on September 11,2000 on board the boat M/B Coco Beach III that capsized en route to Batangas from Puerto Galera,Oriental Mindoro where the couple had stayed at Coco Beach Island Resort (Resort) owned andoperated by respondent.

The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000 was byvirtue of a tour package-contract with respondent that included transportation to and from the Resort

and the point of departure in Batangas.

Miguel C. Matute (Matute),2 a scuba diving instructor and one of the survivors, gave his account ofthe incident that led to the filing of the complaint as follows:

Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to leave theResort in the afternoon of September 10, 2000, but was advised to stay for another night because ofstrong winds and heavy rains.

On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including petitionersson and his wife trekked to the other side of the Coco Beach mountain that was sheltered from thewind where they boarded M/B Coco Beach III, which was to ferry them to Batangas.

Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and intothe open seas, the rain and wind got stronger, causing the boat to tilt from side to side and the captainto step forward to the front, leaving the wheel to one of the crew members.

The waves got more unwieldy. After getting hit by two big waves which came one after the other,M/B Coco Beach III capsized putting all passengers underwater.

The passengers, who had put on their life jackets, struggled to get out of the boat. Upon seeing thecaptain, Matute and the other passengers who reached the surface asked him what they could do tosave the people who were still trapped under the boat. The captain replied "Iligtas niyo na lang ang

sarili niyo" (Just save yourselves).

Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto Galerapassed by the capsized M/B Coco Beach III. Boarded on those two boats were 22 persons, consistingof 18 passengers and four crew members, who were brought to Pisa Island. Eight passengers,including petitioners son and his wife, died during the incident.

At the time of Ruelitos death, he was 28 years old and employed as a contractual worker for MitsuiEngineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly salary of $900.3

Petitioners, by letter of October 26, 2000,4 demanded indemnification from respondent for the deathof their son in the amount of at least P4,000,000.


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HOMEWORK NO. 1

Replying, respondent, by letter dated November 7, 2000,5 denied any responsibility for the incidentwhich it considered to be a fortuitous event. It nevertheless offered, as an act of commiseration, theamount of P10,000 to petitioners upon their signing of a waiver.

As petitioners declined respondents offer, they filed the Complaint, as earlier reflected, alleging thatrespondent, as a common carrier, was guilty of negligence in allowing M/B Coco Beach III to sailnotwithstanding storm warning bulletins issued by the Philippine Atmospheric, Geophysical andAstronomical Services Administration (PAGASA) as early as 5:00 a.m. of September 11, 2000.6

In its Answer,7 respondent denied being a common carrier, alleging that its boats are not available tothe general public as they only ferry Resort guests and crew members. Nonetheless, it claimed that itexercised the utmost diligence in ensuring the safety of its passengers; contrary to petitionersallegation, there was no storm on September 11, 2000 as the Coast Guard in fact cleared the voyage;and M/B Coco Beach III was not filled to capacity and had sufficient life jackets for its passengers.By way of Counterclaim, respondent alleged that it is entitled to an award for attorneys fees andlitigation expenses amounting to not less than P300,000.

Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily requires fourconditions to be met before a boat is allowed to sail, to wit: (1) the sea is calm, (2) there is clearancefrom the Coast Guard, (3) there is clearance from the captain and (4) there is clearance from theResorts assistant manager.8 He added that M/B Coco Beach III met all four conditions on September11, 2000,9 but a subasco or squall, characterized by strong winds and big waves, suddenly occurred,causing the boat to capsize.10

By Decision of February 16, 2005,11 Branch 267 of the Pasig RTC dismissed petitioners Complaintand respondents Counterclaim.

Petitioners Motion for Reconsideration having been denied by Order dated September 2, 2005,12they appealed to the Court of Appeals.

By Decision of August 19, 2008,13 the appellate court denied petitioners appeal, holding, amongother things, that the trial court correctly ruled that respondent is a private carrier which is onlyrequired to observe ordinary diligence; that respondent in fact observed extraordinary diligence intransporting its guests on board M/B Coco Beach III; and that the proximate cause of the incident wasa squall, a fortuitous event.

Petitioners Motion for Reconsideration having been denied by Resolution dated January 16, 2009,14they filed the present Petition for Review.15

Petitioners maintain the position they took before the trial court, adding that respondent is a commoncarrier since by its tour package, the transporting of its guests is an integral part of its resort business.They inform that another division of the appellate court in fact held respondent liable for damages tothe other survivors of the incident.

Upon the other hand, respondent contends that petitioners failed to present evidence to prove that it isa common carrier; that the Resorts ferry services for guests cannot be considered as ancillary to itsbusiness as no income is derived therefrom; that it exercised extraordinary diligence as shown by theconditions it had imposed before allowing M/B Coco Beach III to sail; that the incident was caused bya fortuitous event without any contributory negligence on its part; and that the other case wherein theappellate court held it liable for damages involved different plaintiffs, issues and evidence.16

The petition is impressed with merit.


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HOMEWORK NO. 1

Petitioners correctly rely on De Guzman v. Court of Appeals17 in characterizing respondent as acommon carrier.

The Civil Code defines "common carriers" in the following terms:


The above article makes no distinction between one whose principal business activity is the carryingof persons or goods or both, and one who does such carrying only as an ancillary activity (in localidiom, as "a sideline"). Article 1732 also carefully avoids making any distinction between a person orenterprise offering transportation service on a regular or scheduled basis and one offering such serviceon an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between acarrier offering its services to the "general public," i.e., the general community or population, and onewho offers services or solicits business only from a narrow segment of the general population. Wethink that Article 1733 deliberately refrained from making such distinctions.

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

. . . every person that now or hereafter may own, operate, manage, or control in the Philippines, forhire or compensation, with general or limited clientele, whether permanent, occasional or accidental,and done for general business purposes, any common carrier, railroad, street railway, traction railway,subway motor vehicle, either for freight or passenger, or both, with or without fixed route andwhatever may be its classification, freight or carrier service of any class, express service, steamboat,or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or

freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal,irrigation system, gas, electric light, heat and power, water supply and power petroleum, seweragesystem, wire or wireless communications systems, wire or wireless broadcasting stations and othersimilar public services . . .18 (emphasis and underscoring supplied.)

Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main business asto be properly considered ancillary thereto. The constancy of respondents ferry services in its resortoperations is underscored by its having its own Coco Beach boats. And the tour packages it offers,which include the ferry services, may be availed of by anyone who can afford to pay the same. Theseservices are thus available to the public.

That respondent does not charge a separate fee or fare for its ferry services is of no moment. It wouldbe imprudent to suppose that it provides said services at a loss. The Court is aware of the practice ofbeach resort operators offering tour packages to factor the transportation fee in arriving at the tourpackage price. That guests who opt not to avail of respondents ferry services pay the same amount islikewise inconsequential. These guests may only be deemed to have overpaid.

As De Guzman instructs, Article 1732 of the Civil Code defining "common carriers" has deliberatelyrefrained from making distinctions on whether the carrying of persons or goods is the carriersprincipal business, whether it is offered on a regular basis, or whether it is offered to the generalpublic. The intent of the law is thus to not consider such distinctions. Otherwise, there is no tellinghow many other distinctions may be concocted by unscrupulous businessmen engaged in the carryingof persons or goods in order to avoid the legal obligations and liabilities of common carriers.


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HOMEWORK NO. 1

Under the Civil Code, common carriers, from the nature of their business and for reasons of publicpolicy, are bound to observe extraordinary diligence for the safety of the passengers transported bythem, according to all the circumstances of each case.19 They are bound to carry the passengerssafely as far as human care and foresight can provide, using the utmost diligence of very cautiouspersons, with due regard for all the circumstances.20

When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed that thecommon carrier is at fault or negligent. In fact, there is even no need for the court to make an expressfinding of fault or negligence on the part of the common carrier. This statutory presumption may onlybe overcome by evidence that the carrier exercised extraordinary diligence.21

Respondent nevertheless harps on its strict compliance with the earlier mentioned conditions ofvoyage before it allowed M/B Coco Beach III to sail on September 11, 2000. Respondents positiondoes not impress.

The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical cyclonewarnings for shipping on September 10 and 11, 2000 advising of tropical depressions in Northern

Luzon which would also affect the province of Mindoro.22 By the testimony of Dr. Frisco Nilo,supervising weather specialist of PAGASA, squalls are to be expected under such weathercondition.23

A very cautious person exercising the utmost diligence would thus not brave such stormy weather andput other peoples lives at risk. The extraordinary diligence required of common carriers demands thatthey take care of the goods or lives entrusted to their hands as if they were their own. This respondentfailed to do.

Respondents insistence that the incident was caused by a fortuitous event does not impress either.

The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected occurrence,

or the failure of the debtors to comply with their obligations, must have been independent of humanwill; (b) the event that constituted the caso fortuito must have been impossible to foresee or, ifforeseeable, impossible to avoid; (c) the occurrence must have been such as to render it impossible forthe debtors to fulfill their obligation in a normal manner; and (d) the obligor must have been free fromany participation in the aggravation of the resulting injury to the creditor.24

To fully free a common carrier from any liability, the fortuitous event must have been the proximateand only cause of the loss. And it should have exercised due diligence to prevent or minimize the lossbefore, during and after the occurrence of the fortuitous event.25

Respondent cites the squall that occurred during the voyage as the fortuitous event that overturnedM/B Coco Beach III. As reflected above, however, the occurrence of squalls was expected under theweather condition of September 11, 2000. Moreover, evidence shows that M/B Coco Beach IIIsuffered engine trouble before it capsized and sank.26 The incident was, therefore, not completelyfree from human intervention.

The Court need not belabor how respondents evidence likewise fails to demonstrate that it exerciseddue diligence to prevent or minimize the loss before, during and after the occurrence of the squall.

Article 176427 vis--vis Article 220628 of the Civil Code holds the common carrier in breach of itscontract of carriage that results in the death of a passenger liable to pay the following: (1) indemnityfor death, (2) indemnity for loss of earning capacity and (3) moral damages.

Petitioners are entitled to indemnity for the death of Ruelito which is fixed at P50,000.29


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HOMEWORK NO. 1

As for damages representing unearned income, the formula for its computation is:

Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary livingexpenses).

Life expectancy is determined in accordance with the formula:

2 / 3 x [80 age of deceased at the time of death]30

The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80 age at death])adopted in the American Expectancy Table of Mortality or the Actuarial of Combined ExperienceTable of Mortality.31

The second factor is computed by multiplying the life expectancy by the net earnings of the deceased,i.e., the total earnings less expenses necessary in the creation of such earnings or income and lessliving and other incidental expenses.32 The loss is not equivalent to the entire earnings of thedeceased, but only such portion as he would have used to support his dependents or heirs. Hence, to

be deducted from his gross earnings are the necessary expenses supposed to be used by the deceasedfor his own needs.33

In computing the third factor necessary living expense, Smith Bell Dodwell Shipping Agency Corp.v. Borja34 teaches that when, as in this case, there is no showing that the living expenses constitutedthe smaller percentage of the gross income, the living expenses are fixed at half of the gross income.

Applying the above guidelines, the Court determines Ruelito's life expectancy as follows:

Life expectancy = 2/3 x [80 - age of deceased at the time of death]2/3 x [80 - 28]2/3 x [52]

Life expectancy = 35Documentary evidence shows that Ruelito was earning a basic monthly salary of $90035 which, whenconverted to Philippine peso applying the annual average exchange rate of $1 = P44 in 2000,36amounts to P39,600. Ruelitos net earning capacity is thus computed as follows:

Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary livingexpenses).= 35 x (P475,200 - P237,600)= 35 x (P237,600)Net Earning Capacity = P8,316,000Respecting the award of moral damages, since respondent common carriers breach of contract ofcarriage resulted in the death of petitioners son, following Article 1764 vis--vis Article 2206 of theCivil Code, petitioners are entitled to moral damages.

