Transportation Law Cases (Art. 1732)

8/11/2019 Transportation Law Cases (Art. 1732)

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epublic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

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

PEDRO DE GUZMAN, petitioner,vs.COURT OF APPEALS and ERNESTO CENDANA, respondents.

Vicente D. Millora for petitioner.

Jacinto Callanta for private respondent.

FELICIANO, J .:

Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrapmetal in Pangasinan. Upon gathering sufficient quantities of such scrap material, respondentwould bring such material to Manila for resale. He utilized two (2) six-wheeler trucks which heowned for hauling the material to Manila. On the return trip to Pangasinan, respondent wouldload his vehicles with cargo which various merchants wanted delivered to differingestablishments in Pangasinan. For that service, respondent charged freight rates which werecommonly lower than regular commercial rates.

Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of

General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondentfor the hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk in Makati,Rizal, to petitioner's establishment in Urdaneta on or before 4 December 1970. Accordingly, on1 December 1970, respondent loaded in Makati the merchandise on to his trucks: 150 cartonswere loaded on a truck driven by respondent himself, while 600 cartons were placed on boardthe other truck which was driven by Manuel Estrada, respondent's driver and employee.

Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes neverreached petitioner, since the truck which carried these boxes was hijacked somewhere alongthe MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the truck, itsdriver, his helper and the cargo.

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


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In his Answer, private respondent denied that he was a common carrier and argued that hecould not be held responsible for the value of the lost goods, such loss having been due to forcemajeure .

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

On appeal before the Court of Appeals, respondent urged that the trial court had erred inconsidering him a common carrier; in finding that he had habitually offered trucking services tothe public; in not exempting him from liability on the ground of force majeure; and in orderinghim to pay damages and attorney's fees.

The Court of Appeals reversed the judgment of the trial court and held that respondent hadbeen engaged in transporting return loads of freight "as a casualoccupation a sideline to his scrap iron business" and not as a common carrier. Petitionercame to this Court by way of a Petition for Review assigning as errors the following conclusionsof the Court of Appeals:

1. that private respondent was not a common carrier;

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

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

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

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

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

The above article makes no distinction between one whose principal business activity is thecarrying of persons or goods or both, and one who does such carrying only asan ancillary activity (in local Idiom as "a sideline"). Article 1732 also carefully avoids making anydistinction between a person or enterprise offering transportation service on a regular orscheduled 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 solicitsbusiness only from a narrow segment of the general population. We think that Article 1733deliberaom making such distinctions.

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


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... every person that now or hereafter may own, operate, manage, or control inthe Philippines, for hire or compensation, with general or limited clientele,whether permanent, occasional or accidental, and done for general business

purposes, any common carrier, railroad, street railway, traction railway, subwaymotor vehicle, either for freight or passenger, or both, with or without fixed routeand whatever may be its classification, freight or carrier service of any class,express service, steamboat, or steamship line, pontines, ferries and water craft,engaged in the transportation of passengers or freight or both, shipyard, marinerepair shop, wharf or dock, ice plant,ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power,water supply and power petroleum, sewerage system, wire or wirelesscommunications systems, wire or wireless broadcasting stations and othersimilar public services. ... (Emphasis supplied)

It appears to the Court that private respondent is properly characterized as a common carriereven though he merely "back-hauled" goods for other merchants from Manila to Pangasinan,although such back-hauling was done on a periodic or occasional rather than regular orscheduled manner, and even though private respondent's principal occupation was not thecarriage of goods for others. There is no dispute that private respondent charged his customersa fee for hauling their goods; that fee frequently fell below commercial freight rates is notrelevant here.

The Court of Appeals referred to the fact that private respondent held no certificate of publicconvenience, and concluded he was not a common carrier. This is palpable error. A certificateof public convenience is not a requisite for the incurring of liability under the Civil Codeprovisions governing common carriers. That liability arises the moment a person or firm acts asa common carrier, without regard to whether or not such carrier has also complied with therequirements of the applicable regulatory statute and implementing regulations and has beengranted a certificate of public convenience or other franchise. To exempt private respondentfrom the liabilities of a common carrier because he has not secured the necessary certificate ofpublic convenience, would be offensive to sound public policy; that would be to reward privaterespondent precisely for failing to comply with applicable statutory requirements. The businessof a common carrier impinges directly and intimately upon the safety and well being andproperty of those members of the general community who happen to deal with such carrier. Thelaw imposes duties and liabilities upon common carriers for the safety and protection of thosewho utilize their services and the law cannot allow a common carrier to render such duties andliabilities merely facultative by simply failing to obtain the necessary permits and authorizations.

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

Common carriers, "by the nature of their business and for reasons of public policy" 2 are held toa very high degree of care and diligence ("extraordinary diligence") in the carriage of goods aswell as of passengers. The specific import of extraordinary diligence in the care of goodstransported by a common carrier is, according to Article 1733, "further expressed in Articles1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code.

Article 1734 establishes the general rule that common carriers are responsible for the loss,destruction or deterioration of the goods which they carry, " unless the same is due to any of thefollowing causes only :


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

It is important to point out that the above list of causes of loss, destruction or deterioration whichexempt the common carrier for responsibility therefor, is a closed list. Causes falling outside theforegoing list, even if they appear to constitute a species of force majeure fall within the scope of

Article 1735, which provides as follows:

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

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

Petitioner insists that private respondent had not observed extraordinary diligence in the care ofpetitioner's goods. Petitioner argues that in the circumstances of this case, private respondentshould have hired a security guard presumably to ride with the truck carrying the 600 cartons ofLiberty filled milk. We do not believe, however, that in the instant case, the standard ofextraordinary diligence required private respondent to retain a security guard to ride with thetruck and to engage brigands in a firelight at the risk of his own life and the lives of the driverand his helper.

The precise issue that we address here relates to the specific requirements of the duty ofextraordinary diligence in the vigilance over the goods carried in the specific context of hijackingor armed robbery.

As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article1733, given additional specification not only by Articles 1734 and 1735 but also by Article 1745,

numbers 4, 5 and 6, Article 1745 provides in relevant part: Any of the following or similar stipulations shall be considered unreasonable,unjust and contrary to public policy:

xxx xxx xxx

(5) that the common carrier shall not be responsible for the acts oromissions of his or its employees;


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(6) that the common carrier's liability for acts committed bythieves, or of r obbers who do not act with grave orirresistible threat, violence or force , is dispensed with ordiminished; and

(7) that the common carrier shall not responsible for the loss,destruction or deterioration of goods on account of the defectivecondition of the car vehicle, ship, airplane or other equipmentused in the contract of carriage. (Emphasis supplied)

Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed todivest or to diminish such responsibility even for acts of strangers like thieves orrobbers, except where such thieves or robbers in fact acted "with grave or irresistible threat,violence or force." We believe and so hold that the limits of the duty of extraordinary diligence inthe vigilance over the goods carried are reached where the goods are lost as a result of arobbery which is attended by "grave or irresistible threat, violence or force."

