1. G.R. No.

149038 April 9, 2003

PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, petitioner, vs. PKS SHIPPING COMPANY, respondent.

The petition before the Court seeks a review of the decision of the Court of Appeals in C.A. G.R. CV No. 56470, promulgated on 25 June
2001, which has affirmed in toto the judgment of the Regional Trial Court (RTC), Branch 65, of Makati, dismissing the complaint for
damages filed by petitioner insurance corporation against respondent shipping company.

Davao Union Marketing Corporation (DUMC) contracted the services of respondent PKS Shipping Company (PKS Shipping) for the
shipment to Tacloban City of seventy-five thousand (75,000) bags of cement worth Three Million Three Hundred Seventy-Five Thousand
Pesos (P3,375,000.00). DUMC insured the goods for its full value with petitioner Philippine American General Insurance Company
(Philamgen). The goods were loaded aboard the dumb barge Limar I belonging to PKS Shipping. On the evening of 22 December 1988,
about nine o’clock, while Limar I was being towed by respondent’s tugboat, MT Iron Eagle, the barge sank a couple of miles off the coast
of Dumagasa Point, in Zamboanga del Sur, bringing down with it the entire cargo of 75,000 bags of cement.

DUMC filed a formal claim with Philamgen for the full amount of the insurance. Philamgen promptly made payment; it then sought
reimbursement from PKS Shipping of the sum paid to DUMC but the shipping company refused to pay, prompting Philamgen to file suit
against PKS Shipping with the Makati RTC.

The RTC dismissed the complaint after finding that the total loss of the cargo could have been caused either by a fortuitous event, in which
case the ship owner was not liable, or through the negligence of the captain and crew of the vessel and that, under Article 587 of the Code
of Commerce adopting the "Limited Liability Rule," the ship owner could free itself of liability by abandoning, as it apparently so did, the
vessel with all her equipment and earned freightage.

Philamgen interposed an appeal to the Court of Appeals which affirmed in toto the decision of the trial court. The appellate court ruled that
evidence to establish that PKS Shipping was a common carrier at the time it undertook to transport the bags of cement was wanting
because the peculiar method of the shipping company’s carrying goods for others was not generally held out as a business but as a casual
occupation. It then concluded that PKS Shipping, not being a common carrier, was not expected to observe the stringent extraordinary
diligence required of common carriers in the care of goods. The appellate court, moreover, found that the loss of the goods was sufficiently
established as having been due to fortuitous event, negating any liability on the part of PKS Shipping to the shipper.

In the instant appeal, Philamgen contends that the appellate court has committed a patent error in ruling that PKS Shipping is not a
common carrier and that it is not liable for the loss of the subject cargo. The fact that respondent has a limited clientele, petitioner argues,
does not militate against respondent’s being a common carrier and that the only way by which such carrier can be held exempt for the loss
of the cargo would be if the loss were caused by natural disaster or calamity. Petitioner avers that typhoon "APIANG" has not entered the
Philippine area of responsibility and that, even if it did, respondent would not be exempt from liability because its employees, particularly
the tugmaster, have failed to exercise due diligence to prevent or minimize the loss.

PKS Shipping, in its comment, urges that the petition should be denied because what Philamgen seeks is not a review on points or errors of
law but a review of the undisputed factual findings of the RTC and the appellate court. In any event, PKS Shipping points out, the findings
and conclusions of both courts find support from the evidence and applicable jurisprudence.

The determination of possible liability on the part of PKS Shipping boils down to the question of whether it is a private carrier or a
common carrier and, in either case, to the other question of whether or not it has observed the proper diligence (ordinary, if a private
carrier, or extraordinary, if a common carrier) required of it given the circumstances.

The findings of fact made by the Court of Appeals, particularly when such findings are consistent with those of the trial court, may not at
liberty be reviewed by this Court in a petition for review under Rule 45 of the Rules of Court. 1 The conclusions derived from those factual
findings, however, are not necessarily just matters of fact as when they are so linked to, or inextricably intertwined with, a requisite
appreciation of the applicable law. In such instances, the conclusions made could well be raised as being appropriate issues in a petition for
review before this Court. Thus, an issue whether a carrier is private or common on the basis of the facts found by a trial court or the
appellate court can be a valid and reviewable question of law.

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." Complementary to the codal
definition is Section 13, paragraph (b), of the Public Service Act; it defines "public service" to be –

"x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general
or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad,
street 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, 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, sewerage system, wire or wireless
communication systems, wire or wireless broadcasting stations and other similar public services. x x x. (Underscoring supplied)."

The prevailing doctrine on the question is that enunciated in the leading case of De Guzman vs. Court of Appeals.2 Applying Article 1732
of the Code, in conjunction with Section 13(b) of the Public Service Act, this Court has held:
"The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one
who does such carrying only as an ancillary activity (in local idiom, as `a sideline’). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the `general
public,’ i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the
general population. We think that Article 1732 deliberately refrained from 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 (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers
set forth in the Civil Code."

Much of the distinction between a "common or public carrier" and a "private or special carrier" lies in the character of the business, such
that if the undertaking is an isolated transaction, not a part of the business or occupation, and the carrier does not hold itself out to carry the
goods for the general public or to a limited clientele, although involving the carriage of goods for a fee, 3 the person or corporation
providing such service could very well be just a private carrier. A typical case is that of a charter party which includes both the vessel and
its crew, such as in a bareboat or demise, where the charterer obtains the use and service of all or some part of a ship for a period of time or
a voyage or voyages4 and gets the control of the vessel and its crew.5 Contrary to the conclusion made by the appellate court, its factual
findings indicate that PKS Shipping has engaged itself in the business of carrying goods for others, although for a limited clientele,
undertaking to carry such goods for a fee. The regularity of its activities in this area indicates more than just a casual activity on its part. 6
Neither can the concept of a common carrier change merely because individual contracts are executed or entered into with patrons of the
carrier. Such restrictive interpretation would make it easy for a common carrier to escape liability by the simple expedient of entering into
those distinct agreements with clients.

Addressing now the issue of whether or not PKS Shipping has exercised the proper diligence demanded of common carriers, Article 1733
of the Civil Code requires common carriers to observe extraordinary diligence in the vigilance over the goods they carry. In case of loss,
destruction or deterioration of goods, common carriers are presumed to have been at fault or to have acted negligently, and the burden of
proving otherwise rests on them.7 The provisions of Article 1733, notwithstanding, common carriers are exempt from liability for loss,
destruction, or deterioration of the goods due to any of the following causes:

(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. 8

The appellate court ruled, gathered from the testimonies and sworn marine protests of the respective vessel masters of Limar I and MT Iron
Eagle, that there was no way by which the barge’s or the tugboat’s crew could have prevented the sinking of Limar I. The vessel was
suddenly tossed by waves of extraordinary height of six (6) to eight (8) feet and buffeted by strong winds of 1.5 knots resulting in the entry
of water into the barge’s hatches. The official Certificate of Inspection of the barge issued by the Philippine Coastguard and the Coastwise
Load Line Certificate would attest to the seaworthiness of Limar I and should strengthen the factual findings of the appellate court.

Findings of fact of the Court of Appeals generally conclude this Court; none of the recognized exceptions from the rule - (1) when the
factual findings of the Court of Appeals and the trial court are contradictory; (2) when the conclusion is a finding grounded entirely on
speculation, surmises, or conjectures; (3) when the inference made by the Court of Appeals from its findings of fact is manifestly mistaken,
absurd, or impossible; (4) when there is a grave abuse of discretion in the appreciation of facts; (5) when the appellate court, in making its
findings, went beyond the issues of the case and such findings are contrary to the admissions of both appellant and appellee; (6) when the
judgment of the Court of Appeals is premised on a misapprehension of facts; (7) when the Court of Appeals failed to notice certain
relevant facts which, if properly considered, would justify a different conclusion; (8) when the findings of fact are themselves conflicting;
(9) when the findings of fact are conclusions without citation of the specific evidence on which they are based; and (10) when the findings
of fact of the Court of Appeals are premised on the absence of evidence but such findings are contradicted by the evidence on record –
would appear to be clearly extant in this instance.

All given then, the appellate court did not err in its judgment absolving PKS Shipping from liability for the loss of the DUMC cargo.

WHEREFORE, the petition is DENIED. No costs.

2. 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's responsibility for damage to the cargo and
its liability for demurrage and attorney's fees. The Court also reiterates the well-known rule that findings of facts of trial courts, when
affirmed by the Court of Appeals, are binding on this Court.

