KAPALARAN BUS LINE, petitioner, vs.

ANGEL
CORONADO, LOPE GRAJERA, DIONISIO SHINYO,
and THE COURT OF APPEALS, respondents.
Leopoldo M. Consunto for petitioner.
Danilo S. Cruz for intervenor-appellee.
Conrado Manicad for private respondents.
SYLLABUS
1.REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT OF THE TRIAL
AND APPELLATE COURTS, BINDING ON THE SUPREME COURT.
Kapalaran assails the findings of fact of the Regional Trial Court and
of the Court of Appeals, and insists before this Court that respondent
Grajera, driver of the jeepney, was at fault and not the driver of
Kapalaran's bus. It must be remembered that it is not the function of
this Court to analyze and weigh evidence presented by the parties all
over again and that our jurisdiction is in principle limited to
reviewing errors of law that might have been committed by the Court
of Appeals. Kapalaran has made no compelling showing of any
misapprehension of facts on the part of the Court of Appeals that
would require us to review and overturn the factual findings of that
court. On the contrary, examination of the record shows that not only
are the conclusions of fact of the Court of Appeals and the trial court
on who - the bus driver or the jeepney driver had acted negligently
and was at fault in the collision of their vehicles, amply supported by
the evidence of record, but also that Kapalaran's bus driver was
grossly negligent and had acted wantonly and in obvious disregard of
the applicable rules on safety on the highway.
2.CIVIL LAW; OBLIGATION AND CONTRACT; QUASI-DELICT;
PRESUMPTION OF NEGLIGENCE; MANIFEST WHERE THE DRIVER
WAS VIOLATING TRAFFIC RULES AND REGULATIONS BEFORE THE
COLLISION. Kapalaran's driver had become aware that some
vehicles ahead of the bus and travelling in the same direction had
already stopped at the intersection obviously to give way either to
pedestrians or to another vehicle about to enter the intersection. The
bus driver, who was driving at a speed too high to be safe and proper
at or near an intersection on the highway, and in any case too high to
be able to slow down and stop behind the cars which had preceded it
and which had stopped at the intersection, chose to swerve to the left
lane and overtake such preceding vehicles, entered the intersection
and directly smashed into the jeepney within the intersection.
Immediately before the collision, the bus driver was actually violating
the following traffic rules and regulations, among others, in the Land
Transportation and Traffic Code, Republic Act No. 4136, as amended
(Section 35 [a], 41 a & c). Thus, a legal presumption arose that the
bus driver was negligent, a presumption Kapalaran was unable to
overthrew.
3.ID.; ID.; ID.; LIABILITY OF THE NEGLIGENT DRIVER MAY BE
RECOVERED AGAINST HIS EMPLOYER SUBJECT TO
REIMBURSEMENT. Petitioner Kapalaran also assails the award of
moral damages against itself, upon the ground that its own bus
driver, third-party defendant, was apparently not held liable by the
trial court. Hence, Kapalaran argues that there was no justification for
holding it, the employer, liable for damages, considering that such
liability was premised upon the bus driver's negligence, and that
petitioner "as mere employer" was not guilty of such negligence or
imprudence. This contention is thoroughly unpersuasive. The patent
and gross negligence on the part of petitioner Kapalaran's driver
raised the legal presumption that Kapalaran as employer was guilty
of negligence either in the selection or in the supervision of its bus
drivers. Where the employer is held liable for damages, it has of
course a right of recourse against its own negligent employee.
4.ID.; ID.; ID.; LIABILITY OF THE EMPLOYER FOR DAMAGES CAUSED
BY NEGLIGENCE OF HIS EMPLOYEE, DIRECT AND IMMEDIATE, NOT
SUBSIDIARY. Contrary to Kapalaran's pretense, its liability for the
acts and negligence of its bus driver is not "merely subsidiary," and is
not limited to cases where the employee "cannot pay his liability,"
nor are private respondents compelled first to proceed against the
bus driver. The liability of the employer under Article 2180 of the
Civil Code is direct and immediate; it is not conditioned upon prior
recourse against the negligent employee and a prior showing of the
insolvency of such employee. So far as the record shows, petitioner
Kapalaran was unable to rebut the presumption of negligence on its
own part. The award of moral damages against petitioner Kapalaran
is not only entirely in order; it is also quite modest considering
Dionisio Shinyo's death during the pendency of this petition, a death
hastened by, if not directly due to, the grievous injuries sustained by
him in the violent collision.
5.ID.; DAMAGES; EXEMPLARY DAMAGES; LIABILITY FOR GROSS
NEGLIGENCE AND APPALLING DISREGARD OF THE PHYSICAL
SAFETY AND PROPERTY OF OTHERS. There is no question that
petitioner's bus driver was grossly and very probably criminally
negligent in his reckless disregard of the rights of other vehicles and
their passengers and of pedestrians as well. The Court is entitled to
take judicial notice of the gross negligence and the appalling
disregard of the physical safety and property of others so commonly
exhibited today by the drivers of passenger buses and similar
vehicles on our highways. The law requires petitioner as common
carrier to exercise extraordinary diligence in carrying and
transporting their passengers safely "as far as human care and
foresight can provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances." In requiring the
highest possible degree of diligence from common carriers and
creating a presumption of negligence against them, the law compels
them to curb the recklessness of their drivers. While the immediate
beneficiaries of the standard of extraordinary diligence are, of course,
the passengers and owners of cargo carried by a common carrier,
they are not the only persons that the law seeks to benefit. For if
common carriers carefully observed the statutory standard of
extraordinary diligence in respect of their own passengers, they
cannot help but simultaneously benefit pedestrians and the owners
and passengers of other vehicles who are equally entitled to the safe
and convenient use of our roads and highways. The law seeks to stop
and prevent the slaughter and maiming of people (whether
passengers or not) and the destruction of property (whether freight
or not) on our highways by buses, the very size and power of which
seem often to inflame the minds of their drivers. Article 2231 of the
Civil Code explicitly authorizes the imposition of exemplary damages
in cases of quasi-delicts "if the defendant acted with gross
negligence." Thus we believe that the award of exemplary damages
by the trial court was quite proper.
6.REMEDIAL LAW; ACTIONS; APPEALS; ISSUES NOT RAISED MAY BE
CONSIDERED IF SUBSTANTIAL JUSTICE IS TO BE RENDERED TO
THE PARTIES. The Court is aware that respondent Shinyo did not
file a separate petition for review to set aside that portion of the
Court of Appeals' decision which deleted the grant by the trial court
of exemplary damages. It is settled, however, that issues which must
be resolved if substantial justice is to be rendered to the parties, may
and should be considered and decided by this Court even if those
issues had not been explicitly raised by the party affected. In the
instant case, it is not only the demands of substantial justice but also
the compelling considerations of public policy noted above, which
impel us to the conclusion that the trial court's award of exemplary
damages was erroneously deleted and must be restored and brought
more nearly to the level which public policy and substantial justice
require.
7.CIVIL LAW; DAMAGES; ATTORNEY'S FEES; AWARD THEREOF
AUTHORIZED BY LAW IN CASE AT BAR. We believe that the award
by the trial court of P15,000.00 as attorneys fees and litigation
expenses, deleted by the Court of Appeals, should similarly be
restored, being both authorized by law and demanded by substantial
justice in the instant case.
D E C I S I O N
FELICIANO, J p:
Petitioner Kapalaran Bus Line ("Kapalaran") seeks the reversal or
modification of the Court of Appeals' decision in CA-G.R. CV No.
12476 and the absolution of petitioner from all liability arising from
the collision between one of petitioner's buses and a jeepney owned
by respondent Coronado, driven by respondent Grajera and in which
jeepney respondent Shinyo was a passenger.
The facts of this case as found by the trial court and adopted by the
Court of Appeals, are summarized in the trial court's decision and
quoted in the Court of Appeals' own judgment in the following terms:
"The accident happened on the National
Highway at 10:30 A.M. on August 2, 1982.
The jeepney driven by Lope Grajera was then
coming from Pila, Laguna on its way towards
the direction of Sta. Cruz, traversing the old
highway. As it reached the intersection where
there is a traffic sign 'yield,' it stopped and
cautiously treated the intersection as a 'Thru
Stop' street, which it is not. The KBL bus was
on its way from Sta. Cruz, Laguna, driven by
its regular driver Virgilio Llamoso, on its way
towards Manila. The regular itinerary of the
KBL bus is through the town proper of Pila,
Laguna, but at times it avoids this if a bus is
already fully loaded with passengers and can
no longer accommodate additional
passengers. As the KBL bus neared the
intersection, Virgilio Llamoso inquired from
his conductor if they could still accommodate
passengers and learning that they were
already full, he decided to bypass Pila and
instead, to proceed along the national
highway. Virgilio Llamoso admitted that
there was another motor vehicle ahead of
him.
The general rule is that the vehicle on the
national highway has the right-of-way as
against a feeder road. Another general rule is
that the vehicle coming from the right has the
right-of-way over the vehicle coming from
the left. The general rules on right-of-way
may be invoked only if both vehicles
approach the intersection at almost the same
time. In the case at bar, both roads are
national roads. Also, the KBL bus was still far
from the intersection when the jeepney
reached the same. As testified to by Atty.
Conrado L. Manicad who was driving a
Mustang car coming from the direction of Sta.
Cruz and proceeding towards the direction of
Manila, he stopped at the intersection to give
way to the jeepney driven by Grajera. Behind
Manicad were two vehicles, a car of his client
and another car. A Laguna Transit bus had
just entered the town of Pila ahead of Atty.
Manicad.

The sketch marked Exhibit 'E' indicates very
clearly that the jeepney had already traversed
the intersection when it met the KBL bus
head-on. It is also obvious that the point of
impact was on the right lane of the highway
which is the lane properly belonging to the
jeepney. As testified to by Lope Grajera, the
KBL bus ignored the stopped vehicles of Atty.
Manicad and the other vehicles behind Atty.
Manicad and overtook both vehicles at the
intersection, therefore, causing the accident.
Judging from the testimony of Atty. Conrado
L. Manicad and the sketch (Exhibit 'E'), the
sequence of events shows that the first
vehicle to arrive at the intersection was the
jeepney. Seeing that the road was clear, the
jeepney which had stopped at the
intersection began to move forward, and for
his part, Atty. Manicad stopped his car at the
intersection to give way to the jeepney. At
about this time, the KBL bus was approaching
the intersection and its driver was engaged in
determining from his conductor if they would
still pass through the town proper of Pila.
Upon learning that they were already full, he
turned his attention to the road and found the
stopped vehicles at the intersection with the
jeepney trying to cross the intersection. The
KBL bus had no more room within which to
stop without slamming into the rear of the
vehicle behind the car of Atty. Manicad. The
KBL driver chose to gamble on proceeding on
its way, unfortunately, the jeepney driven by
Grajera, which had the right-of-way, was
about to cross the center of the highway and
was directly on the path of the KBL bus. The
gamble made by Llamoso did not pay off. The
impact indicates that the KBL bus was
travelling at a fast rate of speed because, after
the collision, it did not stop; it travelled for
another 50 meters and stopped only when it
hit an electric post (pp. 3-4, Decision; pp. 166-
167, Record)." 1
On 14 September 1982, Kapalaran, apparently believing that the best
defense was offense, filed a complaint for damage to property and
physical injuries through reckless imprudence against respondents
Angel Coronado and Lope Grajera in the Regional Trial Court, Branch
27, Sta. Cruz, Laguna. Respondents answered with their own claims
(counter-claims) for damages. A third-party complaint and/or a
complaint for intervention was also filed in the same case against
Kapalaran by jeepney passenger Dionisio Shinyo.
On 15 October 1986, after trial, the trial court rendered a judgment in
favor of private respondents and ordering Kapalaran.
"(a)to pay Angel Coronado the sum of
P40,000.00 as compensation for the totally
wrecked jeepney, plus the sum of P5,000.00
as attorney's fees and litigation expenses, and
(b)to Dionisio Shinyo the sum of P35,000.00
representing the expenses incurred by said
intervenor for his treatment including his
car-hire, the further sum of P30,000.00
representing the expenses said defendant
will incur for his second operation to remove
the intramedulary nail from his femur, the
additional sum of P50,000.00 to serve as
moral damages for the pain and suffering
inflicted on said defendant, plus the sum of
P10,000.00 in the concept of exemplary
damages to serve as a deterrent to others
who, like the plaintiff, may be minded to
induce accident victims to perjure themselves
in a sworn statement, and the sum of
P15,000.00 as attorney's fees and litigation
expenses."
From the above judgment, Kapalaran appealed to the Court of
Appeals assailing the trial court's findings on the issue of fault and
the award of damages. The Court of Appeals, on 28 June 1988,
affirmed the decision of the trial court but modified the award of
damages by setting aside the grant of exemplary damages as well as
the award of attorney's fee and litigation expenses made to Dionisio
Shinyo. 2
This decision of the Court of Appeals is now before us on a Petition
for Review, a motion for reconsideration by Kapalaran having been
denied by that court on 13 October 1988. cdll
Kapalaran assails the findings of fact of the Regional Trial Court and
of the Court of Appeals, and insists before this Court that respondent
Grajera, driver of the jeepney, was at fault and not the driver of
Kapalaran's bus. It must be remembered that it is not the function of
this Court to analyze and weigh evidence presented by the parties all
over again and that our jurisdiction is in principle limited to
reviewing errors of law that might have been committed by the Court
of Appeals. Kapalaran has made no compelling showing of any
misapprehension of facts on the part of the Court of Appeals that
would require us to review and overturn the factual findings of that
court. On the contrary, examination of the record shows that not only
are the conclusions of fact of the Court of Appeals and the trial court
on who - the bus driver or the jeepney driver had acted negligently
and was at fault in the collision of their vehicles, amply supported by
the evidence of record, but also that Kapalaran's bus driver was
grossly negligent and had acted wantonly and in obvious disregard of
the applicable rules on safety on the highway.
Kapalaran's driver had become aware that some vehicles ahead of
the bus and travelling in the same direction had already stopped at
the intersection obviously to give way either to pedestrians or to
another vehicle about to enter the intersection. The bus driver, who
was driving at a speed too high to be safe and proper at or near an
intersection on the highway, and in any case too high to be able to
slow down and stop behind the cars which had preceded it and which
had stopped at the intersection, chose to swerve to the left lane and
overtake such preceding vehicles, entered the intersection and
directly smashed into the jeepney within the intersection.
Immediately before the collision, the bus driver was actually violating
the following traffic rules and regulations, among others, in the Land
Transportation and Traffic Code, Republic Act No. 4136, as amended:
"Sec. 35.Restriction as to speed. (a) Any
person driving a motor vehicle on a highway
shall drive the same at a careful and prudent
speed, not greater nor less than is reasonable
and proper, having due regard for the traffic,
the width of the highway, and or any other
condition then and there existing; and no
person shall drive any motor vehicle upon a
highway at such a speed as to endanger the
life, limb and property of any person, nor at a
speed greater than will permit him to bring the
vehicle to a stop within the assured clear
distance ahead.
xxx xxx xxx
Sec. 41.Restrictions on overtaking and
passing. (a) The driver of a vehicle shall
not drive to the left side of the center line of a
highway in overtaking or passing another
vehicle, proceeding in the same direction,
unless such left side is clearly visible, and is
free of oncoming traffic for a sufficient
distance ahead to permit such overtaking or
passing to be made in safety.
xxx xxx xxx
(c)The driver of a vehicle shall not overtake
or pass any other vehicle proceeding in the
same direction, at any railway grade crossing,
or at any intersection of highways, unless
such intersection or crossing is controlled by
traffic signal, or unless permitted to do so by
a watchman or a peace officer, except on a
highway having two or more lanes for
movement of traffic in one direction where
the driver of a vehicle may overtake or pass
another vehicle on the right. Nothing in this
section shall be construed to prohibit a driver
overtaking or passing, upon the right, another
vehicle which is making or about to make a
left turn.
xxx xxx xxx"
(Emphasis supplied).
Thus, a legal presumption arose that the bus driver was negligent 3 a
presumption Kapalaran was unable to overthrow.
Petitioner's contention that the jeepney should have stopped before
entering the "Y-intersection" because of the possibility that another
vehicle behind the cars which had stopped might not similarly stop
and might swerve to the left to proceed to the highway en route to
Manila, is more ingenious than substantial. It also offers illustration
of the familiar litigation tactic of shifting blame from one's own
shoulders to those of the other party. But the jeepney driver, seeing
the cars closest to the intersection on the opposite side of the
highway come to a stop to give way to him, had the right to assume
that other vehicles further away and behind the stopped cars would
similarly come to a stop and not seek illegally to overtake the stopped
vehicles and come careening into the intersection at an unsafe speed.
4 Petitioner's bus was still relatively far away from the intersection
when the jeepney entered the same; the bus collided head-on into the
jeepney because the bus had been going at an excessively high
velocity immediately before and at the time of overtaking the
stopped cars, and so caught the jeepney within the intersection. It
was also the responsibility of the bus driver to see to it, when it
overtook the two (2) cars ahead which had stopped at the
intersection, that the left lane of the road within the intersection and
beyond was clear. The point of impact was on the left side of the
intersection (the right lane so far as concerns the jeepney coming
from the opposite side), which was precisely the lane or side on
which the jeepney had a right to be. prcd
Petitioner Kapalaran also assails the award of moral damages against
itself, upon the ground that its own bus driver, third-party defendant,
was apparently not held liable by the trial court. 5 Hence, Kapalaran
argues that there was no justification for holding it, the employer,
liable for damages, considering that such liability was premised upon
the bus driver's negligence, and that petitioner "as mere employer"
was not guilty of such negligence or imprudence. 6 This contention is
thoroughly unpersuasive. The patent and gross negligence on the
part of petitioner Kapalaran's driver raised the legal presumption
that Kapalaran as employer was guilty of negligence either in the
selection or in the supervision of its bus drivers. 7 Where the
employer is held liable for damages, it has of course a right of
recourse against its own negligent employee. If petitioner Kapalaran
was interested in maintaining its right of recourse against or
reimbursement from its own driver, 8 it should have appealed from
that portion of the trial court's decision which had failed to hold the
bus driver responsible for any damage. Contrary to Kapalaran's
pretense, its liability for the acts and negligence of its bus driver is
not "merely subsidiary," and is not limited to cases where the
employee "cannot pay his liability," nor are private respondents
compelled first to proceed against the bus driver. The liability of the
employer under Article 2180 of the Civil Code is direct and
immediate; it is not conditioned upon prior recourse against the
negligent employee and a prior showing of the insolvency of such
employee. 9 So far as the record shows, petitioner Kapalaran was
unable to rebut the presumption of negligence on its own part. The
award of moral damages against petitioner Kapalaran is not only
entirely in order; it is also quite modest considering Dionisio Shinyo's
death during the pendency of this petition, a death hastened by, if not
directly due to, the grievous injuries sustained by him in the violent
collision.

The Court of Appeals deleted the award of exemplary damages which
the trial court had granted in order "to serve as a deterrent to others
who, like the plaintiff [Kapalaran], may be minded to induce accident
victims to perjure themselves in a sworn statement." The Court of
Appeals held that there was no basis for this award of exemplary
damages, stating that it was not "such a reprehensible act to try to
gather witnesses for one's cause" and that there was no evidence of
use of "pressure or influence" to induce the accident victims to
perjure themselves. While that might have been so, both the trial
court and the Court of Appeals overlooked another and far more
compelling basis for the award of exemplary damages against
petitioner Kapalaran in this case. There is no question that
petitioner's bus driver was grossly and very probably criminally
negligent in his reckless disregard of the rights of other vehicles and
their passengers and of pedestrians as well. The Court is entitled to
take judicial notice of the gross negligence and the appalling
disregard of the physical safety and property of others so commonly
exhibited today by the drivers of passenger buses and similar
vehicles on our highways. The law requires petitioner as common
carrier to exercise extraordinary diligence in carrying and
transporting their passengers safely "as far as human care and
foresight can provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances." 10 In requiring
the highest possible degree of diligence from common carriers and
creating a presumption of negligence against them, the law compels
them to curb the recklessness of their drivers. 11 While the
immediate beneficiaries of the standard of extraordinary diligence
are, of course, the passengers and owners of cargo carried by a
common carrier, they are not the only persons that the law seeks to
benefit. For if common carriers carefully observed the statutory
standard of extraordinary diligence in respect of their own
passengers, they cannot help but simultaneously benefit pedestrians
and the owners and passengers of other vehicles who are equally
entitled to the safe and convenient use of our roads and highways. 12
The law seeks to stop and prevent the slaughter and maiming of
people (whether passengers or not) and the destruction of property
(whether freight or not) on our highways by buses, the very size and
power of which seem often to inflame the minds of their drivers.
Article 2231 of the Civil Code explicitly authorizes the imposition of
exemplary damages in cases of quasi-delicts "if the defendant acted
with gross negligence." Thus we believe that the award of exemplary
damages by the trial court was quite proper, although granted for the
wrong reason, and should not only be restored but augmented in the
present case. The Court is aware that respondent Shinyo did not file a
separate petition for review to set aside that portion of the Court of
Appeals' decision which deleted the grant by the trial court of
exemplary damages. It is settled, however, that issues which must be
resolved if substantial justice is to be rendered to the parties, may
and should be considered and decided by this Court even if those
issues had not been explicitly raised by the party affected. 13 In the
instant case, it is not only the demands of substantial justice but also
the compelling considerations of public policy noted above, which
impel us to the conclusion that the trial court's award of exemplary
damages was erroneously deleted and must be restored and brought
more nearly to the level which public policy and substantial justice
require. prLL
In much the same vein, we believe that the award by the trial court of
P15,000.00 as attorneys fees and litigation expenses, deleted by the
Court of Appeals, should similarly be restored, being both authorized
by law 14 and demanded by substantial justice in the instant case.
WHEREFORE, the Petition for Review on Certiorari is DENIED for
lack of merit and the Decision of the Court of Appeals is hereby
AFFIRMED, except (1) that the award of exemplary damages to
Dionisio Shinyo shall be restored and increased from P10,000.00 to
P25,000.00, and (2) that the grant of attorney's fees and litigation
expenses in the sum of P15,000.00 to Dionisio Shinyo shall similarly
be restored. Costs against petitioner.
SO ORDERED.
Fernan, (C.J.), Gutierrez, Jr., Bidin and Cortes, JJ., concur.
LOURDES J. LARA, ET AL., plaintiffs-
appellants, vs. BRIGIDO R. VALENCIA,
defendant-appellant.
Castillo, Cervantes, Occena, Lozano, Montana,
Cunanan, Sison & Castillo and Eligio G. Lagman for defendant
and appellant.
Donato C. Endriga and Emigdio Dakanay for plaintiffs
and appellants.
SYLLABUS
1.DAMAGES; AUTOMOBILE; INVITED GUEST;
OWNERS DUTY TO EXERCISE ORDINARY OR REASONABLE
CARE. The owner and driver of a vehicle owes to
accommodation passengers or invited guests merely the duty to
exercise reasonable care so that they may be transported safely
to their destination. Thus, "The rule is established by weight of
authority that the owner or operator of an automobile owes the
duty to an invited guest to exercise reasonable care in its
operation, and not unreasonably to expose him to danger and
injury by increasing the hazard of travel. The owner of the
vehicle in the case at bar is only required to observe ordinary
care, and is not in duty bound to exercise extraordinary
diligence as required by our law. (Articles 1755 and 1756, new
Civil Code).
2.ID.; LIABILITY OF CARRIER; PASSENGERS INJURY
ON HIS OWN NEGLIGENCE. A passenger must observe the
diligence of a father of a family to avoid injury to himself (Article
1761, new Civil Code) which means that if the injury to the
passenger has been proximately caused by his own negligence,
the carrier cannot be held liable.
D E C I S I O N
BAUTISTA ANGELO, J p:
This is an action for damages brought by plaintiffs
against defendant in the Court of First Instance of Davao for the
death of one Demetrio Lara, Sr. allegedly caused by the
negligent act of defendant. Defendant denied the charge of
negligence and set up certain affirmative defenses and a
counterclaim.
The court after hearing rendered judgment ordering
defendant to pay the plaintiffs the following amount: (a)
P10,000 as moral damages; (b) P3,000 as exemplary damages;
and (c) P1,000 as attorney's fees, in addition to the costs of
action. Both parties appealed to this Court because the damages
claimed in the complaint exceed the sum of P50,000.
In their appeal, plaintiffs claim that the court a quo
erred in disregarding their claim of P41,400 as actual or
compensatory damages and in awarding as attorneys' fees only
the sum of P1,000 instead of P3,000 as agreed upon between
plaintiffs and their counsel. Defendant, on the other hand,
disputes the finding of the court a quo that the death of
Demetrio Lara, Sr. was due to the negligence of defendant and
the portion of the judgment which orders defendant to pay to
plaintiffs moral and exemplary damages as well as attorneys'
fees, said defendant contending that the court should have
declared that the death of Lara was due to unavoidable accident.
The deceased was an inspector of the Bureau of
Forestry stationed in Davao with an annual salary of P1,800.
The defendant is engaged in the business of exporting logs from
his lumber concession in Cotabato. Lara went to said concession
upon instructions of his chief to classify the logs of defendant
which were about to be loaded on a ship anchored in the port of
Parang. The work of Lara lasted for six days during which he
contracted malaria fever. In the morning of January 9, 1954,
Lara who then in a hurry to return to Davao asked defendant if
he could take him in his pick-up as there was then no other
means of transportation, to which defendant agreed, and in that
same morning the pick-up left Parang bound for Davao taking
along six passengers, including Lara.
The pick-up has a front seat where the driver and two
passengers can be accommodated and the back has a steel
flooring enclosed with a steel walling of 16 to 17 inches tall on
the sides and with a 19 inches tall walling at the back. Before
leaving Parang, the sitting arrangement was as follows:
defendant was at the wheel and seated with him in the front
seat were Mrs. Valencia and Nicanor Quinain; on the back of the
pick-up were two improvised benches placed on each side, and
seated on the right bench were Ricardo Alojipan and Antonio
Lagahit, and on the left one Bernardo and Pastor Geronimo. A
person by the name of Leoning was seated on a box located on
the left side while in the middle Lara sat on a bag. Before leaving
Parang, defendant invited Lara to sit with him on the front seat
but Lara declined. It was their understanding that upon
reaching barrio Samoay, Cotabato, the passengers were to alight
and take a bus bound for Davao, but when they arrived at that
place, only Bernardo alighted and the other passengers
requested defendant to allow them to ride with him up to Davao
because there was then no available bus that they could take in
going to that place. Defendant again accommodated the
passengers.
When they continued their trip, the sitting
arrangement of the passengers remained the same, Lara being
seated on a bag in the middle with his arms on a suitcase and his
head covered by a jacket. Upon reaching Km. 96, barrio
Catidtuan, Lara accidentally fell from the pick-up and as a result
he suffered serious injuries. Valencia stopped the pick-up to see
what happened to Lara. He sought the help of the residents of
that place and applied water to Lara but to no avail. They
brought Lara to the nearest place where they could find a doctor
and not having found any they took him to St. Joseph's Clinic of
Kidapawan. But when Lara arrived he was already dead. From
there they proceeded to Davao City and immediately notified
the local authorities. An investigation was made regarding the
circumstances surrounding the death of Lara but no criminal
action was taken against defendant.
It should be noted that the deceased went to the
lumber concession of defendant in Parang, Cotabato upon
instructions of his chief in order to classify the logs of defendant
which were then ready to be exported and to be loaded on a
ship anchored in the port of Parang. It took Lara six days to do
his work during which he contracted malaria fever and for that
reason he evinced a desire to return immediately to Davao. At
that time, there was no available bus that could take him back to
Davao and so he requested the defendant if he could take him in
his own pick-up. Defendant agreed and, together with Lara,
other passengers tagged along, most of them were employees of
the Government. Defendant merely accommodated them and
did not charge them any fee for the service. It was also their
understanding that upon reaching barrio Samoay, the
passengers would alight and transfer to a bus that regularly
makes the trip to Davao but unfortunately there was none
available at the time and so the same passengers, including Lara,
again requested the defendant to drive them to Davao.
Defendant again accommodated them and upon reaching Km.
96, Lara accidentally fell suffering fatal injuries.
It therefore appears that the deceased, as well as his
companions who rode in the pick-up of defendant, were merely
accommodation passengers who paid nothing for the service
and so they can be considered as invited guests within the
meaning of the law. As accommodation passengers or invited
guests, defendant as owner and driver of the pick-up owes to
them merely the duty to exercise reasonable care so that they
may be transported safely to their destination. Thus, "The rule is
established by the weight of authority that the owner or
operator of an automobile owes the duty to an invited guest to
exercise reasonable care in its operation, and not unreasonably
to expose him to danger and injury by increasing the hazard of
travel. This rule, as frequently stated by the courts, is that an
owner of an automobile owes a guest the duty to exercise
ordinary or reasonable care to avoid injuring him. Since one
riding in an automobile is no less a guest because he asked for
the privilege of doing so, the same obligation of care is imposed
upon the driver as in the case of one expressly invited to ride"
(5 Am. Jur., 626-627). Defendant, therefore, is only required to
observe ordinary care, and is not in duty bound to exercise
extraordinary diligence as required of a common carrier by our
law (Articles 1755 and 1756, new Civil Code).
The question that now arises is: Is there enough
evidence to show that defendant failed to observe ordinary care
or diligence in transporting the deceased from Parang to Davao
on the date in question?
The trial court answered the question in the
affirmative but in so doing it took into account only the
following facts:
"No debe perderse de vista el
hecho, que los negocios de exportacion de
trozos del demandado tiene un volumen de
P1,200. Lara era empleado de la Oficina de
Montes, asalariado por el gobierno, no
pagado por el demandado para classificar los
trozos exportados; debido a los trabajos de
classificacion que duro 6 das, en su ultimo
dia Lara no durmio toda la noche, al da
siguiente, Lara fue atacado de malaria, tenia
inflamada y cuerpo, sufria dolores de cabeza
con erupciones en la cara y cuerpo; que en la
maana del da 8 de enero de 1954, fecha en
que Lara salio de Davao para Parang, en
aeroplano para clasificar los trozos del
demandado, el automobil de este condujo a
aquel al aerodromo de Davao.
xxx xxx xxx
"El viaje de Cotabato a Davao no es
menos de 8 horas, su carretera esta en malas
condiciones, desnivelada, con piedras
salientes y baches, que hacen del vehiculo no
estable en su marcha. Lara estaba enfelmo de
cierta gravedad, tenia el cuerpo y cara
inflamados, atacado de malaria, con dolores
de cabesa y con erupciones on la cara y
cuerpo.
"A la vista de estos hechos, el
demandado debia de saber que era
sumamente peligroso llevar 5 pasajeros en la
parte trasera del pickup; particularmente,
para la salud de Lara; el permitirlo, el
demandado no ha tomado las debidas
precausiones, para evitar un posible
accidente fatal. La negativa de Lara de ocupar
el asiento delantero del pickup no constituye
a juicio del Juzgado una defensa, pues el
demandado conociendo el estado delicado de
salud de Lara, no debio de haber permitido
que aquel regrese a Davao en su pickup; si
querria prestar a aquel un favor, debio de
haber provisto a Lara de un automobil para
su regrese a Davao, ya que el damandado es
un millionario; si no podia prestar a aquel
este favor, debio de haber dejado a Lara en
Samuay para coger aquel un camion de
pasajero de Cotabato a Davao."