Since respondent failed to prove that it exercised the extraordinary diligence required of commoncarriers, it is presumed to have acted recklessly, thus warranting the award too of exemplary damages,which are granted in contractual obligations if the defendant acted in a wanton, fraudulent, reckless,oppressive or malevolent manner.37

Under the circumstances, it is reasonable to award petitioners the amount of P100,000 as moraldamages and P100,000 as exemplary damages.381avvphi1

Pursuant to Article 220839 of the Civil Code, attorney's fees may also be awarded where exemplary

damages are awarded. The Court finds that 10% of the total amount adjudged against respondent isreasonable for the purpose.


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HOMEWORK NO. 1

Finally, Eastern Shipping Lines, Inc. v. Court of Appeals40 teaches that when an obligation,regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, thecontravenor can be held liable for payment of interest in the concept of actual and compensatorydamages, subject to the following rules, to wit

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan orforbearance of money, the interest due should be that which may have been stipulated in writing.Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. Inthe absence of stipulation, the rate of interest shall be 12% per annum to be computed from default,i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of theCivil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on theamount of damages awarded may be imposed at the discretion of the court at the rate of 6% perannum. No interest, however, shall be adjudged on unliquidated claims or damages except when oruntil the demand can be established with reasonable certainty. Accordingly, where the demand is

established with reasonable certainty, the interest shall begin to run from the time the claim is madejudicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonablyestablished at the time the demand is made, the interest shall begin to run only from the date the

judgment of the court is made (at which time the quantification of damages may be deemed to havebeen reasonably ascertained). The actual base for the computation of legal interest shall, in any case,be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate oflegal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annumfrom such finality until its satisfaction, this interim period being deemed to be by then an equivalentto a forbearance of credit. (emphasis supplied).

Since the amounts payable by respondent have been determined with certainty only in the presentpetition, the interest due shall be computed upon the finality of this decision at the rate of 12% perannum until satisfaction, in accordance with paragraph number 3 of the immediately cited guideline inEaster Shipping Lines, Inc.

WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED and SET ASIDE.Judgment is rendered in favor of petitioners ordering respondent to pay petitioners the following: (1)P50,000 as indemnity for the death of Ruelito Cruz; (2) P8,316,000 as indemnity for Ruelitos loss ofearning capacity; (3) P100,000 as moral damages; (4) P100,000 as exemplary damages; (5) 10% ofthe total amount adjudged against respondent as attorneys fees; and (6) the costs of suit.

The total amount adjudged against respondent shall earn interest at the rate of 12% per annumcomputed from the finality of this decision until full payment.

SO ORDERED.

3. FIRST PHIL IND V. CA 1998

- test to determine common carrier

This petition for review on certiorari assails the Decision of the Court of Appeals dated November 29,1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional Trial Court of Batangas City,Branch 84, in Civil Case No. 4293, which dismissed petitioners' complaint for a business tax refundimposed by the City of Batangas.


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HOMEWORK NO. 1

Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract,install and operate oil pipelines. The original pipeline concession was granted in 1967[1] andrenewed by the Energy Regulatory Board in 1992.[2]

Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor ofBatangas City. However, before the mayor's permit could be issued, the respondent City Treasurerrequired petitioner to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to theLocal Government Code.[3] The respondent City Treasurer assessed a business tax on the petitioneramounting to P956,076.04 payable in four installments based on the gross receipts for productspumped at GPS-1 for the fiscal year 1993 which amounted to P181,681,151.00. In order not tohamper its operations, petitioner paid the tax under protest in the amount of P239,019.01 for the firstquarter 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 pipeline operator with a government concession granted

under the Petroleum Act. It is engaged in the business of transporting petroleum products from theBatangas refineries, via pipeline, to Sucat and JTF Pandacan Terminals. As such, our Company isexempt from paying tax on gross receipts under Section 133 of the Local Government Code of 1991 xx x x

"Moreover, Transportation contractors are not included in the enumeration of contractors underSection 131, Paragraph (h) of the Local Government Code. Therefore, the authority to impose tax 'oncontractors and other independent contractors' under Section 143, Paragraph (e) of the LocalGovernment Code does not include the power to levy on transportation contractors.

"The imposition and assessment cannot be categorized as a mere fee authorized under Section 147 ofthe Local Government Code. The said section limits the imposition of fees and charges on business to

such amounts as may be commensurate to the cost of regulation, inspection, and licensing. Hence,assuming arguendo that FPIC is liable for the license fee, the imposition thereof based on grossreceipts is violative of the aforecited provision. The amount of P956,076.04 (P239,019.01 perquarter) is not commensurate to the cost of regulation, inspection and licensing. The fee is already arevenue raising measure, and not a mere regulatory imposition."[4]

On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner cannotbe considered engaged in transportation business, thus it cannot claim exemption under Section 133(j) of the Local Government Code.[5]

On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint[6] fortax refund with prayer for a writ of preliminary injunction against respondents City of Batangas andAdoracion Arellano in her capacity as City Treasurer. In its complaint, petitioner alleged, inter alia,that: (1) the imposition and collection of the business tax on its gross receipts violates Section 133 ofthe Local Government Code; (2) the authority of cities to impose and collect a tax on the grossreceipts of "contractors and independent contractors" under Sec. 141 (e) and 151 does not include theauthority to collect such taxes on transportation contractors for, as defined under Sec. 131 (h), theterm "contractors" excludes transportation contractors; and, (3) the City Treasurer illegally anderroneously imposed and collected the said tax, thus meriting the immediate refund of the tax paid.[7]

Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes underSection 133 (j) of the Local Government Code as said exemption applies only to "transportationcontractors and persons engaged in the transportation by hire and common carriers by air, land and

water." Respondents assert that pipelines are not included in the term "common carrier" which referssolely to ordinary carriers such as trucks, trains, ships and the like. Respondents further posit that the


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term "common carrier" under the said code pertains to the mode or manner by which a product isdelivered to its destination.[8]

On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this wise:

"xxx Plaintiff is either a contractor or other independent contractor.

xxx the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax exemptionsare to be strictly construed against the taxpayer, taxes being the lifeblood of the government.Exemption may therefore be granted only by clear and unequivocal provisions of law.

"Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387, (Exhibit A)whose concession was lately renewed by the Energy Regulatory Board (Exhibit B). Yet neither saidlaw nor the deed of concession grant any tax exemption upon the plaintiff.

"Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of the LocalTax Code. Such being the situation obtained in this case (exemption being unclear and equivocal)

resort to distinctions or other considerations may be of help:

1. That the exemption granted under Sec. 133 (j) encompasses only common carriers so as notto overburden the riding public or commuters with taxes. Plaintiff is not a common carrier, but aspecial carrier extending its services and facilities to a single specific or "special customer" under a"special contract."

2. The Local Tax Code of 1992 was basically enacted to give more and effective localautonomy to local governments than the previous enactments, to make them economically andfinancially viable to serve the people and discharge their functions with a concomitant obligation toaccept certain devolution of powers, x x x So, consistent with this policy even franchise grantees aretaxed (Sec. 137) and contractors are also taxed under Sec. 143 (e) and 151 of the Code."[9]

Petitioner assailed the aforesaid decision before this Court via a petition for review. On February 27,1995, we referred the case to the respondent Court of Appeals for consideration and adjudication.[10]On November 29, 1995, the respondent court rendered a decision[11] affirming the trial court'sdismissal of petitioner's complaint. Petitioner's motion for reconsideration was denied on July 18,1996.[12]

Hence, this petition. At first, the petition was denied due course in a Resolution dated November 11,1996.[13] Petitioner moved for a reconsideration which was granted by this Court in a Resolution[14]of January 20, 1997. Thus, the petition was reinstated.

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

There is merit in the petition.

A "common carrier" may be defined, broadly, as one who holds himself out to the public as engagedin the business of transporting persons or property from place to place, for compensation, offering hisservices to the public generally.

Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm orassociation engaged in the business of carrying or transporting passengers or goods or both, by land,

water, or air, for compensation, offering their services to the public."


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

1. He must be engaged in the business of carrying goods for others as a public employment, andmust hold himself out as ready to engage in the transportation of goods for person generally as abusiness and not as a casual occupation;

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

3. He must undertake to carry by the method by which his business is conducted and over hisestablished roads; and

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

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

petitioner has a limited clientele does not exclude it from the definition of a common carrier. In DeGuzman vs. Court of Appeals[16] we ruled that:

"The above article (Art. 1732, Civil Code) makes no distinction between one whose principalbusiness activity is the carrying of persons or goods or both, and one who does such carrying only asan ancillary activity (in local idiom, as a 'sideline'). Article 1732 x x x avoids making any distinctionbetween a person or enterprise offering transportation service on a regular or scheduled basis and oneoffering such service on an occasional, 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 solicits business only from a narrow segment of thegeneral population. We think that Article 1877 deliberately refrained from making such distinctions.

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

'every person that now or hereafter may own, operate, manage, or control in the Philippines, for hireor compensation, with general or limited clientele, whether permanent, occasional or accidental, anddone for general business purposes, any common carrier, railroad, street railway, traction railway,subway motor vehicle, either for freight or passenger, or both, with or without fixed route andwhatever may be its classification, freight or carrier service of any class, express service, steamboat,or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers orfreight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal,irrigation system gas, electric light heat and power, water supply and power petroleum, seweragesystem, wire or wireless communications systems, wire or wireless broadcasting stations and othersimilar 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 carriers transporting goods and passengers through movingvehicles or vessels either by land, sea or water, is erroneous.

As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes nodistinction as to the means of transporting, as long as it is by land, water or air. It does not providethat the transportation of the passengers or goods should be by motor vehicle. In fact, in the United

States, oil pipe line operators are considered common carriers.[17]


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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 common carrier. - A pipe line shall have the preferential rightto utilize installations for the transportation of petroleum owned by him, but is obligated to utilize theremaining transportation capacity pro rata for the transportation of such other petroleum as may beoffered by others for transport, and to charge without discrimination such rates as may have beenapproved by the Secretary of Agriculture and Natural Resources."

Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7thereof provides:

"that everything relating to the exploration for and exploitation of petroleum x x and everythingrelating to the manufacture, refining, storage, or transportation by special methods of petroleum, ishereby declared to be a public utility." (Underscoring Supplied)

The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling

No. 069-83, it declared:

"x x x since [petitioner] is a pipeline concessionaire that is engaged only in transporting petroleumproducts, it is considered a common carrier under Republic Act No. 387 x x x. Such being the case, itis not subject to withholding tax prescribed by Revenue Regulations No. 13-78, as amended."

From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and, therefore,exempt from the business tax as provided for in Section 133 (j), of the Local Government Code, towit:

"Section 133. Common Limitations on the Taxing Powers of Local Government Units. - Unlessotherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and

barangays shall not extend to the levy of the following :

x x x x x x x x x

(j) Taxes on the gross receipts of transportation contractors and persons engaged in thetransportation of passengers or freight by hire and common carriers by air, land or water, except asprovided in this Code."

The deliberations conducted in the House of Representatives 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 Limitations on 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 the business of transportation. This appears to be one ofthose being deemed to be exempted from the taxing powers of the local government units. May weknow the reason why the transportation business is being excluded from the taxing powers of the localgovernment units?


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MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec. 131), line16, paragraph 5. It states that local government units may not impose taxes on the business oftransportation, except as otherwise provided in this code.

Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see there thatprovinces have the power to impose a tax on business enjoying a franchise at the rate of not more thanone-half of 1 percent of the gross annual receipts. So, transportation contractors who are enjoying afranchise would be subject to tax by the province. That is the exception, Mr. Speaker.

