PEDRO DE GUIZMAN VS.

COURT OF APPEALS
G.R. No. L-47822, December 22, 1988
PONENTE:
Feliciano, J.

PARTIES:
● Pedro de Guzman, petitioner
● Court of Appeals and Ernesto Cendana, respondents

BRIEF STATEMENT OF THE CASE:

● Breach of the contract to carry
● Extraordinary diligence needed over common carriers

BRIEF STATEMENT OF THE FACTS:

● Ernesto Cendana, a junk dealer, engaged in buying used bottles and scrap metal in
Pangasinan.
● Upon gathering sufficient quantities of such scrap material, respondent would bring
such material to Manila for resale.
● He utilized (2) two six-wheeler trucks which he owned for the purpose.
● Upon returning to Pangasinan, he would load his vehicle with cargo belonging to
different merchants to different establishments in Pangasinan which respondents
charged a freight fee for.
● Sometime in November 1970, herein petitioner Pedro de Guzman, a merchant and
dealer of General Milk Company Inc. in Pangasinan contracted with respondent for
hauling 750 cartons of milk.
○ 150 of which was loaded to driven by respondent himself while 650 were loaded
to his employee, Manuel Estrada
○ Unfortunately, only 150 cartons made it, as the other 600 cartons were
intercepted by hijackers who were armed along Marcos Highway.
● Hence, petitioners commenced an action against private respondent
○ Alleging that he is a common carrier
○ And he failed to exercise extraordinary diligence require by law

Respondent’s Argument:
● Respondent argued that he cannot be held liable due to force majeure, and that he is
not a common carrier and hence is not required to exercise extraordinary diligence.
● He also argued that he could not be held responsible for the value of the lost goods,
such loss having been due to force majeure.
● On appeal before the Court of Appeals, Cendana urged that the trial court had
erred:
○ in considering him a common carrier;
○ in finding that he had habitually offered trucking services to the public;
○ in not exempting him from liability on the ground of force majeure; and
○ in ordering him to pay damages and attorneys fees.’

The Court of Appeals:

● Reversed the judgment of the trial court and held that Cendana had been engaged in
transporting return loads of freight “as a casual occupation — a sideline to his scrap
iron business” and not as a common carrier.
Hence, DeGuzman came to the Supreme Court by way of a Petition for Review.

ISSUES:
1. Is the respondent a common carrier?
2. Is the respondent liable for the loss of the cartons of milk due to force majeure?

DECISION:

1. Herein respondent is considered as a common carrier.

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

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

engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air for compensation, offering their services to the public.
● Article 1732 of the New Civil Code avoids any 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.
● It also avoids a distinction between a person or enterprise offering transportation
services on a regular or scheduled basis and one offering such services on an
occasional, episodic, and 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 deliberaom making such distinctions.
● So understood, the concept of "common carrier" under Article 1732 may be seen to
coincide neatly with the notion of "public service," under the Public Service Act.

2. Respondent is not liable for the value of the undelivered merchandise .

Article 1734 of the Civil Code establishes the general rule is established by the article 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 the following causes only:
● a. Flood, storm, earthquake, lightning or other natural disasters;
● b. Act of the public enemy, whether international or civil;
● c. Act or omission of the shipper or owner of the goods;
● d. Character of the goods or defects in the packing;
● e. Order or act of competent public authority.

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

Moreover, the duty of extraordinary diligence in the vigilance over goods is, under Article 1733,
given additional specification not only by Articles 1734 and 1735 but also by Article 1745,
numbers 5, 6 and 7, Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be considered unreasonable, unjust and
contrary to public policy:

Article 1745: 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 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; and
● (7) that the common carrier shall not be 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. (Emphasis supplied)

Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed
to divest or to diminish such responsibility — even for acts of strangers like thieves or robbers,
except where such thieves or robbers in fact acted "with grave or irresistible threat, violence or
force."

● The Supreme Court held that the limits of the duty of extraordinary diligence in the
vigilance over the goods carried are reached where the goods are lost as a result of a
robbery which is attended by "grave or irresistible threat, violence or force."
● In these circumstances, the occurrence of the loss must reasonably be regarded as
quite beyond the control of the common carrier and properly regarded as a fortuitous
event.
● It is necessary to recall that even common carriers are not made absolute insurers
against all risks of travel and of transport of goods, and are not held liable for acts
or events which cannot be foreseen or are inevitable, provided that they shall have
complied with the rigorous standard of extraordinary diligence.