Even if we admit as true the facts found by the trial
court, still we find that the same are not sufficient to show that
defendant has failed to take the precaution necessary to conduct
his passengers safely to their place of destination for there is
nothing there to indicate that defendant has acted with
negligence or without taking the precaution that an ordinary
prudent man would have taken under similar circumstances. It
should be noted that Lara went to the lumber concession of
defendant in answer to a call of duty which he was bound to
perform because of the requirement of his office and he
contracted the malaria fever in the course of the performance of
that duty. It should also be noted that defendant was not in duty
bound to take the deceased in his own pick-up to Davao because
from Parang to Cotabato there was a line of transportation that
regularly makes trips for the public, and if defendant agreed to
take the deceased in his own car, it was only to accommodate
him considering his feverish condition and his request that he
be so accommodated. It should also be noted that the
passengers who rode in the pick-up of defendant took their
respective seats therein at their own choice and not upon
indication of defendant with the particularity that defendant
invited the deceased to sit with him in the front seat but which
invitation the deceased declined. The reason for this can only be
attributed to his desire to be at the back so that he could sit on a
bag and travel in a reclining position because such was more
convenient for him due to his feverish condition. All the
circumstances thereof clearly indicate that defendant had done
what a reasonable prudent man would have done under the
circumstances.
There is every reason to believe that the unfortunate
happening was only due to an unforeseen accident caused by
the fact at the time the deceased was half asleep and must have
fallen from the pick-up when it ran into some stones causing it
to jerk considering that the road was then bumpy, rough and
full of stones.
The finding of the trial court that the pick-up was
running at more than 40 kilometers per hour is not supported
by evidence. This is a mere surmise made by the trial court
considering the time the pick- up left barrio Samoay and the
time the accident occurred in relation to the distance covered by
the pick-up. And even if this is correct, still we say that such
speed is not unreasonable considering that they were travelling
on a national road and the traffic then was not heavy. We may
rather attribute the incident to lack of care on the part of the
deceased considering that the pick-up was open and he was
then in crouching position. Indeed the law provides that "A
passenger must observe the diligence of a good father of a
family to avoid injury to himself" (Article 1761, new Civil Code),
which means that if the injury to the passenger has been
proximately caused by his own negligence, the carrier cannot be
held liable.
All things considered, we are persuaded to conclude
that the accident occurred not due to the negligence of
defendant but to circumstances beyond his control and so he
should be exempt from liability.
Wherefore, the decision appealed from is reversed,
without pronouncement as to costs.
Paras, C.J., Bengzon, Reyes, A., Concepcion, Reyes, J.B.L.,
Endencia and Felix, JJ., concur.

STANDARD VACUUM OIL COMPANY,
plaintiff-appellant, vs. LUZON STEVEDORING
CO., INC., defendant-appellee.
Ross, Selph, Carrascoso & Janda and Martin B. Laurea
for appellant.
Perkins, Ponce Enrile & Contreras for appellee.
SYLLABUS
CARRIES; MERCHANDISE TRANSPORTED AT RISK
OF SHIPPERS WHEN SHIPOWNER LIABLE. Under Article 361
of the Code of Commerce. merchandise transported in the sea
by virtue of a contract entered into between the shipper and the
carrier, is deemed transported at the risk and venture of the
shipper, if the contrary is not stipulated, and all damages
suffered by the merchandise during the transportation by
reason of accident or force majeure shall be for the account and
risk of the shipper, but the proof of these accidents is incumbent
on the carrier. In the present case, the gasoline was delivered in
accordance with the contract but defendant failed to transport it
to its place of destination, not because of accident or force
majeure or cause beyond its control, but due to the
unseaworthiness of the tugboat towing the large carrying the
gasoline, lack of necessary spare parts on board, and deficiency
or incompetence in the man power of the tugboat. The loss was
also caused because the defendant did not have in readiness any
tugboat sufficient in tonnage and equipment to attend to the
rescue. Under the circumstances, defendant is not exempt from
liability under the law.
D E C I S I O N
BAUTISTA ANGELO, J p:
Plaintiff entered into a contract with defendant to
transport between the ports of Manila and Nin Bay, Sagay, Iloilo,
2,916.44 barrels of bulk gasoline belonging to plaintiff. The
gasoline was delivered in accordance with the contract but
defendant failed to transport it to its place of destination and so
plaintiff brought this action in the Court of First Instance of
Manila to recover the sum of P75,578.60 as damages.
Defendant, in its answer, pleaded that its failure to
deliver the gasoline was due to fortuitous event or caused by
circumstances beyond its control and not to its fault or
negligence or that of any of its employees. The court, after
receiving the evidence, rendered decision finding that the
disaster that had befallen the tugboat was the result of an
unavoidable accident and the loss of the gasoline was due to a
fortuitous event which was beyond the control of defendant
and, consequently, dismissed the case with costs against the
plaintiff.
The facts as found by the trial court are: "that
pursuant to an agreement had between the parties, defendant's
barge No. L-522 was laden with gasoline belonging to the
plaintiff to be transported from Manila to the Port of Iloilo; that
early in the morning of February 2, 1947, defendant's tugboat
"Snapper' picked up the barge outside the breakwater; that the
barge was placed behind the tugboat, it being connected to the
latter by a tow rope ten inches in circumference; that behind the
barge, three other barges were likewise placed, one laden with
some cargo while the other two containing hardly any cargo at
all; that the weather was good when on that day the tugboat
with its tow started on its voyage; that the weather remained
good on February 3, 1947, when it passed Santiago Point in
Batangas; that at about 3:00 o'clock in the morning of February
4, 1947, the engine of the tugboat came to a dead stop; that the
engineer on board the tugboat found out that the trouble was
due to a broken idler; that a message was then sent to the
defendant's radio station in Manila informing its officials of the
engine trouble; that upon the receipt of the message the
defendant called up several shipping companies in Manila to
find out if they had any vessels in the vicinity where the
"Snapper' had stalled but said companies replied in the
negative; that thereupon the defendant radioed its tugboat
'Tamban' which was docked at Batangas, ordering it to proceed
to the place where the 'Snapper' was; that at about 6:00 o'clock
in the same morning of February 4, 1947, the master of the
'Snapper' attempted to cast anchor but the water areas around
Elefante Island were so deep that the anchor did not touch
bottom; that in the afternoon of the same day the weather
become worse as the wind increased in intensity and the waves
were likewise increased in size and force; that due to the rough
condition of the sea the anchor chains of the 'Snapper' and the
four barges broke one by one and as a consequence thereof they
were drifted and were finally dashed against the rocks off
Banton Island; that on striking the rocks a hole was opened in
the hull of the 'Snapper', which ultimately caused it to sink,
while the barge No. L-522 was so badly damaged that the
gasoline it had on board leaked out; and that the 'Tamban'
arrived at the place after the gasoline had already leaked out."
Defendant is a private stevedoring company engaged
in transporting local products, including gasoline in bulk and
has a fleet of about 140 tugboats and about 90 per cent of its
business is devoted to transportation. Though it is engaged in a
limited contract of carriage in the sense that it chooses its
customers and is not opened to the public, nevertheless, the
continuity of its operations in this kind of business have earned
for it the level of a public utility. The contract between the
plaintiff and defendant comes therefore under the provisions of
the Code of Commerce. The pertinent law is article 361 which
provides:
"ART. 361.The merchandise shall
be transported at the risk and venture of the
shipper, if the contrary was not expressly
stipulated.
"Therefore, all damages and
impairment suffered by the goods during the
transportation, by reason of accident, force
majeure, or by virtue of the nature or defect
of the articles, shall be for the account and
risk of the shipper.
"The proof of these accidents is
incumbent on the carrier."
It therefore appears that whenever merchandise is
transported on the sea by virtue of a contract entered into
between the shipper and the carrier, the merchandise is deemed
transported at the risk and venture of the shipper, if the
contrary is not stipulated, and all damages suffered by the
merchandise during the transportation by reason of accident or
force majeure shall be for the account and risk of the shipper,
but the proof of these accidents is incumbent on the carrier.
Implementing this provision, our Supreme Court has held that
all a shipper has to prove in connection with sea carriage is
delivery of the merchandise in good condition and its non-
delivery at the place of destination in order that the burden of
proof may shift to the carrier to prove any of the accidents
above adverted to. Thus, it was held that "Shippers who are
forced to ship goods on an ocean liner or any other ship have
some legal rights, and when goods are delivered on board a ship
in good order and condition, and the shipowner delivers them
to the shipper in bad order and condition, it then devolves upon
the shipowner to both allege and prove that the goods were
damaged by reason of some fact which legally exempts him
from liability" (Mirasol vs. Robert Dollar Co., 53 Phil., 129).
The issue to be determined is: Has defendant proven
that its failure to deliver the gasoline to its place of destination
is due to accident or force majeure or to a cause beyond its
control? This would require an analysis of the facts and
circumstances surrounding the transportation of said gasoline.
It appears that the tugboat "Snapper" was acquired
by defendant from the Foreign Liquidation Commission. It was a
surplus property. It was a deep-sea tugboat that had been in the
service of the United States Armed Forces prior to its purchase
by the Luzon Stevedoring Co. The tugboat was put into
operation without first submitting it to an overhaul in a dry-
dock. It also appears that this tugboat had previously made
several trips and each time it had to obtain a special permit
from the Bureau of Customs because it had never been dry-
docked and did not have complete equipment to be able to
obtain a permanent permit. The special permits that were
issued by said Bureau specifically state that they were issued
"pending submission of plans and load line certificate, including
test and final inspection of equipment." It further appears that,
when the tugboat was inspected by the Bureau of Customs on
October 18, 1946, it found it to be inadequately equipped and so
the Bureau required defendant to provide it with the requisite
equipment but it was never able to complete it. The fact that the
tugboat was a surplus property, has not been dry-docked, and
was not provided with the requisite equipment to make it
seaworthy, shows that defendant did not use reasonable
diligence in putting the tugboat in such a condition as would
make its use safe for operation. It is true, as defendant contends,
that there were then no dry-dock facilities in the Philippines,
but this does not mean that they could not be obtained
elsewhere. It being a surplus property, a dry-dock inspection
was a must to put the tugboat in a sea going condition. It may
also be true, as contended, that the deficiency in the equipment
was due to the fact that no such equipment was available at the
time, but this did not justify defendant in putting such tugboat
in business even if unequipped merely to make a profit. Nor
could the fact that the tugboat was given a special permit by the
Bureau of Customs to make the trip relieve defendant from
liability.
"Where owner buys old tug,
licensed coastwise, and equips it for ocean
going, it is negligence to send tug out without
knowing something of her stability and
especially without stability test, where
history and performance with respect to
crankiness and tenderness are matters of
official record. Sabine Towing Co. vs. Brennan,
C. C. A. Tex., 72 F 2d 490, certiorari denied 55
S. Ct. 141, 293 U. S. 611, 79 L. Ed. 701,
rehearing denied 55 S. Ct. 212, 293 U. S. 632,
79 L. Ed. 717." (80 C. J. S. 803 Footnote)

There are other circumstances which show the lack
of precaution and diligence taken by defendant to make the
travel of the tugboat safe. One is the failure to carry on board
the necessary spare parts. When the idler was broken, the
engineer of the tugboat examined it for the first time and it was
only then that he found that there were no spare parts to use
except a worn out spare driving chain. And the necessity of
carrying such spare parts was emphasized by the very
defendant's witness, Mr. Depree, who said that in vessels
motored by diesel engines it is necessary always to carry spare
chains, ball bearings and chain drives. And this was not done.
"A tug engaged to tow a barge is
liable for damage to the cargo of the barge
caused by faulty equipment of the tug. The
Raleigh, D. C. Md. 50 F. Supp. 961." (80 C. J. S.
Footnote.)
Another circumstance refers to the deficiency or
incompetence in the man power of the tugboat. According to
law, a tugboat of the tonnage and powers of one like the
"Snapper" is required to have a complement composed of one
first mate, one second mate, one third mate, one chief engineer,
one second engineer, and one third engineer, (section 1203,
Revised Administrative Code), but when the trip in question
was undertaken, it was only manned by one master, who was
merely licensed as a bay, river, and lake patron, one second
mate, who was licensed as a third mate, one chief engineer who
was licensed as third motor engineer, one assistant engineer,
who was licensed as a bay, river, and lake motor engineer, and
one second assistant engineer, who was unlicensed. The
employment of this crew to perform functions beyond its
competence and qualifications is not only risky but against the
law and if a mishap is caused, as in this case, one cannot but
surmise that such incompetence has something to do with the
mishap. The fact that the tugboat had undertaken several trips
before with practically the same crew without any untoward
consequence, cannot furnish any justification for continuing in
its employ a deficient or incompetent personnel contrary to law
and the regulations of the Bureau of Customs.
"(1)Generally, seaworthiness is
that strength, durability and engineering skill
made a part of a ship's construction and
continued maintenance, together with a
competent and sufficient crew, which would
withstand the vicissitudes and dangers of the
elements which might reasonably be
expected or encountered during her voyage
without loss or damage to her particular
cargo. The Cleveco, D. C. Ohio, 59 F. Supp. 71,
78, affirmed, C. C. A., 154 F. 2d 606." (80 C. J.
S. 997, Footnote.)
Let us now come to the efforts exerted by defendant
in extending help to the tugboat when it was notified of the
breakage of the idler. The evidence shows that the idler was
broken at about 3:00 o'clock in the morning of February 4,
1947. Within a few minutes, a message was sent to defendant by
radio informing it of the engine trouble. The weather was good
at the time and the sea was smooth, and remained good until
12:00 o'clock noon when the wind started to blow. According to
defendant, since it received the message, it called up different
shipping lines in Manila asking them if they had any vessel in
the vicinity where the "Snapper" stalled but, unfortunately,
none was available at the time, and as its tug "Tamban" was
then docked in Batangas, Batangas, which was nearest to the
place, it radioed said tug to go to the aid of the "Snapper".
Accordingly, the tug "Tamban" set sail from Batangas for the
rescue only to return to secure a map of the vicinity where the
"Snapper" had stalled, which entailed a delay of two hours. In
the meantime, the captain of the "Snapper" attempted to cast
anchor. The water areas off Elefante Island were deep and the
anchor would not touch bottom. Then the sea became rough and
the waves increased in size and force and notwithstanding the
efforts of the crew to prevent the tug from drifting away, the
force of the wind and the violence of the waves dashed the tug
and the barges against the rocks. The tug developed a hole in
her hull and sank. The barge carrying the gasoline was so badly
damaged that the gasoline leaked out. The tug "Tamban" was
finally able to locate the "Snapper" but it was too late.
The foregoing acts only serve to emphasize that the
efforts made by defendant fall short of that diligence and
precaution that are demanded by the situation to save the
tugboat and the barge it was towing from disaster for it appears
that more than twenty-four hours had elapsed before the tug
"Tamban" showed up to extend help. The delay was caused not
so much because of the lack of available ships in the vicinity
where the "Snapper" stalled but because defendant did not have
in readiness any tugboat sufficient in tonnage and equipment to
attend to the rescue. The tug "Tamban" that was ordered to
extend help was fully inadequate for that purpose. It was a small
vessel that was authorized to operate only within Manila Bay
and did not even have any map of the Visayan Islands. A public
utility that is engaged in sea transportation even for a limited
service with a fleet of 140 tugboats should have a competent tug
to rush for towing or repairs in the event of untoward
happening overseas. If defendant had only such a tug ready for
such an emergency, this disaster would not have happened.
Defendant could have avoided sending a poorly equipped tug
which, as it is to be expected, failed to do job.
While the breaking of the idler may be due to an
accident, or to something unexpected, the cause of the disaster
which resulted in the loss of the gasoline can only be attributed
to the negligence or lack of precaution to avert it on the part of
defendant. Defendant had enough time to effectuate the rescue
if it had only a competent tug for the purpose because the
weather was good from 3:00 o'clock a.m. to 12:00 o'clock noon
of February 4, 1947 and it was only in the afternoon that the
wind began to blow with some intensity, 1 but failed to do so
because of that shortcoming. The loss of the gasoline certainly
cannot be said to be due to force majeure or unforeseen event
but to the failure of defendant to extend adequate and proper
help. Considering these circumstances, and those we have
discussed elsewhere, we are persuaded to conclude that
defendant has failed to establish that it is exempt from liability
under the law.
Wherefore, the decision appealed from is reversed.
Defendant is hereby ordered to pay to plaintiff the sum of
P75,578.50, with legal interest from the date of the filing of the
complaint, with costs.
Paras, C. J., Bengzon, Padilla, Montemayor, Reyes, A.,
Jugo, Labrador, Concepcion, Reyes, J. B. L. and Endencia, JJ.,
concur.
NATIONAL STEEL CORPORATION,
petitioner, vs. COURT OF APPEALS AND
VLASONS SHIPPING, INC., respondents.
[G.R. No. 112350. December 12, 1997.]
VLASONS SHIPPING, INC., petitioner, vs.
COURT OF APPEALS and NATIONAL STEEL
CORPORATION, respondents.
Poblador, De los Reyes & Dacayo, Jr. for National Steel Corp.
De Rosario & Del Rosario for Vlasons Shipping, Inc.
SYNOPSIS
The cases under consideration are two separate petitions for review
filed by National Steel Corporation (NSC) and Vlasons Shipping Inc.
(VSI), both assailing the decision of the Court of Appeals. The records
of the case reveal that NSC hired MV Vlasons I, a private vessel owned
by VSI. They entered into a contract of affreightment or contract of
voyage charter hire wherein the contract states that NSC hired VSI's
vessel to make one voyage to load steel products at Iligan City and
discharge them at North Harbor, Manila. Thereafter, in accordance
with the voyage charter hire, NSC's shipment of 1,677 skids of
tinplates and 92 packages of hot rolled sheets were loaded to MV
Vlasons I for carriage to Manila. The vessel arrived safely at North
Harbor, Manila but upon opening the three hatches containing the
shipment, nearly all the skids of tinplates and hot rolled sheets were
allegedly found to be wet and rusty. On the basis of this incident, NSC
filed a complaint against VSI for damages due to the downgrading of
the damaged tinplates in the amount of P941,145.18. After trial on
the merits, the court a quo rendered judgment dismissing the
complaint and ordering NSC to pay VSI on the counterclaim prayed
for by the latter. NSC seasonably filed an appeal to the Court of
Appeals, but the said court just modified the appealed decision by
reducing the award of demurrage and deleting the award of
attorney's fees and expenses of litigation. Both parties filed their
separate motions for reconsideration, but the appellate court denied
both motions. Hence, this petition.
The Supreme Court affirms the assailed decision of the Court of
Appeals, except in respect with the demurrage. It is undisputed that
VSI did not offer its services to the general public. As correctly
concluded by the Court of Appeals, MV Vlasons I was not a common
but a private carrier. Verily, the extent of VSI's responsibility and
liability over NSC's cargo are determined primarily by the
stipulations in the contract of carriage or charter party and the Code
of Commerce. In the instant case, the burden of proof lies on the part
of NSC and not the VSI. Additionally, the Court ruled that the since the
problems raised by NSC were all factual issues already threshed out
and decided by the trial court and subsequently affirmed by the Court
of Appeals, the factual findings of both courts are binding on this
Court. However, the Court disagrees with the findings of both courts
to have found and affirmed respectively that NSC incurred eleven
days of delay in unloading the cargo. In this case, the contract of
voyage charter hire provided four-day laytime; it also qualified
laytime as WWDSHINC or weather working days Sundays and
holidays included. Consequently, NSC cannot be held liable for
demurrage as the four-day laytime allowed it did not lapse, having
been tolled by unfavorable weather condition in view of WWDSHINC
qualification agreed upon by the parties. In view thereof, the
consolidated petitions are denied and the questioned decision is
affirmed with modification that the award of demurrage awarded to
VSI is deleted.
SYLLABUS
1.CIVIL LAW; COMMON CARRIERS; THE TRUE TEST OF A COMMON
CARRIER IS THE CARRIAGE OF PASSENGERS OR GOODS, PROVIDED
IT HAS SPACE, FOR ALL WHO OPT TO AVAIL THEMSELVES OF ITS
TRANSPORTATION SERVICE FOR A FEE. Article 1732 of the Civil
Code defines a common carrier as "persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water or air, for compensation,
offering their services to the public." It has been held that the true
test of a common carrier is the carriage of passengers or goods,
provided it has space, for all who opt to avail themselves of its
transportation service for a fee. A carrier which does not qualify
under the above test is deemed a private carrier. "Generally, private
carriage is undertaken by special agreement and the carrier does not
hold himself out to carry goods for the general public. . . ."
2.ID.; ID.; A CARRIER CARRYING PASSENGERS OR GOODS ONLY FOR
THOSE IT CHOSE UNDER A SPECIAL CONTRACT OF CHARTER
PARTY IS PRIVATE CARRIER; CASE AT BAR. It is undisputed that
VSI did not offer its services to the general public. As found by the
Regional Trial Court, it carried passengers or goods only for those it
chose under a "special contract of charter party." As correctly
concluded by the Court of Appeals, the MV Vlason I "was not a
common but a private carrier." Consequently, the rights and
obligations of VSI and NSC, including their respective liability for
damage to the cargo, are determined primarily by stipulations in
their contract of private carriage or charter party.
3.ID.; ID.; IN A CONTRACT OF PRIVATE CARRIAGE, THE BURDEN OF
PROOF IN CASE OF ACCIDENT IS ON THE CARRIER. In view of the
aforementioned contractual stipulations, NSC must prove that the
damage to its shipment was caused by VSI's willful negligence or
failure to exercise due diligence in making MV Vlason I seaworthy
and fit for holding, carrying and safekeeping the cargo. Ineluctably,
the burden of proof was placed on NSC by the parties' agreement.
Because the MV Vlason I was a private carrier, the shipowner's
obligations are governed by the provisions of the Code of Commerce
(Arts. 361 & 362) and not by the Civil Code which, as a general rule
places the prima facie presumption of negligence on a common
carrier. In the instant case, the Court of Appeals correctly found that
NSC "has not taken the correct position in relation to the question of
who has the burden of proof. Thus in its brief, after citing Clause 10
and Clause 12 of the NANYOZAI Charter Party it argues that 'a careful
examination of the evidence will show that VSI miserably failed to
comply with any of these obligations' as if defendant-appellee [VSI]
had the burden of proof."
4.COMMERCIAL LAW; CARRIAGE OF GOODS BY SEA ACT;
DEMURRAGE; DEFINED. The Court defined demurrage in its strict
sense as the compensation provided for in the contract of
affreightment for the detention of the vessel beyond the laytime or
that period of time agreed on for loading and unloading of cargo. It is
given to compensate the shipowner for the nonuse of the vessel.
5.ID.; ID.; PETITIONER NSC, NOT LIABLE FOR DEMURRAGE, AS THE
FOUR-DAY LAYTIME ALLOWED IN THE CHARTER CONTRACT DID
NOT LAPSE; CASE AT BAR. The contract of voyage charter hire
provided for a four day laytime; it also qualified laytime as
WWDSHINC or weather working days Sundays and holidays
included. The running of laytime was thus made subject to the
weather, and would cease to run in the event unfavorable weather
interfered with the unloading of cargo. Consequently, NSC may not be
held liable for demurrage as the four-day laytime allowed it did not
lapse, having been tolled by unfavorable weather condition in view of
the WWDSHINC qualification agreed upon by the parties. Clearly, it
was error for the trial court and the Court of Appeals to have found
and affirmed respectively that NSC incurred eleven days of delay in
unloading the cargo. The trial court arrived at this erroneous finding
by subtracting from the twelve days, specifically August 13, 1974 to
August 24, 1974, the only day of unloading unhampered by
unfavorable weather or rain, which was August 22, 1974. Based on
our previous discussion, such finding is a reversible error.
6.REMEDIAL LAW; CIVIL PROCEDURE; APPEAL TO THE SUPREME
COURT; WHERE THE FACTUAL FINDINGS OF BOTH THE TRIAL
COURT AND THE COURT OF APPEALS COINCIDE, THE SAME ARE
BINDING ON THE COURT. The questions of fact were threshed out
and decided by the trial court, which had the firsthand opportunity to
hear the parties' conflicting claims and to carefully weigh their
respective evidence. The findings of the trial court were subsequently
affirmed by the Court of Appeals. Where the factual findings of both
the trial court and the Court of Appeals coincide, the same are
binding on this Court. We stress that, subject to some exceptional
instances, only questions of law not questions of fact may be
raised before this Court in a petition for review under Rule 45 of the
Rules of Court. After a thorough review of the case at bar, we find no
reason to disturb the lower courts' factual findings, as indeed NSC
has not successfully proven the application of any of the aforecited
exceptions.
7.ID.; EVIDENCE; ADMISSIBILITY OF EVIDENCE; AN ORIGINAL
CERTIFICATE ISSUED BY AN OFFICER OF THE PHILIPPINE COAST
GUARD, IS ADMISSIBLE UNDER A WELL-SETTLED EXCEPTION TO
THE HEARSAY RULE UNDER SECTION 44, RULE 130 OF THE RULES
OF COURT. Exhibit 11 is admissible under a well-settled exception
to the hearsay rule per Section 44 of Rule 130 of the Rules of Courts
which provides that "(e)ntries in official records made in the
performance of a duty by a public officer of the Philippines, or by a
person in the performance of a duty especially enjoined by law, are
prima facie evidence of the facts therein stated." Exhibit 11 is an
original certificate of the Philippine Coast Guard in Cebu issued by
Lieutenant Junior Grade Noli C. Flores to the effect that "the vessel
'VLASONS I was drydocked . . . and PCG Inspectors were sent on
board for inspection. . . . After completion of drydocking and duly
inspected by PCG Inspectors, the vessel 'VLASONS I', a cargo vessel, is
in seaworthy condition, meets all requirements, fitted and equipped
for trading as a cargo vessel was cleared by the Philippine Coast
Guard and sailed for Cebu Port on July 10, 1974." NSC's claim,
therefore, is obviously misleading and erroneous.