In the instant case, armed men held up the second truck owned by private respondent whichcarried petitioner's cargo. The record shows that an information for robbery in band was filed inthe Court of First Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled " People of thePhilippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one JohnDoe ." There, the accused were charged with willfully and unlawfully taking and carrying awaywith them the second truck, driven by Manuel Estrada and loaded with the 600 cartons ofLiberty filled milk destined for delivery at petitioner's store in Urdaneta, Pangasinan. Thedecision of the trial court shows that the accused acted with grave, if not irresistible, threat,violence or force. 3 Three (3) of the five (5) hold-uppers were armed with firearms. The robbersnot only took away the truck and its cargo but also kidnapped the driver and his helper,detaining them for several days and later releasing them in another province (in Zambales). Thehijacked truck was subsequently found by the police in Quezon City. The Court of First Instanceconvicted all the accused of robbery, though not of robbery in band. 4

In these circumstances, we hold that the occurrence of the loss must reasonably be regarded asquite beyond the control of the common carrier and properly regarded as a fortuitous event. It isnecessary to recall that even common carriers are not made absolute insurers against all risksof travel and of transport of goods, and are not held liable for acts or events which cannot beforeseen or are inevitable, provided that they shall have complied with the rigorous standard ofextraordinary diligence.

We, therefore, agree with the result reached by the Court of Appeals that private respondentCendana is not liable for the value of the undelivered merchandise which was lost because ofan event entirely beyond private respondent's control.

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

SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.


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Footnotes

1 Rollo, p. 14.

2 Article 1733, Civil Code.

3 Rollo, p. 22.

4 The evidence of the prosecution did not show that more than three (3) of thefive (5) hold-uppers were armed . Thus, the existence of a "band" within thetechnical meaning of Article 306 of the Revised Penal Code, was not affirmativelyproved by the prosecution.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 112287 December 12, 1997

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.

PANGANIBAN, J .:

The Court finds occasion to apply the rules on the seaworthiness of private carrier, its owner'sresponsibility for damage to the cargo and its liability for demurrage and attorney's fees. TheCourt also reiterates the well-known rule that findings of facts of trial courts, when affirmed bythe Court of Appeals, are binding on this Court.

The Case

Before us are two separate petitions for review filed by National Steel Corporation (NSC) andVlasons 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:


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WHEREFORE, judgment is hereby rendered in favor of defendant and against theplaintiff dismissing the complaint with cost against plaintiff, and ordering plaintiff to paythe defendant on the counterclaim as follows:

1. The sum of P75,000.00 as unpaid freight and P88,000.00 as demurrage with interestat the legal rate on both amounts from April 7, 1976 until the same shall have been fullypaid;

2. Attorney's fees and expenses of litigation in the sum of P100,000.00; and

3. Costs 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'sfees 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 transportcargo or shipment for the general public. Its services are available only to specific persons whoenter into a special contract of charter party with its owner. It is undisputed that the ship is aprivate carrier. And it is in the 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 anddefendant Vlasons Shipping, Inc. (VSI) as Owner, entered into a Contract of VoyageCharter 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 dischargethem 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 atMaster's option.

3. . . .

4. Freight/Payment: P30.00/metric ton, FIOST basis. Payment upon presentation of Billof Lading within fifteen (15) days.


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5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.

6. Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather Working Day of 24consecutive 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. Shipownersnot responsible for losses/damages except on proven willful negligence of the officers ofthe vessel.

10. Other terms: (a) All terms/conditions of NONYAZAI C/P [sic ] or other internationallyrecognized 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 inthe NANYOZAI Charter Party which stands for "Freight In and Out including Stevedoringand Trading", which means that the handling, loading and unloading of the cargoes arethe responsibility of the Charterer. Under Paragraph 5 of the NANYOZAI Charter Party, itstates, "Charterers to load, stow and discharge the cargo free of risk and expenses toowners . . . . (Emphasis supplied).

Under paragraph 10 thereof, it is provided that "(o)wners shall, before and at thebeginning of the voyage, exercise due diligence to make the vessel seaworthy andproperly manned, equipped and supplied and to make the holds and all other parts ofthe 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 orresulting from: unseaworthiness unless caused by want of due diligence on the part ofthe owners to make the vessel seaworthy, and to secure that the vessel is properlymanned, equipped and supplied and to make the holds and all other parts of the vesselin 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 bulkor weight or any other loss or damage arising from inherent defect, quality or vice of thecargo; 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 ofthe 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 ordefault 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 1,677skids of tinplates and 92 packages of hot rolled sheets or a total of 1,769 packages witha total weight of about 2,481.19 metric tons for carriage to Manila. The shipment wasplaced in the three (3) hatches of the ship. Chief Mate Gonzalo Sabando, acting as


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agent of the vessel[,] acknowledged receipt of the cargo on board and signed thecorresponding 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) hatchescontaining the shipment were opened by plaintiff's agents, nearly all the skids of tinplatesand hot rolled sheets were allegedly found to be wet and rusty. The cargo wasdischarged and unloaded by stevedores hired by the Charterer. Unloading wascompleted only on August 24, 1974 after incurring a delay of eleven (11) days due to theheavy rain which interrupted the unloading operations. (Exhibit "E")

(4) To determine the nature and extent of the wetting and rusting, NSC called for asurvey of the shipment by the Manila Adjusters and Surveyors Company (MASCO). In aletter to the NSC dated March 17, 1975 (Exhibit "G"), MASCO made a report of its ocularinspection conducted on the cargo, both while it was still on board the vessel and later atthe NDC warehouse in Pureza St., Sta. Mesa, Manila where the cargo was taken andstored. MASCO reported that it found wetting and rusting of the packages of hot rolledsheets and metal covers of the tinplates; that tarpaulin hatch covers were noted torn atvarious extents; that container/metal casings of the skids were rusting all over. MASCOventured the opinion that "rusting of the tinplates was caused by contact with SEAWATER sustained while still on board the vessel as a consequence of the heavyweather and rough seas encountered while en route to destination (Exhibit "F"). It wasalso reported that MASCO's surveyors drew at random samples of bad order packingmaterials of the tinplates and delivered the same to the M.I.T. Testing Laboratories foranalysis. 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 packingmaterials . . . 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 filedwith the defendant its claim for damages suffered due to the downgrading of thedamaged tinplates in the amount of P941,145.18. Then on October 3, 1974, plaintiffformally 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 asCivil Case No. 23317, CFI, Rizal.