The decision of the trial court shows that the armed men who held up the second truck
owned by a private respondent acted with grave, if not irresistible, threat, violence or
force, which is an exception of the general rule of Article 1745 (6).

Test for Determining Common Carriers

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

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

● 1. He must be engaged in the business of carrying goods for others as a public

employment, and must hold himself out as ready to engage in the transportation of
goods for person generally as a business and not as a casual occupation;
● 2. He must undertake to carry goods of the kind to which his business is confined;
● 3. He must undertake to carry by the method by which his business is conducted and
over his established roads; and
● 4. The transportation must be for hire.
On the above definitions and requirements, there is no doubt that petitioner is a common
carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum products,
for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all
persons who choose to employ its services, and transports the goods by land and for
compensation. The fact that petitioner has a limited clientele does not exclude it from the
definition of a common carrier.

As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code
makes no distinction as to the means of transporting, as long as it is by land, water or air. It
does not provide that the transportation of the passengers or goods should be by motor
vehicle.

The concept of "common carrier" under Article 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 least partially supplements the law on common carriers set forth in the Civil
Code. Under the Public Service 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 or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, subway motor vehicle, either
for freight or passenger, or both, with or without fixed route and whatever may be its
classification, freight or carrier service of any class, express service, steamboat, or
steamship line, pontines, ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system gas, electric light heat and power, water
supply and power petroleum

2.) How does the Supreme Court define common carriers?

The Supreme Court defines common carriers as persons, corporations, firms, or associations
engaged in the business of carrying or transporting passengers or goods for compensation,
offering their services to the public.

3.) Does the law make a distinction between carriers based on the nature of their business or
the regularity of their services?

No, the law does not make a distinction between carriers based on the nature of their business
or the regularity of their services.

4.) What is the duty of common carriers?

Common carriers are held to a high degree of care and diligence in the carriage of goods and
passengers.

5.) What is the liability of common carriers?

Common carriers are responsible for the loss, destruction, or deterioration of goods, unless the
cause falls within the specific exempting causes listed in the law.
6.) What is considered a fortuitous event?

A fortuitous event is an event that is unforeseen, unexpected, and beyond the control of the
parties involved.

7.) Was the hijacking of the truck carrying the goods considered a fortuitous event?

Yes, the hijacking of the truck carrying the goods was considered a fortuitous event.

8.) Is a common carrier liable for the loss of goods due to a fortuitous event?

No, a common carrier is not liable for the loss of goods due to a fortuitous event.

9.) What is the duty of extraordinary diligence?

The duty of extraordinary diligence is the high standard of care and vigilance that common
carriers are required to observe in the carriage of goods and passengers.

10.) Can a common carrier be held liable for acts of strangers like thieves or robbers?

A common carrier can be held liable for acts of strangers like thieves or robbers, unless such
acts involve grave or irresistible threat, violence, or force.
BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. vs. PHILIPPINE FIRST
INSURANCE CO., INC
G.R. No. 143133
June 5, 2002

DOCTRINE:

Proof of the delivery of goods in good order to a common carrier and of their arrival in bad
order at their destination constitutes prima facie fault or negligence on the part of the carrier. If
no adequate explanation is given as to how the loss, the destruction or the deterioration of the
goods happened, the carrier shall be held liable therefor.

FACTS:

● Before the Court is a petition for review under Rule 45 of the ROC, assailing the decision
of the CA that reversed the RTC decision.
● The CMC Trading A.G. shipped on board the M/V 'Anangel Sky' at Hamburg, Germany
242 coils of various Prime Cold Rolled Steel sheets for transportation to Manila consigned
to the Philippine Steel Trading Corporation.
● Upon arrival, four coils were found to be in a bad order.
● Finding them in their damaged state to be unfit for the intended purpose, the consignee
Philippine Steel Trading Corporation declared the same as total loss.
● Despite receipt of a formal demand, defendants-appellees (Petitioner) refused to submit
to the consignee's claim, and averred that, in any event, they exercised due diligence and
foresight required by law to prevent any damage/loss to said shipment.
● Subsequently, plaintiff-appellant (Respondent) instituted this complaint for recovery of the
amount paid by them, to the consignee as insured. (Note: P506,086.50)
● In favor of Petitioner: The RTC dismissed the Complaint because Respondent had failed
to prove its claims with the quantum of proof required by law.
● In favor of Respondent: The CA ruled that petitioners were liable for the loss or the
damage of the goods shipped, because they had failed to overcome the presumption of
negligence imposed on common carriers.