8.CIVIL LAW; DAMAGES; ATTORNEY'S FEES; RESPONDENT VSI NOT
ENTITLED THERETO, IN THE ABSENCE OF BAD FAITH ON THE PART
OF THE PETITIONER NSC. VSI assigns as error of law the Court of
Appeals' deletion of the award of attorney's fees. We disagree. While
VSI was compelled to litigate to protect its rights, such fact by itself
will not justify an award of attorney's fees under Article 2208 of the
Civil Code when ". . . no sufficient showing of bad faith would be
reflected in a party's persistence in a case other than an erroneous
conviction of the righteousness of his cause. . . ." Moreover, attorney's
fees may not be awarded to a party for the reason alone that the
judgment rendered was favorable to the latter, as this is tantamount
to imposing a premium on one's right to litigate or seek judicial
redress of legitimate grievances.
D E C I S I O N
PANGANIBAN, J p:
The Court finds occasion to apply the rules on the seaworthiness of a
private carrier, its owner's responsibility for damage to the cargo and
its liability for demurrage and attorney's fees. The Court also
reiterates the well-known rule that findings of facts of trial courts,
when affirmed by the Court of Appeals, are binding on this Court.
cdasia
The Case
Before us are two separate petitions for review filed by National Steel
Corporation (NSC) and Vlasons Shipping, Inc. (VSI), both of which
assail the August 12, 1993 Decision of the Court of Appeals. 1 The
Court of Appeals modified the decision of the Regional Trial Court of
Pasig, Metro Manila, Branch 163 in Civil Case No. 23317. The RTC
disposed as follows:
"WHEREFORE, judgment is hereby rendered
in favor of defendant and against the plaintiff
dismissing the complaint with cost against
plaintiff, and ordering plaintiff to pay the
defendant on the counterclaim as follows:
1.The sum of P75,000.00 as unpaid freight
and P88,000.00 as demurrage with interest at
the legal rate on both amounts from April 7,
1976 until the same shall have been fully
paid;
2.Attorney's fees and expenses of litigation in
the sum of P100,000.00; and
3.Cost of suit.
SO ORDERED." 2
On the other hand, the Court of Appeals ruled:
"WHEREFORE, premises considered, the
decision appealed from is modified by
reducing the award for demurrage to
P44,000.00 and deleting the award for
attorney's fees and expenses of litigation.
Except as thus modified, the decision is
AFFIRMED. There is no pronouncement as to
costs.
SO ORDERED." 3
The Facts
The MV Vlasons I is a vessel which renders tramping service and, as
such, does not transport cargo or shipment for the general public. Its
services are available only to specific persons who enter into a
special contract of charter party with its owner. It is undisputed that
the ship is a private carrier. And it is in this capacity that its owner,
Vlasons Shipping, Inc., entered into a contract of affreightment or
contract of voyage charter hire with National Steel Corporation.
The facts as found by Respondent Court of Appeals are as follows:
"(1)On July 17, 1974, plaintiff National Steel
Corporation (NSC) as Charterer and
defendant Vlasons Shipping, Inc. (VSI) as
Owner, entered into a Contract of Voyage
Charter Hire (Exhibit 'B'; also Exhibit '1')
whereby NSC hired VSI's vessel, the MV
'VLASONS I' to make one (1) voyage to load
steel products at Iligan City and discharge
them at North Harbor, Manila, under the
following terms and conditions, viz:
'1.. . .
2.Cargo: Full cargo of steel
products of not less than
2,500 MT, 10% more or
less at Master's option.
3.. . .
4.Freight/Payment: P30.00/metric
ton, FIOST basis.
Payment upon
presentation of Bill of
Lading within fifteen
(15) days.
5.Laydays/Cancelling: July 26,
1974/Aug. 5, 1974
6.Loading/Discharging Rate: 750
tons per WWDSHINC.
(Weather Working Day
of 24 consecutive hours,
Sundays and Holidays
Included).
7.Demurrage/Dispatch:
P8,000.00/P4,000.00
per day.
8.. . .
9.Cargo Insurance: Charterer's
and/or Shipper's must
insure the cargoes.
Shipowners not
responsible for
losses/damages except
on proven willful
negligence of the
officers of the vessel.
10.Other terms: (a) All
terms/conditions of
NONYAZAI C/P [sic] or
other internationally
recognized Charter
Party Agreement shall
form part of this
Contract.
xxx xxx xxx'
The terms 'F.I.O.S.T.' which is used in the
shipping business is a standard provision in
the NANYOZAI Charter Party which stands
for 'Freight In and Out including Stevedoring
and Trading', which means that the handling,
loading and unloading of the cargoes are the
responsibility of the Charterer. Under
Paragraph 5 of the NANYOZAI Charter Party,
it states, 'Charterers to load, stow and
discharge the cargo free of risk and expenses
to owners. . . .' (Emphasis supplied).
Under paragraph 10 thereof, it is provided
that '(o)wners shall, before and at the
beginning of the voyage, exercise due
diligence to make the vessel seaworthy and
properly manned, equipped and supplied and
to make the holds and all other parts of the
vessel in which cargo is carried, fit and safe
for its reception, carriage and preservation.
Owners shall not be liable for loss of or
damage of the cargo arising or resulting from:
unseaworthiness unless caused by want of
due diligence on the part of the owners to
make the vessel seaworthy, and to secure
that the vessel is properly manned, equipped
and supplied and to make the holds and all
other parts of the vessel in which cargo is
carried, fit and safe for its reception, carriage
and preservation; . . ; perils, dangers and
accidents of the sea or other navigable
waters; . . ; wastage in bulk or weight or any
other loss or damage arising from inherent
defect, quality or vice of the cargo;
insufficiency of packing; . . .; latent defects not
discoverable by due diligence; any other
cause arising without the actual fault or
privity of Owners or without the fault of the
agents or servants of owners.'
Paragraph 12 of said NANYOZAI Charter
Party also provides that '(o)wners shall not
be responsible for split, chafing and/or any
damage unless caused by the negligence or
default of the master and crew.'
(2)On August 6, 7 and 8, 1974, in accordance
with the Contract of Voyage Charter Hire, the
MV 'VLASONS I' loaded at plaintiffs pier at
Iligan City, the NSC's shipment of 1,677 skids
of tinplates and 92 packages of hot rolled
sheets or a total of 1,769 packages with a
total weight of about 2,481.19 metric tons for
carriage to Manila. The shipment was placed
in the three (3) hatches of the ship. Chief
Mate Gonzalo Sabando, acting as agent of the
vessel[,] acknowledged receipt of the cargo
on board and signed the corresponding bill of
lading, B.L.P.P. No. 0233 (Exhibit 'D') on
August 8, 1974.
(3)The vessel arrived with the cargo at Pier
12, North Harbor, Manila, on August 12, 1974.
The following day, August 13, 1974, when the
vessel's three (3) hatches containing the
shipment were opened by plaintiff's agents,
nearly all the skids of tinplates and hot rolled
sheets were allegedly found to be wet and
rusty. The cargo was discharged and
unloaded by stevedores hired by the
Charterer. Unloading was completed only on
August 24, 1974 after incurring a delay of
eleven (11) days due to the heavy rain which
interrupted the unloading operations.
(Exhibit 'E')
(4)To determine the nature and extent of the
wetting and rusting, NSC called for a survey
of the shipment by the Manila Adjusters and
Surveyors Company (MASCO). In a letter to
the NSC dated March 17, 1975 (Exhibit 'G'),
MASCO made a report of its ocular inspection
conducted on the cargo, both while it was still
on board the vessel and later at the NDC
warehouse in Pureza St., Sta. Mesa, Manila
where the cargo was taken and stored.
MASCO reported that it found wetting and
rusting of the packages of hot rolled sheets
and metal covers of the tinplates; that
tarpaulin hatch covers were noted torn at
various extents; that container/metal casings
of the skids were rusting all over. MASCO
ventured the opinion that 'rusting of the
tinplates was caused by contact with SEA
WATER sustained while still on board the
vessel as a consequence of the heavy weather
and rough seas encountered while en route to
destination (Exhibit 'F'). It was also reported
that MASCO's surveyors drew at random
samples of bad order packing materials of the
tinplates and delivered the same to the M.I.T.
Testing Laboratories for analysis. On August
31, 1974, the M.I.T. Testing Laboratories
issued Report No. 1770 (Exhibit 'I') which in
part, states, 'The analysis of bad order
samples of packing materials . . . shows that
wetting was caused by contact with SEA
WATER'.
(5)On September 6, 1974, on the basis of the
aforesaid Report No. 1770, plaintiff filed with
the defendant its claim for damages suffered
due to the downgrading of the damaged
tinplates in the amount of P941,145.18. Then
on October 3, 1974, plaintiff formally
demanded payment of said claim but
defendant VSI refused and failed to pay.
Plaintiff filed its complaint against defendant
on April 21, 1976 which was docketed as Civil
Case No. 23317, CFI, Rizal.
(6)In its complaint, plaintiff claimed that it
sustained losses in the aforesaid amount of
P941,145.18 as a result of the act, neglect and
default of the master and crew in the
management of the vessel as well as the want
of due diligence on the part of the defendant
to make the vessel seaworthy and to make
the holds and all other parts of the vessel in
which the cargo was carried, fit and safe for
its reception, carriage and preservation all
in violation of defendant's undertaking under
their Contract of Voyage Charter Hire.
(7)In its answer, defendant denied liability
for the alleged damage claiming that the MV
'VLASONS I' was seaworthy in all respects for
the carriage of plaintiff's cargo; that said
vessel was not a 'common carrier' inasmuch
as she was under voyage charter contract
with the plaintiff as charterer under the
charter party; that in the course of the voyage
from Iligan City to Manila, the MV 'VLASONS
I' encountered very rough seas, strong winds
and adverse weather condition, causing
strong winds and big waves to continuously
pound against the vessel and seawater to
overflow on its deck and hatch covers; that
under the Contract of Voyage Charter Hire,
defendant shall not be responsible for
losses/damages except on proven willful
negligence of the officers of the vessel, that
the officers of said MV 'VLASONS I' exercised
due diligence and proper seamanship and
were not willfully negligent; that furthermore
the Voyage Charter Party provides that
loading and discharging of the cargo was on
FIOST terms which means that the vessel was
free of risk and expense in connection with
the loading and discharging of the cargo; that
the damage, if any, was due to the inherent
defect, quality or vice of the cargo or to the
insufficient packing thereof or to latent defect
of the cargo not discoverable by due diligence
or to any other cause arising without the
actual fault or privity of defendant and
without the fault of the agents or servants of
defendant; consequently, defendant is not
liable; that the stevedores of plaintiff who
discharged the cargo in Manila were
negligent and did not exercise due care in the
discharge of the cargo; and that the cargo was
exposed to rain and seawater spray while on
the pier or in transit from the pier to
plaintiff's warehouse after discharge from the
vessel; and that plaintiff's claim was highly
speculative and grossly exaggerated and that
the small stain marks or sweat marks on the
edges of the tinplates were magnified and
considered total loss of the cargo. Finally,
defendant claimed that it had complied with
all its duties and obligations under the
Voyage Charter Hire Contract and had no
responsibility whatsoever to plaintiff. In turn,
it alleged the following counterclaim:

(a)That despite the full and proper
performance by defendant of its
obligations under the Voyage
Charter Hire Contract, plaintiff
failed and refused to pay the
agreed charter hire of P75,000.00
despite demands made by
defendant;
(b)That under their Voyage
Charter Hire Contract, plaintiff had
agreed to pay defendant the sum of
P8,000.00 per day for demurrage.
The vessel was on demurrage for
eleven (11) days in Manila waiting
for plaintiff to discharge its cargo
from the vessel. Thus, plaintiff was
liable to pay defendant demurrage
in the total amount of P88,000.00.
cdasia
(c)For filing a clearly unfounded
civil action against defendant,
plaintiff should be ordered to pay
defendant attorney's fees and all
expenses of litigation in the
amount of not less than
P100,000.00.
(8)From the evidence presented by both
parties, the trial court came out with the
following findings which were set forth in its
decision:
(a)The MV 'VLASONS I' is a vessel
of Philippine registry engaged in
the tramping service and is
available for hire only under
special contracts of charter party
as in this particular case.
(b)That for purposes of the voyage
covered by the Contract of Voyage
Charter Hire (Exh. '1'), the MV
'VLASONS I' was covered by the
required seaworthiness
certificates including the
Certification of Classification
issued by an international
classification society, the NIPPON
KAIJI KYOKAI (Exh. '4'); Coastwise
License from the Board of
Transportation (Exh. '5');
International Loadline Certificate
from the Philippine Coast Guard
(Exh. '6'); Cargo Ship Safety
Equipment Certificate also from
the Philippine Coast Guard (Exh.
'7'); Ship Radio Station License
(Exh. '8'); Certificate of Inspection
by the Philippine Coast Guard
(Exh. '12'); and Certificate of
Approval for Conversion issued by
the Bureau of Customs (Exh. '9').
That being a vessel engaged in
both overseas and coastwise trade,
the MV 'VLASONS I' has a higher
degree of seaworthiness and
safety.
(c)Before it proceeded to Iligan
City to perform the voyage called
for by the Contract of Voyage
Charter Hire, the MV 'VLASONS I'
underwent drydocking in Cebu and
was thoroughly inspected by the
Philippine Coast Guard. In fact,
subject voyage was the vessel's
first voyage after the drydocking.
The evidence shows that the MV
'VLASONS I' was seaworthy and
properly manned, equipped and
supplied when it undertook the
voyage. It had all the required
certificates of seaworthiness.
(d)The cargo/shipment was
securely stowed in three (3)
hatches of the ship. The hatch
openings were covered by
hatchboards which were in turn
covered by two or double
tarpaulins. The hatch covers were
water tight. Furthermore, under
the hatchboards were steel beams
to give support.
(e)The claim of the plaintiff that
defendant violated the contract of
carriage is not supported by
evidence. The provisions of the
Civil Code on common carriers
pursuant to which there exists a
presumption of negligence in case
of loss or damage to the cargo are
not applicable. As to the damage to
the tinplates which was allegedly
due to the wetting and rusting
thereof, there is unrebutted
testimony of witness Vicente
Angliongto that tinplates 'sweat' by
themselves when packed even
without being in contract (sic) with
water from outside especially
when the weather is bad or
raining. The rust caused by sweat
or moisture on the tinplates may
be considered as a loss or damage
but then, defendant cannot be held
liable for it pursuant to Article
1734 of the Civil Case which
exempts the carrier from
responsibility for loss or damage
arising from the 'character of the
goods . . .'. All the 1,769 skids of the
tinplates could not have been
damaged by water as claimed by
plaintiff. It was shown as claimed
by plaintiff that the tinplates
themselves were wrapped in kraft
paper lining and corrugated
cardboards could not be affected
by water from outside.
(f)The stevedores hired by the
plaintiff to discharge the cargo of
tinplates were negligent in not
closing the hatch openings of the
MV 'VLASONS I' when rains
occurred during the discharging of
the cargo thus allowing rainwater
to enter the hatches. It was proven
that the stevedores merely set up
temporary tents to cover the hatch
openings in case of rain so that it
would be easy for them to resume
work when the rains stopped by
just removing the tent or canvas.
Because of this improper covering
of the hatches by the stevedores
during the discharging and
unloading operations which were
interrupted by rains, rainwater
drifted into the cargo through the
hatch openings. Pursuant to
paragraph 5 of the NANYOSAI [sic]
Charter Party which was expressly
made part of the Contract of
Voyage Charter Hire, the loading,
stowing and discharging of the
cargo is the sole responsibility of
the plaintiff charterer and
defendant carrier has no liability
for whatever damage may occur or
maybe [sic] caused to the cargo in
the process.
(g)It was also established that the
vessel encountered rough seas and
bad weather while en route from
Iligan City to Manila causing sea
water to splash on the ship's deck
on account of which the master of
the vessel (Mr. Antonio C. Dumlao)
filed a 'Marine Protest' on August
13, 1974 (Exh. '15') which can be
invoked by defendant as a force
majeure that would exempt the
defendant from liability.
(h)Plaintiff did not comply with the
requirement prescribed in
paragraph 9 of the Voyage Charter
Hire contract that it was to insure
the cargo because it did not. Had
plaintiff complied with the
requirement, then it could have
recovered its loss or damage from
the insurer. Plaintiff also violated
the charter party contract when it
loaded not only 'steel products', i.e.
steel bars, angular bars and the
like but also tinplates and hot
rolled sheets which are high grade
cargo commanding a higher
freight. Thus plaintiff was able to
ship high grade cargo at a lower
freight rate.
(i)As regards defendant's
counterclaim, the contract of
voyage charter hire under
paragraph 4 thereof, fixed the
freight at P30.00 per metric ton
payable to defendant carrier upon
presentation of the bill of lading
within fifteen (15) days. Plaintiff
has not paid the total freight due of
P75,000.00 despite demands. The
evidence also showed that the
plaintiff was required and bound
under paragraph 7 of the same
Voyage Charter Hire contract to
pay demurrage of P8,000.00 per
day of delay in the unloading of the
cargoes. The delay amounted to
eleven (11) days thereby making
plaintiff liable to pay defendant for
demurrage in the amount of
P88,000.00.
Appealing the RTC decision to the Court of Appeals, NSC alleged six
errors:
"I
The trial court erred in finding that the MV
'VLASONS I' was seaworthy, properly
manned, equipped and supplied, and that
there is no proof of willful negligence of the
vessel's officers.
"II
The trial court erred in finding that the
rusting of NSC's tinplates was due to the
inherent nature or character of the goods and
not due to contact with seawater.
"III
The trial court erred in finding that the
stevedores hired by NSC were negligent in
the unloading of NSC's shipment.
"IV
The trial court erred in exempting VSI from
liability on the ground of force majeure.
"V
The trial court erred in finding that NSC
violated the contract of voyage charter hire.
"VI
The trial court erred in ordering NSC to pay
freight, demurrage and attorney's fees, to
VSI." 4
As earlier stated, the Court of Appeals modified the decision of the
trial court by reducing the demurrage from P88,000.00 to P44,000.00
and deleting the award of attorneys fees and expenses of litigation.
NSC and VSI filed separate motions for reconsideration. In a
Resolution 5 dated October 20, 1993, the appellate court denied both
motions. Undaunted, NSC and VSI filed their respective petitions for
review before this Court. On motion of VSI, the Court ordered on
February 14, 1994 the consolidation of these petitions. 6
The Issues
In its petition 7 and memorandum, 8 NSC raises the following
questions of law and fact:
Questions of Law
"1.Whether or not a charterer of a vessel is
liable for demurrage due to cargo
unloading delays caused by
weather interruption;
2.Whether or not the alleged 'seaworthiness
certificates' (Exhibits '3', '4', '5', '6',
'7', '8', '9', '11' and '12') were
admissible in evidence and
constituted evidence of the vessel's
seaworthiness at the beginning of
the voyages; and
3.Whether or not a charterer's failure to
insure its cargo exempts the
shipowner from liability for cargo
damage."
Questions of Fact
"1.Whether or not the vessel was seaworthy
and cargo-worthy;
2.Whether or not vessel's officers and crew
were negligent in handling and
caring for NSC's cargo;
3.Whether or not NSC's cargo of tinplates did
sweat during the voyage and,
hence, rusted on their own; and
4.Whether or not NSC's stevedores were
negligent and caused the
wetting[/]rusting of NSC's
tinplates."
In its separate petition, 9 VSI submits for the consideration of this
Court the following alleged errors of the CA:
"A.The respondent Court of Appeals
committed an error of law in reducing the
award of demurrage from P88,000.00 to
P44,000.00.
B.The respondent Court of Appeals
committed an error of law in deleting the
award of P10,000 for attorney's fees and
expenses of litigation."
Amplifying the foregoing, VSI raises the following issues in its
memorandum: 10
"I.Whether or not the provisions of the Civil
Code of the Philippines on common carriers
pursuant to which there exist[s] a
presumption of negligence against the
common carrier in case of loss or damage to
the cargo are applicable to a private carrier.
II.Whether or not the terms and conditions of
the Contract of Voyage Charter Hire,
including the Nanyozai Charter, are valid and
binding on both contracting parties."
The foregoing issues raised by the parties will be discussed under the
following headings:
1.Questions of Fact
2.Effect of NSC's Failure to Insure the Cargo