What we want to guard against here, Mr. Speaker, is the imposition of taxes by local governmentunits on the carrier business. Local government units may impose taxes on top of what is alreadybeing imposed by the 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 an exception under Section 125 [nowSec. 137] that a province 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 excluding from the taxing power of the local government unitthe imposition of business tax against common carriers is to prevent a duplication of the so-called"common carrier's tax."

Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings underthe National Internal Revenue Code.[19] To tax petitioner again on its gross receipts in itstransportation of petroleum business would defeat the purpose of the Local Government Code.

WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of Appealsdated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.

SO ORDERED.

Bellosillo, (Chairman), Puno, and Mendoza, JJ., concur.

4. CALVO (TCTSI ) V. UCPB MARCH 19 2002

This is a petition for review of the decision,[1] dated May 31, 2001, of the Court of Appeals,affirming the decision[2] of the Regional Trial Court, Makati City, Branch 148, which orderedpetitioner to pay respondent, as subrogee, the amount of P93,112.00 with legal interest, representingthe value of damaged cargo handled by petitioner, 25% thereof as attorneys fees, and the cost of the

suit.

The facts are as follows:

Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI), asole proprietorship customs broker. At the time material to this case, petitioner entered into acontract with San Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical flutingpaper and 124 reels of kraft liner board from the Port Area in Manila to SMCs warehouse at theTabacalera 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 unloaded from the vessel to the custody of thearrastre operator, Manila Port Services, Inc. From July 23 to July 25, 1990, petitioner, pursuant to her


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contract with SMC, withdrew the cargo from the arrastre operator and delivered it to SMCswarehouse in Ermita, Manila. On July 25, 1990, the goods were inspected by Marine CargoSurveyors, who found that 15 reels of the semi-chemical fluting paper were wet/stained/torn and 3reels of kraft liner board were likewise torn. The damage was placed at P93,112.00.

SMC collected payment from respondent UCPB under its insurance contract for the 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 petitionerliable to respondent for the damage to the shipment.

The trial court held:

It cannot be denied . . . that the subject cargoes sustained damage while in the custody of defendants.Evidence such as the Warehouse Entry Slip (Exh. E); the Damage Report (Exh. F) with entriesappearing therein, classified as TED and TSN, which the claims processor, Ms. Agrifina DeLuna, claimed to be tearrage at the end and tearrage at the middle of the subject damaged cargoesrespectively, coupled with the Marine Cargo Survey Report (Exh. H - H-4-A) confirms the fact of

the damaged condition of the subject cargoes. The surveyor[s] report (Exh. H-4-A) in particular,which provides among others that:

. . . we opine that damages sustained by shipment is attributable to improper handling in transitpresumably whilst in the custody of the broker . . . .

is a finding which cannot be traversed and overturned.

The evidence adduced by the defendants is not enough to sustain [her] defense that [she is] are notliable. Defendant by reason of the nature of [her] business should have devised ways and means inorder to prevent the damage to the cargoes which it is under obligation to take custody of and toforthwith deliver to the consignee. Defendant did not present any evidence on what precaution [she]

performed to prevent [the] said incident, hence the presumption is that the moment the defendantaccepts the cargo [she] shall perform such extraordinary diligence because of the nature of the cargo.

. . . .

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

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

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


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1. The sum of P93,112.00 plus interest;

2. 25% thereof as lawyers fee;

3. Costs of suit.[4]

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

Petitioner contends that:

I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR [IN]DECIDING THE CASE NOT ON THE EVIDENCE PRESENTED BUT ON PURE SURMISES,SPECULATIONS AND MANIFESTLY MISTAKEN INFERENCE.

II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR INCLASSIFYING THE PETITIONER AS A COMMON CARRIER AND NOT AS PRIVATE OR

SPECIAL CARRIER WHO DID NOT HOLD ITS SERVICES TO THE PUBLIC.[5]

It will be convenient to deal with these contentions in the inverse order, for if petitioner is not acommon carrier, although both the trial court and the Court of Appeals held otherwise, then she isindeed not liable beyond what ordinary diligence in the vigilance over the goods transported by her,would require.[6] Consequently, any damage to the cargo she agrees to transport cannot be presumedto have been due to her fault or negligence.

Petitioner contends that contrary to the findings of the trial court and the Court of Appeals, she is nota common carrier but a private carrier because, as a customs broker and warehouseman, she does notindiscriminately hold her services out to the public but only offers the same to select parties withwhom she may contract in the conduct of her business.

The contention has no merit. In De Guzman v. Court of Appeals,[7] the Court dismissed a similarcontention and held the party to be a common carrier, thus !

The Civil Code defines common carriers in the following terms:


The above article makes no distinction between one whose principal business activity is thecarrying of persons or goods or both, and one who does such carrying only as an ancillary activity . .. Article 1732 also carefully avoids making any distinction between a person or enterprise offeringtransportation service on a regular or scheduled basis and one offering such service on an occasional,episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering itsservices to the general public, i.e., the general community or population, and one who offersservices or solicits business only from a narrow segment of the general population. We think thatArticle 1732 deliberately refrained from making such distinctions.

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


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x x x every person that now or hereafter may own, operate, manage, or control in the Philippines,for hire or compensation, with general or limited clientele, whether permanent, occasional oraccidental, and done for general business purposes, any common carrier, railroad, street railway,traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixedroute and whatever may be its classification, freight or carrier service of any class, express service,steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation ofpassengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigerationplant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum,sewerage system, wire or wireless communications systems, wire or wireless broadcasting stationsand other similar public services. x x x [8]

There is greater reason for holding petitioner to be a common carrier because the transportation ofgoods is an integral part of her business. To uphold petitioners contention would be to deprive thosewith whom she contracts the protection which the law affords them notwithstanding the fact that theobligation to carry goods for her customers, as already noted, is part and parcel of petitionersbusiness.