(6) In its complaint, plaintiff claimed that it sustained losses in the aforesaid amount ofP941,145.18 as a result of the act, neglect and default of the master and crew in themanagement of the vessel as well as the want of due diligence on the part of thedefendant to make the vessel seaworthy and to make the holds and all other parts of thevessel in which the cargo was carried, fit and safe for its reception, carriage andpreservation all in violation of defendant's undertaking under their Contract of VoyageCharter 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 saidvessel was not a "common carrier" inasmuch as she was under voyage charter contractwith the plaintiff as charterer under the charter party; that in the course of the voyagefrom Iligan City to Manila, the MV "VLASONS I" encountered very rough seas, strongwinds and adverse weather condition, causing strong winds and big waves tocontinuously pound against the vessel and seawater to overflow on its deck and hatch


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covers, that under the Contract of Voyage Charter Hire, defendant shall not beresponsible for losses/damages except on proven willful negligence of the officers of thevessel, that the officers of said MV "VLASONS I" exercised due diligence and properseamanship and were not willfully negligent; that furthermore the Voyage Charter Partyprovides that loading and discharging of the cargo was on FIOST terms which meansthat the vessel was free of risk and expense in connection with the loading anddischarging of the cargo; that the damage, if any, was due to the inherent defect, qualityor vice of the cargo or to the insufficient packing thereof or to latent defect of the cargonot discoverable by due diligence or to any other cause arising without the actual fault orprivity 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 thecargo in Manila were negligent and did not exercise due care in the discharge of thecargo; land that the cargo was exposed to rain and seawater spray while on the pier orin transit from the pier to plaintiff's warehouse after discharge from the vessel; and thatplaintiff's claim was highly speculative and grossly exaggerated and that the small stainmarks or sweat marks on the edges of the tinplates were magnified and considered totalloss of the cargo. Finally, defendant claimed that it had complied with all its duties andobligations under the Voyage Charter Hire Contract and had no responsibilitywhatsoever to plaintiff. In turn, it alleged the following counterclaim:

(a) That despite the full and proper performance by defendant of itsobligations under the Voyage Charter Hire Contract, plaintiff failed andrefused to pay the agreed charter hire of P75,000.00 despite demandsmade by defendant;

(b) That under their Voyage Charter Hire Contract, plaintiff had agreed topay defendant the sum of P8,000.00 per day for demurrage. The vesselwas on demurrage for eleven (11) days in Manila waiting for plaintiff todischarge its cargo from the vessel. Thus, plaintiff was liable to paydefendant demurrage in the total amount of P88,000.00.

(c) For filing a clearly unfounded civil action against defendant, plaintiffshould be ordered to pay defendant attorney's fees and all expenses oflitigation in the amount of not less than P100,000.00.

(8) From the evidence presented by both parties, the trial court came out with thefollowing findings which were set forth in its decision:

(a) The MV "VLASONS I" is a vessel of Philippine registry engaged in thetramping service and is available for hire only under special contracts ofcharter party as in this particular case.

(b) That for purposes of the voyage covered by the Contract of VoyageCharter Hire (Exh. "1"), the MV VLASONS I" was covered by the requiredseaworthiness certificates including the Certification of Classificationissued by an international classification society, the NIPPON KAIJIKYOKAI (Exh. "4"); Coastwise License from the Board of Transportation(Exh. "5"); International Loadline Certificate from the Philippine CoastGuard (Exh. "6"); Cargo Ship Safety Equipment Certificate also from thePhilippine Coast Guard (Exh. "7"); Ship Radio Station License (Exh. "8");


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Certificate of Inspection by the Philippine Coast Guard (Exh. "12"); andCertificate of Approval for Conversion issued by the Bureau of Customs(Exh. "9"). That being a vessel engaged in both overseas and coastwisetrade, the MV "VLASONS I" has a higher degree of seaworthiness andsafety.

(c) Before it proceeded to Iligan City to perform the voyage called for bythe Contract of Voyage Charter Hire, the MV "VLASONS I" underwentdrydocking in Cebu and was thoroughly inspected by the Philippine CoastGuard. In fact, subject voyage was the vessel's first voyage after thedrydocking. The evidence shows that the MV "VLASONS I" wasseaworthy and properly manned, equipped and supplied when itundertook the voyage. It has all the required certificates of seaworthiness.

(d) The cargo/shipment was securely stowed in three (3) hatches of theship. The hatch openings were covered by hatchboards which were inturn covered by two or double tarpaulins. The hatch covers were watertight. Furthermore, under the hatchboards were steel beams to givesupport.

(e) The claim of the plaintiff that defendant violated the contract ofcarriage is not supported by evidence. The provisions of the Civil Code oncommon carriers pursuant to which there exists a presumption ofnegligence in case of loss or damage to the cargo are not applicable. Asto the damage to the tinplates which was allegedly due to the wetting andrusting thereof, there is unrebutted testimony of witness Vicente

Angliongto that tinplates "sweat" by themselves when packed evenwithout being in contract ( sic ) with water from outside especially when theweather is bad or raining. The trust caused by sweat or moisture on thetinplates may be considered as a loss or damage but then, defendantcannot be held liable for it pursuant to Article 1734 of the Civil Case whichexempts the carrier from responsibility for loss or damage arising from the"character of the goods . . ." All the 1,769 skids of the tinplates could nothave been damaged by water as claimed by plaintiff. It was shown asclaimed by plaintiff that the tinplates themselves were wrapped in kraftpaper lining and corrugated cardboards could not be affected by waterfrom outside.

(f) The stevedores hired by the plaintiff to discharge the cargo of tinplateswere negligent in not closing the hatch openings of the MV "VLASONS I"when rains occurred during the discharging of the cargo thus allowingrainwater to enter the hatches. It was proven that the stevedores merelyset up temporary tents to cover the hatch openings in case of rain so thatit would be easy for them to resume work when the rains stopped by justremoving the tent or canvas. Because of this improper covering of thehatches by the stevedores during the discharging and unloadingoperations which were interrupted by rains, rainwater drifted into thecargo through the hatch openings. Pursuant to paragraph 5 of theNANYOSAI [sic ] Charter Party which was expressly made part of theContract of Voyage Charter Hire, the loading, stowing and discharging of


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the cargo is the sole responsibility of the plaintiff charterer and defendantcarrier 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 andbad weather while en route from Iligan City to Manila causing sea waterto 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 thatwould exempt the defendant from liability.

(h) Plaintiff did not comply with the requirement prescribed in paragraph 9of the Voyage Charter Hire contract that it was to insure the cargobecause it did not. Had plaintiff complied with the requirement, then itcould have recovered its loss or damage from the insurer. Plaintiff alsoviolated the charter party contract when it loaded not only "steelproducts", i .e . steel bars, angular bars and the like but also tinplates andhot rolled sheets which are high grade cargo commanding a higherfreight. Thus plaintiff was able to ship grade cargo at a lower freight rate.

(i) As regards defendant's counterclaim, the contract of voyage charterhire under Paragraph 4 thereof, fixed the freight at P30.00 per metric tonpayable to defendant carrier upon presentation of the bill of lading withinfifteen (15) days. Plaintiff has not paid the total freight due of P75,000.00despite demands. The evidence also showed that the plaintiff wasrequired and bound under paragraph 7 of the same Voyage Charter Hirecontract to pay demurrage of P8,000.00 per day of delay in the unloadingof the cargoes. The delay amounted to eleven (11) days thereby makingplaintiff liable to pay defendant for demurrage in the amount ofP88,000.00.