3.Admissibility of Certificates Proving
Seaworthiness
4.Demurrage and Attorney's Fees.
The Court's Ruling
The Court affirms the assailed Decision of the Court of Appeals,
except in respect of the demurrage.
Preliminary Matter : Common Carrier or Private Carrier ?
At the outset, it is essential to establish whether VSI contracted with
NSC as a common carrier or as a private carrier. The resolution of this
preliminary question determines the law, standard of diligence and
burden of proof applicable to the present case.
Article 1732 of the Civil Code defines a common carrier as "persons,
corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water,
or air, for compensation, offering their services to the public." It has
been held that the true test of a common carrier is the carriage of
passengers or goods, provided it has space, for all who opt to avail
themselves of its transportation service for a fee. 11 A carrier which
does not qualify under the above test is deemed a private carrier.
"Generally, private carriage is undertaken by special agreement and
the carrier does not hold himself out to carry goods for the general
public. The most typical, although not the only form of private
carriage, is the charter party, a maritime contract by which the
charterer, a party other than the shipowner, obtains the use and
service of all or some part of a ship for a period of time or a voyage or
voyages." 12
In the instant case, it is undisputed that VSI did not offer its services
to the general public. As found by the Regional Trial Court, it carried
passengers or goods only for those it chose under a "special contract
of charter party." 13 As correctly concluded by the Court of Appeals,
the MV Vlasons I "was not a common but a private carrier." 14
Consequently, the rights and obligations of VSI and NSC, including
their respective liability for damage to the cargo, are determined
primarily by stipulations in their contract of private carriage or
charter party. 15 Recently, in Valenzuela Hardwood and Industrial
Supply, Inc., vs. Court of Appeals and Seven Brothers Shipping
Corporation, 16 the Court ruled:
". . . in a contract of private carriage, the
parties may freely stipulate their duties and
obligations which perforce would be binding
on them. Unlike in a contract involving a
common carrier, private carriage does not
involve the general public. Hence, the
stringent provisions of the Civil Code on
common carriers protecting the general
public cannot justifiably be applied to a ship
transporting commercial goods as a private
carrier. Consequently, the public policy
embodied therein is not contravened by
stipulations in a charter party that lessen or
remove the protection given by law in
contracts involving common carriers." 17
Extent of VSI's Responsibility and
Liability Over NSC's Cargo
It is clear from the parties' Contract of Voyage Charter Hire, dated
July 17, 1974, that VSI "shall not be responsible for losses except on
proven willful negligence of the officers of the vessel." The NANYOZAI
Charter Party, which was incorporated in the parties' contract of
transportation further provided that the shipowner shall not be liable
for loss of or damage to the cargo arising or resulting from
unseaworthiness, unless the same was caused by its lack of due
diligence to make the vessel seaworthy or to ensure that the same
was "properly manned, equipped and supplied," and to "make the
holds and all other parts of the vessel in which cargo [was] carried, fit
and safe for its reception, carriage and preservation." 18 The
NANYOZAI Charter Party also provided that "[o]wners shall not be
responsible for split, chafing and/or any damage unless caused by the
negligence or default of the master or crew." 19
Burden of Proof
In view of the aforementioned contractual stipulations, NSC must
prove that the damage to its shipment was caused by VSI's willful
negligence or failure to exercise due diligence in making MV Vlasons I
seaworthy and fit for holding, carrying and safekeeping the cargo.
Ineluctably, the burden of proof was placed on NSC by the parties'
agreement.
This view finds further support in the Code of Commerce which
pertinently provides:
"Art. 361.Merchandise shall be transported at
the risk and venture of the shipper, if the
contrary has not been expressly stipulated.
Therefore, the damage and impairment
suffered by the goods during the
transportation, due to fortuitous event, force
majeure, or the nature and inherent defect of
the things, shall be for the account and risk of
the shipper.
The burden of proof of these accidents is on
the carrier."
"Art. 362.The carrier, however, shall be liable
for damages arising from the cause
mentioned in the preceding article if proofs
against him show that they occurred on
account of his negligence or his omission to
take the precautions usually adopted by
careful persons, unless the shipper
committed fraud in the bill of lading, making
him to believe that the goods were of a class
or quality different from what they really
were."
Because the MV Vlasons I was a private carrier, the shipowner's
obligations are governed by the foregoing provisions of the Code of
Commerce and not by the Civil Code which, as a general rule, places
the prima facie presumption of negligence on a common carrier. It is
a hornbook doctrine that:
"In an action against a private carrier for loss
of, or injury to, cargo, the burden is on the
plaintiff to prove that the carrier was
negligent or unseaworthy, and the fact that
the goods were lost or damaged while in the
carrier's custody does not put the burden of
proof on the carrier.
Since . . . a private carrier is not an insurer but
undertakes only to exercise due care in the
protection of the goods committed to its care,
the burden of proving negligence or a breach
of that duty rests on plaintiff and proof of loss
of, or damage to, cargo while in the carrier's
possession does not cast on it the burden of
proving proper care and diligence on its part
or that the loss occurred from an excepted
cause in the contract or bill of lading.
However, in discharging the burden of proof,
plaintiff is entitled to the benefit of the
presumptions and inferences by which the
law aids the bailor in an action against a
bailee, and since the carrier is in a better
position to know the cause of the loss and
that it was not one involving its liability, the
law requires that it come forward with the
information available to it, and its failure to
do so warrants an inference or presumption
of its liability. However, such inferences and
presumptions, while they may affect the
burden of coming forward with evidence, do
not alter the burden of proof which remains
on plaintiff, and, where the carrier comes
forward with evidence explaining the loss or
damage, the burden of going forward with the
evidence is again on plaintiff.
Where the action is based on the shipowner's
warranty of seaworthiness, the burden of
proving a breach thereof and that such
breach was the proximate cause of the
damage rests on plaintiff, and proof that the
goods were lost or damaged while in the
carrier's possession does not cast on it the
burden of proving seaworthiness. . . . Where
the contract of carriage exempts the carrier
from liability for unseaworthiness not
discoverable by due diligence, the carrier has
the preliminary burden of proving the
exercise of due diligence to make the vessel
seaworthy." 20
In the instant case, the Court of Appeals correctly found that NSC "has
not taken the correct position in relation to the question of who has
the burden of proof. Thus, in its brief (pp. 10-11), after citing Clause
10 and Clause 12 of the NANYOZAI Charter Party (incidentally
plaintiff-appellant's [NSC's] interpretation of Clause 12 is not even
correct), it argues that 'a careful examination of the evidence will
show that VSI miserably failed to comply with any of these
obligations' as if defendant-appellee [VSI] had the burden of proof."
21
First Issue : Questions of Fact
Based on the foregoing, the determination of the following factual
questions is manifestly relevant: (1) whether VSI exercised due
diligence in making MV Vlasons I seaworthy for the intended purpose
under the charter party; (2) whether the damage to the cargo should
be attributed to the willful negligence of the officers and crew of the
vessel or of the stevedores hired by NSC; and (3) whether the rusting
of the tinplates was caused by its own "sweat" or by contact with
seawater. LibLex
These questions of fact were threshed out and decided by the trial
court, which had the firsthand opportunity to hear the parties'
conflicting claims and to carefully weigh their respective evidence.
The findings of the trial court were subsequently affirmed by the
Court of Appeals. Where the factual findings of both the trial court
and the Court of Appeals coincide, the same are binding on this Court.
22 We stress that, subject to some exceptional instances, 23 only
questions of law not questions of fact may be raised before this
Court in a petition for review under Rule 45 of the Rules of Court.
After a thorough review of the case at bar, we find no reason to
disturb the lower courts' factual findings, as indeed NSC has not
successfully proven the application of any of the aforecited
exceptions.
Was MV Vlasons I Seaworthy?
In any event, the records reveal that VSI exercised due diligence to
make the ship seaworthy and fit for the carriage of NSC's cargo of
steel and tinplates. This is shown by the fact that it was drydocked
and harbored by the Philippine Coast Guard before it proceeded to
Iligan City for its voyage to Manila under the contract of voyage
charter hire. 24 The vessel's voyage from Iligan to Manila was the
vessel's first voyage after drydocking. The Philippine Coast Guard
Station in Cebu cleared it as seaworthy, fitted and equipped; it met all
requirements for trading as cargo vessel. 25 The Court of Appeals
itself sustained the conclusion of the trial court that MV Vlasons I was
seaworthy. We find no reason to modify or reverse this finding of
both the trial and the appellate courts.

Who Were Negligent :
Seamen or Stevedores?
As noted earlier, the NSC had the burden of proving that the damage
to the cargo was caused by the negligence of the officers and the crew
of MV Vlasons I in making their vessel seaworthy and fit for the
carriage of tinplates. NSC failed to discharge this burden.
Before us, NSC relies heavily on its claim that MV Vlasons I had used
an old and torn tarpaulin or canvas to cover the hatches through
which the cargo was loaded into the cargo hold of the ship. It faults
the Court 26 of Appeals for failing to consider such claim as an
"uncontroverted fact and denies that MV Vlasons I "was equipped
with new canvas covers in tandem with the old ones as indicated in
the Marine Protest . . ." 27 We disagree.
The records sufficiently support VSI's contention that the ship used
the old tarpaulin, only in addition to the new one used primarily to
make the ship's hatches watertight. The foregoing are clear from the
marine protest of the master of the MV Vlasons I, Antonio C. Dumlao,
and the deposition of the ship's boatswain, Jose Pascua. The salient
portions of said marine protest read:
". . . That the M/V "VLASONS I" departed
Iligan City on or about 0730 hours of August
8, 1974, loaded with approximately 2,487.9
tons of steel plates and tin plates consigned
to National Steel Corporation; that before
departure, the vessel was rigged, fully
equipped and cleared by the authorities; that
on or about August 9, 1974, while in the
vicinity of the western part of Negros and
Panay, we encountered very rough seas and
strong winds and Manila office was advised
by telegram of the adverse weather
conditions encountered; that in the morning
of August 10, 1974, the weather condition
changed to worse and strong winds and big
waves continued pounding the vessel at her
port side causing sea water to overflow on
deck and hatch (sic) covers and which caused
the first layer of the canvass covering to give
way while the new canvass covering still
holding on;
That the weather condition improved when
we reached Dumali Point protected by
Mindoro; that we re-secured the canvass
covering back to position; that in the
afternoon of August 10, 1974, while entering
Maricaban Passage, we were again exposed to
moderate seas and heavy rains; that while
approaching Fortune Island, we encountered
again rough seas, strong winds and big waves
which caused the same canvass to give way
and leaving the new canvass holding on;
xxx xxx xxx" 28
And the relevant portions of Jose Pascua's deposition are as follows:
"qWhat is the purpose of the canvas cover?
aSo that the cargo would not be soaked with
water.
qAnd will you describe how the canvas cover
was secured on the hatch opening?
WITNESS
aIt was placed flat on top of the hatch cover,
with a little canvas flowing over
the sides and we place[d] a flat bar
over the canvas on the side of the
hatches and then we place[d] a
stopper so that the canvas could
not be removed.
ATTY. DEL ROSARIO
qAnd will you tell us the size of the hatch
opening? The length and the width
of the hatch opening.
aForty-five feet by thirty-five feet, sir.
xxx xxx xxx
qHow was the canvas supported in the
middle of the hatch opening?
aThere is a hatch board.
ATTY. DEL ROSARIO
qWhat is the hatch board made of?
aIt is made of wood, with a handle.
qAnd aside from the hatch board, is there any
other material there to cover the
hatch?
aThere is a beam supporting the hatch board.
qWhat is this beam made of?
aIt is made of steel, sir.
qIs the beam that was placed in the hatch
opening covering the whole hatch
opening?
a No, sir.
qHow many hatch beams were there placed
across the opening?
aThere are five beams in one hatch opening.
ATTY. DEL ROSARIO
qAnd on top of the beams you said there is a
hatch board. How many pieces of
wood are put on top?
aPlenty, sir, because there are several pieces
on top of the hatch beam.
qAnd is there a space between the hatch
boards?
aThere is none, sir.
qThey are tight together?
aYes, sir.
qHow tight?
aVery tight, sir.
qNow, on top of the hatch boards, according
to you, is the canvas cover. How
many canvas covers?
aTwo, sir." 29
That due diligence was exercised by the officers and the crew of the
MV Vlasons I was further demonstrated by the fact that, despite
encountering rough weather twice, the new tarpaulin did not give
way and the ship's hatches and cargo holds remained waterproof. As
aptly stated by the Court of Appeals, ". . . we find no reason not to
sustain the conclusion of the lower court based on overwhelming
evidence, that the MV 'VLASONS I' was seaworthy when it undertook
the voyage on August 8, 1974 carrying on board thereof plaintiff-
appellant's shipment of 1,677 skids of tinplates and 92 packages of
hot rolled sheets or a total of 1,769 packages from NSC's pier in Iligan
City arriving safely at North Harbor, Port Area, Manila, on August 12,
1974; . . ." 30
Indeed, NSC failed to discharge its burden to show negligence on the
part of the officers and the crew of MV Vlasons I, On the contrary, the
records reveal that it was the stevedores of NSC who were negligent
in unloading the cargo from the ship. cdasia
The stevedores employed only a tent-like material to cover the
hatches when strong rains occasioned by a passing typhoon
disrupted the loading of the cargo. This tent-like covering, however,
was clearly inadequate for keeping rain and seawater away from the
hatches of the ship. Vicente Angliongto, an officer of VSI, testified
thus:
"ATTY. ZAMORA:
QNow, during your testimony on November
5, 1979, you stated on August 14
you went on board the vessel upon
notice from the National Steel
Corporation in order to conduct
the inspection of the cargo. During
the course of the investigation, did
you chance to see the discharging
operation?
WITNESS:
AYes, sir, upon my arrival at the vessel, I saw
some of the tinplates already
discharged on the pier but
majority of the tinplates were
inside the hall, all the hatches were
opened.
QIn connection with these cargoes which
were unloaded, where is the place.
AAt the Pier.
QWhat was used to protect the same from
weather?
ATTY. LOPEZ:
We object, your Honor, this question was
already asked. This particular
matter . . . the transcript of
stenographic notes shows the
same was covered in the direct
examination.
ATTY. ZAMORA:
Precisely, your Honor, we would like to go on
detail, this is the serious part of the
testimony.
COURT:
All right, witness may answer.
ATTY. LOPEZ:
QWhat was used in order to protect the cargo
from the weather?
AA base of canvas was used as cover on top of
the tinplates, and tents were built
at the opening of the hatches.
QYou also stated that the hatches were
already opened and that there
were tents constructed at the
opening of the hatches to protect
the cargo from the rain. Now, will
you describe [to] the Court the
tents constructed.
AThe tents are just a base of canvas which
look like a tent of an Indian camp
raise[d] high at the middle with the
whole side separated down to the
hatch, the size of the hatch and it is
soaks [sic] at the middle because of
those weather and this can be used
only to temporarily protect the
cargo from getting wet by rains.
QNow, is this procedure adopted by the
stevedores of covering tents proper?
ANo sir, at the time they were discharging the
cargo, there was a typhoon passing
by and the hatch tent was not good
enough to hold all of it to prevent
the water soaking through the
canvas and enter the cargo.
QIn the course of your inspection, Mr.
Anglingto [sic], did you see in fact
the water enter and soak into the
canvas and tinplates.
AYes, sir, the second time I went there, I saw it.
QAs owner of the vessel, did you not advise
the National Steel Corporation [of]
the procedure adopted by its
stevedores in discharging the
cargo particularly in this tent
covering of the hatches?
AYes, sir, I did the first time I saw it, I called
the attention of the stevedores but
the stevedores did not mind at all,
so, I called the attention of the
representative of the National
Steel but nothing was done, just
the same. Finally, I wrote a letter to
them." 31
NSC attempts to discredit the testimony of Angliongto by questioning
his failure to complain immediately about the stevedores' negligence
on the first day of unloading, pointing out that he wrote his letter to
petitioner only seven days later. 32 The Court is not persuaded.
Angliongto's candid answer in his aforequoted testimony
satisfactorily explained the delay. Seven days lapsed because he first
called the attention of the stevedores, then the NSC's representative,
about the negligent and defective procedure adopted in unloading
the cargo. This series of actions constitutes a reasonable response in
accord with common sense and ordinary human experience. Vicente
Angliongto could not be blamed for calling the stevedores' attention
first and then the NSC's representative on location before formally
informing NSC of the negligence he had observed, because he was not
responsible for the stevedores or the unloading operations. In fact, he
was merely expressing concern for NSC which was ultimately
responsible for the stevedores it had hired and the performance of
their task to unload the cargo.
We see no reason to reverse the trial and the appellate courts'
findings and conclusions on this point, viz:
"In the THIRD assigned error, [NSC] claims
that the trial court erred in finding that the
stevedores hired by NSC were negligent in
the unloading of NSC's shipment. We do not
think so. Such negligence according to the
trial court is evident in the stevedores hired
by [NSC], not closing the hatch of MV
'VLASONS I' when rains occurred during the
discharging of the cargo thus allowing rain
water and seawater spray to enter the
hatches and to drift to and fall on the cargo. It
was proven that the stevedores merely set up
temporary tents or canvas to cover the hatch
openings when it rained during the unloading
operations so that it would be easier for them
to resume work after the rains stopped by
just removing said tents or canvass. It has
also been shown that on August 20, 1974, VSI
President Vicente Angliongto wrote [NSC]
calling attention to the manner the
stevedores hired by [NSC] were discharging
the cargo on rainy days and the improper
closing of the hatches which allowed
continuous heavy rain water to leak through
and drip to the tinplates' covers and [Vicente
Angliongto] also suggesting that due to four
(4) days continuous rains with strong winds
that the hatches be totally closed down and
covered with canvas and the hatch tents
lowered. (Exh '13'). This letter was received
by [NSC] on 22 August 1974 while
discharging operations were still going on
(Exhibit '13-A') " 33

The fact that NSC actually accepted and proceeded to remove the
cargo from the ship during unfavorable weather will not make VSI
liable for any damage caused thereby. In passing, it may be noted that
the NSC may seek indemnification, subject to the laws on
prescription, from the stevedoring company at fault in the discharge
operations. "A. stevedore company engaged in discharging cargo . . .
has the duty to load the cargo . . . in a prudent manner, and it is liable
for injury to, or loss of, cargo caused by its negligence . . . and where
the officers and members and crew of the vessel do nothing and have
no responsibility in the discharge of cargo by stevedores . . . the
vessel is not liable for loss of, or damage to, the cargo caused by the
negligence of the stevedores . . ." 34 as in the instant case.
Do Tinplates "Sweat"?
The trial court relied on the testimony of Vicente Angliongto in
finding that " . . . tinplates 'sweat' by themselves when packed even
without being in contact with water from outside especially when the
weather is bad or raining . . ." 35 The Court of Appeals affirmed the
trial court's finding.
A discussion of this issue appears inconsequential and unnecessary.
As previously discussed, the damage to the tinplates was occasioned
not by airborne moisture but by contact with rain and seawater
which the stevedores negligently allowed to seep in during the
unloading.
Second Issue : Effect of NSC's Failure to Insure the Cargo
The obligation of NSC to insure the cargo stipulated in the Contract of
Voyage Charter Hire is totally separate and distinct from the
contractual or statutory responsibility that may be incurred by VSI
for damage to the cargo caused by the willful negligence of the
officers and the crew of MV Vlasons I . Clearly, therefore, NSC's failure
to insure the cargo will not affect its right, as owner and real party in
interest, to file an action against VSI for damages caused by the
latter's willful negligence. We do not find anything in the charter
party that would make the liability of VSI for damage to the cargo
contingent on or affected in any manner by NSC's obtaining an
insurance over the cargo.
Third Issue : Admissibility of Certificates Proving Seaworthiness
NSC's contention that MV Vlasons I was not seaworthy is anchored on
the alleged inadmissibility of the certificates of seaworthiness offered
in evidence by VSI. The said certificates include the following:
1.Certificate of Inspection of the Philippine
Coast Guard at Cebu
2.Certificate of Inspection from the Philippine
Coast Guard
3.International Load Line Certificate from the
Philippine Coast Guard
4.Coastwise License from the Board of
Transportation
5.Certificate of Approval for Conversion
issued by the Bureau of Customs
36
NSC argues that the certificates are hearsay for not having been
presented in accordance with the Rules of Court. It points out that
Exhibits 3, 4 and 11 allegedly are "not written records or acts of
public officers"; while Exhibits 5, 6, 7, 8, 9, 11 and 12 are not
"evidenced by official publications or certified true copies" as
required by Sections 25 and 26, Rule 132, of the Rules of Court. 37
After a careful examination of these exhibits, the Court rules that
Exhibits 3, 4, 5, 6, 7, 8, 9 and 12 are inadmissible, for they have not
been properly offered as evidence. Exhibits 3 and 4 are certificates
issued by private parties, but they have not been proven by one who
saw the writing executed, or by evidence of the genuineness of the
handwriting of the maker, or by a subscribing witness. Exhibits 5, 6,
7, 8, 9, and 12 are photocopies, but their admission under the best
evidence rule have not been demonstrated.
We find, however, that Exhibit 11 is admissible under a well-settled
exception to the hearsay rule per Section 44 of Rule 130 of the Rules
of Court, which provides that "(e)ntries in official records made in the
performance of a duty by a public officer of the Philippines, or by a
person in the performance of a duty specially enjoined by law, are
prima facie evidence of the facts therein stated." 38 Exhibit 11 is an
original certificate of the Philippine Coast Guard in Cebu issued by
Lieutenant Junior Grade Noli C. Flores to the effect that "the vessel
'VLASONS I', was drydocked . . . and PCG Inspectors were sent on
board for inspection . . . After completion of drydocking and duly
inspected by PCG Inspectors, the vessel 'VLASONS I', a cargo vessel, is
in seaworthy condition, meets all requirements, fitted and equipped
for trading as a cargo vessel was cleared by the Philippine Coast
Guard and sailed for Cebu Port on July 10, 1974." (sic) NSC's Claim,
therefore, is obviously misleading and erroneous.
At any rate, it should be stressed that NSC has the burden of proving
that MV Vlasons I was not seaworthy. As observed earlier, the vessel
was a private carrier and, as such, it did not have the obligation of a
common carrier to show that it was seaworthy. Indeed, NSC glaringly
failed to discharge its duty of proving the willful negligence of VSI in
making the ship seaworthy resulting in damage to its cargo. Assailing
the genuineness of the certificate of seaworthiness is not sufficient
proof that the vessel was not seaworthy.
Fourth Issue : Demurrage and Attorney's Fees
The contract of voyage charter hire provides inter alia:
"xxx xxx xxx
2.Cargo : Full cargo of steel products of not
less than 2,500 MT, 10% more or less at
Master's option.
xxx xxx xxx
6.Loading/Discharging Rate : 750 tons per
WWDSHINC.
7.Demurrage/Dispatch :
P8,000.00/P4,000.00 per day." 39
The Court defined demurrage in its strict sense as the compensation
provided for in the contract of affreightment for the detention of the
vessel beyond the laytime or that period of time agreed on for
loading and unloading of cargo. 40 It is given to compensate the
shipowner for the nonuse of the vessel. On the other hand, the
following is well-settled:
"Laytime runs according to the particular
clause of the charter party. . . If laytime is
expressed in 'running days,' this means days
when the ship would be run continuously,
and holidays are not excepted. A qualification
of 'weather permitting' excepts only those
days when bad weather reasonably prevents
the work contemplated." 41
In this case, the contract of voyage charter hire provided for a four-
day laytime; it also qualified laytime as WWDSHINC or weather
working days Sundays and holidays included. 42 The running of
laytime was thus made subject to the weather, and would cease to
run in the event unfavorable weather interfered with the unloading
of cargo. 43 Consequently, NSC may not be held liable for demurrage
as the four-day laytime allowed it did not lapse, having been tolled by
unfavorable weather condition in view of the WWDSHINC
qualification agreed upon by the parties. Clearly, it was error for the
trial court and the Court of Appeals to have found and affirmed
respectively that NSC incurred eleven days of delay in unloading the
cargo. The trial court arrived at this erroneous finding by subtracting
from the twelve days, specifically August 13, 1974 to August 24,
1974, the only day of unloading unhampered by unfavorable weather
or rain which was August 22, 1974. Based on our previous
discussion, such finding is a reversible error. As mentioned, the
respondent appellate court also erred in ruling that NSC was liable to
VSI for demurrage, even if it reduced the amount by half. LibLex
Attorney's Fees
VSI assigns as error of law the Court of Appeals' deletion of the award
of attorney's fees. We disagree. While VSI was compelled to litigate to
protect its rights, such fact by itself will not justify an award of
attorney's fees under Article 2208 of the Civil Code when" . . . no
sufficient showing of bad faith would be reflected in a party's
persistence in a case other than an erroneous conviction of the
righteousness of his cause . . ." 44 Moreover, attorney's fees may not
be awarded to a party for the reason alone that the judgment
rendered was favorable to the latter, as this is tantamount to
imposing a premium on one's right to litigate or seek judicial redress
of legitimate grievances. 45
Epilogue
At bottom, this appeal really hinges on a factual issue: when, how and
who caused the damage to the cargo? Ranged against NSC are two
formidable truths. First, both lower courts found that such damage
was brought about during the unloading process when rain and
seawater seeped through the cargo due to the fault or negligence of
the stevedores employed by it. Basic is the rule that factual findings
of the trial court, when affirmed by the Court of Appeals, are binding
on the Supreme Court. Although there are settled exceptions, NSC has
not satisfactorily shown that this case is one of them. Second, the
agreement between the parties the Contract of Voyage Charter
Hire placed the burden of proof for such loss or damage upon the
shipper, not upon the shipowner. Such stipulation, while
disadvantageous to NSC, is valid because the parties entered into a
contract of private charter, not one of common carriage. Basic too is
the doctrine that courts cannot relieve a party from the effects of a
private contract freely entered into, on the ground that it is allegedly
one-sided or unfair to the plaintiff. The charter party is a normal
commercial contract and its stipulations are agreed upon in
consideration of many factors, not the least of which is the transport
price which is determined not only by the actual costs but also by the
risks and burdens assumed by the shipper in regard to possible loss
or damage to the cargo. In recognition of such factors, the parties
even stipulated that the shipper should insure the cargo to protect
itself from the risks it undertook under the charter party. That NSC
failed or neglected to protect itself with such insurance should not
adversely affect VSI, which had nothing to do with such failure or
neglect.