Before us are two separate petitions for review filed by National Steel Corporation (NSC) and Vlasons Shipping, Inc. (VSI), both of which
assail the August 12, 1993 Decision of the Court of Appeals.1 The Court of Appeals modified the decision of the Regional Trial Court of
Pasig, Metro Manila, Branch 163 in Civil Case No. 23317. The RTC disposed as follows:

WHEREFORE, judgment is hereby rendered in favor of defendant and against the plaintiff dismissing the complaint with cost against
plaintiff, and ordering plaintiff to pay the defendant on the counterclaim as follows:
1. The sum of P75,000.00 as unpaid freight and P88,000.00 as demurrage with interest at the legal rate on both amounts from April 7,
1976 until the same shall have been fully paid;
2. Attorney's fees and expenses of litigation in the sum of P100,000.00; and
3. 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's fees and expenses of litigation. Except as thus modified, the decision is AFFIRMED. There is no
pronouncement as to costs.
SO ORDERED.3

The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport cargo or shipment for the general public. Its
services are available only to specific persons who enter into a special contract of charter party with its owner. It is undisputed that the ship
is a private carrier. And it is in 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 and defendant Vlasons Shipping, Inc. (VSI) as Owner,
entered into a Contract of Voyage Charter Hire (Exhibit "B"; also Exhibit "1") whereby NSC hired VSI's vessel, the MV "VLASONS I" to
make one (1) voyage to load steel products at Iligan City and discharge them at North Harbor, Manila, under the following terms and
conditions, viz:

1. . . .
2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Master's option.
3. . . .
4. Freight/Payment: P30.00/metric ton, FIOST basis. Payment upon presentation of Bill of Lading within fifteen (15) days.
5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.
6. Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather Working Day of 24 consecutive hours, Sundays and Holidays
Included).
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.
8. . . .
9. Cargo Insurance: Charterer's and/or Shipper's must insure the cargoes. Shipowners not responsible for losses/damages except on
proven willful negligence of the officers of the vessel.
10. Other terms: (a) All terms/conditions of NONYAZAI C/P [sic] or other internationally recognized Charter Party Agreement shall
form part of this Contract.

The terms "F.I.O.S.T." which is used in the shipping business is a standard provision in the NANYOZAI Charter Party which stands for
"Freight In and Out including Stevedoring and Trading", which means that the handling, loading and unloading of the cargoes are the
responsibility of the Charterer. Under Paragraph 5 of the NANYOZAI Charter Party, it states, "Charterers to load, stow and discharge the
cargo free of risk and expenses to owners. . . . (Emphasis supplied).

Under paragraph 10 thereof, it is provided that "(o)wners shall, before and at the beginning of the voyage, exercise due diligence to make
the vessel seaworthy and properly manned, equipped and supplied and to make the holds and all other parts of the vessel in which cargo is
carried, fit and safe for its reception, carriage and preservation. Owners shall not be liable for loss of or damage of the cargo arising or
resulting from: unseaworthiness unless caused by want of due diligence on the part of the owners to make the vessel seaworthy, and to
secure that the vessel is properly manned, equipped and supplied and to make the holds and all other parts of the vessel in which cargo is
carried, fit and safe for its reception, carriage and preservation; . . . ; perils, dangers and accidents of the sea or other navigable waters; . . . ;
wastage in bulk or weight or any other loss or damage arising from inherent defect, quality or vice of the cargo; insufficiency of packing; .
. . ; latent defects not discoverable by due diligence; any other cause arising without the actual fault or privity of Owners or without the
fault of the agents or servants of owners."

Paragraph 12 of said NANYOZAI Charter Party also provides that "(o)wners shall not be responsible for split, chafing and/or any damage
unless caused by the negligence or default of the master and crew."

(2) On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter Hire, the MV "VLASONS I" loaded at plaintiffs pier at
Iligan City, the NSC's shipment of 1,677 skids of tinplates and 92 packages of hot rolled sheets or a total of 1,769 packages with a total
weight of about 2,481.19 metric tons for carriage to Manila. The shipment was placed in the three (3) hatches of the ship. Chief Mate
Gonzalo Sabando, acting as agent of the vessel[,] acknowledged receipt of the cargo on board and signed the corresponding bill of lading,
B.L.P.P. No. 0233 (Exhibit "D") on August 8, 1974.

(3) The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on August 12, 1974. The following day, August 13, 1974, when the
vessel's three (3) hatches containing the shipment were opened by plaintiff's agents, nearly all the skids of tinplates and hot rolled sheets
were allegedly found to be wet and rusty. The cargo was discharged and unloaded by stevedores hired by the Charterer. Unloading was
completed only on August 24, 1974 after incurring a delay of eleven (11) days due to the heavy rain which interrupted the unloading
operations. (Exhibit "E")

(4) To determine the nature and extent of the wetting and rusting, NSC called for a survey of the shipment by the Manila Adjusters and
Surveyors Company (MASCO). In a letter to the NSC dated March 17, 1975 (Exhibit "G"), MASCO made a report of its ocular inspection
conducted on the cargo, both while it was still on board the vessel and later at the NDC warehouse in Pureza St., Sta. Mesa, Manila where
the cargo was taken and stored. MASCO reported that it found wetting and rusting of the packages of hot rolled sheets and metal covers of
the tinplates; that tarpaulin hatch covers were noted torn at various extents; that container/metal casings of the skids were rusting all over.
MASCO ventured the opinion that "rusting of the tinplates was caused by contact with SEA WATER sustained while still on board the
vessel as a consequence of the heavy weather and rough seas encountered while en route to destination (Exhibit "F"). It was also reported
that MASCO's surveyors drew at random samples of bad order packing materials of the tinplates and delivered the same to the M.I.T.
Testing Laboratories for analysis. On August 31, 1974, the M.I.T. Testing Laboratories issued Report No. 1770 (Exhibit "I") which in part,
states, "The analysis of bad order samples of packing materials . . . shows that wetting was caused by contact with SEA WATER".

(5) On September 6, 1974, on the basis of the aforesaid Report No. 1770, plaintiff filed with the defendant its claim for damages suffered
due to the downgrading of the damaged tinplates in the amount of P941,145.18. Then on October 3, 1974, plaintiff formally demanded
payment of said claim but defendant VSI refused and failed to pay. Plaintiff filed its complaint against defendant on April 21, 1976 which
was docketed as Civil Case No. 23317, CFI, Rizal.

(6) In its complaint, plaintiff claimed that it sustained losses in the aforesaid amount of P941,145.18 as a result of the act, neglect and
default of the master and crew in the management of the vessel as well as the want of due diligence on the part of the defendant to make
the vessel seaworthy and to make the holds and all other parts of the vessel in which the cargo was carried, fit and safe for its reception,
carriage and preservation — all in violation of defendant's undertaking under their Contract of Voyage Charter Hire.

(7) In its answer, defendant denied liability for the alleged damage claiming that the MV "VLASONS I" was seaworthy in all respects for
the carriage of plaintiff's cargo; that said vessel was not a "common carrier" inasmuch as she was under voyage charter contract with the
plaintiff as charterer under the charter party; that in the course of the voyage from Iligan City to Manila, the MV "VLASONS I"
encountered very rough seas, strong winds and adverse weather condition, causing strong winds and big waves to continuously pound
against the vessel and seawater to overflow on its deck and hatch covers, that under the Contract of Voyage Charter Hire, defendant shall
not be responsible for losses/damages except on proven willful negligence of the officers of the vessel, that the officers of said MV
"VLASONS I" exercised due diligence and proper seamanship and were not willfully negligent; that furthermore the Voyage Charter Party
provides that loading and discharging of the cargo was on FIOST terms which means that the vessel was free of risk and expense in
connection with the loading and discharging of the cargo; that the damage, if any, was due to the inherent defect, quality or vice of the
cargo or to the insufficient packing thereof or to latent defect of the cargo not discoverable by due diligence or to any other cause arising
without the actual fault or privity of defendant and without the fault of the agents or servants of defendant; consequently, defendant is not
liable; that the stevedores of plaintiff who discharged the cargo in Manila were negligent and did not exercise due care in the discharge of
the cargo; land that the cargo was exposed to rain and seawater spray while on the pier or in transit from the pier to plaintiff's warehouse
after discharge from the vessel; and that plaintiff's claim was highly speculative and grossly exaggerated and that the small stain marks or
sweat marks on the edges of the tinplates were magnified and considered total loss of the cargo. Finally, defendant claimed that it had
complied with all its duties and obligations under the Voyage Charter Hire Contract and had no responsibility whatsoever to plaintiff. In
turn, it alleged the following counterclaim:

(a) That despite the full and proper performance by defendant of its obligations under the Voyage Charter Hire Contract, plaintiff failed
and refused to pay the agreed charter hire of P75,000.00 despite demands made by defendant;

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

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

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

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

(b) That for purposes of the voyage covered by the Contract of Voyage Charter Hire (Exh. "1"), the MV VLASONS I" was covered by the
required seaworthiness certificates including the Certification of Classification issued by an international classification society, the
NIPPON KAIJI KYOKAI (Exh. "4"); Coastwise License from the Board of Transportation (Exh. "5"); International Loadline Certificate
from the Philippine Coast Guard (Exh. "6"); Cargo Ship Safety Equipment Certificate also from the Philippine Coast Guard (Exh. "7");
Ship Radio Station License (Exh. "8"); Certificate of Inspection by the Philippine Coast Guard (Exh. "12"); and Certificate of Approval for
Conversion issued by the Bureau of Customs (Exh. "9"). That being a vessel engaged in both overseas and coastwise trade, the MV
"VLASONS I" has a higher degree of seaworthiness and safety.

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

(d) The cargo/shipment was securely stowed in three (3) hatches of the ship. The hatch openings were covered by hatchboards which were
in turn covered by two or double tarpaulins. The hatch covers were water tight. Furthermore, under the hatchboards were steel beams to
give support.

(e) The claim of the plaintiff that defendant violated the contract of carriage is not supported by evidence. The provisions of the Civil Code
on common carriers pursuant to which there exists a presumption of negligence in case of loss or damage to the cargo are not applicable.
As to the damage to the tinplates which was allegedly due to the wetting and rusting thereof, there is unrebutted testimony of witness
Vicente Angliongto that tinplates "sweat" by themselves when packed even without being in contract (sic) with water from outside
especially when the weather is bad or raining. The trust caused by sweat or moisture on the tinplates may be considered as a loss or
damage but then, defendant cannot be held liable for it pursuant to Article 1734 of the Civil Case which exempts the carrier from
responsibility for loss or damage arising from the "character of the goods . . ." All the 1,769 skids of the tinplates could not have been
damaged by water as claimed by plaintiff. It was shown as claimed by plaintiff that the tinplates themselves were wrapped in kraft paper
lining and corrugated cardboards could not be affected by water from outside.