ISSUE: Whether petitioners have overcome the presumption of negligence of a common

carrier. (NO)

RULING: (Note: The Petition is partly meritorious.)

NO.

Well-settled is the rule that common carriers, from the nature of their business and for reasons
of public policy, are bound to observe extraordinary diligence and vigilance with respect to the
safety of the goods and the passengers they transport.

Common carriers, as a general rule, are presumed to have been at fault or negligent if the
goods they transported deteriorated or got lost or destroyed. That is, unless they prove that
they exercised extraordinary diligence in transporting the goods. In order to avoid responsibility
for any loss or damage, therefore, they have the burden of proving that they observed such
diligence.
However, the presumption of fault or negligence will not arise if the loss is due to any of the
following causes:

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

● (2) an act of the public enemy in war, whether international or civil;
● (3) an act or omission of the shipper or owner of the goods;
● (4) the character of the goods or defects in the packing or the container; or
● (5) an order or act of competent public authority. This is a closed list. If the cause of
destruction, loss or deterioration is other than the enumerated circumstances, then the
carrier is liable therefor.

That petitioners failed to rebut the prima facie presumption of negligence is revealed in the
case at bar by a review of the records and more so by the evidence adduced by respondent.
PROOFS:

● First, as stated in the Bill of Lading, petitioners received the subject shipment in good
order and condition in Hamburg, Germany.
● Second, prior to the unloading of the cargo, an Inspection Report showed the steel
bands broken, the metal envelopes rust-stained and heavily buckled, and the contents
thereof exposed and rusty.
● Third, Bad Order Tally Sheet No. 154979 issued by Jardine Davies Transport Services,
Inc., stated that the four coils were in bad order and condition.
● Fourth, the Certificate of Analysis stated that, based on the sample submitted and
tested, the steel sheets found in bad order were wet with fresh water.
● Fifth, petitioners admitted that they were aware of the condition of the four coils found in
bad order and condition.

All these conclusively prove the fact of shipment in good order and condition and the
consequent damage to the four coils while in the possession of petitioner, who notably failed to
explain why. Having failed to discharge the burden of proving that they have exercised the
extraordinary diligence required by law, petitioners cannot escape liability for the damage to
the four coils.

Additional Issue: Whether the package limitation of liability is applicable.

Assuming arguendo they are liable for respondent's claims, petitioners contend that their
liability should be limited to US$500 per package as provided in the Bill of Lading and by
Section 4(5) of COGSA (Carriage of Goods by Sea Act).

On the other hand, respondent argues that Section 4(5) of COGSA is inapplicable, because
the value of the subject shipment was declared by petitioners beforehand, as evidenced by the
Letter of Credit (L/C No. 90/02447) in the said Bill of Lading.

A bill of lading serves two functions:

1. First, it is receipt for the goods shipped.

2. Second, it is a contract by which three parties—namely, the shipper, the carrier, and the
consignee—undertake specific responsibilities and assume stipulated obligations.

Further, a stipulation in the bill of lading limiting to a certain sum the common carrier's
liability for loss or destruction of a cargo -- unless the shipper or owner declares a
greater value -- is sanctioned by law.
 There are, however, two conditions to be satisfied:

● (1) the contract is reasonable and just under the circumstances, and
● (2) it has been fairly and freely agreed upon by the parties. The rationale for this
rule is to bind the shippers by their agreement to the value (maximum valuation)
of their goods.

In the case before us, there was no stipulation in the Bill of Lading limiting the carrier's liability.
Neither did the shipper declare a higher valuation of the goods to be shipped. This fact
notwithstanding, the insertion of the words "L/C No. 90/02447 cannot be the basis for
petitioners' liability.

WHEREFORE, the Petition is partly granted and the assailed Decision MODIFIED. Petitioners'
liability is reduced to US$2,000… (From CA: 451,027.32 pesos)

NOTE:

COGSA 4(5) states: Neither the carrier not the ship shall in any event be or become liable for
any loss or damage to or in connection with the transportation of goods in an amount
exceeding $ 600 per package… unless the nature and value of such goods have been
declared by the shipper before shipment and inserted in the bill of lading.

summary:

This was a petition for review of the Court of Appeals (CA) decision in CA-GR CV No 53571,
requiring the petitioner to pay the respondent PHP 451,027.32 in damages, representing the
value of damaged cargo.
On 13 June 1990, CMC Trading AG shipped 242 of prime cold rolled steel sheets from
Hamburg to Manila consigned to the Philippine Steel Trading Corp on board the MV Anangel
Sky. Four coils were found to be in bad order on discharge. The consignee declared them as a
total loss. The respondent paid out the consignee under its policy and sued the petitioner.
The trial Court dismissed the complaint, because the respondent had failed to prove its claims.
The CA reversed, ruling that the petitioner was liable for the loss or damage of the goods
shipped, because it had failed to overcome the presumption of negligence imposed on
common carriers. As to the extent of the petitioner's liability, the CA held that the package
limitation under COGSA was not applicable, because the words 'L/C No. 90/02447' indicated
that a higher valuation of the cargo had been declared by the shipper. The petitioner appealed
to the Supreme Court.
Held: The petition is partly granted and the assailed decision modified. The petitioner's liability
is reduced to USD 2,000 plus interest.
Common carriers, from the nature of their business and for reasons of public policy, are bound
to observe extraordinary diligence and vigilance with respect to the safety of the goods and the
passengers they transport. Thus, common carriers are required to render service with the
greatest skill and foresight and 'to use all reason[a]ble means to ascertain the nature and
characteristics of the goods tendered for shipment, and to exercise due care in the handling
and stowage, including such methods as their nature requires'. The extraordinary responsibility
lasts from the time the goods are unconditionally placed in the possession of, and received for
transportation by, the carrier until they are delivered, actually or constructively, to the
consignee, or to the person who has a right to receive them.
Owing to this high degree of diligence required of them, common carriers, as a general rule,
are presumed to have been at fault or negligent if the goods they transported deteriorated or
got lost or destroyed, unless they prove that they exercised extraordinary diligence in
transporting the goods. In order to avoid responsibility for any loss or damage, therefore, they
have the burden of proving that they observed such diligence. However, the presumption of
fault or negligence will not arise if the loss is due to any of the following causes: (1) flood,
storm, earthquake, lightning, or other natural disaster or calamity; (2) an act of the public
enemy in war, whether international or civil; (3) an act or omission of the shipper or owner of
the goods; (4) the character of the goods or defects in the packing or the container; or (5) an
order or act of competent public authority. This is a closed list. If the cause of destruction, loss
or deterioration is other than the enumerated circumstances, then the carrier is liable therefor.
Mere proof of delivery of the goods in good order to a common carrier and of their arrival in
bad order at their destination thus constitutes a prima facie case of fault or negligence against
the carrier. If no adequate explanation is given as to how the deterioration, the loss, or the
destruction of the goods happened, the transporter shall be held responsible. The petitioner
failed to rebut this prima facie presumption of negligence. As stated in the bill of lading, the
petitioner received the shipment in good order and condition in Hamburg, Germany. Prior to
the unloading of the cargo, an inspection report prepared and signed by representatives of
both parties showed the steel bands broken, the metal envelopes rust-stained and heavily
buckled, and the contents thereof exposed and rusty.
The petitioner claims that pursuant to s 3(6) of the Carriage of Goods by Sea Act (COGSA),
respondent should have filed its notice of loss within three days from delivery. However, the
cargo was discharged on 31 July 1990, but the respondent filed its notice of claim only on 18
September 1990. The Court is not persuaded. First, COGSA provides that the notice of claim
need not be given if the state of the goods, at the time of their receipt, has been the subject of
a joint inspection or survey. Prior to unloading the cargo, an inspection report as to the
condition of the goods was prepared and signed by representatives of both parties. Second, a
failure to file a notice of claim within three days will not bar recovery if it is nonetheless filed
within one year. This one-year prescriptive period also applies to the shipper, the consignee,
the insurer of the goods, or any legal holder of the bill of lading.
In Loadstar Shipping Co Inc v Court of Appeals 315 SCRA 339, 28 September 1999
(CMI1522), this Court ruled that a claim is not barred by prescription as long as the one-year
period has not lapsed:
Inasmuch as the 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.
In this case, the cargo was discharged on 31 July 1990, while the complaint was filed by the
respondent on 25 July 1991, within the one-year prescriptive period.
The petitioner contends that its liability should be limited to USD 500 per package as provided
in the bill of lading and by s 4(5) of COGSA. On the other hand, the respondent argues that s
4(5) of COGSA is inapplicable, because the value of the subject shipment was declared by the
petitioner beforehand, as evidenced by the reference to, and the insertion of, the letter of credit
or 'L/C No. 90/02447' in the bill of lading.
The Civil Code does not limit the liability of the common carrier to a fixed amount per package.
In all matters not regulated by the Civil Code, the right and the obligations of common carriers
are governed by the Code of Commerce and special laws. Thus, COGSA, which is suppletory
to the provisions of the Civil Code, supplements the latter by establishing a statutory provision
limiting the carrier's liability in the absence of a shipper's declaration of a higher value in the bill
of lading. The provisions on limited liability are as much a part of the bill of lading as though
physically in it, and as though placed there by agreement of the parties.
In this case, there was no stipulation in the bill of lading limiting the carrier's liability. Neither did
the shipper declare a higher valuation of the goods to be shipped. The insertion of the words
'L/C No. 90/02447' cannot be the basis for the petitioner's liability. A notation in the bill of lading
which indicates the amount of the letter of credit obtained by the shipper for the importation of
steel sheets does not effect a declaration of the value of the goods as required by the bill. That
notation was made only for the convenience of the shipper and the bank processing the letter
of credit. In Keng Hua Paper Products v Court of Appeals 286 SCRA 257, 12 February 1998,
this Court held that a bill of lading was separate from the other letter of credit arrangements.
[T]he contract of carriage, as stipulated in the bill of lading in the present case, must be
treated independently of the contract of sale between the seller and the buyer, and the
contract of issuance of a letter of credit between the amount of goods described in the
commercial invoice in the contract of sale and the amount allowed in the letter of credit
will not affect the validity and enforceability of the contract of carriage as embodied in the
bill of lading. As the bank cannot be expected to look beyond the documents presented
to it by the seller pursuant to the letter of credit, neither can the carrier be expected to go
beyond the representations of the shipper in the bill of lading and to verify their accuracy
vis-à-vis the commercial invoice and the letter of credit. Thus, the discrepancy between
the amount of goods indicated in the invoice and the amount in the bill of lading cannot
negate petitioner's obligation to private respondent arising from the contract of
transportation.
The petitioner's liability should be computed based on USD 500 per package and not on the
per metric ton price declared in the letter of credit. In Eastern Shipping Lines Inc v
Intermediate Appellate Court 150 SCRA 463, 29 May 1987 (CMI1530), this Court explained
the meaning of packages:
When what would ordinarily be considered packages are shipped in a container supplied
by the carrier and the number of such units is disclosed in the shipping documents, each
of those units and not the container constitutes the 'package' referred to in the liability
limitation provision of Carriage of Goods by Sea Act.