WHEREFORE, premises considered, the instant consolidated
petitions are hereby DENIED. The questioned Decision of the Court of
Appeals is AFFIRMED with the MODIFICATION that the demurrage
awarded to VSI is deleted. No pronouncement as to costs.
SO ORDERED.
Narvasa, C .J ., Romero, Melo and Francisco, JJ ., concur.
LOADSTAR SHIPPING CO., INC., petitioner,
vs. COURT OF APPEALS and THE MANILA
INSURANCE CO., INC., respondents.
King Capuchino Tan & Associates for petitioner.
Zapa Law Office for private respondent.
SYNOPSIS
When LOADSTAR's M/V "Cherokee" sank off Limasawa Island, Manila
Insurance, Co., Inc., as insurer of its wood shipment, paid the total
loss thereof, then filed a complaint against LOADSTAR. The trial court
ruled in favor of MIC, and the Court of Appeals affirmed the same.
Hence, this appeal with the issue: whether M/V "Cherokee" is a public
carrier and, whether LOADSTAR observed due diligence in the
premises.
LOADSTAR is a common carrier under Art. 1732 of the Civil Code. It
is not necessary that the carrier be issued a certificate of public
convenience and that the carriage of the goods was periodic or
unscheduled. Further, on that fateful day, the vessel was not
chartered for a special cargo or to a special person only. It was
carrying a particular type of cargo for one shipper, but that is no
reason to convert the vessel from a common to a private carrier,
especially as it was also carrying passengers. On the second issue, the
Court found M/V "Cherokee" not seaworthy as it was not even
sufficiently manned at the time. The Court affirmed the decision of
the Court of Appeals.
SYLLABUS
1.CIVIL LAW; SPECIAL CONTRACTS; COMMON CARRIERS;
ELUCIDATED. LOADSTAR is a common carrier. It is not necessary
that the carrier be issued a certificate of public convenience, and this
public character is not altered by the fact that the carriage of the
goods in question was periodic, occasional, episodic or unscheduled.
In the case of De Guzman v. Court of Appeals, the Court juxtaposed the
statutory definition of "common carriers" with the peculiar
circumstances of that case, viz: The Civil Code defines "common
carriers" in the following terms: "Article 1732. Common carriers are
persons, corporations, firms or associations engaged in the business
of carrying or transporting passengers or goods or both, by land,
water, or air for compensation, offering their services to the public."
The above article makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one
who does such carrying only as an ancillary activity (in local idiom, as
"a sideline." Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the
general population. We think that Article 1733 deliberately refrained
from making such distinctions. SacTCA
2.ID.; ID.; ID.; CASE OF HOME INSURANCE CO. V. AMERICAN
STEAMSHIP AGENCIES, INC. [23 SCRA 24 (1968)]; NOT APPLICABLE
IN ABSENCE OF EVIDENCE THAT VESSEL WAS SPECIALLY
CHARTERED. LOADSTAR relied on the 1968 case of Home
Insurance Co. v. American Steamship Agencies, Inc., where this Court
held that a common carrier transporting special cargo or chartering
the vessel to a special person becomes a private carrier that is not
subject to the provisions of the Civil Code. However, the records do
not disclose that the M/V "Cherokee," on the date in question,
undertook to carry a special cargo or was chartered to a special
person only. There was no charter party. The bills of lading failed to
show any special arrangement, but only a general provision to the
effect that the M/V "Cherokee" was a "general cargo carrier." Further,
the bare fact that the vessel was carrying a particular type of cargo
for one shipper, which appears to be purely coincidental, is not
reason enough to convert the vessel from a common to a private
carrier, especially where, as in this case, it was shown that the vessel
was also carrying passengers.
3.ID.; ID.; ID.; FAILURE TO KEEP VESSEL SEAWORTHY. M/V
"Cherokee" was not seaworthy when it embarked on its voyage on 19
November 1984. The vessel was not even sufficiently manned at the
time. "For a vessel to be seaworthy, it must be adequately equipped
for the voyage and manned with a sufficient number of competent
officers and crew. The failure of a common carrier to maintain in
seaworthy condition its vessel involved in a contract of carriage is a
clear breach of its duty prescribed in Article 1755 of the Civil Code."
4.ID.; ID.; ID.; DOCTRINE OF LIMITED LIABILITY; NOT APPLICABLE
WHERE THERE WAS NEGLIGENCE ON PART OF THE VESSEL
OWNER. The doctrine of limited liability does not apply where
there was negligence on the part of the vessel owner or agent.
LOADSTAR was at fault or negligent in not maintaining a seaworthy
vessel and in having allowed its vessel to sail despite knowledge of an
approaching typhoon. In any event, it did not sink because of any
storm that may be deemed as force majeure, inasmuch as the wind
condition in the area where it sank was determined to be moderate.
Since it was remiss in the performance of its duties, LOADSTAR
cannot hide behind the "limited liability" doctrine to escape
responsibility for the loss of the vessel and its cargo.
5.ID.; ID.; ID.; STIPULATION OF SHIPMENTS MADE AT OWNER'S
RISK; VOID. The stipulation in the case at bar effectively reduces
the common carrier's liability for the loss or destruction of the goods
to a degree less than extraordinary (Articles 1744 and 1745), that is,
the carrier is not liable for any loss or damage to shipments made at
"owner's risk." Such stipulation is obviously null and void for being
contrary to public policy. It has been said: Three kinds of stipulations
have often been made in a bill of lading. The first is one exempting the
carrier from any and all liability for loss or damage occasioned by its
own negligence. The second is one providing for an unqualified
limitation of such liability to an agreed valuation. And the third is one
limiting the liability of the carrier to an agreed valuation unless the
shipper declares a higher value and pays a higher rate of freight.
According to an almost uniform weight of authority, the first and
second kinds of stipulations are invalid as being contrary to public
policy, but the third is valid and enforceable. Since the stipulation in
question is null and void, it follows that when MIC paid the shipper, it
was subrogated to all the rights which the latter has against the
common carrier, LOADSTAR.
6.ID.; ID.; ID.; PRESCRIPTION OF CLAIMS FOR LOSS. MIC's cause of
action had not yet prescribed at the time it was concerned. Inasmuch
as neither the Civil Code nor the Code of Commerce states a specific
prescriptive period on the matter, the Carriage of Goods by Sea Act
(COGSA) which provides for a one-year period of limitation on
claims for loss of, or damage to, cargoes sustained during transit
may be applied suppletorily to the case at bar. This one-year
prescriptive period also applies to the insurer of the goods. In this
case, the period for filing the action for recovery has not yet elapsed.
Moreover, a stipulation reducing the one-year period is null and void;
it must, accordingly, be struck down. STcADa
D E C I S I O N
DAVIDE, JR., C.J p:
Petitioner Loadstar Shipping Co., Inc. (hereafter LOADSTAR), in this
petition for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure, seeks to reverse and set aside the following: (a) the
30 January 1997 decision 1 of the Court of Appeals in CA-G.R. CV No.
36401, which affirmed the decision of 4 October 1991 2 of the
Regional Trial Court of Manila, Branch 16, in Civil Case No. 85-29110,
ordering LOADSTAR to pay private respondent Manila Insurance Co.
(hereafter MIC) the amount of P6,067,178, with legal interest from
the filing of the complaint until fully paid, P8,000 as attorney's fees,
and the costs of the suit; and (b) its resolution of 19 November 1997,
3 denying LOADSTAR's motion for reconsideration of said decision.
The facts are undisputed. LLjur
On 19 November 1984, LOADSTAR received on board its M/V
"Cherokee" (hereafter, the vessel) the following goods for shipment:
a)705 bales of lawanit hardwood;
b)27 boxes and crates of tilewood assemblies
and others; and
c)49 bundles of mouldings R & W (3) Apitong
Bolidenized.
The goods, amounting to P6,067,178, were insured for the same
amount with MIC against various risks including "TOTAL LOSS BY
TOTAL LOSS OF THE VESSEL." The vessel, in turn, was insured by
Prudential Guarantee & Assurance, Inc. (hereafter PGAI) for P4
million. On 20 November 1984, on its way to Manila from the port
of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank
off Limasawa Island. As a result of the total loss of its shipment, the
consignee made a claim with LOADSTAR which, however, ignored
the same. As the insurer, MIC paid P6,075,000 to the insured in full
settlement of its claim, and the latter executed a subrogation
receipt therefor.
On 4 February 1985, MIC filed a complaint against LOADSTAR and
PGAI, alleging that the sinking of the vessel was due to the fault and
negligence of LOADSTAR and its employees. It also prayed that PGAI
be ordered to pay the insurance proceeds from the loss of the vessel
directly to MIC, said amount to be deducted from MIC's claim from
LOADSTAR.
In its answer, LOADSTAR denied any liability for the loss of the
shipper's goods and claimed that the sinking of its vessel was due to
force majeure. PGAI, on the other hand, averred that MIC had no
cause of action against it, LOADSTAR being the party insured. In any
event, PGAI was later dropped as a party defendant after it paid the
insurance proceeds to LOADSTAR.
As stated at the outset, the court a quo rendered judgment in favor of
MIC, prompting LOADSTAR to elevate the matter to the Court of
Appeals, which, however, agreed with the trial court and affirmed its
decision in toto.

In dismissing LOADSTAR's appeal, the appellate court made the
following observations:
1)LOADSTAR cannot be considered a private
carrier on the sole ground that
there was a single shipper on that
fateful voyage. The court noted
that the charter of the vessel was
limited to the ship, but LOADSTAR
retained control over its crew. 4
2)As a common carrier, it is the Code of
Commerce, not the Civil Code,
which should be applied in
determining the rights and
liabilities of the parties.
3)The vessel was not seaworthy because it
was undermanned on the day of
the voyage. If it had been
seaworthy, it could have withstood
the "natural and inevitable action
of the sea" on 20 November 1984,
when the condition of the sea was
moderate. The vessel sank, not
because of force majeure, but
because it was not seaworthy.
LOADSTAR'S allegation that the
sinking was probably due to the
"convergence of the winds," as
stated by a PAGASA expert, was
not duly proven at the trial. The
"limited liability" rule, therefore, is
not applicable considering that, in
this case, there was an actual
finding of negligence on the part of
the carrier. 5
4)Between MIC and LOADSTAR, the
provisions of the Bill of Lading do
not apply because said provisions
bind only the shipper/consignee
and the carrier. When MIC paid the
shipper for the goods insured, it
was subrogated to the latter's
rights as against the carrier,
LOADSTAR. 6
5)There was a clear breach of the contract of
carriage when the shipper's goods
never reached their destination.
LOADSTAR's defense of "diligence
of a good father of a family" in the
training and selection of its crew is
unavailing because this is not a
proper or complete defense in
culpa contractual. cdll
6)"Art. 361 (of the Code of Commerce) has
been judicially construed to mean
that when goods are delivered on
board a ship in good order and
condition, and the shipowner
delivers them to the shipper in bad
order and condition, it then
devolves upon the shipowner to
both allege and prove that the
goods were damaged by reason of
some fact which legally exempts
him from liability." Transportation
of the merchandise at the risk and
venture of the shipper means that
the latter bears the risk of loss or
deterioration of his goods arising
from fortuitous events, force
majeure, or the inherent nature
and defects of the goods, but not
those caused by the presumed
negligence or fault of the carrier,
unless otherwise proved. 7
The errors assigned by LOADSTAR boil down to a determination of
the following issues:
(1)Is the M/V "Cherokee" a private or a
common carrier?
(2)Did LOADSTAR observe due and/or
ordinary diligence in these
premises?
Regarding the first issue, LOADSTAR submits that the vessel was a
private carrier because it was not issued a certificate of public
convenience, it did not have a regular trip or schedule nor a fixed
route, and there was only "one shipper, one consignee for a special
cargo."
In refutation, MIC argues that the issue as to the classification of the
M/V "Cherokee" was not timely raised below; hence, it is barred by
estoppel. While it is true that the vessel had on board only the cargo
of wood products for delivery to one consignee, it was also carrying
passengers as part of its regular business. Moreover, the bills of
lading in this case made no mention of any charter party but only a
statement that the vessel was a "general cargo carrier." Neither was
there any "special arrangement" between LOADSTAR and the shipper
regarding the shipment of the cargo. The singular fact that the vessel
was carrying a particular type of cargo for one shipper is not
sufficient to convert the vessel into a private carrier.
As regards the second error, LOADSTAR argues that as a private
carrier, it cannot be presumed to have been negligent, and the burden
of proving otherwise devolved upon MIC. 8
LOADSTAR also maintains that the vessel was seaworthy. Before the
fateful voyage on 19 November 1984, the vessel was allegedly dry
docked at Keppel Philippines Shipyard and was duly inspected by the
maritime safety engineers of the Philippine Coast Guard, who
certified that the ship was fit to undertake a voyage. Its crew at the
time was experienced, licensed and unquestionably competent. With
all these precautions, there could be no other conclusion except that
LOADSTAR exercised the diligence of a good father of a family in
ensuring the vessel's seaworthiness.
LOADSTAR further claims that it was not responsible for the loss of
the cargo, such loss being due to force majeure. It points out that
when the vessel left Nasipit, Agusan del Norte, on 19 November 1984,
the weather was fine until the next day when the vessel sank due to
strong waves. MIC's witness, Gracelia Tapel, fully established the
existence of two typhoons, "WELFRING" and "YOLING," inside the
Philippine area of responsibility. In fact, on 20 November 1984, signal
no. 1 was declared over Eastern Visayas, which includes Limasawa
Island. Tapel also testified that the convergence of winds brought
about by these two typhoons strengthened wind velocity in the area,
naturally producing strong waves and winds, in turn, causing the
vessel to list and eventually sink. LibLex
LOADSTAR goes on to argue that, being a private carrier, any
agreement limiting its liability, such as what transpired in this case, is
valid. Since the cargo was being shipped at "owner's risk," LOADSTAR
was not liable for any loss or damage to the same. Therefore, the
Court of Appeals erred in holding that the provisions of the bills of
lading apply only to the shipper and the carrier, and not to the
insurer of the goods, which conclusion runs counter to the Supreme
Court's ruling in the case of St. Paul Fire & Marine Insurance Co. v.
Macondray & Co., Inc., 9 and National Union Fire Insurance Company
of Pittsburgh v. Stolt-Nielsen Phils., Inc. 10
Finally, LOADSTAR avers that MIC's claim had already prescribed, the
case having been instituted beyond the period stated in the bills of
lading for instituting the same suits based upon claims arising
from shortage, damage, or non-delivery of shipment shall be
instituted within sixty days from the accrual of the right of action.
The vessel sank on 20 November 1984; yet, the case for recovery was
filed only on 4 February 1985.
MIC, on the other hand, claims that LOADSTAR was liable,
notwithstanding that the loss of the cargo was due to force majeure,
because the same concurred with LOADSTAR's fault or negligence.
Secondly, LOADSTAR did not raise the issue of prescription in the
court below; hence, the same must be deemed waived.
Thirdly, the "limited liability" theory is not applicable in the case at
bar because LOADSTAR was at fault or negligent, and because it
failed to maintain a seaworthy vessel. Authorizing the voyage
notwithstanding its knowledge of a typhoon is tantamount to
negligence.
We find no merit in this petition.
Anent the first assigned error, we hold that LOADSTAR is a common
carrier. It is not necessary that the carrier be issued a certificate of
public convenience, and this public character is not altered by the fact
that the carriage of the goods in question was periodic, occasional,
episodic or unscheduled.
In support of its position, LOADSTAR relied on the 1968 case of Home
Insurance Co. v. American Steamship Agencies, Inc., 11 where this
Court held that a common carrier transporting special cargo or
chartering the vessel to a special person becomes a private carrier
that is not subject to the provisions of the Civil Code. Any stipulation
in the charter party absolving the owner from liability for loss due to
the negligence of its agent is void only if the strict policy governing
common carriers is upheld. Such policy has no force where the public
at large is not involved, as in the case of a ship totally chartered for
the use of a single party. LOADSTAR also cited Valenzuela Hardwood
and Industrial Supply, Inc. v. Court of Appeals 12 and National Steel
Corp. v. Court of Appeals, 13 both of which upheld the Home Insurance
doctrine. LLjur
These cases invoked by LOADSTAR are not applicable in the case at
bar for the simple reason that the factual settings are different. The
records do not disclose that the M/V "Cherokee," on the date in
question, undertook to carry a special cargo or was chartered to a
special person only. There was no charter party. The bills of lading
failed to show any special arrangement, but only a general provision
to the effect that the M/V "Cherokee" was a "general cargo carrier."
14 Further, the bare fact that the vessel was carrying a particular
type of cargo for one shipper, which appears to be purely
coincidental, is not reason enough to convert the vessel from a
common to a private carrier, especially where, as in this case, it was
shown that the vessel was also carrying passengers.
Under the facts and circumstances obtaining in this case, LOADSTAR
fits the definition of a common carrier under Article 1732 of the Civil
Code. In the case of De Guzman v. Court of Appeals, 15 the Court
juxtaposed the statutory definition of "common carriers" with the
peculiar circumstances of that case, viz.:
The Civil Code defines "common carriers" in
the following terms:
"ARTICLE 1732.Common carriers
are persons, corporations, firms or
associations engaged in the
business of carrying or
transporting passengers or goods
or both, by land, water, or air for
compensation, offering their
services to the public."
The above article makes no distinction
between one whose principal business
activity is the carrying of persons or goods or
both, and one who does such carrying only as
an ancillary activity (in local idiom, as "a
sideline". Article 1732 also carefully avoids
making any distinction between a person or
enterprise offering transportation service on
a regular or scheduled basis and one offering
such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its
services to the "general public," i.e., the
general community or population, and one
who offers services or solicits business only
from a narrow segment of the general
population. We think that Article 1733
deliberately refrained from making such
distinctions.

xxx xxx xxx
It appears to the Court that private
respondent is properly characterized as a
common carrier even though he merely
"back-hauled" goods for other merchants
from Manila to Pangasinan, although such
backhauling was done on a periodic or
occasional rather than regular or scheduled
manner, and even though private
respondent's principal occupation was not
the carriage of goods for others. There is no
dispute that private respondent charged his
customers a fee for hauling their goods; that
that fee frequently fell below commercial
freight rates is not relevant here.
The Court of Appeals referred to the fact that
private respondent held no certificate of
public convenience, and concluded he was
not a common carrier. This is palpable error.
A certificate of public convenience is not a
requisite for the incurring of liability under
the Civil Code provisions governing 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
the applicable regulatory statute and
implementing regulations and has been
granted a certificate of public convenience or
other franchise. To exempt private
respondent from the liabilities of a common
carrier because he has not secured the
necessary certificate of public convenience,
would be offensive to sound public policy;
that would be to reward private respondent
precisely for failing to comply with applicable
statutory requirements. The business of a
common carrier impinges directly and
intimately upon the safety and well being and
property of those members of the general
community who happen to deal with such
carrier. The law imposes duties and liabilities
upon common carriers for the safety and
protection of those who utilize their services
and the law cannot allow a common carrier to
render such duties and liabilities merely
facultative by simply failing to obtain the
necessary permits and authorizations.
Moving on to the second assigned error, we find that the M/V
"Cherokee" was not seaworthy when it embarked on its voyage on 19
November 1984. The vessel was not even sufficiently manned at the
time. "For a vessel to be seaworthy, it must be adequately equipped
for the voyage and manned with a sufficient number of competent
officers and crew. The failure of a common carrier to maintain in
seaworthy condition its vessel involved in a contract of carriage is a
clear breach of its duty prescribed in Article 1755 of the Civil Code."
16
Neither do we agree with LOADSTAR's argument that the "limited
liability" theory should be applied in this case. The doctrine of limited
liability does not apply where there was negligence on the part of the
vessel owner or agent. 17 LOADSTAR was at fault or negligent in not
maintaining a seaworthy vessel and in having allowed its vessel to
sail despite knowledge of an approaching typhoon. In any event, it
did not sink because of any storm that may be deemed as force
majeure, inasmuch as the wind condition in the area where it sank
was determined to be moderate. Since it was remiss in the
performance of its duties, LOADSTAR cannot hide behind the "limited
liability" doctrine to escape responsibility for the loss of the vessel
and its cargo.
LOADSTAR also claims that the Court of Appeals erred in holding it
liable for the loss of the goods, in utter disregard of this Court's
pronouncements in St. Paul Fire & Marine Ins. Co. v. Macondray & Co.,
Inc., 18 and National Union Fire Insurance v. Stolt-Nielsen Phils., Inc.
19 It was ruled in these two cases that after paying the claim of the
insured for damages under the insurance policy, the insurer is
subrogated merely to the rights of the assured, that is, it can recover
only the amount that may, in turn, be recovered by the latter. Since
the right of the assured in case of loss or damage to the goods is
limited or restricted by the provisions in the bills of lading, a suit by
the insurer as subrogee is necessarily subject to the same limitations
and restrictions. We do not agree. In the first place, the cases relied
on by LOADSTAR involved a limitation on the carrier's liability to an
amount fixed in the bill of lading which the parties may enter into,
provided that the same was freely and fairly agreed upon (Articles
1749-1750). On the other hand, the stipulation in the case at bar
effectively reduces the common carrier's liability for the loss or
destruction of the goods to a degree less than extraordinary (Articles
1744 and 1745), that is, the carrier is not liable for any loss or
damage to shipments made at "owner's risk." Such stipulation is
obviously null and void for being contrary to public policy. 20 It has
been said:
Three kinds of stipulations have often been
made in a bill of lading. The first is one
exempting the carrier from any and all
liability for loss or damage occasioned by its
own negligence. The second is one providing
for an unqualified limitation of such liability
to an agreed valuation. And the third is one
limiting the liability of the carrier to an
agreed valuation unless the shipper declares
a higher value and pays a higher rate of
freight. According to an almost uniform
weight of authority, the first and second
kinds of stipulations are invalid as being
contrary to public policy, but the third is valid
and enforceable. 21
Since the stipulation in question is null and void, it follows that
when MIC paid the shipper, it was subrogated to all the rights
which the latter has against the common carrier, LOADSTAR.
Neither is there merit to the contention that the claim in this case was
barred by prescription. MIC's cause of action had not yet prescribed
at the time it was concerned. Inasmuch as neither the Civil Code nor
the Code of Commerce states a specific prescriptive period on the
matter, the Carriage of Goods by Sea Act (COGSA) which provides
for a one-year period of limitation on claims for loss of, or damage to,
cargoes sustained during transit may be applied suppletorily to
the case at bar. This one-year prescriptive period also applies to the
insurer of the goods. 22 In this case, the period for filing the action for
recovery has not yet elapsed. Moreover, a stipulation reducing the
one-year period is null and void; 23 it must, accordingly, be struck
down.
WHEREFORE, the instant petition is DENIED and the challenged
decision of 30 January 1997 of the Court of Appeals in CA-G.R. CV No.
36401 is AFFIRMED. Costs against petitioner.
SO ORDERED. LLphil
Puno, Kapunan, Pardo and Ynares-Santiago, JJ., concur.
VALENZUELA HARDWOOD AND
INDUSTRIAL SUPPLY, INC., petitioner, vs.
COURT OF APPEALS AND SEVEN
BROTHERS SHIPPING CORPORATION,
respondents.
Alejandro P. Cruz, Jr. for petitioner.
Lorenzo A. Parungao for private respondent.
SYLLABUS
1.CIVIL LAW; OBLIGATIONS AND CONTRACTS; CIVIL LAW
PROVISIONS ON COMMON CARRIERS DO NOT APPLY TO PRIVATE
CARRIAGE UNLESS EXPRESSLY STIPULATED BY THE PARTIES.
Private respondent had acted as a private carrier in transporting
petitioner's lauan logs. Thus, Article 1745 and other Civil Code
provisions on common carriers which were cited by petitioner may
not be applied unless expressly stipulated by the parties in their
charter party. cTECHI
2.ID.; ID.; PRIVATE CARRIAGE; PARTIES MAY STIPULATE LIMITED
LIABILITY FOR LOSS. In a contract of private carriage, the parties
may validly stipulate that responsibility for the cargo rests solely on
the charterer, exempting the shipowner from liability for loss of or
damage to the cargo caused even by the negligence of the ship
captain. Pursuant to Article 1306 of the Civil Code, such stipulation is
valid because it is freely entered into by the parties and the same is
not contrary to law, morals, good customs, public order, or public
policy. Indeed, their contract of private carriage is not even a contract
of adhesion. We stress that in a contract of private carriage, the
parties may freely stipulate their duties and obligations which
perforce would be binding on them. Unlike in contract involving a
common carrier, private carriage does not involve the general public.
Hence, the stringent provisions of the Civil Code on common carriers
protecting the general public cannot justifiably be applied to a ship
transporting commercial goods as a private carrier. Consequently,
the public policy embodied therein is not contravened by stipulations
in a charter party that lessen or remove the protection given by law
in contracts involving common carriers.
3.ID.; ID.; ID.; STIPULATION EXEMPTING THE OWNER FROM
LIABILITY FOR NEGLIGENCE OF ITS AGENT, NOT AGAINST PUBLIC
POLICY. The provisions of our Civil Code on common carriers were
taken from Anglo-American law. Under American jurisprudence, a
common carrier undertaking to carry a special cargo or chartered to
a special person only, becomes a private carrier. As a private carrier a
stipulation exempting the owner from liability for the negligence of its
agent is not against public policy and is deemed valid. Such doctrine
We find reasonable. The Civil Code provisions on common carriers
should not be applied where the carrier is not acting as such but as a
private carrier. The stipulation in the charter party absolving the
owner from liability for loss due to the negligence of its agent would be
void only if the strict public policy governing common carriers is
applied. Such policy has no force where the public at large is not
involved as in this case of a ship totally chartered for the use of a single
party. (Home Insurance Co. vs. American Steamship Agencies Inc., 23
SCRA 24, April 4, 1968). cHSIDa
4.ID.; ID.; ID.; ID.; The general public enters into a contract of
transportation with common carriers without a hand or a voice in the
preparation thereof. The riding public merely adheres to the
contract; even if the public wants to it cannot submit it own
stipulations for the approval of the common carrier. Thus the law on
common carriers extends its protective mantle against one-sided
stipulations inserted in tickets, invoices or other documents over
which the riding public has no understanding or, worse, no choice.
Compared to the general public, a charterer in a contract of private
carriage is not similarly situated. It can - and in fact it usually does -
enter into a free and voluntary agreement. In practice, the parties in a
contract of private carriage can stipulate the carrier's obligations and
liabilities over the shipment which, in turn, determine the price or
consideration of the charter. Thus, a charterer, in exchange for
convenience and economy, may opt to set aside the protection of the
law on common carriers. When the charterer decides to exercise this
option, he takes a normal business risk.
5.ID.; ID.; ID.; DOCTRINE IN HOME INSURANCE CASE (23 SCRA 24,
April 4,1968) APPLICABLE TO CASE AT BAR. Petitioner contends
that the rule in Home Insurance is not applicable to the present case
because it "covers only a stipulation exempting a private carrier from
liability for the negligence of his agent, but it does not apply to a
stipulation exempting a private carrier like private respondent from
the negligence of his employee or servant which is the situation in
this case. This contention of petitioner is bereft of merit, for it raises a
distinction without any substantive difference. The case of Home
Insurance specifically dealt with "liability of the shipowner for acts or
negligence of its captain and crew" and a charter party stipulation
which "exempts the owner of the vessel from any loss or damage or
delay arising from any other source, even from the neglect or fault of
the captain or crew or some other person employed by the owner on
board, for whose acts the owner would ordinarily be liable except for
said paragraph. Undoubtedly, Home Insurance is applicable to the
case at bar.
6.REMEDIAL LAW; ACTIONS; JUDGMENTS; DOCTRINE OF STARE
DECISIS. The naked assertion of petitioner that the American rule
enunciated in Home Insurance is not the rule in the Philippines
deserves scant consideration. The Court there categorically held that
said rule was "reasonable" and proceeded to apply it in the resolution
of that case. Petitioner miserably failed to show such circumstances
or arguments which would necessitate a departure from a well-
settled rule. Consequently, our ruling in said case remains a binding
judicial precedent based on the doctrine of stare decisis and Article 8
of the Civil Code which provides that "(j)udicial decisions applying or
interpreting the laws or the Constitution shall form part of the legal
system of the Philippines.
7.CIVIL LAW; OBLIGATIONS AND CONTRACTS; PRIVATE CARRIAGE;
PATRIMONIAL RIGHTS SUCH AS RIGHT TO RECOVER DAMAGES
FROM THE SHIPOWNER AND SHIP AGENTS FOR ACTS OF THE
CAPTAIN DEEMED WAIVED WHEN IT ENTERED INTO A CHARTER
PARTY. Petitioner Valenzuela insists that the charter party
stipulation is contrary to Articles 586 and 587 of the Code of
Commerce which confer on petitioner the right to recover damages
from the shipowner and ship agent for the acts or conduct of the
captain. We are not persuaded. Whatever rights petitioner may have
under the aforementioned statutory provisions were waived when it
entered into the charter party. Article 6 of the Civil Code provides
that "(r)ight may be waived unless the waiver is contrary to law,
public order, public policy, morals, or good customs, or prejudicial to
a person with a right recognized by law." As a general rule,
patrimonial rights may be waived as opposed to rights to personality
and family rights which may not be made the subject of waiver. Being
patently and undoubtedly patrimonial, petitioner's right conferred
under said articles may be waived. This, the petitioner did by
acceding to the contractual stipulation that it is solely responsible for
any damages to the cargo, thereby exempting the private carrier from
any responsibility for loss or damage thereto. Furthermore, as
discussed above, the contract of private carriage binds petitioner and
private respondent alone; it is not imbued with public policy
considerations for the general public or third persons are not affected
thereby.
8.ID.; ID.; ARTICLE 1170 AND 1173 OF THE CIVIL CODE ON
OBLIGORS WITHOUT APPLICATION TO THE PRIVATE CARRIER IN
RESPECT TO CARGO AS THE OBLIGATION TO BEAR THE LOSS WAS
SHIFTED TO THE SHIPPER IN THEIR CHARTER PARTY. Petitioner
likewise argues that the stipulation subject of this controversy is void
for being contrary to Articles 1170 and 1173 of the Civil Code. The
Court notes that the foregoing articles are applicable only to the
obligor or the one with an obligation to perform. In the instant case,
Private Respondent Seven Brothers is not an obligor in respect of the
cargo, for this obligation to bear the loss was shifted to petitioner by
virtue of the charter party. This shifting of responsibility, as earlier
observed, is not void. The provisions cited by petitioner are,
therefore, inapplicable to the present case. Moreover, the factual
milieu of this case does not justify the application of the second
paragraph of Article 1173 of the Civil Code which prescribes the
standard of diligence to be observed in the event the law or the
contract is silent. In the instant case, Article 362 of the Code of
Commerce provides the standard of ordinary diligence for the
carriage of goods by a carrier. The standard of diligence under this
statutory provision may, however, be modified in a contract of
private carriage as the petitioner and private respondent had done in
their party. aTcSID
9.ID.; ID.; COMMON CARRIER; JURISPRUDENCE APPLYING
STRINGENT LAWS TO COMMON CARRIER NOT APPLICABLE TO A
CASE INVOLVING A PRIVATE CARRIER. Petitioner cites Shewaram
vs. Philippine Airlines, Inc. which, in turn, quoted Juan Ysmael & Co. vs.
Gabino Barreto & Co. and argues that the public policy considerations
stated there vis-a-vis contractual stipulations limiting the carrier's
liability be applied "with equal force" to this case. It also cites Manila
Railroad Co. vs. Compania Transatlantica and contends that
stipulations exempting a party from liability for damages due to
negligence "should not be countenanced" and should be "strictly
construed" against the party claiming its benefit. We disagree. The
cases of Shewaram and Ysmael both involve a common carrier; thus,
they necessarily justify the application of such policy considerations
and concomitantly stricter rules. As already discussed above, the
public policy considerations behind the rigorous treatment of
common carriers are absent in the case of private carriers. Hence, the
stringent laws applicable to common carriers are not applied to
private carriers. The case of Manila Railroad is also inapplicable
because the action for damages there does not involve a contract for
transportation. Furthermore, the defendant therein made a "promise
to use due care in the lifting operations" and, consequently, it was
"bound by its undertaking"; besides, the exemption was intended to
cover accidents due to hidden defects in the apparatus or other
unforseeable occurrences" not caused by its "personal negligence."
This promise was thus construed to make sense together with the
stipulation against liability for damages. In the present case, we
stress that the private respondent made no such promise. The
agreement of the parties to exempt the shipowner from
responsibility for any damages to the cargo and place responsibility
over the same to petitioner is the lone stipulation considered now by
this Court.