(f) The stevedores hired by the plaintiff to discharge the cargo of tinplates were negligent in not closing the hatch openings of the MV
"VLASONS I" when rains occurred during the discharging of the cargo thus allowing rainwater to enter the hatches. It was proven that the
stevedores merely set up temporary tents to cover the hatch openings in case of rain so that it would be easy for them to resume work when
the rains stopped by just removing the tent or canvas. Because of this improper covering of the hatches by the stevedores during the
discharging and unloading operations which were interrupted by rains, rainwater drifted into the cargo through the hatch openings.
Pursuant to paragraph 5 of the NANYOSAI [sic] Charter Party which was expressly made part of the Contract of Voyage Charter Hire, the
loading, stowing and discharging of the cargo is the sole responsibility of the plaintiff charterer and defendant carrier has no liability for
whatever damage may occur or maybe [sic] caused to the cargo in the process.

(g) It was also established that the vessel encountered rough seas and bad weather while en route from Iligan City to Manila causing sea
water to splash on the ship's deck on account of which the master of the vessel (Mr. Antonio C. Dumlao) filed a "Marine Protest" on
August 13, 1974 (Exh. "15"); which can be invoked by defendant as a force majeure that would exempt the defendant from liability.

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

(i) As regards defendant's counterclaim, the contract of voyage charter hire under Paragraph 4 thereof, fixed the freight at P30.00 per
metric ton payable to defendant carrier upon presentation of the bill of lading within fifteen (15) days. Plaintiff has not paid the total
freight due of P75,000.00 despite demands. The evidence also showed that the plaintiff was required and bound under paragraph 7 of the
same Voyage Charter Hire contract to pay demurrage of P8,000.00 per day of delay in the unloading of the cargoes. The delay amounted
to eleven (11) days thereby making plaintiff liable to pay defendant for demurrage in the amount of P88,000.00.

Appealing the RTC decision to the Court of Appeals, NSC alleged six errors:

I. The trial court erred in finding that the MV "VLASONS I" was seaworthy, properly manned, equipped and supplied, and that
there is no proof of willful negligence of the vessel's officers.
II. The trial court erred in finding that the rusting of NSC's tinplates was due to the inherent nature or character of the goods and not
due to contact with seawater.
III. The trial court erred in finding that the stevedores hired by NSC were negligent in the unloading of NSC's shipment.
IV. The trial court erred in exempting VSI from liability on the ground of force majeure.
V. The trial court erred in finding that NSC violated the contract of voyage charter hire.
VI. The trial court erred in ordering NSC to pay freight, demurrage and attorney's fees, to VSI.4

As earlier stated, the Court of Appeals modified the decision of the trial court by reducing the demurrage from P88,000.00 to P44,000.00
and deleting the award of attorneys fees and expenses of litigation. NSC and VSI filed separate motions for reconsideration. In a
Resolution5 dated October 20, 1993, the appellate court denied both motions. Undaunted, NSC and VSI filed their respective petitions for
review before this Court. On motion of VSI, the Court ordered on February 14, 1994 the consolidation of these petitions.6

The Issues
In its petition7 and memorandum,8 NSC raises the following questions of law and fact:
Questions of Law
1. Whether or not a charterer of a vessel is liable for demurrage due to cargo unloading delays caused by weather interruption;
2. Whether or not the alleged "seaworthiness certificates" (Exhibits "3", "4", "5", "6", "7", "8", "9", "11" and "12") were admissible in
evidence and constituted evidence of the vessel's seaworthiness at the beginning of the voyages; and
3. Whether or not a charterer's failure to insure its cargo exempts the shipowner from liability for cargo damage.
Questions of Fact
1. Whether or not the vessel was seaworthy and cargo-worthy;
2. Whether or not vessel's officers and crew were negligent in handling and caring for NSC's cargo;
3. Whether or not NSC's cargo of tinplates did sweat during the voyage and, hence, rusted on their own; and
4. Whether or not NSC's stevedores were negligent and caused the wetting[/]rusting of NSC's tinplates.
In its separate petition,9 VSI submits for the consideration of this Court the following alleged errors of the CA:
A. The respondent Court of Appeals committed an error of law in reducing the award of demurrage from P88,000.00 to P44,000.00.
B. The respondent Court of Appeals committed an error of law in deleting the award of P100,000 for attorney's fees and expenses of
litigation.
Amplifying the foregoing, VSI raises the following issues in its memorandum:10
I. Whether or not the provisions of the Civil Code of the Philippines on common carriers pursuant to which there exist[s] a presumption
of negligence against the common carrier in case of loss or damage to the cargo are applicable to a private carrier.
II. Whether or not the terms and conditions of the Contract of Voyage Charter Hire, including the Nanyozai Charter, are valid and
binding on both contracting parties.
The foregoing issues raised by the parties will be discussed under the following headings:
1. Questions of Fact
2. Effect of NSC's Failure to Insure the Cargo
3. Admissibility of Certificates Proving Seaworthiness
4. Demurrage and Attorney's Fees.
The Court's Ruling
The Court affirms the assailed Decision of the Court of Appeals, except in respect of the demurrage.
Preliminary Matter: Common Carrier or Private Carrier?

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

Article 1732 of the Civil Code defines a common carrier as "persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public." It has
been held that the true test of a common carrier is the carriage of passengers or goods, provided it has space, for all who opt to avail
themselves of its transportation service for a fee.11 A carrier which does not qualify under the above test is deemed a private carrier.
"Generally, private carriage is undertaken by special agreement and the carrier does not hold himself out to carry goods for the general
public. The most typical, although not the only form of private carriage, is the charter party, a maritime contract by which the charterer, a
party other than the shipowner, obtains the use and service of all or some part of a ship for a period of time or a voyage or voyages."12

In the instant case, it is undisputed that VSI did not offer its services to the general public. As found by the Regional Trial Court, it carried
passengers or goods only for those it chose under a "special contract of charter party." 13 As correctly concluded by the Court of Appeals,
the MV Vlasons I "was not a common but a private carrier."14 Consequently, the rights and obligations of VSI and NSC, including their
respective liability for damage to the cargo, are determined primarily by stipulations in their contract of private carriage or charter party.15
Recently, in Valenzuela Hardwood and Industrial Supply, Inc., vs. Court of Appeals and Seven Brothers Shipping Corporation,16 the
Court ruled:

. . . in a contract of private carriage, the parties may freely stipulate their duties and obligations which perforce would be binding on them.
Unlike in a contract involving a common carrier, private carriage does not involve the general public. Hence, the stringent provisions of
the Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a
private carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a charter party that lessen or remove
the protection given by law in contracts involving common carriers.17

Extent of VSI's Responsibility and Liability Over NSC's Cargo: It is clear from the parties' Contract of Voyage Charter Hire, dated July 17,
1974, that VSI "shall not be responsible for losses except on proven willful negligence of the officers of the vessel." The NANYOZAI
Charter Party, which was incorporated in the parties' contract of transportation further provided that the shipowner shall not be liable for
loss of or a damage to the cargo arising or resulting from unseaworthiness, unless the same was caused by its lack of due diligence to make
the vessel seaworthy or to ensure that the same was "properly manned, equipped and supplied," and to "make the holds and all other parts
of the vessel in which cargo [was] carried, fit and safe for its reception, carriage and preservation."18 The NANYOZAI Charter Party also
provided that "[o]wners shall not be responsible for split, chafing and/or any damage unless caused by the negligence or default of the
master or crew."19

Burden of Proof: In view of the aforementioned contractual stipulations, NSC must prove that the damage to its shipment was caused by
VSI's willful negligence or failure to exercise due diligence in making MV Vlasons I seaworthy and fit for holding, carrying and
safekeeping the cargo. Ineluctably, the burden of proof was placed on NSC by the parties' agreement.

This view finds further support in the Code of Commerce which pertinently provides:

Art. 361. Merchandise shall be transported at the risk and venture of the shipper, if the contrary has not been expressly stipulated.

Therefore, the damage and impairment suffered by the goods during the transportation, due to fortuitous event, force majeure, or the nature
and inherent defect of the things, shall be for the account and risk of the shipper.

The burden of proof of these accidents is on the carrier. Art. 362. The carrier, however, shall be liable for damages arising from the cause
mentioned in the preceding article if proofs against him show that they occurred on account of his negligence or his omission to take the
precautions usually adopted by careful persons, unless the shipper committed fraud in the bill of lading, making him to believe that the
goods were of a class or quality different from what they really were.

Because the MV Vlasons I was a private carrier, the shipowner's obligations are governed by the foregoing provisions of the Code of
Commerce and not by the Civil Code which, as a general rule, places the prima facie presumption of negligence on a common carrier. It is
a hornbook doctrine that:

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

Since . . . a private carrier is not an insurer but undertakes only to exercise due care in the protection of the goods committed to its care, the
burden of proving negligence or a breach of that duty rests on plaintiff and proof of loss of, or damage to, cargo while in the carrier's
possession does not cast on it the burden of proving proper care and diligence on its part or that the loss occurred from an excepted cause
in the contract or bill of lading. However, in discharging the burden of proof, plaintiff is entitled to the benefit of the presumptions and
inferences by which the law aids the bailor in an action against a bailee, and since the carrier is in a better position to know the cause of the
loss and that it was not one involving its liability, the law requires that it come forward with the information available to it, and its failure
to do so warrants an inference or presumption of its liability. However, such inferences and presumptions, while they may affect the
burden of coming forward with evidence, do not alter the burden of proof which remains on plaintiff, and, where the carrier comes forward
with evidence explaining the loss or damage, the burden of going forward with the evidence is again on plaintiff.