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, properlymanned, equipped and supplied, and that there is no proof of willful negligence of thevessel's officers.

II

The trial court erred in finding that the rusting of NSC's tinplates was due to the inherentnature 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 theunloading of NSC's shipment.

IV


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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, toVSI. 4

As earlier stated, the Court of Appeals modified the decision of the trial court by reducing thedemurrage from P88,000.00 to P44,000.00 and deleting the award of attorneys fees andexpenses of litigation. NSC and VSI filed separate motions for reconsideration. In aResolution 5 dated October 20, 1993, the appellate court denied both motions. Undaunted, NSCand VSI filed their respective petitions for review before this Court. On motion of VSI, the Courtordered 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 unloadingdelays 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 thevessel's seaworthiness at the beginning of the voyages; and

3. Whether or not a charterer's failure to insure its cargo exempts the shipowner fromliability 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 forNSC'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 ofNSC's tinplates.

In its separate petition, 9 VSI submits for the consideration of this Court the following allegederrors of the CA:


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A. The respondent Court of Appeals committed an error of law in reducing the award ofdemurrage from P88,000.00 to P44,000.00.

B. The respondent Court of Appeals committed an error of law in deleting the award ofP100,000 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 carrierspursuant to which there exist[s] a presumption of negligence against the common carrierin 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 thedemurrage.

Preliminary Matter : Common Carrier or Private Carrier?

At the outset, it is essential to establish whether VSI contracted with NSC as a common carrieror as a private carrier. The resolution of this preliminary question determines the law, standardof diligence and burden of proof applicable to the present case.

Article 1732 of the Civil Code defines a common carrier as "persons, corporations, firms orassociations 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 heldthat the true test of a common carrier is the carriage of passengers or goods, provided it hasspace, for all who opt to avail themselves of its transportation service for a fee. 11 A carrier whichdoes not qualify under the above test is deemed a private carrier. "Generally, private carriage isundertaken by special agreement and the carrier does not hold himself out to carry goods forthe general public. The most typical, although not the only form of private carriage, is the charterparty, a maritime contract by which the charterer, a party other than the shipowner, obtains theuse 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. Asfound by the Regional Trial Court, it carried passengers or goods only for those it chose under a


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"special contract of charter party." 13 As correctly concluded by the Court of Appeals, the MVVlasons I "was not a common but a private carrier." 14 Consequently, the rights and obligations ofVSI and NSC, including their respective liability for damage to the cargo, are determinedprimarily 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 BrothersShipping Corporation , 16 the Court ruled:

. . . in a contract of private carriage, the parties may freely stipulate their duties andobligations which perforce would be binding on them. Unlike in a contract involving acommon carrier, private carriage does not involve the general public. Hence, thestringent provisions of the Civil Code on common carriers protecting the general publiccannot 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 acharter party that lessen or remove the protection given by law in contracts involvingcommon carriers. 17

Extent of VSI's Responsibility andLiability Over NSC's Cargo

It is clear from the parties' Contract of Voyage Charter Hire, dated July 17, 1974, that VSI "shallnot 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 transportationfurther provided that the shipowner shall not be liable for loss of or a damage to the cargoarising or resulting from unseaworthiness, unless the same was caused by its lack of duediligence 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 NANYOZAICharter Party also provided that "[o]wners shall not be responsible for split, chafing and/or anydamage 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 itsshipment was caused by VSI's willful negligence or failure to exercise due diligence inmaking 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 thecontrary 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 causementioned in the preceding article if proofs against him show that they occurred on


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account of his negligence or his omission to take the precautions usually adopted bycareful persons, unless the shipper committed fraud in the bill of lading, making him tobelieve 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 bythe foregoing provisions of the Code of Commerce and not by the Civil Code which, as ageneral rule, places the prima facie presumption of negligence on a common carrier. It is ahornbook doctrine that:

In an action against a private carrier for loss of, or injury to, cargo, the burden is on theplaintiff to prove that the carrier was negligent or unseaworthy, and the fact that thegoods were lost or damaged while in the carrier's custody does not put the burden ofproof on the carrier.

Since . . . a private carrier is not an insurer but undertakes only to exercise due care inthe protection of the goods committed to its care, the burden of proving negligence or abreach of that duty rests on plaintiff and proof of loss of, or damage to, cargo while in thecarrier's possession does not cast on it the burden of proving proper care and diligenceon its part or that the loss occurred from an excepted cause in the contract or bill oflading. However, in discharging the burden of proof, plaintiff is entitled to the benefit ofthe presumptions and inferences by which the law aids the bailor in an action against abailee, and since the carrier is in a better position to know the cause of the loss and thatit was not one involving its liability, the law requires that it come forward with theinformation available to it, and its failure to do so warrants an inference or presumptionof its liability. However, such inferences and presumptions, while they may affect theburden of coming forward with evidence, do not alter the burden of proof which remainson plaintiff, and, where the carrier comes forward with evidence explaining the loss ordamage, 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 ofproving a breach thereof and that such breach was the proximate cause of the damagerests on plaintiff, and proof that the goods were lost or damaged while in the carrier'spossession does not cast on it the burden of proving seaworthiness. . . . Where thecontract of carriage exempts the carrier from liability for unseaworthiness notdiscoverable by due diligence, the carrier has the preliminary burden of proving theexercise of due diligence to make the vessel seaworthy. 20

In the instant case, the Court of Appeals correctly found the NSC "has not taken the correctposition 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 carefulexamination of the evidence will show that VSI miserably failed to comply with any of theseobligation's as if defendant-appellee [VSI] had the burden ofproof." 21

First Issue : Questions of Fact

Based on the foregoing, the determination of the following factual questions is manifestlyrelevant: (1) whether VSI exercised due diligence in making MV Vlasons I seaworthy for theintended purpose under the charter party; (2) whether the damage to the cargo should be


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winds and Manila office was advised by telegram of the adverse weather conditionsencountered; that in the morning of August 10, 1974, the weather condition changed toworse and strong winds and big waves continued pounding the vessel at her port sidecausing sea water to overflow on deck andhatch ( sic ) covers and which caused the firstlayer of the canvass covering to give way while the new canvass covering still holdingon;

That the weather condition improved when we reached Dumali Point protected byMindoro; that we re-secured the canvass covering back to position; that in the afternoonof August 10, 1974, while entering Maricaban Passage, we were again exposed tomoderate seas and heavy rains; that while approaching Fortune Island, we encounteredagain rough seas, strong winds and big waves which caused the same canvass to giveway and leaving the new canvass holding on;

xxx xxx xxx 28

And the relevant portions of Jose Pascua's deposition are as follows:

q What is the purpose of the canvas cover?

a So that the cargo would not be soaked with water.

q And will you describe how the canvas cover was secured on the hatchopening?