10.REMEDIAL LAW; ACTIONS; THE ISSUE WHETHER THE SHIPPER
STILL HAS A CAUSE OF ACTION AGAINST THE CARRIER IN VIEW OF
THIS COURT'S RULING AFFIRMING THE LIABILITY OF AN
INSURANCE COMPANY FOR THE LOSS SUFFERED BY THE FORMER
WAS RENDERED MOOT AND ACADEMIC BY THE DISCUSSION IN
THIS CASE UPHOLDING VALIDITY OF CHARTER PARTY
STIPULATION. In its memorandum, Seven Brothers argues that
petitioner has no cause of action against it because this Court has
earlier affirmed the liability of South Sea for the loss suffered by
petitioner. Private respondent submits that petitioner is not legally
entitled to collect twice for single loss. In view of the above
disquisition upholding the validity of the questioned charter party
stipulation and holding that petitioner may not recover from private
respondent, the present issue is moot and academic.
11.CIVIL LAW; DAMAGES; AGGRIEVED PARTY MAY RECOVER
DEFICIENCY WHERE AMOUNT PAID BY INSURANCE COMPANY
DOES NOT FULLY COVER LOSS. It suffices to state that the
Resolution of this Court dated June 2, 1995 affirming the liability of
South Sea does not, by itself, necessarily preclude the petitioner from
proceeding against private respondent. An aggrieved party may still
recover the deficiency from the person causing the loss in the event
the amount paid by the insurance company does not fully cover the
loss. (Article 2207 of the Civil Code). AaCTID
D E C I S I O N
PANGANIBAN, J p:
Is a stipulation in a charter party that the "(o)wners shall not be
responsible for loss, split, short-landing, breakages and any kind of
damages to the cargo" 1 valid? This is the main question raised in this
petition for review assailing the Decision of Respondent Court of
Appeals 2 in CA-G.R. No. CV-20156 promulgated on October 15, 1991.
The Court of Appeals modified the judgment of the Regional Trial
Court of Valenzuela, Metro Manila, Branch 171, the dispositive
portion of which reads:
"WHEREFORE, Judgment is hereby rendered
ordering South Sea Surety and Insurance Co.,
Inc., to pay plaintiff the sum of TWO MILLION
PESOS (P2,000,000.00) representing the
value of the policy of the lost logs with legal
interest thereon from the date of demand on
February 2, 1984 until the amount is fully
paid or in the alternative, defendant Seven
Brothers Shipping Corporation to pay
plaintiff the amount of TWO MILLION PESOS
(P2,000,000.00) representing the value of
lost logs plus legal interest from the date of
demand on April 24, 1984 until full payment
thereof; the reasonable attorney's fees in the
amount equivalent to five (5) percent of the
amount of the claim and the costs of the suit.
cdt
Plaintiff is hereby ordered to pay defendant
Seven Brothers Shipping Corporation the sum
of TWO HUNDRED THIRTY THOUSAND
PESOS (P230,000.00) representing the
balance of the stipulated freight charges.
Defendant South Sea Surety and Insurance
Company's counterclaim is hereby
dismissed."
In its assailed Decision, Respondent Court of Appeals held:
"WHEREFORE, the appealed judgment is
hereby AFFIRMED except in so far (sic) as the
liability of the Seven Brothers Shipping
Corporation to the plaintiff is concerned
which is hereby REVERSED and SET ASIDE."
3
The Facts
The factual antecedents of this case as narrated in the Court of
Appeals Decision are as follows:
"It appears that on 16 January 1984, plaintiff
(Valenzuela Hardwood and Industrial Supply,
Inc.) entered into an agreement with the
defendant Seven Brothers (Shipping
Corporation) whereby the latter undertook to
load on board its vessel M/V Seven
Ambassador the former's lauan round logs
numbering 940 at the port of Maconacon,
Isabela for shipment to Manila.
On 20 January 1984, plaintiff insured the logs
against loss and/or damage with defendant
South Sea Surety and Insurance Co., Inc. for
P2,000,000.00 and the latter issued its
Marine Cargo Insurance Policy No. 84/24229
for P2,000,000.00 on said date.
On 24 January 1984, the plaintiff gave the
check in payment of the premium on the
insurance policy to Mr. Victorio Chua.
In the meantime, the said vessel M/V Seven
Ambassador sank on 25 January 1984
resulting in the loss of the plaintiff's insured
logs.
On 30 January 1984, a check for P5,625.00
(Exh. 'E') to cover payment of the premium
and documentary stamps due on the policy
was tendered due to the insurer but was not
accepted. Instead, the South Sea Surety and
Insurance Co., Inc. cancelled the insurance
policy it issued as of the date of the inception
for non-payment of the premium due in
accordance with Section 77 of the Insurance
Code.
On 2 February 1984, plaintiff demanded from
defendant South Sea Surety and Insurance
Co., Inc. the payment of the proceeds of the
policy but the latter denied liability under the
policy. Plaintiff likewise filed a formal claim
with defendant Seven Brothers Shipping
Corporation for the value of the lost logs but
the latter denied the claim.
After due hearing and trial, the court a quo
rendered judgment in favor of plaintiff and
against defendants. Both defendants shipping
corporation and the surety company
appealed.
Defendant-appellant Seven Brothers Shipping
Corporation impute (sic) to the court a quo
the following assignment of errors, to wit:
'A.The lower court erred in holding
that the proximate cause of the
sinking of the vessel Seven
Ambassadors, was not due to
fortuitous event but to the
negligence of the captain in
stowing and securing the logs on
board, causing the iron chains to
snap and the logs to roll to the
portside.
B.The lower court erred
in declaring that the non-liability
clause of the Seven Brothers
Shipping Corporation from logs
(sic) of the cargo stipulated in the
charter party is void for being
contrary to public policy invoking
article 1745 of the New Civil Code.
C.The lower court erred
in holding defendant-appellant
Seven Brothers Shipping
Corporation liable in the
alternative and ordering/directing
it to pay plaintiff-appellee the
amount of two million
(P2,000,000.00) pesos
representing the value of the logs
plus legal interest from date of
demand until fully paid.
D.The lower court erred
in ordering defendant-appellant
Seven Brothers Shipping
Corporation to pay appellee
reasonable attorney's fees in the
amount equivalent to 5% of the
amount of the claim and the costs
of the suit.
E.The lower court erred
in not awarding defendant-
appellant Seven Brothers
Corporation its counter-claim for
attorney's fees.
F.The lower court erred
in not dismissing the complaint
against Seven Brothers Shipping
Corporation.'
Defendant-appellant
South Sea Surety and Insurance
Co., Inc. assigns the following
errors:
A.The trial court erred in holding
that Victorio Chua was an agent of
defendant-appellant South Sea
Surety and Insurance Company,
Inc. and likewise erred in not
holding that he was the
representative of the insurance
broker Columbia Insurance
Brokers, Ltd.
B.The trial court erred
in holding that Victorio Chua
received
compensation/commission on the
premiums paid on the policies
issued by the defendant-appellant
South Sea Surety and Insurance
Company, Inc. cdasia
C.The trial court erred in
not applying Section 77 of the
Insurance Code.
D.The trial court erred
in disregarding the 'receipt of
payment clause' attached to and
forming part of the Marine Cargo
Insurance Policy No. 84/24229.
E.The trial court in
disregarding the statement of
account or bill stating the amount
of premium and documentary
stamps to be paid on the policy by
the plaintiff-appellee.
F.The trial court erred in
disregarding the indorsement of
cancellation of the policy due to
non-payment of premium and
documentary stamps.
G.The trial court erred
in ordering defendant-appellant
South Sea Surety and Insurance
Company, Inc. to pay plaintiff-
appellee P2,000,000.00
representing value of the policy
with legal interest from 2 February
1984 until the amount is fully paid.
H.The trial court erred
in not awarding to the defendant-
appellant the attorney's fees
alleged and proven in its
counterclaim.'
The primary issue to be
resolved before us is whether
defendants shipping corporation
and the surety company are liable
to the plaintiff for the latter's lost
logs." 4
The Court of Appeals affirmed in part the RTC judgment by sustaining
the liability of South Sea Surety and Insurance Company ("South
Sea"), but modified it by holding that Seven Brothers Shipping
Corporation ("Seven Brothers") was not liable for the lost cargo. 5 In
modifying the RTC judgment, the respondent appellate court
ratiocinated thus:
"It appears that there is a stipulation in the
charter party that the ship owner would be
exempted from liability in case of loss.
The court a quo erred in applying the
provisions of the Civil Code on common
carriers to establish the liability of the
shipping corporation. The provisions on
common carriers should not be applied
where the carrier is not acting as such but as
a private carrier.
Under American jurisprudence, a common
carrier undertaking to carry a special cargo
or chartered to a special person only,
becomes a private carrier.
As a private carrier, a stipulation exempting
the owner from liability even for the
negligence of its agent is valid (Home
Insurance Company, Inc. vs. American
Steamship Agencies, Inc., 23 SCRA 24).
The shipping corporation should not
therefore be held liable for the loss of the
logs." 6
South Sea and herein Petitioner Valenzuela Hardwood and Industrial
Supply, Inc. ("Valenzuela") filed separate petitions for review before
this Court. In a Resolution dated June 2, 1995, this Court denied the
petition of South Sea. 7 There the Court found no reason to reverse
the factual findings of the trial court and the Court of Appeals that
Chua was indeed an authorized agent of South Sea when he received
Valenzuela's premium payment for the marine cargo insurance policy
which was thus binding on the insurer. 8 aisadc
The Court is now called upon to resolve the petition for review filed
by Valenzuela assailing the CA Decision which exempted Seven
Brothers from any liability for the lost cargo.

The Issue
Petitioner Valenzuela's arguments revolve around a single issue:
"whether or not respondent Court (of Appeals) committed a
reversible error in upholding the validity of the stipulation in the
charter party executed between the petitioner and the private
respondent exempting the latter from liability for the loss of
petitioner's logs arising from the negligence of its (Seven Brothers')
captain." 9
The Court's Ruling
The petition is not meritorious.
Validity of Stipulation is Lis Mota
The charter party between the petitioner and private respondent
stipulated that the "(o)wners shall not be responsible for loss, split,
short-landing, breakages and any kind of damages to the cargo." 10
The validity of this stipulation is the lis mota of this case.
It should be noted at the outset that there is no dispute between the
parties that the proximate cause of the sinking of M/V Seven
Ambassadors resulting in the loss of its cargo was the "snapping of
the iron chains and the subsequent rolling of the logs to the portside
due to the negligence of the captain in stowing and securing the logs
on board the vessel and not due to fortuitous event." 11 Likewise
undisputed is the status of Private Respondent Seven Brothers as a
private carrier when it contracted to transport the cargo of Petitioner
Valenzuela. Even the latter admits this in its petition. 12
The trial court deemed the charter party stipulation void for being
contrary to public policy, 13 citing Article 1745 of the Civil Code
which provides:
"Art. 1745.Any of the following or similar
stipulations shall be considered
unreasonable, unjust and contrary to public
policy:
(1)That the goods are transported at the risk
of the owner or shipper;
(2)That the common carrier will not be liable
for any loss, destruction, or deterioration of
the goods;
(3)That the common carrier need not observe
any diligence in the custody of the goods;
(4)That the common carrier shall exercise a
degree of diligence less than that of a good
father of a family, or of a man of ordinary
prudence in the vigilance over the movables
transported;
(5)That the common carrier shall not be
responsible for the acts or omissions of his or
its employees;
(6)That the common carrier's liability for acts
committed by thieves, or of robbers who do
not act with grave or irresistible threat,
violence or force, is dispensed with or
diminished;
(7)That the common carrier is not
responsible for the loss, destruction, or
deterioration of goods on account of the
defective condition of the car, vehicle, ship,
airplane or other equipment used in the
contract of carriage."
Petitioner Valenzuela adds that the stipulation is void for being
contrary to Articles 586 and 587 of the Code of Commerce 14 and
Articles 1170 and 1173 of the Civil Code. Citing Article 1306 and
paragraph 1, Article 1409 of the Civil Code, 15 petitioner further
contends that said stipulation "gives no duty or obligation to the
private respondent to observe the diligence of a good father of a
family in the custody and transportation of the cargo."
The Court is not persuaded. As adverted to earlier, it is undisputed
that private respondent had acted as a private carrier in transporting
petitioner's lauan logs. Thus, Article 1745 and other Civil Code
provisions on common carriers which were cited by petitioner may
not be applied unless expressly stipulated by the parties in their
charter party. 16
In a contract of private carriage, the parties may validly stipulate that
responsibility for the cargo rests solely on the charterer, exempting
the shipowner from liability for loss of or damage to the cargo caused
even by the negligence of the ship captain. Pursuant to Article 1306
17 of the Civil Code, such stipulation is valid because it is freely
entered into by the parties and the same is not contrary to law,
morals, good customs, public order, or public policy. Indeed, their
contract of private carriage is not even a contract of adhesion. We
stress that in a contract of private carriage, the parties may freely
stipulate their duties and obligations which perforce would be
binding on them. Unlike in a contract involving a common carrier,
private carriage does not involve the general public. Hence, the
stringent provisions of the Civil Code on common carriers protecting
the general public cannot justifiably be applied to a ship transporting
commercial goods as a private carrier. Consequently, the public
policy embodied therein is not contravened by stipulations in a
charter party that lessen or remove the protection given by law in
contacts involving common carriers. cdtai
The issue posed in this case and the arguments raised by petitioner
are not novel; they were resolved long ago by this Court in Home
Insurance Co. vs. American Steamship Agencies, Inc. 18 In that case, the
trial court similarly nullified a stipulation identical to that involved in
the present case for being contrary to public policy based on Article
1744 of the Civil Code and Article 587 of the Code of Commerce.
Consequently, the trial court held the shipowner liable for damages
resulting from the partial loss of the cargo. This Court reversed the
trial court and laid down, through Mr. Justice Jose P. Bengzon, the
following well-settled observation and doctrine:
"The provisions of our Civil Code on common
carriers were taken from Anglo-American
law. Under American jurisprudence, a
common carrier undertaking to carry a
special cargo or chartered to a special person
only, becomes a private carrier. As a private
carrier, a stipulation exempting the owner
from liability for the negligence of its agent is
not against public policy, and is deemed valid.
Such doctrine We find reasonable. The Civil
Code provisions on common carriers should
not be applied where the carrier is not acting
as such but as a private carrier. The stipulation
in the charter party absolving the owner from
liability for loss due to the negligence of its
agent would be void only if the strict public
policy governing common carriers is applied.
Such policy has no force where the public at
large is not involved, as in this case of a ship
totally chartered for the use of a single party."
19 (Emphasis supplied.)
Indeed, where the reason for the rule ceases, the rule itself does not
apply. The general public enters into a contract of transportation
with common carriers without a hand or a voice in the preparation
thereof. The riding public merely adheres to the contract; even if the
public wants to, it cannot submit its own stipulations for the approval
of the common carrier. Thus, the law on common carriers extends its
protective mantle against one-sided stipulations inserted in tickets,
invoices or other documents over which the riding public has no
understanding or, worse, no choice. Compared to the general public, a
charterer in a contract of private carriage is not similarly situated. It
can and in fact it usually does enter into a free and voluntary
agreement. In practice, the parties in a contract of private carriage
can stipulate the carrier's obligations and liabilities over the
shipment which, in turn, determine the price or consideration of the
charter. Thus, a charterer, in exchange for convenience and economy,
may opt to set aside the protection of the law on common carriers.
When the charterer decides to exercise this option, he takes a normal
business risk.
Petitioner contends that the rule in Home Insurance is not applicable
to the present case because it "covers only a stipulation exempting a
private carrier from liability for the negligence of his agent, but it
does not apply to a stipulation exempting a private carrier like
private respondent from the negligence of his employee or servant
which is the situation in this case." 20 This contention of petitioner is
bereft of merit, for it raises a distinction without any substantive
difference. The case of Home Insurance specifically dealt with "the
liability of the shipowner for acts or negligence of its captain and
crew" 21 and a charter party stipulation which "exempts the owner
of the vessel from any loss or damage or delay arising from any other
source, even from the neglect or fault of the captain or crew or some
other person employed by the owner on board, for whose acts the
owner would ordinarily be liable except for said paragraph." 22
Undoubtedly, Home Insurance is applicable to the case at bar.
The naked assertion of petitioner that the American rule enunciated
in Home Insurance is not the rule in the Philippines 23 deserves scant
consideration. The Court there categorically held that said rule was
"reasonable" and proceeded to apply it in the resolution of that case.
Petitioner miserably failed to show such circumstances or arguments
which would necessitate a departure from a well-settled rule.
Consequently, our ruling in said case remains a binding judicial
precedent based on the doctrine of stare decisis and Article 8 of the
Civil Code which provides that "(j)udicial decisions applying or
interpreting the laws or the Constitution shall form part of the legal
system of the Philippines."
In fine, the respondent appellate court aptly stated that "[in the case
of] a private carrier, a stipulation exempting the owner from liability
even for the negligence of its agent is valid." 24
Other Arguments
On the basis of the foregoing alone, the present petition may already
be denied; the Court, however, will discuss the other arguments of
petitioner for the benefit and satisfaction of all concerned.
Articles 586 and 587, Code of Commerce
Petitioner Valenzuela insists that the charter party stipulation is
contrary to Articles 586 and 587 of the Code of Commerce which
confer on petitioner the right to recover damages from the
shipowner and ship agent for the acts or conduct of the captain. 25
We are not persuaded. Whatever rights petitioner may have under
the aforementioned statutory provisions were waived when it
entered into the charter party. cdtai