Where the action is based on the shipowner's warranty of seaworthiness, the burden of proving a breach thereof and that such breach was
the proximate cause of the damage rests on plaintiff, and proof that the goods were lost or damaged while in the carrier's possession does
not cast on it the burden of proving seaworthiness. . . . Where the contract of carriage exempts the carrier from liability for
unseaworthiness not discoverable by due diligence, the carrier has the preliminary burden of proving the exercise of due diligence to make
the vessel seaworthy.20

In the instant case, the Court of Appeals correctly found the NSC "has not taken the correct position in relation to the question of who has
the burden of proof. Thus, in its brief (pp. 10-11), after citing Clause 10 and Clause 12 of the NANYOZAI Charter Party (incidentally
plaintiff-appellant's [NSC's] interpretation of Clause 12 is not even correct), it argues that 'a careful examination of the evidence will show
that VSI miserably failed to comply with any of these obligation's as if defendant-appellee [VSI] had the burden of
proof."21

First Issue: Questions of Fact: Based on the foregoing, the determination of the following factual questions is manifestly relevant: (1)
whether VSI exercised due diligence in making MV Vlasons I seaworthy for the intended purpose under the charter party; (2) whether the
damage to the cargo should be attributed to the willful negligence of the officers and crew of the vessel or of the stevedores hired by NSC;
and (3) whether the rusting of the tinplates was caused by its own "sweat" or by contact with seawater.

These questions of fact were threshed out and decided by the trial court, which had the firsthand opportunity to hear the parties' conflicting
claims and to carefully weigh their respective evidence. The findings of the trial court were subsequently affirmed by the Court of Appeals.
Where the factual findings of both the trial court and the Court of Appeals coincide, the same are binding on this Court.22 We stress that,
subject to some exceptional instances,23 only questions of law — not questions of fact — may be raised before this Court in a petition for
review under Rule 45 of the Rules of Court. After a thorough review of the case at bar, we find no reason to disturb the lower court's
factual findings, as indeed NSC has not successfully proven the application of any of the aforecited exceptions.

Was MV Vlasons I Seaworthy?: In any event, the records reveal that VSI exercised due diligence to make the ship seaworthy and fit for the
carriage of NSC's cargo of steel and tinplates. This is shown by the fact that it was drylocked and inspected by the Philippine Coast Guard
before it proceeded to Iligan City for its voyage to Manila under the contract of voyage charter hire.24 The vessel's voyage from Iligan to
Manila was the vessel's first voyage after drydocking. The Philippine Coast Guard Station in Cebu cleared it as seaworthy, fitted and
equipped; it met all requirements for trading as cargo vessel.25 The Court of Appeals itself sustained the conclusion of the trial court that
MV Vlasons I was seaworthy. We find no reason to modify or reverse this finding of both the trial and the appellate courts.

Who Were Negligent: Seamen or Stevedores?

As noted earlier, the NSC had the burden of proving that the damage to the cargo was caused by the negligence of the officers and the crew
of MV Vlasons I in making their vessel seaworthy and fit for the carriage of tinplates. NSC failed to discharge this burden.

Before us, NSC relies heavily on its claim that MV Vlasons I had used an old and torn tarpaulin or canvas to cover the hatches through
which the cargo was loaded into the cargo hold of the ship. It faults the Court of Appeals for failing to consider such claim as an
"uncontroverted fact"26 and denies that MV Vlasons I "was equipped with new canvas covers in tandem with the old ones as indicated in
the Marine Protest . . ."27 We disagree.

The records sufficiently support VSI's contention that the ship used the old tarpaulin, only in addition to the new one used primarily to
make the ship's hatches watertight. The foregoing are clear from the marine protest of the master of the MV Vlasons I, Antonio C. Dumlao,
and the deposition of the ship's boatswain, Jose Pascua. The salient portions of said marine protest read:

. . . That the M/V "VLASONS I" departed Iligan City or about 0730 hours of August 8, 1974, loaded with approximately 2,487.9 tons of
steel plates and tin plates consigned to National Steel Corporation; that before departure, the vessel was rigged, fully equipped and cleared
by the authorities; that on or about August 9, 1974, while in the vicinity of the western part of Negros and Panay, we encountered very
rough seas and strong winds and Manila office was advised by telegram of the adverse weather conditions encountered; that in the morning
of August 10, 1974, the weather condition changed to worse and strong winds and big waves continued pounding the vessel at her port side
causing sea water to overflow on deck andhatch (sic) covers and which caused the first layer of the canvass covering to give way while the
new canvass covering still holding on;

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

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 hatch opening?
WITNESS
a It was placed flat on top of the hatch cover, with a little canvas flowing over the sides and we place[d] a flat bar over the canvas on
the side of the hatches and then we place[d] a stopper so that the canvas could not be removed.
ATTY DEL ROSARIO
q And will you tell us the size of the hatch opening? The length and the width of the hatch opening.
a Forty-five feet by thirty-five feet, sir. q And aside from the hatch board, is there any other material
xxx xxx xxx there to cover the hatch?
q How was the canvas supported in the middle of the hatch a There is a beam supporting the hatch board.
opening? q What is this beam made of?
a There is a hatch board. a It is made of steel, sir.
ATTY DEL ROSARIO q Is the beam that was placed in the hatch opening covering
q What is the hatch board made of? the whole hatch opening?
a It is made of wood, with a handle. a No, sir.
 q How many hatch beams were there placed across the a There is none, sir.
opening? q They are tight together?
a There are five beams in one hatch opening. a Yes, sir.
ATTY DEL ROSARIO q How tight?
q And on top of the beams you said there is a hatch board. a Very tight, sir.
How many pieces of wood are put on top? q Now, on top of the hatch boards, according to you, is the
a Plenty, sir, because there are several pieces on top of the canvass cover. How many canvas covers?
hatch beam. a Two, sir.29
q And is there a space between the hatch boards?
That due diligence was exercised by the officers and the crew of the MV Vlasons I was further demonstrated by the fact that, despite
encountering rough weather twice, the new tarpaulin did not give way and the ship's hatches and cargo holds remained waterproof. As
aptly stated by the Court of Appeals, ". . . we find no reason not to sustain the conclusion of the lower court based on overwhelming
evidence, that the MV 'VLASONS I' was seaworthy when it undertook the voyage on August 8, 1974 carrying on board thereof plaintiff-
appellant's shipment of 1,677 skids of tinplates and 92 packages of hot rolled sheets or a total of 1,769 packages from NSC's pier in Iligan
City arriving safely at North Harbor, Port Area, Manila, on August 12, 1974; . . .30

Indeed, NSC failed to discharge its burden to show negligence on the part of the officers and the crew of MV Vlasons I. On the contrary,
the records reveal that it was the stevedores of NSC who were negligent in unloading the cargo from the ship.

The stevedores employed only a tent-like material to cover the hatches when strong rains occasioned 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
the ship. 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
National Steel Corporation in order to conduct the inspection of the cargo. During the course of the investigation, did you chance to see
the discharging operation?
WITNESS:
A Yes, sir, upon my arrival at the vessel, I saw some of the tinplates already discharged on the pier but majority of the tinplates were
inside the hall, all the hatches were opened.
Q In connection with these cargoes which were unloaded, where is the place.
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 particular matter . . . the transcript of stenographic notes shows the same
was covered in the direct examination.
ATTY ZAMORA:
Precisely, your Honor, we would like to go on detail, this is the serious part of the testimony.
COURT:
All right, witness may answer.
ATTY LOPEZ:
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 tents were built at the opening of the hatches.
Q You also stated that the hatches were already opened and that there were tents constructed at the opening of the hatches to protect the
cargo from the rain. Now, will you describe [to] the Court the tents constructed.
A The tents are just a base of canvas which look like a tent of an Indian camp raise[d] high at the middle with the whole side separated
down to the hatch, the size of the hatch and it is soaks [sic] at the middle because of those weather and this can be used only to
temporarily protect the cargo from getting wet by rains.
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 a typhoon passing by and the hatch tent was not good enough to hold
all of it 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 fact the 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 Steel Corporation [of] the procedure adopted by its stevedores in discharging
the 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 the stevedores but the stevedores did not mind at all, so, called the
attention of the representative of the National Steel but nothing was done, just the same. Finally, I wrote a letter to them.31

NSC attempts to discredit the testimony of Angliongto by questioning his failure to complain immediately about the stevedores' negligence
on the first day of unloading, pointing out that he wrote his letter to petitioner only seven days later.32 The Court is not persuaded.
Angliongto's candid answer in his aforequoted testimony satisfactorily explained the delay. Seven days lapsed because he first called the
attention of the stevedores, then the NSC's representative, about the negligent and defective procedure adopted in unloading the cargo. This
series of actions constitutes a reasonable response in accord with common sense and ordinary human experience. Vicente Angliongto
could not be blamed for calling the stevedores' attention first and then the NSC's representative on location before formally informing NSC
of the negligence he had observed, because he was not responsible for the stevedores or the unloading operations. In fact, he was merely
expressing concern for NSC which was ultimately responsible for the stevedores it had hired and the performance of their task to unload
the cargo.