Considering the ruling in Eastern Shipping Lines, and the fact that the bill of lading clearly
disclosed the contents of the containers, the number of units, as well as the nature of the steel
sheets, the four damaged coils should be considered as the shipping unit subject to the USD
500 limitation.
EASTERN SHIPPING LINES, INC. VS. INTERMEDIATE APPELLATE COURT
G.R. No. L-69044
May 29, 1987

PONENTE: MELENCIO-HERRERA, J.

BRIEF STATEMENT OF THE CASE:

Nature of the case: This is a petition for review on Certiorari.

It involved the sinking of a vessel operated by Eastern Shipping Lines, Inc., the Supreme Court
ruled in favor of insurance companies, holding the carrier liable for the loss of insured goods
and determining the limitation of liability and attorney's fees.

BRIEF STATEMENT OF THE FACTS:

1. G.R. No. 69044

● Around June 1977, the M/S ASIATICA, a vessel operated by Petitioner Carrier
was going to transport lance pipes from Kobe, Japan to Manila.
1. The pipes are
consigned to Phil. Blooming Mills Co., Inc and Central Textile
Mills, Inc. and
a. insured against marine risk with respondent Insurance Corp.

2. G.R. No. 71478

● At the same time, the vessel took on board
2. 128 cartons of garment fabrics and accessories
a. consigned to Mariveles Apparel Corp. and
b. insured by Nisshin Fire. As well as
3. surveying instruments
a. consigned to Aman Ent. & General Mdse. and
b. insured by Dowa Fire.

3. Enroute, the vessel caught fire and sank which resulted to the loss of the ship and
cargo.
● The respective respondent Insurers paid the consignees and was subrogated to
their rights.

4. G.R. NO. 69044

● In May 1978, respondent Insurance Corp. filed a suit against petitioner Carrier
to recover
○ but the latter refused to pay claiming that the loss was due to an
extraordinary fortuitous event, hence, it is not liable under the law.
● In August 1979, the Trial Court rendered judgment, which was later affirmed by
the CA, in favor of Insurance Corp.