Article 6 of the Civil Code provides that "(r)ights may be waived,
unless the waiver is contrary to law, public order, public policy,
morals, or good customs, or prejudicial to a person with a right
recognized by law." As a general rule, patrimonial rights may be
waived as opposed to rights to personality and family rights which
may not be made the subject of waiver. 26 Being patently and
undoubtedly patrimonial, petitioner's right conferred under said
articles may be waived. This, the petitioner did by acceding to the
contractual stipulation that it is solely responsible for any damage to
the cargo, thereby exempting the private carrier from any
responsibility for loss or damage thereto. Furthermore, as discussed
above, the contract of private carriage binds petitioner and private
respondent alone; it is not imbued with public policy considerations
for the general public or third persons are not affected thereby.
Articles 1170 and 1173, Civil Code
Petitioner likewise argues that the stipulation subject of this
controversy is void for being contrary to Articles 1170 and 1173 of
the Civil Code 27 which read:
"Art. 1170.Those who in the performance of
their obligations are guilty of fraud,
negligence, or delay, and those who in any
manner contravene the tenor thereof, are
liable for damages.
Art. 1173.The fault or negligence of the
obligor consists in the omission of that
diligence which is required by the nature of
the obligation and corresponds with the
circumstances of the persons, of the time and
of the place. When negligence shows bad
faith, the provisions of articles 1171 and
2201, shall apply.
If the law does not state the diligence which is
to be observed in the performance, that
which is expected of a good father of a family
shall be required."
The Court notes that the foregoing articles are applicable only to the
obligor or the one with an obligation to perform. In the instant case,
Private Respondent Seven Brothers is not an obligor in respect of the
cargo, for this obligation to bear the loss was shifted to petitioner by
virtue of the charter party. This shifting of responsibility, as earlier
observed, is not void. The provisions cited by petitioner are,
therefore, inapplicable to the present case.
Moreover, the factual milieu of this case does not justify the
application of the second paragraph of Article 1173 of the Civil Code
which prescribes the standard of diligence to be observed in the
event the law or the contract is silent. In the instant case, Article 362
of the Code of Commerce 28 provides the standard of ordinary
diligence for the carriage of goods by a carrier. The standard of
diligence under this statutory provision may, however, be modified in
a contract or private carriage as the petitioner and private
respondent had done in their charter party.
Cases Cited by Petitioner Inapplicable
Petitioner cites Shewaram vs. Philippine Airlines, Inc. 29 which, in
turn, quoted Juan Ysmael & Co. vs. Gabino Barreto & Co. 30 and argues
that the public policy considerations stated there vis-a-vis
contractual stipulations limiting the carrier's liability be applied
"with equal force" to this case. 31 It also cites Manila Railroad Co. vs.
Compaia Transatlantica 32 and contends that stipulations
exempting a party from liability for damages due to negligence
"should not be countenanced" and should be "strictly construed"
against the party claiming its benefit. 33 We disagree.
The cases of Shewaram and Ysmael both involve a common carrier;
thus, they necessarily justify the application of such policy
considerations and concomitantly stricter rules. As already discussed
above, the public policy considerations behind the rigorous
treatment of common carriers are absent in the case of private
carriers. Hence, the stringent laws applicable to common carriers are
not applied to private carriers. The case of Manila Railroad is also
inapplicable because the action for damages there does not involve a
contract for transportation. Furthermore, the defendant therein
made a "promise to use due care in the lifting operations" and,
consequently, it was "bound by its undertaking"; besides, the
exemption was intended to cover accidents due to hidden defects in
the apparatus or other unforseeable occurrences" not caused by its
"personal negligence." This promise was thus construed to make
sense together with the stipulation against liability for damages. 34
In the present case, we stress that the private respondent made no
such promise. The agreement of the parties to exempt the shipowner
from responsibility for any damage to the cargo and place
responsibility over the same to petitioner is the lone stipulation
considered now by this Court.
Finally, petitioner points to Standard Oil Co. of New York vs. Lopez
Costelo, 35 Walter A. Smith & Co. vs. Cadwallader Gibson Lumber Co.,
36 N. T . Hashim and Co. vs. Rocha and Co., 37 Ohta Development Co. vs.
Steamship "Pompey" 38 and Limpangco Sons vs. Yangco Steamship Co.
39 in support of its contention that the shipowner be held liable for
damages. 40 These however are not on all fours with the present case
because they do not involve a similar factual milieu or an identical
stipulation in the charter party expressly exempting the shipowner
from responsibility for any damage to the cargo. cdasia
Effect of the South Sea Resolution
In its memorandum, Seven Brothers argues that petitioner has no
cause of action against it because this Court has earlier affirmed the
liability of South Sea for the loss suffered by petitioner. Private
respondent submits that petitioner is not legally entitled to collect
twice for a single loss. 41 In view of the above disquisition upholding
the validity of the questioned charter party stipulation and holding
that petitioner may not recover from private respondent, the present
issue is moot and academic. It suffices to state that the Resolution of
this Court dated June 2, 1995 42 affirming the liability of South Sea
does not, by itself, necessarily preclude the petitioner from
proceeding against private respondent. An aggrieved party may still
recover the deficiency from the person causing the loss in the event
the amount paid by the insurance company does not fully cover the
loss. Article 2207 of the Civil Code provides:
"Art. 2207.If the plaintiff's property has been
insured, and he has received indemnity from
the insurance company for the injury or loss
arising out of the wrong or breach of contract
complained of, the insurance company shall
be subrogated to the rights of the insured
against the wrongdoer or the person who has
violated the contract. If the amount paid by
the insurance company does not fully cover
the injury or loss, the aggrieved party shall be
entitled to recover the deficiency from the
person causing the loss or injury."
WHEREFORE, premises considered, the petition is hereby DENIED
for its utter failure to show any reversible error on the part of
Respondent Court. The assailed Decision is AFFIRMED.
SO ORDERED.
Narvasa, C .J ., Davide, Jr., Melo and Francisco, JJ ., concur.
PHILIPPINE HOME ASSURANCE
CORPORATION, petitioner, vs. COURT OF
APPEALS and EASTERN SHIPPING LINES,
INC., respondents.
Diosdado Z. Reloj, Jr. for petitioner.
Del Rosario & Del Rosario for private respondent.
SYLLABUS
1.REMEDIAL LAW; EVIDENCE; FINDINGS OF TRIAL COURT,
GENERALLY RESPECTED; EXCEPTIONS. While it is well-settled
rule that only questions of law may be raised in a petition for review
under Rule 45 of the Rules of Court, it is equally well-settled that the
same admits of the following exceptions, namely: (a) when the
conclusion is a finding grounded entirely on speculation, surmises or
conjectures; (b) when the inference made is manifestly mistaken,
absurd or impossible; (c) where there is a grave abuse of discretion;
(d) when the judgment is based on a misapprehension of facts; (e)
when the findings of fact are conflicting; (f) when the Court of
Appeals, in making its findings, went beyond the issues of the case
and the same is contrary to the admissions of both appellant and
appellee; (g) when the findings of the Court of Appeals are contrary
to those of the trial court; (h) when the findings of fact are
conclusions without citation of specific evidence on which they are
based; (i) when the facts set forth in the petition as well as in the
petitioners' main and reply briefs are not disputed by the
respondents; and (j) when the finding of fact of the Court of Appeals
is premised on the supposed absence of evidence and is contradicted
by the evidence on record. Thus, if there is a showing, as in the
instant case, that the findings complained of are totally devoid of
support in the records, or that they are so glaringly erroneous as to
constitute grave abuse of discretion, the same may be properly
reviewed and evaluated by this Court.
2.COMMERCIAL LAW; COMMON CARRIER; LIABILITY FOR EXPENSES
IN SALVAGE OPERATION AND TRANSSHIPMENT OF GOODS VIA
DIFFERENT CARRIER; CASE AT BAR. What is at issue here is who,
among the carrier, consignee or insurer of the goods, is liable for the
additional charges or expenses incurred by the owner of the ship in
the salvage operations and in the transshipment of the goods via a
different carrier. In our jurisprudence, fire may not be considered a
natural disaster or calamity since it almost always arises from some
act of man or by human means. It cannot be an act of God unless
caused by lightning or a natural disaster or casualty not attributable
to human agency. In the case at bar, it is not disputed that a small
flame was detected on the acetylene cylinder and that by reason
thereof, the same exploded despite efforts to extinguish the fire.
Neither is there any doubt that the acetylene cylinder, obviously fully
loaded, was stored in the accommodation area near the engine room
and not in a storage area considerably far, and in a safe distance, from
the engine room. Moreover, there was no showing, and none was
alleged by the parties, that the fire was caused by a natural disaster
or calamity not attributable to human agency. On the contrary, there
is strong evidence indicating that the acetylene cylinder caught fire
because of the fault and negligence of respondent ESLI, its captain
and its crew. As a rule, general or gross averages include all damages
and expenses which are deliberately caused in order in order to save
the vessel, its cargo, or both at the same time, from a real and known
risk. While the instant case may technically fall within the purview of
the said provision, the formalities prescribed under Articles 813 and
814 of the Code of Commerce in order to incur the expenses and
cause the damage corresponding to gross average were not complied
with. Consequently, respondent ESLI's claim for contribution from
the consignees of the cargo at the time of the occurrence of the
average turns to naught. Hence, cargo consignees cannot be made
liable to respondent carrier for additional freight and salvage
charges. Respondent carrier must refund the amount paid under
protest for additional freight and salvage charges.
3.REMEDIAL LAW; EVIDENCE; RULES OF ADMISSIBILITY;
TESTIMONY GENERALLY CONFINED TO PERSONAL KNOWLEDGE;
HEARSAY EXCLUDED. The Statement of Facts and the Marine Note
of Protest issued by Captain Licaycay are hearsay evidence. He who
issued the said documents was not presented in court to testify to the
truth of the facts he stated therein. Section 36, Rule 130 of the Rules
of Court provides that any evidence, whether oral or documentary, is
hearsay if its probative value is not based on the personal knowledge
of the witness but on the knowledge of some other person not on the
witness stand. Consequently, hearsay evidence, whether objected to
or not, has no probative value unless the proponent can show that
the evidence falls within the exceptions to the hearsay evidence rule.
It is excluded because the party against whom it is presented is
deprived of his right and opportunity to cross-examine the persons to
whom the statements or writings are attributed.
D E C I S I O N
KAPUNAN, J p:
Eastern Shipping Lines, Inc. (ESLI) loaded on board
SS Eastern Explorer in Kobe, Japan, the following shipment for
carriage to Manila and Cebu, freight pre-paid and in good order
and condition, viz: (a) two (2) boxes internal combustion engine
parts, consigned to William Lines, Inc. under Bill of Lading No.
042283; (b) ten (10) metric tons (334 bags) ammonium
chloride, consigned to Orca's Company under Bill of Lading No.
KCE-12; (c) two hundred (200) bags Glue 300, consigned to Pan
Oriental Match Company under Bill of Lading No. KCE-8; and (d)
garments, consigned to Ding Velayo under Bills of Lading Nos.
KMA-73 and KMA-74.
While the vessel was off Okinawa, Japan, a small
flame was detected on the acetylene cylinder located in the
accommodation area near the engine room on the main deck
level. As the crew was trying to extinguish the fire, the acetylene
cylinder suddenly exploded sending a flash of flame throughout
the accommodation area, thus causing death and severe injuries
to the crew and instantly setting fire to the whole
superstructure of the vessel. The incident forced the master and
the crew to abandon the ship.
Thereafter, SS Eastern Explorer was found to be a
constructive total loss and its voyage was declared abandoned.
Several hours later, a tugboat under the control of
Fukuda Salvage Co. arrived near the vessel and commenced to
tow the vessel for the port of Naha, Japan.
Fire fighting operations were again conducted at the
said port. After the fire was extinguished, the cargoes which
were saved were loaded to another vessel for delivery to their
original ports of destination. ESLI charged the consignees
several amounts corresponding to additional freight and salvage
charges, as follows: (a) for the goods covered by Bill of Lading
No. 042283, ESLI charged the consignee the sum of P1,927.65,
representing salvage charges assessed against the goods; (b) for
the goods covered by Bill of Lading No. KCE-12, ESLI charged
the consignee the sum of P2,980.64 for additional freight and
P826.14 for salvage charges against the goods; (c) for the goods
covered by Bill of Lading No. KCE-8, ESLI charged the consignee
the sum of P3,292.26 for additional freight and P4,130.68 for
salvage charges against the goods; and (d) for the goods under
Bills of Lading Nos. KMA-73 and KMA-74, ESLI charged the
consignee the sum of P8,337.06 for salvage charges against the
goods.
The charges were all paid Philippine Home Assurance
Corporation (PHAC) under protest for and in behalf of the
consignees.
PHAC, as subrogee of the consignees, thereafter filed
a complaint before the Regional Trial Court of Manila, Branch
39, against ESLI to recover the sum paid under protest on the
ground that the same were actually damages directly brought
about by the fault, negligence, illegal act and/or breach of
contract of ESLI.
In its answer, ESLI contended that it exercised the
diligence required by law in the handling, custody and carriage
of the shipment; that the fire was caused by an unforeseen
event; that the additional freight charges are due and
demandable pursuant to the Bill of Lading; 1 and that salvage
charges are properly collectible under Act No. 2616, known as
the Salvage Law.
The trial court dismissed PHAC's complaint and ruled
in favor of ESLI ratiocinating thus:
The question to be resolved is whether or not
the fire on the vessel which was caused by
the explosion of an acetylene cylinder loaded
on the same was the fault or negligence of the
defendant.
Evidence has been presented that the SS
"Eastern Explorer" was a seaworthy vessel
(Deposition of Jumpei Maeda, October 23,
1980, p. 3) and before the ship loaded the
Acetylene Cylinder No. NCW 875, the same
has been tested, checked and examined and
was certified to have complied with the
required safety measures and standards
(Deposition of Senjei Hayashi, October 23,
1980, pp. 2-3). When the fire was detected by
the crew, fire fighting operations was
immediately conducted but due to the
explosion of the acetylene cylinder, the crew
were unable to contain the fire and had to
abandon the ship to save their lives and were
saved from drowning by passing vessels in
the vicinity. The burning of the vessel
rendering it a constructive total loss and
incapable of pursuing its voyage to the
Philippines was, therefore, not the fault or
negligence of defendant but a natural disaster
or calamity which nobody would like to
happen. The salvage operations conducted by
Fukuda Salvage Company (Exhibits "4-A" and
"6-A") was perfectly a legal operation and
charges made on the goods recovered were
legitimate charges.
Act No. 2616, otherwise known as the Salvage
Law, is thus applicable to the case at bar.
Section 1 of Act No. 2616 states:
"Section 1.When in case of
shipwreck, the vessel or its cargo
shall be beyond the control of the
crew, or shall have been
abandoned by them, and picked up
and conveyed to a safe place by
other persons, the latter shall be
entitled to a reward for the
salvage.

Those who, not being included in
the above paragraph, assist in
saving a vessel or its cargo from
shipwreck, shall be entitled to like
reward."
In relation to the above provision, the
Supreme Court has ruled in Erlanger &
Galinger v. Swedish East Asiatic Co., Ltd., 34
Phil. 178, that three elements are necessary
to a valid salvage claim, namely (a) a marine
peril (b) service voluntarily rendered when
not required as an existing duty or from a
special contract and (c) success in whole or in
part, or that the service rendered contributed
to such success.
The above elements are all present in the
instant case. Salvage charges may thus be
assessed on the cargoes saved from the
vessel. As provided for in Section 13 of the
Salvage Law, "The expenses of salvage, as
well as the reward for salvage or assistance,
shall be a charge on the things salvaged or
their value." In Manila Railroad Co. v.
Macondray Co., 37 Phil. 583, it was also held
that "when a ship and its cargo are saved
together, the salvage allowance should be
charged against the ship and cargo in the
proportion of their respective values, the
same as in a case of general average . . ." Thus,
the "compensation to be paid by the owner of
the cargo is in proportion to the value of the
vessel and the value of the cargo saved."
(Atlantic Gulf and Pacific Co. v. Uchida Kisen
Kaisha, 42 Phil. 321). (Memorandum for
Defendant, Records, pp. 212-213).
With respect to the additional freight charged by defendant from the
consignee of the goods, the same are also validly demandable.
As provided by the Civil Code:
"Article 1174.Except in cases expressly
specified by law, or when it is otherwise
declared by stipulation, or when the nature of
the obligation require the assumption of risk,
no person shall be responsible for those
events which could not be foreseen, or which
though foreseen, were inevitable."
"Article 1266.The debtor in obligations to do
shall also be released when the prestation
becomes legally or physically impossible
without the fault of the obligor."
The burning of "EASTERN EXPLORER" while off Okinawa rendered it
physically impossible for defendant to comply with its obligation of
delivering the goods to their port of destination pursuant to the
contract of carriage. Under Article 1266 of the Civil Code, the physical
impossibility of the prestation extinguished defendant's obligation.
It is but legal and equitable for the defendant therefore, to demand
additional freight from the consignees for forwarding the goods from
Naha, Japan to Manila and Cebu City on board another vessel, the
"EASTERN MARS." This finds support under Article 844 of the Code
of Commerce which provides as follows:
"Article 844.A captain who may have taken
on board the goods saved from the wreck
shall continue his course to the port of
destination; and on arrival should deposit the
same, with judicial intervention at the
disposal of their legitimate owners. . . .
The owners of the cargo shall defray all the
expenses of this arrival as well as the
payment of the freight which, after taking
into consideration the circumstances of the
case, may be fixed by agreement or by a
judicial decision."
Furthermore, the terms and conditions of the Bill of Lading authorize
the imposition of additional freight charges in case of forced
interruption or abandonment of the voyage. At the dorsal portion of
the Bills of Lading issued to the consignees is this stipulation:
"12.All storage, transshipment, forwarding or
other disposition of cargo at or from a port of
distress or other place where there has been
a forced interruption or abandonment of the
voyage shall be at the expense of the owner,
shipper, consignee of the goods or the holder
of this bill of lading who shall be jointly and
severally liable for all freight charges and
expenses of every kind whatsoever, whether
payable in advance or not that may be
incurred by the cargo in addition to the
ordinary freight, whether the service be
performed by the named carrying vessel or
by carrier's other vessels or by strangers. All
such expenses and charges shall be due and
payable day by day immediately when they
are incurred."
The bill of lading is a contract and the parties are bound by its terms
(Govt. of the Philippine Islands vs. Ynchausti and Co., 40 Phil. 219). The
provision quoted is binding upon the consignee.
Defendant therefore, can validly require payment of additional
freight from the consignee. Plaintiff can not thus recover the
additional freight paid by the consignee to defendant. (Memorandum
for Defendant, Record, pp. 215-216). 2
On appeal to the Court of Appeals, respondent court
affirmed the trial court's findings and conclusions, 3 hence, the
present petition for review before this Court on the following
errors:
I.THE RESPONDENT COURT ERRONEOUSLY
ADOPTED WITH APPROVAL THE TRIAL
COURT'S FINDING THAT THE BURNING OF
THE SS "EASTERN EXPLORER", RENDERING
IT A CONSTRUCTIVE TOTAL LOSS, IS A
NATURAL DISASTER OR CALAMITY WHICH
NOBODY WOULD LIKE TO HAPPEN, DESPITE
EXISTING JURISPRUDENCE TO THE
CONTRARY.
II.THE RESPONDENT COURT ARBITRARILY
RULED THAT THE BURNING OF THE SS
"EASTERN EXPLORER" WAS NOT THE FAULT
AND NEGLIGENCE OF RESPONDENT
EASTERN SHIPPING LINES.
III.THE RESPONDENT COURT COMMITTED
GRAVE ABUSE OF DISCRETION IN RULING
THAT DEFENDANT HAD EXERCISED THE
EXTRAORDINARY DILIGENCE IN THE
VIGILANCE OVER THE GOODS AS REQUIRED
BY LAW.
IV.THE RESPONDENT COURT ARBITRARILY
RULED THAT THE MARINE NOTE OF
PROTEST AND STATEMENT OF FACTS
ISSUED BY THE VESSEL'S MASTER ARE NOT
HEARSAY DESPITE THE FACT THAT THE
VESSEL'S MASTER, CAPT. LICAYLICAY WAS
NOT PRESENTED IN COURT, WITHOUT
EXPLANATION WHATSOEVER FOR HIS NON-
PRESENTATION, THUS, PETITIONER WAS
DEPRIVED OF ITS RIGHT TO CROSS-
EXAMINE THE AUTHOR THEREOF.
V.THE RESPONDENT COURT ERRONEOUSLY
ADOPTED WITH APPROVAL THE TRIAL
COURT'S CONCLUSION THAT THE EXPENSES
OR AVERAGES INCURRED IN SAVING THE
CARGO CONSTITUTE GENERAL AVERAGE.
VI.THE RESPONDENT COURT ERRONEOUSLY
ADOPTED THE TRIAL COURT'S RULING
THAT PETITIONER WAS LIABLE TO
RESPONDENT CARRIER FOR ADDITIONAL
FREIGHT AND SALVAGE CHARGES. 4
It is quite evident that the foregoing assignment of
errors challenges the findings of fact and the appreciation of
evidence made by the trial court and later affirmed by
respondent court. While it is a well-settled rule that only
questions of law may be raised in a petition for review under
Rule 45 of the Rules of Court, it is equally well-settled that the
same admits of the following exceptions, namely: (a) when the
conclusion is a finding grounded entirely on speculation,
surmises or conjectures; (b) when the inference made is
manifestly mistaken, absurd or impossible; (c) where there is a
grave abuse of discretion; (d) when the judgment is based on a
misapprehension of facts; (e) when the findings of fact are
conflicting; (f) when the Court of Appeals, in making its findings,
went beyond the issues of the case and the same is contrary to
the admissions of both appellant and appellee; (g) when the
findings of the Court of Appeals are contrary to those of the trial
court; (h) when the findings of fact are conclusions without
citation of specific evidence on which they are based; (i) when
the facts set forth in the petition as well as in the petitioners'
main and reply briefs are nor disputed by the respondents; and
(j) when the finding of fact of the Court of Appeals is premised
on the supposed absence of evidence and is contradicted by the
evidence on record. 5 Thus, if there is a showing, as in the
instant case, that the findings complained of are totally devoid
of support in the records, or that they are so glaringly erroneous
as to constitute grave abuse of discretion, the same may be
properly reviewed and evaluated by this Court.
It is worthy to note at the outset that the goods
subject of the present controversy were neither lost nor
damaged in transit by the fire that razed the carrier. In fact, the
said goods were all delivered to the consignees, even if the
transshipment took longer than necessary. What is at issue
therefore is not whether or not the carrier is liable for the loss,
damage, or deterioration of the goods transported by them but
who, among the carrier, consignee or insurer of the goods, is
liable for the additional charges or expenses incurred by the
owner of the ship in the salvage operations and in the
transshipment of the goods via a different carrier.
In absolving respondent carrier of any liability,
respondent Court of Appeals sustained the trial court's finding
that the fire that gutted the ship was a natural disaster or
calamity. Petitioner takes exception to this conclusion and we
agree.
In our jurisprudence, fire may not be considered a
natural disaster or calamity since it almost always arises from
some act of man or by human means. It cannot be an act of God
unless caused by lightning or a natural disaster or casualty not
attributable to human agency. 6
In the case at bar, it is not disputed that a small flame
was detected on the acetylene cylinder and that by reason
thereof, the same exploded despite efforts to extinguish the fire.
Neither is there any doubt that the acetylene cylinder, obviously
fully loaded, was stored in the accommodation area near the
engine room and not in a storage area considerably far, and in a
safe distance, from the engine room. Moreover, there was no
showing, and none was alleged by the parties, that the fire was
caused by a natural disaster or calamity not attributable to
human agency. On the contrary, there is strong evidence
indicating that the acetylene cylinder caught fire because of the
fault and negligence of respondent ESLI, its captain and its crew.
First, the acetylene cylinder which was fully loaded
should not have been stored in the accommodation area near
the engine room where the heat generated therefrom could
cause the acetylene cylinder to explode by reason of
spontaneous combustion. Respondent ESLI should have easily
foreseen that the acetylene cylinder, containing highly
inflammable material, was in a real danger of exploding because
it was stored in close proximity to the engine room.

Second, respondent ESLI should have known that by
storing the acetylene cylinder in the accommodation area
supposed to be reserved for passengers, it unnecessarily
exposed its passengers to grave danger and injury. Curious
passengers, ignorant of the danger the tank might have on
humans and property, could have handled the same or could
have lighted and smoked cigarettes while repairing in the
accommodation area.
Third, the fact that the acetylene cylinder was
checked, tested and examined and subsequently certified as
having complied with the safety measures and standards by
qualified experts 7 before it was loaded in the vessel only shows
to a great extent that negligence was present in the handling of
the acetylene cylinder after it was loaded and while it was on
board the ship. Indeed, had the respondent and its agents not
been negligent in storing the acetylene cylinder near the engine
room, then the same would not have leaked and exploded
during the voyage.
Verily, there is no merit in the finding of the trial
court to which respondent court erroneously agreed that the
fire was not fault or negligence of respondent but a natural
disaster or calamity. The records are simply wanting in this
regard.
Anent petitioner's objection to the admissibility of
Exhibits "4" and "5", the Statement of Facts and the Marine Note
of Protest issued by Captain Tiburcio A. Licaylicay, we find the
same impressed with merit because said documents are hearsay
evidence. Capt. Licaylicay, Master of S.S. Eastern Explorer who
issued the said documents, was not presented in court to testify
to the truth of the facts he stated therein; instead, respondent
ESLI presented Junpei Maeda, its Branch Manager in Tokyo and
Yokohama, Japan, who evidently had no personal knowledge of
the facts stated in the documents at issue. It is clear from
Section 36, Rule 130 of the Rules of Court that any evidence,
whether oral or documentary, is hearsay if its probative value is
not based on the personal knowledge of the witness but on the
knowledge of some other person not on the witness stand.
Consequently, hearsay evidence, whether objected to or not, has
no probative value unless the proponent can show that the
evidence falls within the exceptions to the hearsay evidence
rule. 8 It is excluded because the party against whom it is
presented is deprived of his right and opportunity to cross-
examine the persons to whom the statements or writings are
attributed.
On the issue of whether or not respondent court
committed an error in concluding that the expenses incurred in
saving the cargo are considered general average, we rule in the
affirmative. As a rule, general or gross averages include all
damages and expenses which are deliberately caused in order
to save the vessel, its cargo, or both at the same time, from a real
and known risk. 9 While the instant case may technically fall
within the purview of the said provision, the formalities
prescribed under Article 813 10 and 814 11 of the Code of
Commerce in order to incur the expenses and cause the damage
corresponding to gross average were not complied with.
Consequently, respondent ESLI's claim for contribution from
the consignees of the cargo at the time of the occurrence of the
average turns to naught.
Prescinding from the foregoing premises, it
indubitably follows that the cargo consignees cannot be made
liable to respondent carrier for additional freight and salvage
charges. Consequently, respondent carrier must refund to
herein petitioner the amount it paid under protest for additional
freight and salvage charges in behalf of the consignee.
WHEREFORE, the judgment appealed from is hereby
REVERSED and SET ASIDE. Respondent Eastern Shipping Lines,
Inc. is ORDERED to return to petitioner Philippine Home
Assurance Corporation the amount it paid under protest in
behalf of the consignees herein.
SO ORDERED.
Padilla, Bellosillo, Vitug and Hermosisima, Jr., JJ ., concur.
COASTWISE LIGHTERAGE CORPORATION,
petitioner, vs. COURT OF APPEALS and the
PHILIPPINE GENERAL INSURANCE
COMPANY, respondents.
David & Associates Law Offices for petitioner.
Fajardo Law Offices for private respondent.
SYLLABUS
1.CIVIL LAW; SPECIAL CONTRACTS; COMMON CARRIER; KINDS OF
CHARTER PARTIES; CONTRACT OF AFFREIGHTMENT;
DISTINGUISHED FROM BAREBOAT OR DEMISE. The distinction
between the two kinds of charter parties (i.e. bareboat or demise and
contract of affreightment) is more clearly set out in the case of
Puromines, Inc. vs. Court of Appeals, wherein we ruled: "Under the
demise or bareboat charter of the vessel, the charterer will generally
be regarded as the owner for the voyage or service stipulated. The
charterer mans the vessel with his own people and becomes the
owner pro hac vice, subject to liability to others for damages caused
by negligence. To create a demise, the owner of a vessel must
completely and exclusively relinquish possession, command and
navigation thereof to the charterer, anything short of such a complete
transfer is a contract of affreightment (time or voyage charter party)
or not a charter party at all. On the other hand a contract of
affreightment is one in which the owner of the vessel leases part or
all of its space to haul goods for others. It is a contract for special
service to be rendered by the owner of the vessel and under such
contract the general owner retains the possession, command and
navigation of the ship, the charterer or freighter merely having use of
the space in the vessel in return for his payment of the charter hire. . .
. An owner who retains possession of the ship though the hold is the
property of the charterer, remains liable as carrier and must answer
for any breach of duty as to the care, loading and unloading of the
cargo. . . ." Although a charter party may transform a common carrier
into a private one, the same however is not true in a contract of
affreightment on account of the aforementioned distinctions between
the two.
2.ID.; ID.; ID.; ID.; ID.; LIABLE AS A COMMON CARRIER. Petitioner
admits that the contract it entered into with the consignee was one of
affreightment. We agree. Pag-asa Sales, Inc. only leased three of
petitioner's vessels, in order to carry cargo from one point to another,
but the possession, command and navigation of the vessels remained
with petitioner Coastwise Lighterage. Pursuant therefore to the
ruling in the aforecited Puromines case, Coastwise Lighterage, by the
contract of affreightment, was not converted into a private carrier,
but remained a common carrier and was still liable as such. The law
and jurisprudence on common carriers both hold that the mere proof
of delivery of goods in good order to a carrier and the subsequent
arrival of the same goods at the place of destination in bad order
makes for a prima facie case against the carrier. It follows then that
the presumption of negligence that attaches to common carriers,
once the goods it transports are lost, destroyed or deteriorated,
applies to the petitioner. This presumption, which is overcome only
by proof of the exercise of extraordinary diligence, remained
unrebutted in this case.
3.ID.; ID.; ID.; ID.; ID.; MUST ALSO EXERCISE EXTRAORDINARY
DILIGENCE BY PLACING A PERSON WITH NAVIGATIONAL SKILLS.
Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted
that he was not licensed. The Code of Commerce, which subsidiarily
governs common carriers (which are primarily governed by the
provisions of the Civil Code). Clearly, petitioner Coastwise
Lighterage's embarking on a voyage with an unlicensed patron
violates this rule. It cannot safely claim to have exercised
extraordinary diligence, by placing a person whose navigational skills
are questionable, at the helm of the vessel which eventually met the
fateful accident. It may also logically, follow that a person without
license to navigate, lacks not just the skill to do so, but also the
utmost familiarity with the usual and safe routes taken by seasoned
and legally authorized ones. Had the patron been licensed, he could
be presumed to have both the skill and the knowledge that would
have prevented the vessel's hitting the sunken derelict ship that lay
on their way to Pier 18. As a common carrier, petitioner is liable for
breach of the contract of carriage, having failed to overcome the
presumption of negligence with the loss and destruction of goods it
transported, by proof of its exercise of extraordinary diligence.
4.ID.; DAMAGES; INSURANCE COMPANY SHALL BE SUBROGATED TO
THE RIGHTS OF THE INSURED AGAINST THE WRONGDOER. On
the issue of subrogation, which petitioner contends as inapplicable in
this case, we once more rule against the petitioner. We have already
found petitioner liable for breach of the contract of carriage it
entered into with Pag-asa Sales, Inc. However, for the damage
sustained by the loss of the cargo which petitioner-carrier was
transporting, it was not the carrier which paid the value thereof to
Pag-asa Sales, Inc. but the latter's insurer, herein private respondent
PhilGen. Article 2207 of the Civil Code is explicit on this point.
Containing the equitable principle of subrogation has been applied in
a long line of cases including Compania Maritima v. Insurance
Company of North America; Fireman's Fund Insurance Company v.
Jamilla & Company, Inc., and Pan Malayan Insurance Corporation v.
Court of Appeals, wherein this Court explained: "Article 2207 of the
Civil Code is founded on the well-settled principle of subrogation. If
the insured property is destroyed or damaged through the fault or
negligence of a party other than the assured, then the insurer, upon
payment to the assured will be subrogated to the rights of the
assured to recover from the wrongdoer to the extent that the insurer
has been obligated to pay. Payment by the insurer to the assured
operated as an equitable assignment to the former of all remedies
which the latter may have against the third party whose negligence or
wrongful act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of, any privity of contract or
upon written assignment of claim. It accrues simply upon payment of
the insurance claim by the insurer."
R E S O L U T I O N
FRANCISCO, J p:
This is a petition for review of a Decision rendered by
the Court of Appeals, dated December 17, 1993, affirming
Branch 35 of the Regional Trial Court, Manila in holding that
herein petitioner is liable to pay herein private respondent the
amount of P700,000.00, plus legal interest thereon, another sum
of P100,000.00 as attorney's fees and the cost of the suit. cdasia
The factual background of this case is as follows:
Pag-asa Sales, Inc. entered into a contract to
transport molasses from the province of Negros to Manila with
Coastwise Lighterage Corporation (Coastwise for brevity), using
the latter's dumb barges. The barges were towed in tandem by
the tugboat MT Marica, which is likewise owned by Coastwise.
Upon reaching Manila Bay, while approaching Pier
18, one of the barges, "Coastwise 9," struck an unknown sunken
object. The forward buoyancy compartment was damaged, and
water gushed in through a hole "two inches wide and twenty-
two inches long." 1 As a consequence, the molasses at the cargo
tanks were contaminated and rendered unfit for the use it was
intended. This prompted the consignee, Pag-asa Sales, Inc. to
reject the shipment of molasses as a total loss. Thereafter, Pag-
asa Sales, Inc. filed a formal claim with the insurer of its lost
cargo, herein private respondent, Philippine General Insurance
Company (PhilGen, for short) and against the carrier, herein
petitioner, Coastwise Lighterage. Coastwise Lighterage denied
the claim and it was PhilGen which paid the consignee, Pag-asa
Sales, Inc., the amount of P700,000.00, representing the value of
the damaged cargo of molasses. cdtai
In turn, PhilGen then filed an action against Coastwise
Lighterage before the Regional Trial Court of Manila, seeking to
recover the amount of P700,000.00 which it paid to Pag-asa
Sales, Inc. for the latter's lost cargo. PhilGen now claims to be
subrogated to all the contractual rights and claims which the
consignee may have against the carrier, which is presumed to
have violated the contract of carriage.
The RTC awarded the amount prayed for by PhilGen.
On Coastwise Lighterage's appeal to the Court of Appeals, the
award was affirmed.
Hence, this petition. cdt
There are two main issues to be resolved herein.
First, whether or not petitioner Coastwise Lighterage was
transformed into a private carrier, by virtue of the contract of
affreightment which it entered into with the consignee, Pag-asa
Sales, Inc. Corollarily, if it were in fact transformed into a private
carrier, did it exercise the ordinary diligence to which a private
carrier is in turn bound? Second, whether or not the insurer was
subrogated into the rights of the consignee against the carrier,
upon payment by the insurer of the value of the consignee's
goods lost while on board one of the carrier's vessels.
On the first issue, petitioner contends that the RTC
and the Court of Appeals erred in finding that it was a common
carrier. It stresses the fact that it contracted with Pag-asa Sales,
Inc. to transport the shipment of molasses from Negros Oriental
to Manila and refers to this contract as a "charter agreement." It
then proceeds to cite the case of Home Insurance Company vs.
American Steamship Agencies, Inc. 2 wherein this Court held: ". . .
a common carrier undertaking to carry a special cargo or
chartered to a special person only becomes a private carrier."
Petitioner's reliance on the aforementioned case is
misplaced. In its entirety, the conclusions of the court are as
follows: aisadc
"Accordingly, the charter party
contract is one of affreightment over the
whole vessel, rather than a demise. As such,
the liability of the shipowner for acts or
negligence of its captain and crew, would
remain in the absence of stipulation." 3