We see no reason to reverse the trial and the appellate courts' findings and conclusions on this point, viz: In the THIRD assigned error,
[NSC] claims that the trial court erred in finding that the stevedores hired by NSC were negligent in the unloading of NSC's shipment. We
do not think so. Such negligence according to the trial court is evident in the stevedores hired by [NSC], not closing the hatch of MV
'VLASONS I' when rains occurred during the discharging of the cargo thus allowing rain water and seawater spray to enter the hatches and
to drift to and fall on the cargo. It was proven that the stevedores merely set up temporary tents or canvas to cover the hatch openings when
it rained during the unloading operations so that it would be easier for them to resume work after the rains stopped by just removing said
tents or canvass. It has also been shown that on August 20, 1974, VSI President Vicente Angliongto wrote [NSC] calling attention to the
manner the stevedores hired by [NSC] were discharging the cargo on rainy days and the improper closing of the hatches which allowed
continuous heavy rain water to leak through and drip to the tinplates' covers and [Vicente Angliongto] also suggesting that due to four (4)
days continuos rains with strong winds that the hatches be totally closed down and covered with canvas and the hatch tents lowered. (Exh.
"13"). This letter was received by [NSC] on 22 August 1974 while discharging operations were still going on (Exhibit "13-A").33

The fact that NSC actually accepted and proceeded to remove the cargo from the ship during unfavorable weather will not make VSI liable
for any damage caused thereby. In passing, it may be noted that the NSC may seek indemnification, subject to the laws on prescription,
from the stevedoring company at fault in the discharge operations. "A stevedore company engaged in discharging cargo . . . has the duty to
load the cargo . . . in a prudent manner, and it is liable for injury to, or loss of, cargo caused by its negligence . . . and where the officers
and members and crew of the vessel do nothing and have no responsibility in the discharge of cargo by stevedores . . . the vessel is not
liable for loss of, or damage to, the cargo caused by the negligence of the
stevedores . . ."34 as in the instant case.

Do Tinplates "Sweat"? The trial court relied on the testimony of Vicente Angliongto in finding that ". . . tinplates 'sweat' by themselves
when packed even without being in contact with water from outside especially when the weather is bad or
raining . . ."35 The Court of Appeals affirmed the trial court's finding.

A discussion of this issue appears inconsequential and unnecessary. As previously discussed, the damage to the tinplates was occasioned
not by airborne moisture but by contact with rain and seawater which the stevedores negligently allowed to seep in during the unloading.

Second Issue: Effect of NSC's Failure to Insure the Cargo: The obligation of NSC to insure the cargo stipulated in the Contract of Voyage
Charter Hire is totally separate and distinct from the contractual or statutory responsibility that may be incurred by VSI for damage to the
cargo caused by the willful negligence of the officers and the crew of MV Vlasons I. Clearly, therefore, NSC's failure to insure the cargo
will not affect its right, as owner and real party in interest, to file an action against VSI for damages caused by the latter's willful
negligence. We do not find anything in the charter party that would make the liability of VSI for damage to the cargo contingent on or
affected in any manner by NSC's obtaining an insurance over the cargo.

Third Issue: Admissibility of Certificates Proving Seaworthiness

NSC's contention that MV Vlasons I was not seaworthy is anchored on the alleged inadmissibility of the certificates of seaworthiness
offered in evidence by VSI. The said certificates include the following:
1. Certificate of Inspection of the 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 Transportation
5. Certificate of Approval for Conversion issued by the Bureau of Customs36

NSC argues that the certificates are hearsay for not having been presented in accordance with the Rules of Court. It points out that Exhibits
3, 4 and 11 allegedly are "not written records or acts of public officers"; while Exhibits 5, 6, 7, 8, 9, 11 and 12 are not "evidenced by
official publications or certified true copies" as required by Sections 25 and 26, Rule 132, of the Rules of Court.37

After a careful examination of these exhibits, the Court rules that Exhibits 3, 4, 5, 6, 7, 8, 9 and 12 are inadmissible, for they have not been
properly offered as evidence. Exhibits 3 and 4 are certificates issued by private parties, but they have not been proven by one who saw the
writing executed, or by evidence of the genuineness of the handwriting of the maker, or by a subscribing witness. Exhibits, 5, 6, 7, 8, 9,
and 12 are photocopies, but their admission under the best evidence rule have not been demonstrated.

We find, however, that Exhibit 11 is admissible under a well-settled exception to the hearsay rule per Section 44 of Rule 130 of the Rules
of Court, which provides that "(e)ntries in official records made in the performance of a duty by a public officer of the Philippines, or by a
person in the performance of a duty specially enjoined by law, are prima facie evidence of the facts therein stated."38 Exhibit 11 is an
original certificate of the Philippine Coast Guard in Cebu issued by Lieutenant Junior Grade Noli C. Flores to the effect that "the vessel
'VLASONS I' was drydocked . . . and PCG Inspectors were sent on board for inspection . . . After completion of drydocking and duly
inspected by PCG Inspectors, the vessel 'VLASONS I', a cargo vessel, is in seaworthy condition, meets all requirements, fitted and
equipped for trading as a cargo vessel was cleared by the Philippine Coast Guard and sailed for Cebu Port on July 10, 1974." (sic) NSC's
claim, therefore, is obviously misleading and erroneous.

At any rate, it should be stressed that NSC has the burden of proving that MV Vlasons I was not seaworthy. As observed earlier, the vessel
was a private carrier and, as such, it did not have the obligation of a common carrier to show that it was seaworthy. Indeed, NSC glaringly
failed to discharge its duty of proving the willful negligence of VSI in making the ship seaworthy resulting in damage to its cargo.
Assailing the genuineness of the certificate of seaworthiness is not sufficient proof that the vessel was not seaworthy.

Fourth Issue: Demurrage and Attorney's Fees

The contract of voyage charter hire provides inter alia:
2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Master's option.
6. Loading/Discharging Rate: 750 tons per WWDSHINC.
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.39

The Court defined demurrage in its strict sense as the compensation provided for in the contract of affreightment for the detention of the
vessel beyond the laytime or that period of time agreed on for loading and unloading of cargo.40 It is given to compensate the shipowner
for the nonuse of the vessel. On the other hand, the following is well-settled:
Laytime runs according to the particular clause of the charter party. . . . If laytime is expressed in "running days," this means days when the
ship would be run continuously, and holidays are not excepted. A qualification of "weather permitting" excepts only those days when bad
weather reasonably prevents the work contemplated.41

In this case, the contract of voyage charter hire provided for a four-day laytime; it also qualified laytime as WWDSHINC or weather
working days Sundays and holidays included.42 The running of laytime was thus made subject to the weather, and would cease to run in
the event unfavorable weather interfered with the unloading of cargo.43 Consequently, NSC may not be held liable for demurrage as the
four-day laytime allowed it did not lapse, having been tolled by unfavorable weather condition in view of the WWDSHINC qualification
agreed upon by the parties. Clearly, it was error for the trial court and the Court of Appeals to have found and affirmed respectively that
NSC incurred eleven days of delay in unloading the cargo. The trial court arrived at this erroneous finding by subtracting from the twelve
days, specifically August 13, 1974 to August 24, 1974, the only day of unloading unhampered by unfavorable weather or rain, which was
August 22, 1974. Based on our previous discussion, such finding is a reversible error. As mentioned, the respondent appellate court also
erred in ruling that NSC was liable to VSI for demurrage, even if it reduced the amount by half.

Attorney's Fees: VSI assigns as error of law the Court of Appeals' deletion of the award of attorney's fees. We disagree. While VSI was
compelled to litigate to protect its rights, such fact by itself will not justify an award of attorney's fees under Article 2208 of the Civil Code
when ". . . no sufficient showing of bad faith would be reflected in a party's persistence in a case other than an erroneous conviction of the
righteousness of his cause . . ."44 Moreover, attorney's fees may not be awarded to a party for the reason alone that the judgment rendered
was favorable to the latter, as this is tantamount to imposing a premium on one's right to litigate or seek judicial redress of legitimate
grievances.45

Epilogue: At bottom, this appeal really hinges on a factual issue: when, how and who caused the damage to the cargo? Ranged against
NSC are two formidable truths. First, both lower courts found that such damage was brought about during the unloading process when rain
and seawater seeped through the cargo due to the fault or negligence of the stevedores employed by it. Basic is the rule that factual
findings of the trial court, when affirmed by the Court of Appeals, are binding on the Supreme Court. Although there are settled
exceptions, NSC has not satisfactorily shown that this case is one of them. Second, the agreement between the parties — the Contract of
Voyage Charter Hire — placed the burden of proof for such loss or damage upon the shipper, not upon the shipowner. Such stipulation,
while disadvantageous to NSC, is valid because the parties entered into a contract of private charter, not one of common carriage. Basic
too is the doctrine that courts cannot relieve a parry from the effects of a private contract freely entered into, on the ground that it is
allegedly one-sided or unfair to the plaintiff. The charter party is a normal commercial contract and its stipulations are agreed upon in
consideration of many factors, not the least of which is the transport price which is determined not only by the actual costs but also by the
risks and burdens assumed by the shipper in regard to possible loss or damage to the cargo. In recognition of such factors, the parties even
stipulated that the shipper should insure the cargo to protect itself from the risks it undertook under the charter party. That NSC failed or
neglected to protect itself with such insurance should not adversely affect VSI, which had nothing to do with such failure or neglect.