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

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

In Compania Maritima v. Court of Appeals,[9] the meaning of extraordinary diligence in thevigilance over goods was explained thus:

The extraordinary diligence in the vigilance over the goods tendered for shipment requires thecommon carrier to know and to follow the required precaution for avoiding damage to, or destructionof the goods entrusted to it for sale, carriage and delivery. It requires common carriers to render

service with the greatest skill and foresight and to use all reasonable means to ascertain the natureand characteristic of goods tendered for shipment, and to exercise due care in the handling andstowage, including such methods as their nature requires.

In the case at bar, petitioner denies liability for the damage to the cargo. She claims that thespoilage or wettage took place while the goods were in the custody of either the carrying vesselM/V Hayakawa Maru, which transported the cargo to Manila, or the arrastre operator, to whom thegoods were unloaded and who allegedly kept them in open air for nine days from July 14 to July 23,1998 notwithstanding the fact that some of the containers were deformed, cracked, or 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 door distorted/partly loose

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

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

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

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

In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino testified that he has nopersonal knowledge on whether the container vans were first stored in petitioners warehouse prior to


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their delivery to the consignee. She likewise claims that after withdrawing the container vans fromthe arrastre operator, her driver, Ricardo Nazarro, immediately delivered the cargo to SMCswarehouse in Ermita, Manila, which is a mere thirty-minute drive from the Port Area where the cargocame from. Thus, the damage to the cargo could not have taken place while these were in hercustody.[11]

Contrary to petitioners assertion, the Survey Report (Exh. H) of the Marine Cargo Surveyorsindicates that when the shipper transferred the cargo in question to the arrastre operator, these werecovered by clean Equipment Interchange Report (EIR) and, when petitioners employees withdrewthe cargo from the arrastre operator, they did so without exception or protest either with regard to thecondition of container vans or their contents. The Survey Report pertinently reads !

Details of Discharge:

Shipment, provided with our protective supervision was noted discharged ex vessel to dock of Pier#13 South Harbor, Manila on 14 July 1990, containerized onto 30 x 20 secure metal vans, coveredby clean EIRs. Except for slight dents and paint scratches on side and roof panels, these containers

were deemed to have [been] received in good condition.

. . . .

Transfer/Delivery:

On July 23, 1990, shipment housed onto 30 x 20 cargo containers was [withdrawn] byTransorient Container Services, Inc. . . . without exception.

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

As found by the Court of Appeals:

From the [Survey Report], it [is] clear that the shipment was discharged from the vessel to thearrastre, Marina Port Services Inc., in good order and condition as evidenced by clean EquipmentInterchange Reports (EIRs). Had there been any damage to the shipment, there would have been areport to that effect made by the arrastre operator. The cargoes were withdrawn by the defendant-appellant from the arrastre still in good order and condition as the same were received by the formerwithout exception, that is, without any report of damage or loss. Surely, if the container vans weredeformed, cracked, distorted or dented, the defendant-appellant would report it immediately to theconsignee or make an exception on the delivery receipt or note the same in the Warehouse Entry Slip(WES). None of these took place. To put it simply, the defendant-appellant received the shipment ingood order and condition and delivered the same to the consignee damaged. We can only concludethat the damages to the cargo occurred while it was in the possession of the defendant-appellant.Whenever the thing is lost (or damaged) in the possession of the debtor (or obligor), it shall bepresumed that the loss (or damage) was due to his fault, unless there is proof to the contrary. Noproof was proffered to rebut this legal presumption and the presumption of negligence attached to acommon carrier in case of loss or damage to the goods.[13]

Anent petitioners insistence that the cargo could not have been damaged while in her custody as sheimmediately delivered the containers to SMCs compound, suffice it to say that to prove the exerciseof extraordinary diligence, petitioner must do more than merely show the possibility that some otherparty could be responsible for the damage. It must prove that it used all reasonable means toascertain the nature and characteristic of goods tendered for [transport] and that [it] exercise[d] due

care in the handling [thereof]. Petitioner failed to do this.


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

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

. . . .

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

. . . .

For this provision to apply, the rule is that if the improper packing or, in this case, the defect/s in thecontainer, is/are known to the carrier or his employees or apparent upon ordinary observation, but henevertheless accepts the same without protest or exception notwithstanding such condition, he is notrelieved of liability for damage resulting therefrom.[14] In this case, petitioner accepted the cargowithout exception despite the apparent defects in some of the container vans. Hence, for failure ofpetitioner to prove that she exercised extraordinary diligence in the carriage of goods in this case or

that she is exempt from liability, the presumption of negligence as provided under Art. 1735[15]holds.

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

SO ORDERED.

5. ASIA LIGHTERAGE V. CA, PRUDENTIAL AUG 19 2003

- extra ordinary diligence of common carriers, negligence

On appeal is the Court of Appeals May 11, 2000 Decision[1] in CA-G.R. CV No. 49195 and

February 21, 2001 Resolution[2] affirming with modification the April 6, 1994 Decision[3] of theRegional Trial Court of Manila which found petitioner liable to pay private respondent the amount ofindemnity 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 American Corporation of Portland, Oregon on board thevessel M/V NEO CYMBIDIUM V-26 for delivery to the consignee, General Milling Corporation inManila, evidenced by Bill of Lading No. PTD/Man-4.[5] The shipment was insured by the privaterespondent Prudential Guarantee and Assurance, Inc. against loss or damage for P14,621,771.75

under Marine Cargo Risk Note RN 11859/90.[6]

On July 25, 1990, the carrying vessel arrived in Manila and the cargo was transferred to the custodyof the petitioner Asia Lighterage and Shipping, Inc. The petitioner was contracted by the consigneeas carrier to deliver the cargo to consignee's warehouse at Bo. Ugong, Pasig City.