5. G.R. NO. 71478

● In June 1978, respondents Nisshin Fire and Dowa Fire filed suit against
Petitioner Carrier to recover, imputing unseaworthiness of the ship and non-
observance of extraordinary diligence by petitioner Carrier.
● Petitioner Carrier denied liability on the grounds that:
i. The fire is an exempting circumstance under Section 4(2) (b) of the
Carriage of Goods by Sea Act (COGSA); and
 ii. That when the loss of fire is established, the burden of proving
negligence of the vessel is shifted to the cargo shipper.
● In September 1980, the Trial Court rendered judgment in favor of Nisshin Fire
and Dowa Fire which was later affirmed by the CA.
6. Hence, this Petition for Review on certiorari by Petitioner Carrier.

ISSUES:
(1) Which law should govern — the Civil Code provisions on Common carriers or
the Carriage of Goods by Sea Act?
(2) Who has the burden of proof to show negligence of the carrier?

DECISION:

1. As to the governing law

The law of the country to which the goods are to be transported governs the liability of the
common carrier.
● Since the cargoes were transported from Japan to the Philippines, the liability of
Petitioner Carrier is governed primarily by the Civil Code.
● However, in all matters not regulated by said Code, the Code of Commerce and
special laws (e.g. Carriage of Goods by Sea Act) will be suppletory.

2. On the Burden of Proof

● Under the Civil Code, common carriers are bound to observe extraordinary diligence
and are responsible for the loss, destruction, or deterioration of the goods unless the
same is due to any of the following causes only:
○ (1) Flood, storm, earthquake, lightning or other natural disaster or
calamity;

● Contrary to Petitioner’s claims, the Court held that fire is not a natural disaster or
calamity because it arises almost always from some act of man or by human
means.
○ It is not an act of God except if caused by lightning or other natural
disaster or calamity.
○ There is therefore a presumption of negligence on the carrier.

● In this case, the boat was already on fire for almost 24 hours before it was noticed by
the Boatswain Ernesto Pastrana. As a result, they were no longer able to contain the
fire.

● The defendant failed to show that extraordinary vigilance was observed:

i. No regular inspection was made as to their condition during the voyage.
ii. The crew couldn’t even explain what could have caused the fire.

● Even under the Carriage of Goods by Sea Act, the Petitioner Carrier is liable:
○ Sec. 4(2). Neither the carrier nor the ship shall be responsible for
loss or damage arising or resulting from (b) Fire, unless caused by
the actual fault or privity of the carrier.
As to Liability
● Article 1749 of the New Civil Code expressly permits a stipulation limiting the liability of
the carrier.
● Thus, the COGSA which is suppletory to the provisions of the Civil Code, may provide
for the stipulations on the limited liability.
Applying this, Petitioner Carrier's liability should only be the amount of damage actually
sustained with the additional limitation afforded by section 4(5) of the COGSA which provides
that the carrier shall not in any event be liable for any loss or damage to or in connection with
the transportation of goods in an amount exceeding $500 per package.

COMMON CARRIER CASES/ Principles

1. 1734, robbery…
Article 1734 enumerates the instances when a carrier might be exempt from liability for the
loss of the goods. These are:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers; and
(5) Order or act of competent public authority.

Moreover, the duty of extraordinary diligence in the vigilance over goods is, under Article 1733,
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:

Article 1745: 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 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; and
2. (7) that the common carrier shall not be 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. (Emphasis supplied)

3. Common carrier is not an insurer against all risk/loss

4. Valid Stipulations in the package liability
● Not liable at all: Not valid
● Liable for a 1000 only: not valid
● Liable for 1,000 per kilo, unless a larger amount is declared.
● Eastern shipping: 500 dollars per package, COGSA
5. Contributory Negligence of passenger
● If the proximate cause is the negligence of common carrier
6. Proximate cause is the passengers negligence
7. Real and Hypothecary nature of maritime law, no vessel, no liability
Analogy: corporation goes insolvent, receivership
8. Common carrier becomes a private carrier (chartering bareboat or demise)
9. Prescription
● Notice of claim: Immediately if visible
● Not visible : 24 hours
● File of claim: 1 year
Stoppage in Transitu: buyer has become insolvent, common carrier becomes a mere
depositary

SPOUSES PERENA VS SPOUSES ZARATE

G.R. No. 157917 August 29, 2012

Doctrine:
The operator of a school bus service is a common carrier in the eyes of the law. He is bound to
observe extraordinary diligence in the conduct of his business. He is presumed to be negligent
when death occurs to a passenger. His liability may include indemnity for loss of earning
capacity even if the deceased passenger may only be an unemployed high school student at
the time of the accident.