WHEREFORE, premises considered, the instant consolidated petitions are hereby DENIED. The questioned Decision of the Court of
Appeals is AFFIRMED with the MODIFICATION that the demurrage awarded to VSI is deleted. No pronouncement as to costs. SO
ORDERED.

3. G.R. No. 131621 September 28, 1999

LOADSTAR SHIPPING CO., INC., petitioner, vs. COURT OF APPEALS and THE MANILA INSURANCE CO., INC.,
respondents. DAVIDE, JR., C.J.:

Petitioner Loadstar Shipping Co., Inc. (hereafter LOADSTAR), in this petition for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure, seeks to reverse and set aside the following: (a) the 30 January 1997 decision 1 of the Court of Appeals in CA-G.R. CV
No. 36401, which affirmed the decision of 4 October 1991 2 of the Regional Trial Court of Manila, Branch 16, in Civil Case No. 85-29110,
ordering LOADSTAR to pay private respondent Manila Insurance Co. (hereafter MIC) the amount of P6,067,178, with legal interest from
the filing of the compliant until fully paid, P8,000 as attorney's fees, and the costs of the suit; and (b) its resolution of 19 November 1997, 3
denying LOADSTAR's motion for reconsideration of said decision.

The facts are undisputed.

On 19 November 1984, LOADSTAR received on board its M/V "Cherokee" (hereafter, the vessel) the following goods for shipment:
a) 705 bales of lawanit hardwood;
b) 27 boxes and crates of tilewood assemblies and the others ;and
c) 49 bundles of mouldings R & W (3) Apitong Bolidenized.

The goods, amounting to P6,067,178, were insured for the same amount with MIC against various risks including "TOTAL LOSS BY
TOTAL OF THE LOSS THE VESSEL." The vessel, in turn, was insured by Prudential Guarantee & Assurance, Inc. (hereafter PGAI) for
P4 million. On 20 November 1984, on its way to Manila from the port of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank
off Limasawa Island. As a result of the total loss of its shipment, the consignee made a claim with LOADSTAR which, however, ignored
the same. As the insurer, MIC paid P6,075,000 to the insured in full settlement of its claim, and the latter executed a subrogation receipt
therefor.

On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking of the vessel was due to the fault and
negligence of LOADSTAR and its employees. It also prayed that PGAI be ordered to pay the insurance proceeds from the loss the vessel
directly to MIC, said amount to be deducted from MIC's claim from LOADSTAR.

In its answer, LOADSTAR denied any liability for the loss of the shipper's goods and claimed that sinking of its vessel was due to force
majeure. PGAI, on the other hand, averred that MIC had no cause of action against it, LOADSTAR being the party insured. In any event,
PGAI was later dropped as a party defendant after it paid the insurance proceeds to LOADSTAR.
As stated at the outset, the court a quo rendered judgment in favor of MIC, prompting LOADSTAR to elevate the matter to the court of
Appeals, which, however, agreed with the trial court and affirmed its decision in toto.

In dismissing LOADSTAR's appeal, the appellate court made the following observations:

1) LOADSTAR cannot be considered a private carrier on the sole ground that there was a single shipper on that fateful voyage. The court
noted that the charter of the vessel was limited to the ship, but LOADSTAR retained control over its crew. 4

2) As a common carrier, it is the Code of Commerce, not the Civil Code, which should be applied in determining the rights and liabilities
of the parties.

3) The vessel was not seaworthy because it was undermanned on the day of the voyage. If it had been seaworthy, it could have withstood
the "natural and inevitable action of the sea" on 20 November 1984, when the condition of the sea was moderate. The vessel sank, not
because of force majeure, but because it was not seaworthy. LOADSTAR'S allegation that the sinking was probably due to the
"convergence of the winds," as stated by a PAGASA expert, was not duly proven at the trial. The "limited liability" rule, therefore, is not
applicable considering that, in this case, there was an actual finding of negligence on the part of the carrier.5

4) Between MIC and LOADSTAR, the provisions of the Bill of Lading do not apply because said provisions bind only the
shipper/consignee and the carrier. When MIC paid the shipper for the goods insured, it was subrogated to the latter's rights as against the
carrier, LOADSTAR. 6

5) There was a clear breach of the contract of carriage when the shipper's goods never reached their destination. LOADSTAR's defense of
"diligence of a good father of a family" in the training and selection of its crew is unavailing because this is not a proper or complete
defense in culpa contractual.

6) "Art. 361 (of the Code of Commerce) has been judicially construed to mean that when goods are delivered on board a ship in good order
and condition, and the shipowner delivers them to the shipper in bad order and condition, it then devolves upon the shipowner to both
allege and prove that the goods were damaged by reason of some fact which legally exempts him from liability." Transportation of the
merchandise at the risk and venture of the shipper means that the latter bears the risk of loss or deterioration of his goods arising from
fortuitous events, force majeure, or the inherent nature and defects of the goods, but not those caused by the presumed negligence or fault
of the carrier, unless otherwise proved. 7

The errors assigned by LOADSTAR boil down to a determination of the following issues:

(1) Is the M/V "Cherokee" a private or a common carrier?

(2) Did LOADSTAR observe due and/or ordinary diligence in these premises.

Regarding the first issue, LOADSTAR submits that the vessel was a private carrier because it was not issued certificate of public
convenience, it did not have a regular trip or schedule nor a fixed route, and there was only "one shipper, one consignee for a special
cargo."

In refutation, MIC argues that the issue as to the classification of the M/V "Cherokee" was not timely raised below; hence, it is barred by
estoppel. While it is true that the vessel had on board only the cargo of wood products for delivery to one consignee, it was also carrying
passengers as part of its regular business. Moreover, the bills of lading in this case made no mention of any charter party but only a
statement that the vessel was a "general cargo carrier." Neither was there any "special arrangement" between LOADSTAR and the shipper
regarding the shipment of the cargo. The singular fact that the vessel was carrying a particular type of cargo for one shipper is not
sufficient to convert the vessel into a private carrier.

As regards the second error, LOADSTAR argues that as a private carrier, it cannot be presumed to have been negligent, and the burden of
proving otherwise devolved upon MIC. 8

LOADSTAR also maintains that the vessel was seaworthy. Before the fateful voyage on 19 November 1984, the vessel was allegedly dry
docked at Keppel Philippines Shipyard and was duly inspected by the maritime safety engineers of the Philippine Coast Guard, who
certified that the ship was fit to undertake a voyage. Its crew at the time was experienced, licensed and unquestionably competent. With all
these precautions, there could be no other conclusion except that LOADSTAR exercised the diligence of a good father of a family in
ensuring the vessel's seaworthiness.

LOADSTAR further claims that it was not responsible for the loss of the cargo, such loss being due to force majeure. It points out that
when the vessel left Nasipit, Agusan del Norte, on 19 November 1984, the weather was fine until the next day when the vessel sank due to
strong waves. MCI's witness, Gracelia Tapel, fully established the existence of two typhoons, "WELFRING" and "YOLING," inside the
Philippine area of responsibility. In fact, on 20 November 1984, signal no. 1 was declared over Eastern Visayas, which includes Limasawa
Island. Tapel also testified that the convergence of winds brought about by these two typhoons strengthened wind velocity in the area,
naturally producing strong waves and winds, in turn, causing the vessel to list and eventually sink.

LOADSTAR goes on to argue that, being a private carrier, any agreement limiting its liability, such as what transpired in this case, is valid.
Since the cargo was being shipped at "owner's risk," LOADSTAR was not liable for any loss or damage to the same. Therefore, the Court
of Appeals erred in holding that the provisions of the bills of lading apply only to the shipper and the carrier, and not to the insurer of the
goods, which conclusion runs counter to the Supreme Court's ruling in the case of St. Paul Fire & Marine Co. v. Macondray & Co., Inc., 9
and National Union Fire Insurance Company of Pittsburgh v. Stolt-Nielsen Phils., Inc. 10
Finally, LOADSTAR avers that MIC's claim had already prescribed, the case having been instituted beyond the period stated in the bills of
lading for instituting the same — suits based upon claims arising from shortage, damage, or non-delivery of shipment shall be instituted
within sixty days from the accrual of the right of action. The vessel sank on 20 November 1984; yet, the case for recovery was filed only
on 4 February 1985.

MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding that the loss of the cargo was due to force majeure, because
the same concurred with LOADSTAR's fault or negligence.

Secondly, LOADSTAR did not raise the issue of prescription in the court below; hence, the same must be deemed waived.

Thirdly, the " limited liability " theory is not applicable in the case at bar because LOADSTAR was at fault or negligent, and because it
failed to maintain a seaworthy vessel. Authorizing the voyage notwithstanding its knowledge of a typhoon is tantamount to negligence.

We find no merit in this petition.

Anent the first assigned error, we hold that LOADSTAR is a common carrier. It is not necessary that the carrier be issued a certificate of
public convenience, and this public character is not altered by the fact that the carriage of the goods in question was periodic, occasional,
episodic or unscheduled.

In support of its position, LOADSTAR relied on the 1968 case of Home Insurance Co. v. American Steamship Agencies, Inc., 11 where this
Court held that a common carrier transporting special cargo or chartering the vessel to a special person becomes a private carrier that is not
subject to the provisions of the Civil Code. Any stipulation in the charter party absolving the owner from liability for loss due to the
negligence of its agent is void only if the strict policy governing common carriers is upheld. Such policy has no force where the public at is
not involved, as in the case of a ship totally chartered for the use of a single party. LOADSTAR also cited Valenzuela Hardwood and
Industrial Supply, Inc. v. Court of Appeals 12 and National Steel Corp. v. Court of Appeals, 13 both of which upheld the Home Insurance
doctrine.