WITNESS

a It was placed flat on top of the hatch cover, with a little canvas flowingover 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 notbe removed.

ATTY DEL ROSARIO

q And will you tell us the size of the hatch opening? The length and thewidth of the hatch opening.

a Forty-five feet by thirty-five feet, sir.

xxx xxx xxx

q How was the canvas supported in the middle of the hatch opening?

a There is a hatch board.

ATTY DEL ROSARIO

q What is the hatch board made of?


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a It is made of wood, with a handle.

q And aside from the hatch board, is there any other material there tocover the hatch?

a There is a beam supporting the hatch board.

q What is this beam made of?

a It is made of steel, sir.

q Is the beam that was placed in the hatch opening covering the wholehatch opening?

a No, sir.

q How many hatch beams were there placed across the opening?

a There are five beams in one hatch opening.

ATTY DEL ROSARIO

q And on top of the beams you said there is a hatch board. How manypieces of wood are put on top?

a Plenty, sir, because there are several pieces on top of the hatch beam.

q And is there a space between the hatch boards?

a There is none, sir.

q They are tight together?

a Yes, sir.

q How tight?

a Very tight, sir.

q Now, on top of the hatch boards, according to you, is the canvass

cover. How many canvas covers?

a Two, sir. 29

That due diligence was exercised by the officers and the crew of the MV Vlasons I was furtherdemonstrated by the fact that, despite encountering rough weather twice, the new tarpaulin didnot give way and the ship's hatches and cargo holds remained waterproof. As aptly stated bythe Court of Appeals, ". . . we find no reason not to sustain the conclusion of the lower courtbased on overwhelming evidence, that the MV 'VLASONS I' was seaworthy when it undertook


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the voyage on August 8, 1974 carrying on board thereof plaintiff-appellant's shipment of 1,677skids of tinplates and 92 packages of hot rolled sheets or a total of 1,769 packages from NSC'spier 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 andthe crew of MV Vlasons I . On the contrary, the records reveal that it was the stevedores of NSCwho were negligent in unloading the cargo from the ship.

The stevedores employed only a tent-like material to cover the hatches when strong rainsoccasioned by a passing typhoon disrupted the unloading of the cargo. This tent-like covering,however, was clearly inadequate for keeping rain and seawater away from the hatches of theship. Vicente Angliongto, an officer of VSI, testified thus:

ATTY ZAMORA:

Q Now, during your testimony on November 5, 1979, you stated on August 14 you went on board the vessel upon notice from the NationalSteel Corporation in order to conduct the inspection of the cargo. Duringthe course of the investigation, did you chance to see the dischargingoperation?

WITNESS:

A Yes, sir, upon my arrival at the vessel, I saw some of the tinplatesalready discharged on the pier but majority of the tinplates were inside thehall, all the hatches were opened.

Q In connection with these cargoes which were unloaded, where is theplace.

A At the Pier.

Q What was used to protect the same from weather?

ATTY LOPEZ:

We object, your Honor, this question was already asked. This particularmatter . . . the transcript of stenographic notes shows the same wascovered in the direct examination.

ATTY ZAMORA:

Precisely, your Honor, we would like to go on detail, this is the seriouspart of the testimony.

COURT:

All right, witness may answer.


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ATTY LOPEZ:

Q What was used in order to protect the cargo from the weather?

A A base of canvas was used as cover on top of the tin plates, and tentswere built at the opening of the hatches.

Q You also stated that the hatches were already opened and that therewere tents constructed at the opening of the hatches to protect the cargofrom the rain. Now, will you describe [to] the Court the tents constructed.

A The tents are just a base of canvas which look like a tent of an Indiancamp raise[d] high at the middle with the whole side separated down tothe hatch, the size of the hatch and it is soaks [ sic ] at the middle becauseof those weather and this can be used only to temporarily protect thecargo from getting wet by rains.

Q Now, is this procedure adopted by the stevedores of covering tents proper?

A No, sir, at the time they were discharging the cargo, there was atyphoon passing by and the hatch tent was not good enough to hold all ofit to prevent the water soaking through the canvass and enter the cargo .

Q In the course of your inspection, Mr . Anglingto [sic], did you see in factthe water enter and soak into the canvass and tinplates .

A Yes, sir, the second time I went there, I saw it .

Q As owner of the vessel, did you not advise the National SteelCorporation [of] the procedure adopted by its stevedores in dischargingthe cargo particularly in this tent covering of the hatches?

A Yes, sir, I did the first time I saw it, I called the attention of thestevedores but the stevedores did not mind at all, so, called the attentionof the representative of the National Steel but nothing was done, just thesame. Finally, I wrote a letter to them. 31

NSC attempts to discredit the testimony of Angliongto by questioning his failure to complainimmediately about the stevedores' negligence on the first day of unloading, pointing out that hewrote his letter to petitioner only seven days later. 32 The Court is not persuaded. Angliongto'scandid answer in his aforequoted testimony satisfactorily explained the delay. Seven dayslapsed 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 ofactions constitutes a reasonable response in accord with common sense and ordinary humanexperience. Vicente Angliongto could not be blamed for calling the stevedores' attention firstand then the NSC's representative on location before formally informing NSC of the negligencehe had observed, because he was not responsible for the stevedores or the unloadingoperations. In fact, he was merely expressing concern for NSC which was ultimately responsiblefor the stevedores it had hired and the performance of their task to unload the cargo.


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We see no reason to reverse the trial and the appellate courts' findings and conclusions on thispoint, viz :

In the THIRD assigned error, [NSC] claims that the trial court erred in finding that thestevedores hired by NSC were negligent in the unloading of NSC's shipment. We do notthink so. Such negligence according to the trial court is evident in the stevedores hiredby [NSC], not closing the hatch of MV 'VLASONS I' when rains occurred during thedischarging of the cargo thus allowing rain water and seawater spray to enter thehatches and to drift to and fall on the cargo. It was proven that the stevedores merely setup temporary tents or canvas to cover the hatch openings when it rained during theunloading operations so that it would be easier for them to resume work after the rainsstopped by just removing said tents or canvass. It has also been shown that on August20, 1974, VSI President Vicente Angliongto wrote [NSC] calling attention to the mannerthe stevedores hired by [NSC] were discharging the cargo on rainy days and theimproper closing of the hatches which allowed continuous heavy rain water to leakthrough and drip to the tinplates' covers and [Vicente Angliongto] also suggesting thatdue to four (4) days continuos rains with strong winds that the hatches be totally closeddown and covered with canvas and the hatch tents lowered. (Exh. "13"). This letter wasreceived 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 duringunfavorable weather will not make VSI liable for any damage caused thereby. In passing, it maybe noted that the NSC may seek indemnification, subject to the laws on prescription, from thestevedoring company at fault in the discharge operations. "A stevedore company engaged indischarging cargo . . . has the duty to load the cargo . . . in a prudent manner, and it is liable forinjury to, or loss of, cargo caused by its negligence . . . and where the officers and members andcrew 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 thestevedores . . ." 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 especiallywhen the weather is bad orraining . . ." 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 rainand seawater which the stevedores negligently allowed to seep in during the unloading.