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

It appears that on August 17, 1990, the transport of said cargo was suspended due to a warning of anincoming typhoon. On August 22, 1990, the petitioner proceeded to pull the barge to EngineeringIsland off Baseco to seek shelter from the approaching typhoon. PSTSI III was tied down to other

barges which arrived ahead of it while weathering out the storm that night. A few days after, thebarge developed a list because of a hole it sustained after hitting an unseen protuberance underneath


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the water. The petitioner filed a Marine Protest on August 28, 1990.[8] It likewise secured theservices of Gaspar Salvaging Corporation which 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. Mesa spillways, the barge again ran aground due tostrong current. To avoid the complete sinking of the barge, a portion of the goods was transferred tothree other barges.[10]

The next day, September 6, 1990, the towing bits of the barge broke. It sank completely, resulting inthe total loss of the remaining cargo.[11] A second Marine Protest was filed on September 7,1990.[12]

On September 14, 1990, a bidding was conducted to dispose of the damaged wheat retrieved andloaded on the three other barges.[13] The total proceeds from the sale of the salvaged cargo wasP201,379.75.[14]

On the same date, September 14, 1990, consignee sent a claim letter to the petitioner, and anotherletter dated September 18, 1990 to the private respondent for the value of the lost cargo.

On January 30, 1991, the private respondent indemnified the consignee in the amount ofP4,104,654.22.[15] Thereafter, as subrogee, it sought recovery of said amount from the petitioner,but to no avail.

On July 3, 1991, the private respondent filed a complaint against the petitioner for recovery of theamount of indemnity, attorney's fees and cost of suit.[16] Petitioner filed its answer withcounterclaim.[17]

The Regional Trial Court ruled in favor of the private respondent. The dispositive portion of its

Decision states:

WHEREFORE, premises considered, judgment is hereby rendered ordering defendant AsiaLighterage & Shipping, Inc. liable to pay plaintiff Prudential Guarantee & Assurance Co., Inc. thesum of P4,104,654.22 with interest from the date complaint was filed on July 3, 1991 until fullysatisfied plus 10% of the amount awarded as and for attorney's fees. Defendant's counterclaim ishereby DISMISSED. With costs against defendant.[18]

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

WHEREFORE, the decision appealed from is hereby AFFIRMED with modification in the sense thatthe salvage value of P201,379.75 shall be deducted from the amount of P4,104,654.22. Costs againstappellant.

SO ORDERED.

Petitioners Motion for Reconsideration dated June 3, 2000 was likewise denied by the appellate courtin a Resolution promulgated on February 21, 2001.

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


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(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORDWITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURTWHEN IT HELD THAT PETITIONER IS A COMMON CARRIER.

(2) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORDWITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURTWHEN IT AFFIRMED THE FINDING OF THE LOWER COURT A QUO THAT ON THE BASISOF THE PROVISIONS OF THE CIVIL CODE APPLICABLE TO COMMON CARRIERS, THELOSS OF THE CARGO IS, THEREFORE, BORNE BY THE CARRIER IN ALL CASES EXCEPTIN THE FIVE (5) CASES ENUMERATED.

(3) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORDWITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURTWHEN IT EFFECTIVELY CONCLUDED THAT PETITIONER FAILED TO EXERCISE DUEDILIGENCE AND/OR WAS NEGLIGENT IN 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 diligencein its care and custody of the consignees cargo.

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

Article 1732 of the Civil Code defines common carriers as persons, corporations, firms or associationsengaged in the business of carrying or transporting passengers or goods or both, by land, water, or air,for compensation, offering their services to the public.

Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it has no fixed andpublicly known route, maintains no terminals, and issues no tickets. It points out that it is not obligedto carry indiscriminately for any person. It is not bound to carry goods unless it consents. In short, itdoes not hold out its services to the general public.[20]

We disagree.

In De Guzman vs. Court of Appeals,[21] we held that the definition of common carriers in Article1732 of the Civil Code makes no distinction between one whose principal business activity is thecarrying of persons or goods or both, and one who does such carrying only as an ancillary activity.We also did not distinguish between a person or enterprise offering transportation service on a regularor scheduled basis and one offering such service on an occasional, episodic or unscheduled basis.Further, we ruled that Article 1732 does not distinguish between a carrier offering its services to thegeneral public, and one who offers services or solicits business only from a narrow segment of thegeneral population.

In the case at bar, the principal business of the petitioner is that of lighterage and drayage[22] and itoffers its barges to the public for carrying or transporting goods by water for compensation.Petitioner is clearly a common carrier. In De Guzman, supra,[23] we considered private respondentErnesto Cendaa to be a common carrier even if his principal occupation was not the carriage ofgoods for others, but that of buying used bottles and scrap metal in Pangasinan and selling these itemsin Manila.


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We therefore hold that petitioner is a common carrier whether its carrying of goods is done on anirregular rather than scheduled manner, and with an only limited clientele. A common carrier neednot have fixed and publicly known routes. Neither does it have to maintain terminals or issue tickets.

To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs. Court ofAppeals.[24] The test to determine a common carrier is whether the given undertaking is a part of thebusiness engaged in by the carrier which he has held out to the general public as his occupation ratherthan the quantity or extent of the business transacted.[25] In the case at bar, the petitioner admittedthat it is engaged in the business of shipping and lighterage,[26] offering its barges to the public,despite its limited clientele for carrying or transporting goods by water for compensation.[27]

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

Common carriers are bound to observe extraordinary diligence in the vigilance over the goodstransported by them.[28] They are presumed to have been at fault or to have acted negligently if thegoods are lost, destroyed or deteriorated.[29] To overcome the presumption of negligence in the case

of loss, destruction or deterioration of the goods, the common carrier must prove that it exercisedextraordinary diligence. There are, however, exceptions to this rule. Article 1734 of the Civil Codeenumerates the instances when the presumption of negligence does not attach:

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

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

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

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

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

(5) Order or act of competent public authority.