These cases invoked by LOADSTAR are not applicable in the case at bar for the simple reason that the factual settings are different. The
records do not disclose that the M/V "Cherokee," on the date in question, undertook to carry a special cargo or was chartered to a special
person only. There was no charter party. The bills of lading failed to show any special arrangement, but only a general provision to the
effect that the M/V"Cherokee" was a "general cargo carrier." 14 Further, the bare fact that the vessel was carrying a particular type of
cargo for one shipper, which appears to be purely coincidental, is not reason enough to convert the vessel from a common to a private
carrier, especially where, as in this case, it was shown that the vessel was also carrying passengers.

Under the facts and circumstances obtaining in this case, LOADSTAR fits the definition of a common carrier under Article 1732 of the
Civil Code. In the case of De Guzman v. Court of Appeals,15 the Court juxtaposed the statutory definition of "common carriers" with the
peculiar circumstances of that case, viz.:

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

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

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

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

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

Moving on to the second assigned error, we find that the M/V "Cherokee" was not seaworthy when it embarked on its voyage on 19
November 1984. The vessel was not even sufficiently manned at the time. "For a vessel to be seaworthy, it must be adequately equipped
for the voyage and manned with a sufficient number of competent officers and crew. The failure of a common carrier to maintain in
seaworthy condition its vessel involved in a contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code."
16

Neither do we agree with LOADSTAR's argument that the "limited liability" theory should be applied in this case. The doctrine of limited
liability does not apply where there was negligence on the part of the vessel owner or agent. 17 LOADSTAR was at fault or negligent in not
maintaining a seaworthy vessel and in having allowed its vessel to sail despite knowledge of an approaching typhoon. In any event, it did
not sink because of any storm that may be deemed as force majeure, inasmuch as the wind condition in the performance of its duties,
LOADSTAR cannot hide behind the "limited liability" doctrine to escape responsibility for the loss of the vessel and its cargo.

LOADSTAR also claims that the Court of Appeals erred in holding it liable for the loss of the goods, in utter disregard of this Court's
pronouncements in St. Paul Fire & Marine Ins. Co. v. Macondray & Co., Inc., 18 and National Union Fire Insurance v. Stolt-Nielsen
Phils., Inc. 19 It was ruled in these two cases that after paying the claim of the insured for damages under the insurance policy, the insurer is
subrogated merely to the rights of the assured, that is, it can recover only the amount that may, in turn, be recovered by the latter. Since the
right of the assured in case of loss or damage to the goods is limited or restricted by the provisions in the bills of lading, a suit by the
insurer as subrogee is necessarily subject to the same limitations and restrictions. We do not agree. In the first place, the cases relied on by
LOADSTAR involved a limitation on the carrier's liability to an amount fixed in the bill of lading which the parties may enter into,
provided that the same was freely and fairly agreed upon (Articles 1749-1750). On the other hand, the stipulation in the case at bar
effectively reduces the common carrier's liability for the loss or destruction of the goods to a degree less than extraordinary (Articles 1744
and 1745), that is, the carrier is not liable for any loss or damage to shipments made at "owner's risk." Such stipulation is obviously null
and void for being contrary to public policy." 20 It has been said:

Three kinds of stipulations have often been made in a bill of lading. The first one exempting the carrier from any and all liability for loss or
damage occasioned by its own negligence. The second is one providing for an unqualified limitation of such liability to an agreed
valuation. And the third is one limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and pays
a higher rate of. freight. According to an almost uniform weight of authority, the first and second kinds of stipulations are invalid as being
contrary to public policy, but the third is valid and enforceable. 21

Since the stipulation in question is null and void, it follows that when MIC paid the shipper, it was subrogated to all the rights which the
latter has against the common carrier, LOADSTAR.

Neither is there merit to the contention that the claim in this case was barred by prescription. MIC's cause of action had not yet prescribed
at the time it was concerned. Inasmuch as neither the Civil Code nor the Code of Commerce states a specific prescriptive period on the
matter, the Carriage of Goods by Sea Act (COGSA) — which provides for a one-year period of limitation on claims for loss of, or damage
to, cargoes sustained during transit — may be applied suppletorily to the case at bar. This one-year prescriptive period also applies to the
insurer of the goods. 22 In this case, the period for filing the action for recovery has not yet elapsed. Moreover, a stipulation reducing the
one-year period is null and void; 23 it must, accordingly, be struck down.

WHEREFORE, the instant petition is DENIED and the challenged decision of 30 January 1997 of the Court of Appeals in CA-G.R. CV
No. 36401 is AFFIRMED. Costs against petitioner. SO ORDERED.

4. G.R. No. L-69044 May 29, 1987

EASTERN SHIPPING LINES, INC., petitioner, vs. INTERMEDIATE APPELLATE COURT and DEVELOPMENT
INSURANCE & SURETY CORPORATION, respondents.
No. 71478 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner, vs. THE NISSHIN FIRE AND MARINE INSURANCE CO., and DOWA FIRE
& MARINE INSURANCE CO., LTD., respondents. MELENCIO-HERRERA, J.:

These two cases, both for the recovery of the value of cargo insurance, arose from the same incident, the sinking of the M/S ASIATICA
when it caught fire, resulting in the total loss of ship and cargo.

The basic facts are not in controversy:

In G.R. No. 69044, sometime in or prior to June, 1977, the M/S ASIATICA, a vessel operated by petitioner Eastern Shipping Lines, Inc.,
(referred to hereinafter as Petitioner Carrier) loaded at Kobe, Japan for transportation to Manila, 5,000 pieces of calorized lance pipes in 28
packages valued at P256,039.00 consigned to Philippine Blooming Mills Co., Inc., and 7 cases of spare parts valued at P92,361.75,
consigned to Central Textile Mills, Inc. Both sets of goods were insured against marine risk for their stated value with respondent
Development Insurance and Surety Corporation.

In G.R. No. 71478, during the same period, the same vessel took on board 128 cartons of garment fabrics and accessories, in two (2)
containers, consigned to Mariveles Apparel Corporation, and two cases of surveying instruments consigned to Aman Enterprises and
General Merchandise. The 128 cartons were insured for their stated value by respondent Nisshin Fire & Marine Insurance Co., for US
$46,583.00, and the 2 cases by respondent Dowa Fire & Marine Insurance Co., Ltd., for US $11,385.00.

Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the total loss of ship and cargo. The respective respondent
Insurers paid the corresponding marine insurance values to the consignees concerned and were thus subrogated unto the rights of the latter
as the insured.

G.R. NO. 69044 : On May 11, 1978, respondent Development Insurance & Surety Corporation (Development Insurance, for short), having
been subrogated unto the rights of the two insured companies, filed suit against petitioner Carrier for the recovery of the amounts it had
paid to the insured before the then Court of First instance of Manila, Branch XXX (Civil Case No. 6087).
Petitioner-Carrier denied liability mainly on the ground that the loss was due to an extraordinary fortuitous event, hence, it is not liable
under the law. On August 31, 1979, the Trial Court rendered judgment in favor of Development Insurance in the amounts of P256,039.00
and P92,361.75, respectively, with legal interest, plus P35,000.00 as attorney's fees and costs. Petitioner Carrier took an appeal to the then
Court of Appeals which, on August 14, 1984, affirmed.

Petitioner Carrier is now before us on a Petition for Review on Certiorari.

G.R. NO. 71478: On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co. NISSHIN for short), and Dowa Fire & Marine
Insurance Co., Ltd. (DOWA, for brevity), as subrogees of the insured, filed suit against Petitioner Carrier for the recovery of the insured
value of the cargo lost with the then Court of First Instance of Manila, Branch 11 (Civil Case No. 116151), imputing unseaworthiness of
the ship and non-observance of extraordinary diligence by petitioner Carrier.

Petitioner Carrier denied liability on the principal grounds that the fire which caused the sinking of the ship is an exempting circumstance
under Section 4(2) (b) of the Carriage of Goods by Sea Act (COGSA); and that when the loss of fire is established, the burden of proving
negligence of the vessel is shifted to the cargo shipper.

On September 15, 1980, the Trial Court rendered judgment in favor of NISSHIN and DOWA in the amounts of US $46,583.00 and US
$11,385.00, respectively, with legal interest, plus attorney's fees of P5,000.00 and costs. On appeal by petitioner, the then Court of Appeals
on September 10, 1984, affirmed with modification the Trial Court's judgment by decreasing the amount recoverable by DOWA to US
$1,000.00 because of $500 per package limitation of liability under the COGSA.

Hence, this Petition for Review on certiorari by Petitioner Carrier.

Both Petitions were initially denied for lack of merit. G.R. No. 69044 on January 16, 1985 by the First Division, and G. R. No. 71478 on
September 25, 1985 by the Second Division. Upon Petitioner Carrier's Motion for Reconsideration, however, G.R. No. 69044 was given
due course on March 25, 1985, and the parties were required to submit their respective Memoranda, which they have done.

On the other hand, in G.R. No. 71478, Petitioner Carrier sought reconsideration of the Resolution denying the Petition for Review and
moved for its consolidation with G.R. No. 69044, the lower-numbered case, which was then pending resolution with the First Division.
The same was granted; the Resolution of the Second Division of September 25, 1985 was set aside and the Petition was given due course.