Second Issue : Effect of NSC's Failure toInsure the Cargo

The obligation of NSC to insure the cargo stipulated in the Contract of Voyage Charter Hire istotally separate and distinct from the contractual or statutory responsibility that may be incurredby VSI for damage to the cargo caused by the willful negligence of the officers and the crewof MV Vlasons I . Clearly, therefore, NSC's failure to insure the cargo will not affect its right, asowner and real party in interest, to file an action against VSI for damages caused by the latter's


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willful negligence. We do not find anything in the charter party that would make the liability ofVSI for damage to the cargo contingent on or affected in any manner by NSC's obtaining aninsurance over the cargo.

Third Issue : Admissibility of CertificatesProving Seaworthiness

NSC's contention that MV Vlasons I was not seaworthy is anchored on the allegedinadmissibility of the certificates of seaworthiness offered in evidence by VSI. The saidcertificates include the following:

1. Certificate of Inspection of the Philippines 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 Transportation5. 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 withthe Rules of Court. It points out that Exhibits 3, 4 and 11 allegedly are "not written records oracts of public officers"; while Exhibits 5, 6, 7, 8, 9, 11 and 12 are not "evidenced by officialpublications or certified true copies" as required by Sections 25 and 26, Rule 132, of the Rulesof Court. 37

After a careful examination of these exhibits, the Court rules that Exhibits 3, 4, 5, 6, 7, 8, 9 and12 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 writingexecuted, or by evidence of the genuineness of the handwriting of the maker, or by asubscribing witness. Exhibits, 5, 6, 7, 8, 9, and 12 are photocopies, but their admission underthe best evidence rule have not been demonstrated.

We find, however, that Exhibit 11 is admissible under a well-settled exception to the hearsayrule per Section 44 of Rule 130 of the Rules of Court, which provides that "(e)ntries in officialrecords made in the performance of a duty by a public officer of the Philippines, or by a personin the performance of a duty specially enjoined by law, are prima facie evidence of the factstherein stated." 38 Exhibit 11 is an original certificate of the Philippine Coast Guard in Cebuissued by Lieutenant Junior Grade Noli C. Flores to the effect that "the vessel 'VLASONS I' wasdrydocked . . . 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 inseaworthy condition, meets all requirements, fitted and equipped for trading as a cargo vesselwas 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 notseaworthy. As observed earlier, the vessel was a private carrier and, as such, it did not have theobligation of a common carrier to show that it was seaworthy. Indeed, NSC glaringly failed todischarge its duty of proving the willful negligence of VSI in making the ship seaworthy resulting


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in damage to its cargo. Assailing the genuineness of the certificate of seaworthiness is notsufficient 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 atMaster'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 contractof affreightment for the detention of the vessel beyond the laytime or that period of time agreedon for loading and unloading of cargo. 40 It is given to compensate the shipowner for the nonuseof the vessel. On the other hand, the following is well-settled:

Laytime runs according to the particular clause of the charter party. . . . If laytime isexpressed 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 thosedays 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 qualifiedlaytime as WWDSHINC or weather working days Sundays and holidays included. 42 The runningof laytime was thus made subject to the weather, and would cease to run in the eventunfavorable weather interfered with the unloading of cargo. 43 Consequently, NSC may not beheld liable for demurrage as the four-day laytime allowed it did not lapse, having been tolled byunfavorable weather condition in view of the WWDSHINC qualification agreed upon by theparties. Clearly, it was error for the trial court and the Court of Appeals to have found andaffirmed respectively that NSC incurred eleven days of delay in unloading the cargo. The trialcourt arrived at this erroneous finding by subtracting from the twelve days, specifically August13, 1974 to August 24, 1974, the only day of unloading unhampered by unfavorable weather orrain, which was August 22, 1974. Based on our previous discussion, such finding is a reversibleerror. As mentioned, the respondent appellate court also erred in ruling that NSC was liable toVSI for demurrage, even if it reduced the amount by half.

Attorney's Fees

VSI assigns as error of law the Court of Appeals' deletion of the award of attorney's fees. Wedisagree. 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 sufficientshowing of bad faith would be reflected in a party's persistence in a case other than anerroneous conviction of the righteousness of his cause . . ." 44 Moreover, attorney's fees may not


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be awarded to a party for the reason alone that the judgment rendered was favorable to thelatter, as this is tantamount to imposing a premium on one's right to litigate or seek judicialredress of legitimate grievances. 45

Epilogue

At bottom, this appeal really hinges on a factual issue: when, how and who caused the damageto the cargo? Ranged against NSC are two formidable truths. First, both lower courts found thatsuch damage was brought about during the unloading process when rain and seawater seepedthrough the cargo due to the fault or negligence of the stevedores employed by it. Basic is therule that factual findings of the trial court, when affirmed by the Court of Appeals, are binding onthe Supreme Court. Although there are settled exceptions, NSC has not satisfactorily shownthat this case is one of them. Second, the agreement between the parties the Contract ofVoyage 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 theparties entered into a contract of private charter, not one of common carriage. Basic too is thedoctrine that courts cannot relieve a parry from the effects of a private contract freely enteredinto, on the ground that it is allegedly one-sided or unfair to the plaintiff. The charter party is anormal commercial contract and its stipulations are agreed upon in consideration of manyfactors, not the least of which is the transport price which is determined not only by the actualcosts but also by the risks and burdens assumed by the shipper in regard to possible loss ordamage to the cargo. In recognition of such factors, the parties even stipulated that the shippershould insure the cargo to protect itself from the risks it undertook under the charter party. ThatNSC 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 thatthe demurrage awarded to VSI is deleted. No pronouncement as to costs.

SO ORDERED.

Narvasa, C.J., Romero, Melo and Francisco, JJ., concur.


Manila

SECOND DIVISION

G.R. No. 125948 December 29, 1998

FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner,vs.COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and


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ADORACION C. ARELLANO, in her official capacity as City Treasurer of Batangas,respondents.

MARTINEZ, J .:

This petition for review on cer t iorar i assails the Decision of the Court of Appeals datedNovember 29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional TrialCourt of Batangas City, Branch 84, in Civil Case No. 4293, which dismissed petitioners'complaint for a business tax refund imposed by the City of Batangas.

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

Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the

Mayor of Batangas City. However, before the mayor's permit could be issued, therespondent City Treasurer required petitioner to pay a local tax based on its grossreceipts for the fiscal year 1993 pursuant to the Local Government Code 3 . Therespondent City Treasurer assessed a business tax on the petitioner amounting toP956,076.04 payable in four installments based on the gross receipts for productspumped at GPS-1 for the fiscal year 1993 which amounted to P181,681,151.00. In ordernot to hamper its operations, petitioner paid the tax under protest in the amount ofP239,019.01 for the first quarter of 1993.