Facts:

● The Spouses Pereñas were engaged in the business of transporting students from their
respective residences in Parañaque City to Don Bosco in Makati City, and back. They
employed Clemente Alfaro as driver of the van.
● The Spouses Zarates contracted the Pereñas to transport their son Aaron to and from
Don Bosco.
● On August 22, 1996, since they were already running late because of the heavy
vehicular traffic, Alfaro took the van to an alternate route by traversing the narrow path
underneath the Magallanes Interchange that was commonly used by Makati-bound
vehicles as a short cut.
● At that time, railroad crossing in the narrow path had no railroad warning signs, or
watchmen, or other responsible persons manning the crossing.
● When the van was to traverse the railroad crossing, PNR train, operated by Jhonny
Alano, was in the vicinity of the Magallanes Interchange travelling northbound.
● The PNR train hit the rear end of the van, and the impact threw 9 of the 12 students in
the rear, including Aaron, who landed in the path of the train, which dragged his body
and severed his head, instantaneously killing him.
● Devastated by the early and unexpected death of Aaron, the Zarates commenced this
action for damages against Alfaro, the Pereñas, PNR and Alano.
○ The grounds of the Zarates as against the Pereñas was upon breach of the
contract of carriage for the safe transport of Aaron while as against PNR was
based on quasi-delict under Article 2176 of the Civil Code.

● RTC Ruling: In favor of the plaintiff awarding damages, including the award of the loss
of Aaron’s earning capacity.
● CA Ruling: Upheld the decision of the RTC, with only modification as to the award.
○ Both lower courts upheld that Pereñas operated as a common carrier; and that
their standard of care was extraordinary diligence, not the ordinary diligence of a
good father of a family.

● Hence, this petition for review on certiorari.

Petitioners’ Contention:
Pereñas argued that they should not be held jointly and severally liable with PNR
.
● They claim that as private carrier, they exercise ordinary diligence, as required by law,
in hiring the driver Alfaro as the latter has an official driver’s license and that they
ensured that before hiring him, he has no record of any accident or violation of traffic
laws.

● Furthermore, they also assailed the award of damages for loss of earning capacity of
Aaron as a minor who was only a high school student at the time of his death in the
absence of sufficient basis for such an award.

● Diligence of a good father of a family means ordinary care. Just like a father of a family,
it is a care that an average person would do in taking care of his property.

ISSUE: W/N the petitioners are solidarily liable for damages on the death of Aaron as
operators of common carrier.

RULING: YES. Petitioners operated as a common carrier which requires extraordinary

diligence, and thus, solidarily liable with PNR.

A carrier is a person or corporation who undertakes to transport or convey goods or persons

from one place to another, gratuitously or for hire. The carrier is classified either as a
private/special carrier or as a common/public carrier.
● A private carrier is one who, without making the activity a vocation, or without
holding himself or itself out to the public as ready to act for all who may desire his
or its services, undertakes, by special agreement in a particular instance only, to
transport goods or persons from one place to another either gratuitously or for
hire. The provisions on ordinary contracts of the Civil Code govern the contract of
private carriage. The diligence required of a private carrier is only ordinary, that
is, the diligence of a good father of the family.
● In contrast, a common carrier is a person, corporation, firm or association
engaged in the business of carrying or transporting passengers or goods or both,
by land, water, or air, for compensation, offering such services to the public
(Article 1732 of the Civil Code) Contracts of common carriage are governed by
the provisions on common carriers of the Civil Code, the Public Service Act, and
other special laws relating to transportation. A common carrier is required to
observe extraordinary diligence, and is presumed to be at fault or to have acted
negligently in case of the loss of the effects of passengers, or the death or
injuries to passengers (Article 1756 of the Civil Code).

In the previous rulings of the SC, the operator of a school bus service was regarded as private
carrier because it only caters to some specific or privileged individuals and not open to
indefinite public or for public use. However, the SC in this case finally ruled that it should be
regarded as a common carrier.

The true test for a common carrier is not the quantity or extent of the business actually
transacted, or the number and character of the conveyances used in the activity, but whether
the undertaking is a part of the activity engaged in by the carrier that he has held out to the
general public as his business or occupation. If the undertaking is a single transaction, not a
part of the general business or occupation engaged in, as advertised and held out to the
general public, the individual or the entity rendering such service is a private, not a common,
carrier.