The distinction between the two kinds of charter
parties (i.e. bareboat or demise and contract of affreightment) is
more clearly set out in the case of Puromines, Inc. vs. Court of
Appeals,

4 wherein we ruled:
"Under the demise or bareboat charter of the
vessel, the charterer will generally be
regarded as the owner for the voyage or
service stipulated. The charterer mans the
vessel with his own people and becomes the
owner pro hac vice, subject to liability to
others for damages caused by negligence. To
create a demise, the owner of a vessel must
completely and exclusively relinquish
possession, command and navigation thereof
to the charterer, anything short of such a
complete transfer is a contract of
affreightment (time or voyage charter party)
or not a charter party at all. cdta
On the other hand a contract of affreightment
is one in which the owner of the vessel leases
part or all of its space to haul goods for
others. It is a contract for special service to be
rendered by the owner of the vessel and
under such contract the general owner
retains the possession, command and
navigation of the ship, the charterer or
freighter merely having use of the space in
the vessel in return for his payment of the
charter hire. . . .
. . .. An owner who retains possession of the
ship though the hold is the property of the
charterer, remains liable as carrier and must
answer for any breach of duty as to the care,
loading and unloading of the cargo. . . ."
Although a charter party may transform a common
carrier into a private one, the same however is not true in a
contract of affreightment on account of the aforementioned
distinctions between the two. cdasia
Petitioner admits that the contract it entered into
with the consignee was one of affreightment. 5 We agree. Pag-
asa Sales, Inc. only leased three of petitioner's vessels, in order
to carry cargo from one point to another, but the possession,
command and navigation of the vessels remained with
petitioner Coastwise Lighterage.
Pursuant therefore to the ruling in the aforecited
Puromines case, Coastwise Lighterage, by the contract of
affreightment, was not converted into a private carrier, but
remained a common carrier and was still liable as such.
The law and jurisprudence on common carriers both
hold that the mere proof of delivery of goods in good order to a
carrier and the subsequent arrival of the same goods at the
place of destination in bad order makes for a prima facie case
against the carrier. cdtai
It follows then that the presumption of negligence
that attaches to common carriers, once the goods it transports
are lost, destroyed or deteriorated, applies to the petitioner.
This presumption, which is overcome only by proof of the
exercise of extraordinary diligence, remained unrebutted in this
case.
The records show that the damage to the barge which
carried the cargo of molasses was caused by its hitting an
unknown sunken object as it was heading for Pier 18. The object
turned out to be a submerged derelict vessel. Petitioner
contends that this navigational hazard was the efficient cause of
the accident. Further, it asserts that the fact that the Philippine
Coastguard "has not exerted any effort to prepare a chart to
indicate the location of sunken derelicts within Manila North
Harbor to avoid navigational accidents" 6 effectively
contributed to the happening of this mishap. Thus, being
unaware of the hidden danger that lies in its path, it became
impossible for the petitioner to avoid the same. Nothing could
have prevented the event, making it beyond the pale of even the
exercise of extraordinary diligence.
However, petitioner's assertion is belied by the
evidence on record where it appeared that far from having
rendered service with the greatest skill and outmost foresight,
and being free from fault, the carrier was culpably remiss in the
observance of its duties. cdt
Jesus R. Constantino, the patron of the vessel
"Coastwise 9" admitted that he was not licensed. The Code of
Commerce, which subsidiarily governs common carriers (which
are primarily governed by the provisions of the Civil Code)
provides:
"Article 609. Captains, masters, or patrons
of vessels must be Filipinos, have legal
capacity to contract in accordance with this
code, and prove the skill capacity and
qualifications necessary to command and
direct the vessel, as established by marine
and navigation laws, ordinances or
regulations, and must not be disqualified
according to the same for the discharge of the
duties of the position. . . ."
Clearly, petitioner Coastwise Lighterage's embarking
on a voyage with an unlicensed patron violates this rule. It
cannot safely claim to have exercised extraordinary diligence,
by placing a person whose navigational skills are questionable,
at the helm of the vessel which eventually met the fateful
accident. It may also logically, follow that a person without
license to navigate, lacks not just the skill to do so, but also the
utmost familiarity with the usual and safe routes taken by
seasoned and legally authorized ones. Had the patron been
licensed, he could be presumed to have both the skill and the
knowledge that would have prevented the vessel's hitting the
sunken derelict ship that lay on their way to Pier 18. cdt
As a common carrier, petitioner is liable for breach of
the contract of carriage, having failed to overcome the
presumption of negligence with the loss and destruction of
goods it transported, by proof of its exercise of extraordinary
diligence.
On the issue of subrogation, which petitioner
contends as inapplicable in this case, we once more rule against
the petitioner. We have already found petitioner liable for
breach of the contract of carriage it entered into with Pag-asa
Sales, Inc. However, for the damage sustained by the loss of the
cargo which petitioner-carrier was transporting, it was not the
carrier which paid the value thereof to Pag-asa Sales, Inc. but
the latter's insurer, herein private respondent PhilGen.
Article 2207 of the Civil Code is explicit on this point:
aisadc
"Art. 2207.If the plaintiff's property has been
insured, and he has received indemnity from
the insurance company for the injury or loss
arising out of the wrong or breach of contract
complained of, the insurance company shall
be subrogated to the rights of the insured
against the wrongdoer or the person who
violated the contract. . . ."
This legal provision containing the equitable principle
of subrogation has been applied in a long line of cases including
Compania Maritima v. Insurance Company of North America, 7
Firesman's Fund Insurance Company v. Jamilla & Company, Inc., 8
and Pan Malayan Insurance Corporation v. Court of Appeals,

9
wherein this Court explained:
"Article 2207 of the Civil Code is founded on
the well-settled principle of subrogation. If
the insured property is destroyed or
damaged through the fault or negligence of a
party other than the assured, then the
insurer, upon payment to the assured will be
subrogated to the rights of the assured to
recover from the wrongdoer to the extent
that the insurer has been obligated to pay.
Payment by the insurer to the assured
operated as an equitable assignment to the
former of all remedies which the latter may
have against the third party whose negligence
or wrongful act caused the loss. The right of
subrogation is not dependent upon, nor does
it grow out of, any privity of contract or upon
written assignment of claim. It accrues simply
upon payment of the insurance claim by the
insurer." aisadc
Undoubtedly, upon payment by respondent insurer
PhilGen of the amount of P700,000.00 to Pag-asa Sales, Inc., the
consignee of the cargo of molasses totally damaged while being
transported by petitioner Coastwise Lighterage, the former was
subrogated into all the rights which Pag-asa Sales, Inc. may have
had against the carrier, herein petitioner Coastwise Lighterage.
WHEREFORE, premises considered, this petition is
DENIED and the appealed decision affirming the order of
Branch 35 of the Regional Trial Court of Manila for petitioner
Coastwise Lighterage to pay respondent Philippine General
Insurance Company the "principal amount of P700,000.00 plus
interest thereon at the legal rate computed from March 29,
1989, the date the complaint was filed until fully paid and
another sum of P100,000.00 as attorney's fees and costs" 10 is
likewise hereby AFFIRMED. cdt
SO ORDERED.
Feliciano, Romero, Melo and Vitug, JJ., concur.
HERMINIO L. NOCUM, plaintiff-appellee, vs.
LAGUNA TAYABAS BUS COMPANY,
defendant-appellant.
Fernando M. Mangubat and Felimon H. Mendoza for plaintiff-appellee.
Domingo E. de Lara & Associates for defendant-appellant.
SYLLABUS
1.CIVIL LAW; COMMON CARRIERS; EXTRAORDINARY DILIGENCE
REQUIRED BY LAW; QUALIFICATION. Article 1733 of the Civil
Code reasonably qualifies the extraordinary diligence required of
common carriers for the safety of the passengers transported by
them to be "according to all the circumstances of each case." In fact
Article 1755 repeats this same qualification.
2. ID.; ID.; ID.; COMMON CARRIER IN INSTANT CASE NOT LIABLE
FOR DAMAGES TO INJURED PASSENGER. A passenger in
appellant's bus was injured as a consequence of the explosion of
firecrackers, contained in a box, loaded in the bus and declared by
another passenger to the conductor as containing clothes and
miscellaneous items. The lower court sentenced appellant to pay
damages to the injured passenger. Held. Appellant should not be
made liable for damages to the injured passenger. Fairness demands
that in measuring a common carrier's duty towards its passengers,
allowance must be given to the reliance that should be reposed on
the sense of responsibility of all the passengers in regard to their
common safety.
3.ID.; ID.; ID.; DUTY REGARDING PASSENGER'S BAGGAGES.
Inquiry may be verbally made as to the nature of a passenger's
baggage when such is not outwardly perceptible, but beyond this,
constitutional boundaries are already in danger of being
transgressed. When there are sufficient indications that the
representations of the passenger regarding the nature of his baggage
may not be true, the assistance of the police authorities may be
solicited, not necessarily to force the passenger to open his baggage,
but to conduct the needed investigation consistent with the rules of
propriety and, above all, the constitutional rights of the passenger.
4.ID.; ID.; ID.; ID.; WHEN COMMON CARRIER LIABLE BECAUSE OF
PASSENGER'S DANGEROUS BAGGAGE. Where there is evidence of
circumstances indicating cause or causes for apprehension that the
passenger's baggage in dangerous, and the common carrier's
employee has failed to act in the fact of such evidence, the common
carrier becomes liable for any injury caused to its passengers by
reason of such baggage.
D E C I S I O N
BARREDO, J p:
Appeal of the Laguna Tayabas Bus Co., defendant in
the court below, from a judgment of the said court (Court of
First Instance of Batangas) in its Civil Case No. 834, wherein
appellee Herminio L. Nocum was plaintiff, sentencing appellant
to pay appellee the sum of P1,351.00 for actual damages and
P500.00 as attorney's fees, with legal interest from the filing of
the complaint plus costs. Appellee, who was a passenger in
appellant's Bus No. 120 then making a trip within the barrio of
Dita, Municipality of Bay, Laguna, was injured as a consequence
of the explosion of firecrackers, contained in a box, loaded in
said bus and declared to its conductor as containing clothes and
miscellaneous items by a co-passenger. The findings of fact of
the trial court are not assailed. The appeal is purely on legal
questions.
Appellee has not filed any brief. All that We have before Us is
appellant's brief with the following assignment of errors:
"I
"BASED ON THE FACTS
THE LOWER COURT FOUND AS
ESTABLISHED, IT ERRED AS A
MATTER OF LAW IN NOT
ABSOLVING APPELLANT FROM
LIABILITY RESULTING FROM THE
EXPLOSION OF FIRECRACKERS
CONTAINED IN A PACKAGE, THE
CONTENTS OF WHICH WERE
MISREPRESENTED BY A
PASSENGER.
"II
"THE LOWER COURT
ERRED, AS A MATTER OF LAW, IN
AWARDING DAMAGES WITH LEGAL
INTEREST IN FAVOR OF THE
APPELLEE.
"III
"THE LOWER COURT
ERRED IN NOT DISMISSING THE
COMPLAINT, WITH COSTS AGAINST
THE APPELLEE."
Upon consideration of the points raised and discussed by appellant,
We find the appeal to be well taken.
The main basis of the trial court's decision is that appellant did not
observe the extraordinary or utmost diligence of a very cautious
person required by the following articles of the Civil Code:
"ART. 1733.Common
carriers, from the nature of their
business and for reasons of public
policy, are bound to observe
extraordinary diligence in the
vigilance over the goods and for the
safety of the passengers transported
by them, according to all the
circumstances of each case.
"Such extraordinary
diligence in the vigilance over the
goods is further expressed in articles
1734, 1735, and 1745, Nos. 5, 6, and
7, while the extraordinary diligence
for the safety of the passengers is
further set forth in articles 1755 and
1756.
"ART. 1755.A common
carrier is bound to carry the
passengers safely as far as human
care and foresight can provide, using
the utmost diligence of very cautious
persons, with a due regard for all the
circumstances.
"ART. 1756.In case of
death of or injuries to passengers,
common carriers are presumed to
have been at fault or to have acted
negligently, unless they prove that
they observed extraordinary
diligence as prescribed in articles
1733 and 1755."
Analyzing the evidence presented by the parties, His Honor found:
"According to Severino
Andaya, a witness for the plaintiff, a
man with a box went up the baggage
compartment of the bus where he
already was and said box was placed
under the seat. They left Azcarraga at
about 11:30 in the morning and
when the explosion occurred, he was
thrown out. PC investigation report
states that thirty seven (37)
passengers were injured (Exhibits 'O'
and '2').
"The bus conductor,
Sancho Mendoza, testified that the
box belonged to a passenger whose
name he does not know and who told
him that it contained miscellaneous
items and clothes. He helped the
owner in loading the baggage which
weighed about twelve (12) kilos and
because of company regulation, he
charged him for it twenty-five
centavos (P0.25). From its
appearance there was no indication
at all that the contents were
explosives or firecrackers. Neither
did he open the box because he just
relied on the word of the owner.
"Dispatcher Nicolas
Cornista of defendant company
corroborrated the testimony of
Mendoza and he said, among other
things, that he was present when the
box was loaded in the truck and the
owner agreed to pay its fare. He
added that they were not authorized
to open the baggages of passengers
because instruction from the
management was to call the police if
there were packages containing
articles which were against
regulations.
xxx xxx xxx
"There is no question that
Bus No. 120 was road worthy when it
left its Manila Terminal for Lucena
that morning of December 5, 1960.
The injuries suffered by the plaintiff
were not due to mechanical defects
but to the explosion of firecrackers
inside the bus which was loaded by a
co-passenger.
". . . Turning to the present
case, it is quite clear that
extraordinary or utmost diligence of
a very cautious person was not
observed by the defendant company.
The service manual, exhibits '3' and
'3-A', prohibits the employees to
allow explosives, such as dynamite
and firecrackers to be transported on
its buses. To implement this
particular rule for 'the safety of
passengers, it was therefore
incumbent upon the employees of the
company to make the proper
inspection of all the baggages which
are carried by the passengers.
"But then, can it not be
said that the breach of the contract
was due to fortuitous event? The
Supreme Court in the case of Lasam
vs. Smith, 45 Phil. 657, quoted
Escriche's definition of caso fortuito
as 'an unexpected event or act of God
which could neither be foreseen nor
resisted, such as floods, torrents,
shipwrecks, conflagrations, lightning,
compulsions, insurrections,
destructions of buildings by
unforeseen accidents and other
occurrences of a similar nature.' In
other words, the cause of the
unexpected event must be
independent of the will of man, or
something which cannot be avoided.
This cannot be said of the instant
case. If proper and rigid inspection
were observed by the defendant, the
contents of the box could have been
discovered and the accident avoided.
Refusal by the passenger to have the
package opened was no excuse
because, as stated by Dispatcher
Cornista, employees should call the
police if there were packages
containing articles against company
regulations. Neither was failure by
employees of defendant company to
detect the contents of the packages of
passengers because like the rationale
in the Necesito vs. Paras case (supra),
a passenger has neither choice nor
control in the exercise of their
discretion in determining what are
inside the package of co-passengers
which may eventually prove fatal."
We cannot agree. No doubt, the views of His Honor do seem to be in
line with the reasons that the Code Commission had for incorporating
the above-quoted provisions in its draft of the Civil Code. Indeed, in
approving the said draft, Congress must have concurred with the
Commission that by requiring the highest degree of diligence from
common carriers in the safe transport of their passengers and by
creating a presumption of negligence against them, the recklessness
of their drivers which is a common sight even in crowded areas and,
particularly, on the highways throughout the country may, somehow,
if not in a large measure, be curbed. We are not convinced, however,
that the exacting criterion of said provisions has not been met by
appellant in the circumstances of this particular case.
It is undisputed that before the box containing the firecrackers were
allowed to be loaded in the bus by the conductor, inquiry was made
with the passenger carrying the same as to what was in it, since its
"opening . . . was folded and tied with abaca." (Decision p. 16, Record
on Appeal.) According to His Honor, "if proper and rigid inspection
were observed by the defendant, the contents of the box could have
been discovered and the accident avoided. Refusal by the passenger
to have the package opened was no excuse because, as stated by
Dispatcher Cornista, employees should call the police if there were
packages containing articles against company regulations." That may
be true, but it is Our considered opinion that the law does not require
as much. Article 1733 is not as unbending as His Honor has held, for
it reasonably qualifies the extraordinary diligence required of
common carriers for the safety of the passengers transported by
them to be "according to all the circumstances of each case." "In fact,
Article 1755 repeats this same qualification: "A common carrier is
bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances."

In this particular case before Us, it must be considered, that while it is
true the passengers of appellant's bus should not be made to suffer
for something over which they had no control, as enunciated in the
decision of this Court cited by His Honor, 1 fairness demands that in
measuring a common carrier's duty towards its passengers,
allowance must be given to the reliance that should be reposed on
the sense of responsibility of all the passengers in regard to their
common safety. It is to be presumed that a passenger will not take
with him anything dangerous to the lives and limbs of his co-
passengers, not to speak of his own. Not to be lightly considered be
the right to privacy to which each passenger is entitled. He cannot be
subjected to any unusual search, when he protests the innocuousness
of his baggage and nothing appears to indicate the contrary, as in the
case at bar. In other words, inquiry may be verbally made as to the
nature of a passenger's baggage when such is not outwardly
perceptible, but beyond this, constitutional boundaries are already in
danger of being transgressed. Calling a policeman to his aid, as
suggested by the service manual invoked by the trial judge, in
compelling the passenger to submit to more rigid inspection, after
the passenger had already declared that the box contained mere
clothes and other miscellaneous, could not have justified invasion of a
constitutionally protected domain. Police officers acting without
judicial authority secured in the manner provided by law are not
beyond the pale of constitutional inhibitions designed to protect
individual human rights and liberties. Withal, what must be
importantly considered here is not so much the infringement of the
fundamental sacred rights of the particular passenger herein
involved, but the constant threat any contrary ruling would pose on
the right of privacy of all passengers of all common carriers,
considering how easily the duty to inspect can be made an excuse for
mischief and abuse. Of course, when there are sufficient indications
that the representations of the passenger regarding the nature of his
baggage may not be true, in the interest of the common safety of all,
the assistance of the police authorities may be solicited, not
necessarily to force the passenger to open his baggage, but to conduct
the needed investigation consistent with the rules of propriety and,
above all, the constitutional rights of the passenger. It is in this sense
that the mentioned service manual issued by appellant to its
conductors must be understood.
Decisions in other jurisdictions cited by appellant in its brief,
evidently because of the paucity of local precedents squarely in point,
emphasize that there is need, as We hold here, for evidence of
circumstances indicating cause or causes for apprehension that the
passenger's baggage is dangerous and that it is failure of the common
carrier's employee to act in the face of such evidence that constitutes
the cornerstone of the common carrier's liability in cases similar to
the present one.
"The principle that must
control the servants of the carrier in
a case like the one before us is
correctly stated in the opinion in the
case of Clarke v. Louisville & N.R. Co.
20 Ky L. Rep. 839, 49 S.W. 1120. In
that case Clarke was a passenger on
the defendant's train. Another
passenger took a quantity of gasoline
into the same coach in which Clarke
was riding. It ignited and exploded,
by reason of which he was severely
injured. The trial court peremptorily
instructed the jury to find for the
defendant. In the opinion, affirming
the judgment, it is said: 'It may be
stated briefly, in assuming the
liability of a railroad to its passengers
for injury done by another passenger,
only where the conduct of this
passenger had been such before the
injury as to induce a reasonably
prudent and vigilant conductor to
believe that there was reasonable
ground to apprehend violence and
danger to the other passengers, and
in that case asserting it to be the duty
of the conductor of the railroad train
to use all reasonable means to
prevent such injury, and if he
neglects this reasonable duty, and
injury is done, that then the company
is responsible; that otherwise the
railroad is not responsible.'
"The opinion quotes with
approval from the case of Gulf, C. & S.
F. R. Co. vs. Shields, 9 Tex. Civ. App.
652, 29 S. W. 652, in which case the
plaintiff was injured by alcohol which
had been carried upon the train by
another passenger. In the opinion in
that case it is said: 'It was but a short
period of time after the alcohol was
spilt when it was set on fire and the
accident occurred, and it was not
shown that appellant's employees
knew that the jug contained alcohol.
In fact, it is not shown that the
conductor or any other employee
knew that Harris had a jug with him
until it fell out of the sack, though the
conductor had collected . . . (his) fare,
and doubtless knew that he had the
sack on the seat with him. . . . It
cannot be successfully denied that
Harris had the right as a passenger to
carry baggage on the train, and that
he had a right to carry it in a sack if
he chose to do so. We think it is
equally clear that, in the absence of
some intimation or circumstance
indicating that the sack contained
something dangerous to other
passengers, it was not the duty of
appellant's conductor or any other
employee to open the sack and
examine its contents.' Quinn v.
Louisville & N. R. Co. 98 Ky. 231, 32 S.
W. 742; Wood v. Louisville & N. R. Co.
101 Ky. 703, 42 S. W. 349; Louisville
& N. R. Co. v. Vincent, 29 Ky. L. Rep.
1049, 96 S. W. 898; Louisville & N. R.
Co. v. Renfro, 142 Ky. 590, 33 L. R. A.
(N. S.) 133, 135 S. W. 266." 2 (Italics
supplied).
"Explosive or Dangerous
Contents. A carrier is ordinarily
not liable for injuries to passengers
from fires or explosions caused by
articles brought into its conveyances
by other passengers, in the absence
of any evidence that the carrier,
through its employees, was aware of
the nature of the article or had any
reason to anticipate danger
therefrom. (Bogard v. Illinois C. R Co.
144 Ky. 649, 139 S. W. 855, 36 L. R. A.
[N. S.] 337; Clarke v. Louisville & N. R.
Co. 101 Ky. 34, 39 S. W. 840, 36 L. R.
A. 123 [explosion of can of gasoline];
East Indian R. Co. v. Mukerjee [1901]
A. C. [Eng.] 396, 3 B. R. C. 420 P. C.
[explosion of fireworks]; Annotation:
37 L. R. A. [N. S.] 725.)" 3
Appellant further invokes Article 1174 of the Civil Code which
relieves all obligors, including, of course, common carriers like
appellant, from the consequence of fortuitous events. The court a quo
held that "the breach of contract (in this case) was not due to
fortuitous event and that, therefore, the defendant is liable in
damages." Since We hold that appellant has succeeded in rebutting
the presumption of negligence by showing that it has exercised
extraordinary diligence for the safety of its passengers, "according to
the circumstances of the (each) case", We deem it unnecessary to rule
whether or not there was any fortuitous event in this case.
ACCORDINGLY, the appealed judgment of the trial court is reversed
and the case is dismissed, without costs.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez and
Fernando, JJ., concur.
CaAstro, J., concurs in the result.
Teehankee, J., reserves his vote.