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

Please note that our Company (FPIC) is a pipeline operator with agovernment concession granted under the Petroleum Act. It is engaged inthe business of transporting petroleum products from the Batangasrefineries, via pipeline, to Sucat and JTF Pandacan Terminals. As such, ourCompany is exempt from paying tax on gross receipts under Section 133 ofthe Local Government Code of 1991 . . . .

Moreover, Transportation contractors are not included in the enumerationof contractors under Section 131, Paragraph (h) of the Local GovernmentCode. Therefore, the authority to impose tax "on contractors and otherindependent contractors" under Section 143, Paragraph (e) of the LocalGovernment Code does not include the power to levy on transportation

contractors.

The imposition and assessment cannot be categorized as a mere feeauthorized under Section 147 of the Local Government Code. The saidsection limits the imposition of fees and charges on business to suchamounts as may be commensurate to the cost of regulation, inspection,and licensing. Hence, assuming arguendo that FPIC is liable for the licensefee, the imposition thereof based on gross receipts is violative of theaforecited provision. The amount of P956,076.04 (P239,019.01 per quarter)


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is not commensurate to the cost of regulation, inspection and licensing.The fee is already a revenue raising measure, and not a mere regulatoryimposition. 4

On March 8, 1994, the respondent City Treasurer denied the protest contending thatpetitioner cannot be considered engaged in transportation business, thus it cannot claimexemption under Section 133 (j) of the Local Government Code. 5

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

Traversing the complaint, the respondents argued that petitioner cannot be exempt fromtaxes under Section 133 (j) of the Local Government Code as said exemption applies onlyto "transportation contractors and persons engaged in the transportation by hire andcommon carriers by air, land and water." Respondents assert that pipelines are notincluded in the term "common carrier" which refers solely to ordinary carriers such astrucks, trains, ships and the like. Respondents further posit that the term "commoncarrier" under the said code pertains to the mode or manner by which a product isdelivered to its destination. 8

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

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

. . . the exemption to tax claimed by the plaintiff has become unclear. It is arule that tax exemptions are to be strictly construed against the taxpayer,taxes being the lifeblood of the government. Exemption may therefore begranted only by clear and unequivocal provisions of law.

Plaintiff claims that it is a grantee of a pipeline concession under RepublicAct 387. (Exhibit A) whose concession was lately renewed by the Energy

Regulatory Board (Exhibit B). Yet neither said law nor the deed ofconcession grant any tax exemption upon the plaintiff.

Even the Local Government Code imposes a tax on franchise holdersunder Sec. 137 of the Local Tax Code. Such being the situation obtained inthis case (exemption being unclear and equivocal) resort to distinctions orother considerations may be of help:


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1. That the exemption granted under Sec. 133 (j)encompasses only comm on ca r r i er s so as notto overburden the riding public or commuterswith taxes. Plaintif f is not a common carrier, buta special carrier extending its services andfacilities to a single specific or "specialcustomer" under a "special contract."

2. The Local Tax Code of 1992 was basicallyenacted to give more and effective localautonomy to local governments than theprevious enactments, to make themeconomically and financially viable to serve thepeople and discharge their functions with aconcomitant obligation to accept certaindevolution of powers, . . . So, consistent withthis policy even franchise grantees are taxed(Sec. 137) and contractors are also taxed underSec. 143 (e) and 151 of the Code. 9

Petitioner assailed the aforesaid decision before this Court via a petition for review. OnFebruary 27, 1995, we referred the case to the respondent Court of Appeals forconsideration and adjudication. 10On November 29, 1995, the respondent court rendereda decision 11 affirming the trial court's dismissal of petitioner's complaint. Petitioner'smotion for reconsideration was denied on July 18, 1996. 12

Hence, this petition. At first, the petition was denied due course in a Resolution datedNovember 11, 1996. 13 Petitioner moved for a reconsideration which was granted by thisCourt in a Resolution 14 of January 22, 1997. Thus, the petition was reinstated.

Petitioner claims that the respondent Court of Appeals erred in holding that (1) thepetitioner is not a common carrier or a transportation contractor, and (2) the exemptionsought for by petitioner is not clear under the law.

There is merit in the petition.

A "common carrier" may be defined, broadly, as one who holds himself out to the publicas engaged in the business of transporting persons or property from place to place, forcompensation, offering his services to the public generally.

Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm

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

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

1. He must be engaged in the business ofcarrying goods for others as a publicemployment, and must hold himself out asready to engage in the transportation of goods


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for person generally as a business and not as acasual occupation;

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

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

4. The transportation must be for hire. 15

Based on the above definitions and requirements, there is no doubt that petitioner is acommon carrier. It is engaged in the business of transporting or carrying goods, i .e .petroleum products, for hire as a public employment. It undertakes to carry for allpersons indifferently, that is, to all persons who choose to employ its services, andtransports the goods by land and for compensation. The fact that petitioner has a limitedclientele does not exclude it from the definition of a common carrier. In De Guzman vs.Court of Appeals 16 we ruled that:

The above article (Art. 1732, Civil Code) makes no distinctionbetween one whose principal business activity is the carryingof persons or goods or both, and one who does suchcarrying only as an ancillary activity (in local idiom, as a"sideline"). Article 1732 . . . avoids making any distinctionbetween a person or enterprise offering transportationservice on a regular or scheduled basis and one offeringsuch service on an occasional , episodic or unsc heduledbasis . Neither does Article 1732 distinguish between a carrieroffering its services to the " general publ ic , " i .e ., the generalcommunity or population, and one who offers services orsolicits business only from a narrow segment of the generalpopulation. We think that Article 1877 deliberately refrainedfrom making such distinctions.

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

every person that now or hereafter may own,operate. manage, or control in the Philippines,for hire or compensation, with general orlimited clientele, whether permanent,occasional or accidental, and done for generalbusiness purposes, any common carrier,railroad, street railway, traction railway, subway


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motor vehicle, either for freight or passenger, orboth, with or without fixed route and whatevermay be its classification, freight or carrierservice of any class, express service,steamboat, or steamship line, pontines, ferriesand water craft, engaged in the t ransporta t iono f passengers or freight or both, shipyard,marine repair shop, wharf or dock, ice plant,ice-refrigeration plant, canal, irrigation systemgas, electric light heat and power, water supplyand power petroleum, sewerage system, wire orwireless communications systems, wire orwireless broadcasting stations and othersimilar public services. (Emphasis Supplied)

Also, respondent's argument that the term "common carrier" as used in Section 133 (j) ofthe Local Government Code refers only to common carriers transporting goods andpassengers through moving vehicles or vessels either by land, sea or water, iserroneous.