Applying this test in the instant case, the Pereñas as the operators of a school bus service
were: (a) engaged in transporting passengers generally as a business, not just as a casual
occupation; (b) undertaking to carry passengers over established roads by the method by
which the business was conducted; and (c) transporting students for a fee. Therefore, despite
catering to a limited clientèle, the Pereñas operated as a common carrier because they held
themselves out as a ready transportation indiscriminately to the students of a particular school
living within or near where they operated the service and for a fee.

As such, extraordinary diligence is required.

Article 1755 of the Civil Code specifies that the common carrier should "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."
● To successfully fend off liability in an action upon the death or injury to a passenger, the
common carrier must prove his or its observance of that extraordinary diligence;
otherwise, the legal presumption that he or it was at fault or acted negligently would
stand.

However, in this case, the petitioners failed to do so as they have not presented any
compelling defense to what happened. Their defense of having observed the diligence of a
good father of a family in the selection and supervision of their driver was not legally sufficient.
According to Article 1759 of the Civil Code, their liability as a common carrier did not cease
upon proof that they exercised all the diligence of a good father of a family in the selection and
supervision of their employee.

As operators, they are liable as it was evident that Alfaro was negligent under the
circumstances. He was familiar with the shortcut and thus, fully aware of the risks in traversing
it. A loud music was playing inside the van which might have impaired his alertness and
hearing of the warning of the PNR train. He overtook a passenger bus which led to blocking his
view of the approaching train. Compounding these circumstances is his violation of traffic
regulation on right of way at railroad tracks by not going into a full stop before traversing
railroad tracks.

Alfaro’s negligence is determined by the test upheld in the case of Picart v. Smith where the
test by which to determine the existence of negligence in a particular case is: “Did the
defendant in doing the alleged negligent act use that reasonable care and caution which an
ordinarily prudent person would have used in the same situation? If not, then he is guilty of
negligence.”

As to PNR’s negligence, it did not ensure the safety of others through the placing of crossbars,
signal lights, warning signs, and other permanent safety barriers to prevent vehicles or
pedestrians from crossing there. The fact that a crossing guard had been assigned to man that
point from 7 a.m. to 5 p.m. was a good indicium that the PNR was aware of the risks to others
as well as the need to control the vehicular and other traffic there.

Therefore, although the basis of the right to relief of the Zarates (i.e., breach of contract of
carriage) against the Pereñas was distinct from the basis of the Zarates’ right to relief against
the PNR (i.e., quasi-delict under Article 2176, Civil Code), they nonetheless could be held
jointly and severally liable by virtue of their respective negligence combining to cause the
death of Aaron.

DISPOSITION: Wherefore, we DENY the petition for review on certiorari and AFFIRM the
decision of the Court of Appeals.

1.) Who are the petitioners in this case?

Spouses Teodoro and Nanette Pereña

2.) Who are the respondents in this case?

Spouses Nicolas and Teresita L. Zarate, Philippine National Railways, and the Court of
Appeals

3.) What is the main issue raised in this case?

Whether the petitioners, the Pereñas, and the Philippine National Railways (PNR) should be
held liable for the death of Aaron Zarate.

4.) What is the ruling of the Supreme Court in this case?

The Supreme Court upheld the decision of the Court of Appeals (CA), ruling that the Pereñas
and the PNR are liable for the death of Aaron Zarate.

5.) What is the ratio of the Court in holding the Pereñas liable?

The Court held that the Pereñas, as operators of a school bus service, are considered
common carriers and are therefore required to observe extraordinary diligence in the conduct
of their business.

6.) What is the ratio of the Court in holding the PNR liable?

The Court ruled that the PNR was negligent for failing to provide adequate safety measures at
the railroad crossing.

7.) What damages were awarded to the Zarate family?

The Zarate family was awarded damages, including indemnity for loss of earning capacity.

8.) What was the Court's ruling on the award of damages?

The Court affirmed the award of damages to the Zarate family, finding the amounts awarded to
be reasonable and just under the circumstances.

9.) What is the significance of this case for common carriers?

This case emphasizes the accountability of common carriers for negligence and the need for
extraordinary diligence in ensuring the safety of their passengers.
10.) What is the significance of this case for the Philippine National Railways?

This case highlights the duty of the Philippine National Railways to provide adequate safety
measures and the consequences of failing to do so.