In the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss of itscargo. Petitioner claims that this was caused by a typhoon, hence, it should not be held liable for theloss of the cargo. However, petitioner failed to prove that the typhoon is the proximate and onlycause of the loss of the goods, and that it has exercised due diligence before, during and after theoccurrence of the typhoon to prevent or minimize the loss.[30] The evidence show that, even beforethe towing bits of the barge broke, it had already previously sustained damage when it hit a sunkenobject while docked at the Engineering Island. It even suffered a hole. Clearly, this could not besolely attributed to the typhoon. The partly-submerged vessel was refloated but its hole was patchedwith only clay and cement. The patch work was merely a provisional remedy, not enough for thebarge to sail safely. Thus, when petitioner persisted to proceed with the voyage, it recklessly exposedthe cargo to further damage. A portion of the cross-examination of Alfredo Cunanan, cargo-surveyorof 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 after that incident?


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a - After the first accident, through the initiative of the barge owners, they tried to pull out the bargefrom the place of the accident, and bring it to the anchor terminal for safety, then after deciding if thevessel is stabilized, they tried to pull it to the consignees warehouse, now while on route anotheraccident occurred, now this time the barge totally hitting something in the course.

q - You said there was another accident, can you tell the court the nature of the second accident?

a - The sinking, sir.

q - Can you tell the nature . . . can you tell the court, if you know what caused the sinking?

a - Mostly it was related to the first accident because there was already a whole (sic) on the bottompart of the barge.

x x x x x x x x x

This is not all. Petitioner still headed to the consignees wharf despite knowledge of an incoming

typhoon. During the time that the barge was heading towards the consignee's wharf on September 5,1990, typhoon Loleng has already entered the Philippine area of responsibility.[32] A part of thetestimony of Robert Boyd, 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 it might be safer to just allow the Barge to lie whereshe was instead of towing it?

a - Since that time that the Barge was refloated, GMC (General Milling Corporation, the consignee)

as I have said was in a hurry for their goods to be delivered at their Wharf since they needed badly thewheat that was loaded in PSTSI-3. It was needed badly by the consignee.

q - And this is the reason why you towed the Barge 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 you proceeded to the premises of the GMC? Am I correct?

a - The next day, in the morning, we hired for additional two (2) tugboats as I have stated.

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

a - It is already in an inner portion of Pasig River. The typhoon would be coming and it would bedangerous if we are in the vicinity of Manila Bay.

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

a - Yes.


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q - And yet as a standard operating procedure of your Company, you have to secure a sort ofCertification to determine the weather condition, am I correct?

a - Yes, sir.

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

a - Yes, sir.

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

a - ISLOFF Terminal is far from Manila Bay and anytime even with the typhoon if you are alreadyinside the vicinity or inside Pasig entrance, it is a safe place to tow upstream.

Accordingly, the petitioner cannot invoke the occurrence of the typhoon as force majeure to escapeliability for the loss sustained by the private respondent. Surely, meeting a typhoon head-on falls

short of due diligence required from a common carrier. More importantly, the officers/employeesthemselves of petitioner admitted that when the towing bits of the vessel broke that caused its sinkingand the total loss of the cargo upon reaching the Pasig River, it was no longer affected by the typhoon.The typhoon then is not the proximate cause of the loss of the cargo; a human factor, i.e., negligencehad intervened.

IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CVNo. 49195 dated May 11, 2000 and its Resolution dated February 21, 2001 are hereby AFFIRMED.Costs against petitioner.


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6. ASIAN TERMINAL V. DAEHAN FEB 4 2010

-arrastre operator akin to common carrier, due diligence

This is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Court of

Appeals (CA) September 14, 2005 Decision[1] and December 20, 2005 Resolution[2] in CA-G.R. CVNo. 83647. The assailed Decision reversed and set aside the Regional Trial Court (RTC)[3] August 4,2004 Decision[4] in Civil Case No. 01-101309, while the assailed resolution denied petitioner AsianTerminals, Inc.s motion for reconsideration.

The case stemmed from the following facts:

On July 8, 2000, Doosan Corporation (Doosan) shipped twenty-six (26) boxes of printedaluminum sheets on board the vessel Heung-A Dragon owned by Dongnama Shipping Co., Ltd.(Dongnama).[5] The shipment was covered by Bill of Lading No. DNALHMBUMN010010[6] andconsigned to Access International, with address at No. 9 Parada St., San Juan, Metro Manila. Doosaninsured the subject shipment with respondent Daehan Fire and Marine Insurance Co., Ltd. under an

all-risk marine cargo insurance policy,[7] payable to its settling agent in the Philippines, the SmithBell & Co., Inc. (Smith Bell).

On July 12, 2000, the vessel arrived in Manila and the containerized van was discharged andunloaded in apparent good condition, as no survey and exceptions were noted in the EquipmentInterchange Receipt (EIR) issued by petitioner.[8] The container van was stored in the Container Yardof the Port. On July 18, 2000, Access International requested[9] from petitioner and the licensedCustoms Broker, Victoria Reyes Lazo (V. Reyes Lazo), a joint survey of the shipment at the place ofstorage in the Container Yard, but no such inspection was conducted.

On July 19, 2000, V. Reyes Lazo withdrew, and petitioner released, the shipment and deliveredit to Access Internationals warehouse in Binondo, Manila.[10] While the shipment was at Access

Internationals warehouse, the latter, together with its surveyor, Lloyds Agency, conducted aninspection and noted that only twelve (12) boxes were accounted for, while fourteen (14) boxes weremissing.[11] Access International thus filed a claim against petitioner and V. Reyes Lazo for themissing shipment amounting to $34,993.28.[12] For failure to collect its claim, Access Internationalsought indemnification from respondent in the amount of $45,742.81.[13] On November 8, 2000,respondent paid the amount of the claim and Access International accordingly executed a SubrogationReceipt in favor of the former.[14]

On July 10, 2001, respondent, represented by Smith Bell, instituted the present case againstDongnama, Uni-ship, Inc. (Uni-ship), petitioner, and V. Reyes Lazo before the RTC.[15] Respondentalleged that the losses, shortages and short deliveries sustained by the shipment were caused by the

joint fault and negligence of Dongnama, petitioner and V. Reyes Lazo.

Dongnama and Uni-ship filed a Motion to Dismiss[16] on the grounds that Daehan lacked legalcapacity to sue and that the complaint

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