As correctly pointed out by petitioner, the definition of "common carriers" in the CivilCode makes no distinction as to the means of transporting, as long as it is by land, wateror air. It does not provide that the transportation of the passengers or goods should beby motor vehicle. In fact, in the United States, oil pipe line operators are consideredcommon carriers. 17

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

Art. 86. Pipe line concessionaire as common carrier. Apipe line shall have the preferential right to utilizeinstallations for the transportation of petroleum owned byhim, but is obligated to utilize the remaining transportationcapacity pro rata for the transportation of such otherpetroleum as may be offered by others for transport, and tocharge without discrimination such rates as may have beenapproved by the Secretary of Agriculture and NaturalResources.

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

that everything relating to the exploration for and exploitationof petroleum . . . and everything relating to the manufacture,refining, storage, or t ransporta t ion by special method s ofpetroleum , is hereby declared to be a publ ic ut i l i ty . (EmphasisSupplied)

The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." InBIR Ruling No. 069-83, it declared:


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. . . since [petitioner] is a pipeline concessionaire that isengaged only in transporting petroleum products, it isconsidered a common carrier under Republic Act No. 387 . . .. Such being the case, it is not subject to withholding taxprescribed by Revenue Regulations No. 13-78, as amended.

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

Sec. 133. Comm on Limit at ions on the Taxing Powers of LocalGovernment Uni ts . Unless otherwise provided herein, theexercise of the taxing powers of provinces, cities,municipalities, and barangays shall not extend to the levy ofthe following:

xxx xxx xxx

(j) Taxes on the gross receipts oftransportation contractors andpersons engaged in thetransportation of passengers orfreight by hire and commoncarriers by air, land or water,except as provided in this Code.

The deliberations conducted in the House of Representatives on the Local GovernmentCode of 1991 are illuminating:

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

Mr. Speaker, we would like to proceed to page 95, line

1. It states: "SEC. 121 [now Sec. 131]. Common Limitationson the Taxing Powers of Local Government Units." . . .

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

Still on page 95, subparagraph 5, on taxes on the business oftransportation. This appears to be one of those being deemedto be exempted from the taxing powers of the local

government units. May we know the reason why thetransportation business is being excluded from the taxingpowers of the local government units?

MR. JAVIER (E.). Mr. Speaker, there is an exception containedin Section 121 (now Sec. 131), line 16, paragraph 5. It statesthat local government units may not impose taxes on thebusiness of transportation, except as otherwise provided inthis code.


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Now, Mr. Speaker, if the Gentleman would care to go to page98 of Book II, one can see there that provinces have thepower to impose a tax on business enjoying a franchise atthe rate of not more than one-half of 1 percent of the grossannual receipts. So, transportation contractors who areenjoying a franchise would be subject to tax by the province.That is the exception, Mr. Speaker.

What we want to guard against here, Mr. Speaker, is theimposition of taxes by local government units on the carrierbusiness. Local government units may impose taxes on topof what is already being imposed by the National InternalRevenue Code which is the so-called "common carriers tax."We do not want a duplication of this tax, so we just providedfor an exception under Section 125 [now Sec. 137] that aprovince may impose this tax at a specific rate.

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

It is clear that the legislative intent in excluding from the taxing power of the localgovernment unit the imposition of business tax against common carriers is to prevent aduplication of the so-called "common carrier's tax."

Petitioner is already paying three (3%) percent common carrier's tax on its grosssales/earnings under the National Internal Revenue Code. 19 To tax petitioner again on itsgross receipts in its transportation of petroleum business would defeat the purpose ofthe Local Government Code.

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

SO ORDERED.

Bellosi l lo , Puno and Mendoza, JJ . , concur.


Manila

SECOND DIVISION

G.R. No. 148496 March 19, 2002

VIRGINES CALVO doing business under the name and style TRANSORIENT CONTAINERTERMINAL SERVICES, INC., petitioner,


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vs.UCPB GENERAL INSURANCE CO., INC. (formerly Allied Guarantee Ins. Co.,Inc.) respondent.

MENDOZA, J .:

This is a petition for review of the decision, 1 dated May 31, 2001, of the Court of Appeals,affirming the decision 2of the Regional Trial Court, Makati City, Branch 148, which orderedpetitioner to pay respondent, as subrogee, the amount of P93,112.00 with legal interest,representing the value of damaged cargo handled by petitioner, 25% thereof as attorney's fees,and the cost of the suit. 1wphi1.nt

The facts are as follows:

Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI),a sole proprietorship customs broker. At the time material to this case, petitioner entered into acontract with San Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemicalfluting paper and 124 reels of kraft liner board from the Port Area in Manila to SMC's warehouseat the Tabacalera Compound, Romualdez St., Ermita, Manila. The cargo was insured byrespondent UCPB General Insurance Co., Inc.

On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in Manila onboard "M/V Hayakawa Maru" and, after 24 hours, were unloaded from the vessel to the custodyof the arrastre operator, Manila Port Services, Inc. From July 23 to July 25, 1990, petitioner,pursuant to her contract with SMC, withdrew the cargo from the arrastre operator and deliveredit to SMC's warehouse in Ermita, Manila. On July 25, 1990, the goods were inspected by MarineCargo Surveyors, who found that 15 reels of the semi-chemical fluting paper were"wet/stained/torn" and 3 reels of kraft liner board were likewise torn. The damage was placedat P93,112.00.

SMC collected payment from respondent UCPB under its insurance contract for theaforementioned amount. In turn, respondent, as subrogee of SMC, brought suit againstpetitioner in the Regional Trial Court, Branch 148, Makati City, which, on December 20, 1995,rendered judgment finding petitioner liable to respondent for the damage to the shipment.

The trial court held:

It cannot be denied . . . that the subject cargoes sustained damage while in the custodyof defendants. Evidence such as the Warehouse Entry Slip (Exh. "E"); the DamageReport (Exh. "F") with entries appearing therein, classified as "TED" and "TSN", whichthe claims processor, Ms. Agrifina De Luna, claimed to be tearrage at the end and

tearrage at the middle of the subject damaged cargoes respectively, coupled with theMarine Cargo Survey Report (Exh. "H" - "H-4-A") confirms the fact of the damagedcondition of the subject cargoes. The surveyor[s'] report (Exh. "H-4-A") in particular,which provides among others that:

" . . . we opine that damages sustained by shipment is attributable to improperhandling in transit presumably whilst in the custody of the broker . . . ."

is a finding which cannot be traversed and overturned.


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

. . . .

Generally speaking under Article 1735 of the Civil Code, if the goods are proved to havebeen lost, destroyed or deteriorated, common carriers are presumed to have been atfault or to have acted negligently, unless they prove that they have observed theextraordinary diligence required by law. The burden of the plaintiff, therefore, is to provemerely that the goods he transported have been lost, destroyed or deteriorated.Thereafter, the burden is shifted to the carrier to prove that he has exercised theextraordinary diligence required by law. Thus, it has been held that the mere proof ofdelivery of goods in good order to a carrier, and of their arrival at the place of destinationin bad order, makes out a prima facie case against the carrier, so that if no explanationis

Transportation Law Cases (Art. 1732)

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