At the outset, we reject Petitioner Carrier's claim that it is not the operator of the M/S Asiatica but merely a charterer thereof. We note that
in G.R. No. 69044, Petitioner Carrier stated in its Petition:

There are about 22 cases of the "ASIATICA" pending in various courts where various plaintiffs are represented by various counsel
representing various consignees or insurance companies. The common defendant in these cases is petitioner herein, being the operator of
said vessel. ... 1

Petitioner Carrier should be held bound to said admission. As a general rule, the facts alleged in a party's pleading are deemed admissions
of that party and binding upon it. 2 And an admission in one pleading in one action may be received in evidence against the pleader or his
successor-in-interest on the trial of another action to which he is a party, in favor of a party to the latter action. 3

The threshold issues in both cases are: (1) which law should govern — the Civil Code provisions on Common carriers or the Carriage of
Goods by Sea Act? and (2) who has the burden of proof to show negligence of the carrier?

On the Law Applicable : The law of the country to which the goods are to be transported governs the liability of the common carrier in
case of their loss, destruction or deterioration. 4 As the cargoes in question were transported from Japan to the Philippines, the liability of
Petitioner Carrier is governed primarily by the Civil Code. 5 However, in all matters not regulated by said Code, the rights and obligations
of common carrier shall be governed by the Code of Commerce and by special laws. 6 Thus, the Carriage of Goods by Sea Act, a special
law, is suppletory to the provisions of the Civil Code. 7

On the Burden of Proof : Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over goods, according to all the circumstances of each case. 8 Common carriers
are responsible for the loss, destruction, or deterioration of the goods unless the same is due to any of the following causes only:

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

Petitioner Carrier claims that the loss of the vessel by fire exempts it from liability under the phrase "natural disaster or calamity. "
However, we are of the opinion that fire may not be considered a natural disaster or calamity. This must be so as it arises almost invariably
from some act of man or by human means. 10 It does not fall within the category of an act of God unless caused by lightning 11 or by
other natural disaster or calamity. 12 It may even be caused by the actual fault or privity of the carrier. 13

Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event refers to leases of rural lands where a reduction of
the rent is allowed when more than one-half of the fruits have been lost due to such event, considering that the law adopts a protection
policy towards agriculture. 14

As the peril of the fire is not comprehended within the exception in Article 1734, supra, Article 1735 of the Civil Code provides that all
cases than those mention in Article 1734, the common carrier shall be presumed to have been at fault or to have acted negligently, unless it
proves that it has observed the extraordinary deligence required by law.
In this case, the respective Insurers. as subrogees of the cargo shippers, have proven that the transported goods have been lost. Petitioner
Carrier has also proved that the loss was caused by fire. The burden then is upon Petitioner Carrier to proved that it has exercised the
extraordinary diligence required by law. In this regard, the Trial Court, concurred in by the Appellate Court, made the following Finding of
fact:

The cargoes in question were, according to the witnesses defendant placed in hatches No, 2 and 3 cf the vessel, Boatswain Ernesto
Pastrana noticed that smoke was coming out from hatch No. 2 and hatch No. 3; that where the smoke was noticed, the fire was already big;
that the fire must have started twenty-four 24) our the same was noticed; that carbon dioxide was ordered released and the crew was
ordered to open the hatch covers of No, 2 tor commencement of fire fighting by sea water: that all of these effort were not enough to
control the fire.

Pursuant to Article 1733, common carriers are bound to extraordinary diligence in the vigilance over the goods. The evidence of the
defendant did not show that extraordinary vigilance was observed by the vessel to prevent the occurrence of fire at hatches numbers 2 and
3. Defendant's evidence did not likewise show he amount of diligence made by the crew, on orders, in the care of the cargoes. What
appears is that after the cargoes were stored in the hatches, no regular inspection was made as to their condition during the voyage.
Consequently, the crew could not have even explain what could have caused the fire. The defendant, in the Court's mind, failed to
satisfactorily show that extraordinary vigilance and care had been made by the crew to prevent the occurrence of the fire. The defendant, as
a common carrier, is liable to the consignees for said lack of deligence required of it under Article 1733 of the Civil Code. 15

Having failed to discharge the burden of proving that it had exercised the extraordinary diligence required by law, Petitioner Carrier cannot
escape liability for the loss of the cargo.

And even if fire were to be considered a "natural disaster" within the meaning of Article 1734 of the Civil Code, it is required under Article
1739 of the same Code that the "natural disaster" must have been the "proximate and only cause of the loss," and that the carrier has
"exercised due diligence to prevent or minimize the loss before, during or after the occurrence of the disaster. " This Petitioner Carrier has
also failed to establish satisfactorily.

Nor may Petitioner Carrier seek refuge from liability under the Carriage of Goods by Sea Act, It is provided therein that:

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.

In this case, both the Trial Court and the Appellate Court, in effect, found, as a fact, that there was "actual fault" of the carrier shown by
"lack of diligence" in that "when the smoke was noticed, the fire was already big; that the fire must have started twenty-four (24) hours
before the same was noticed; " and that "after the cargoes were stored in the hatches, no regular inspection was made as to their condition
during the voyage." The foregoing suffices to show that the circumstances under which the fire originated and spread are such as to show
that Petitioner Carrier or its servants were negligent in connection therewith. Consequently, the complete defense afforded by the COGSA
when loss results from fire is unavailing to Petitioner Carrier.

On the US $500 Per Package Limitation: Petitioner Carrier avers that its liability if any, should not exceed US $500 per package as
provided in section 4(5) of the COGSA, which reads:

(5) Neither the carrier nor 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 $500 per package lawful money of the United States, or in case of goods not shipped in packages, per
customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the
shipper before shipment and inserted in bill of lading. This declaration if embodied in the bill of lading shall be prima facie evidence, but
all be conclusive on the carrier.

By agreement between the carrier, master or agent of the carrier, and the shipper another maximum amount than that mentioned in this
paragraph may be fixed: Provided, That such maximum shall not be less than the figure above named. In no event shall the carrier be
Liable for more than the amount of damage actually sustained.

Article 1749 of the New Civil Code also allows the limitations of liability in this wise:

Art. 1749. A stipulation that the common carrier's liability as limited to the value of the goods appearing in the bill of lading, unless the
shipper or owner declares a greater value, is binding.

It is to be noted that the Civil Code does not of itself limit the liability of the common carrier to a fixed amount per package although the
Code expressly permits a stipulation limiting such liability. Thus, the COGSA which is suppletory to the provisions of the Civil Code,
steps in and supplements the Code by establishing a statutory provision limiting the carrier's liability in the absence of a declaration of a
higher value of the goods by the shipper in the bill of lading. The provisions of the Carriage of Goods by.Sea Act on limited liability are as
much a part of a bill of lading as though physically in it and as much a part thereof as though placed therein by agreement of the parties. 16

In G.R. No. 69044, there is no stipulation in the respective Bills of Lading (Exhibits "C-2" and "I-3") 1 7 limiting the carrier's liability for
the loss or destruction of the goods. Nor is there a declaration of a higher value of the goods. Hence, Petitioner Carrier's liability should not
exceed US $500 per package, or its peso equivalent, at the time of payment of the value of the goods lost, but in no case "more than the
amount of damage actually sustained."

The actual total loss for the 5,000 pieces of calorized lance pipes was P256,039 (Exhibit "C"), which was exactly the amount of the
insurance coverage by Development Insurance (Exhibit "A"), and the amount affirmed to be paid by respondent Court. The goods were
shipped in 28 packages (Exhibit "C-2") Multiplying 28 packages by $500 would result in a product of $14,000 which, at the current
exchange rate of P20.44 to US $1, would be P286,160, or "more than the amount of damage actually sustained." Consequently, the
aforestated amount of P256,039 should be upheld.

With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their actual value was P92,361.75 (Exhibit "I"), which is likewise the
insured value of the cargo (Exhibit "H") and amount was affirmed to be paid by respondent Court. however, multiplying seven (7) cases by
$500 per package at the present prevailing rate of P20.44 to US $1 (US $3,500 x P20.44) would yield P71,540 only, which is the amount
that should be paid by Petitioner Carrier for those spare parts, and not P92,361.75.

In G.R. No. 71478, in so far as the two (2) cases of surveying instruments are concerned, the amount awarded to DOWA which was
already reduced to $1,000 by the Appellate Court following the statutory $500 liability per package, is in order.

In respect of the shipment of 128 cartons of garment fabrics in two (2) containers and insured with NISSHIN, the Appellate Court also
limited Petitioner Carrier's liability to $500 per package and affirmed the award of $46,583 to NISSHIN. it multiplied 128 cartons
(considered as COGSA packages) by $500 to arrive at the figure of $64,000, and explained that "since this amount is more than the insured
value of the goods, that is $46,583, the Trial Court was correct in awarding said amount only for the 128 cartons, which amount is less than
the maximum limitation of the carrier's liability."

We find no reversible error. The 128 cartons and not the two (2) containers should be considered as the shipping unit.

In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 (1981), the consignees of tin ingots and the shipper of floor covering
brought action against the vessel owner and operator to recover for loss of ingots and floor covering, which had been shipped in vessel —
supplied containers. The U.S. District Court for the Southern District of New York rendered judgment for the plaintiffs, and the defendant
appealed. The United States Court of Appeals, Second Division, modified and affirmed holding that:

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 liability limitation
provision of Carriage of Goods by Sea Act. Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A.& 1304(5).

Even if language and purposes of Carriage of Goods by Sea Act left doubt as to whether carrier-furnished containers whose contents are
disclosed should be treated as packages, the interest in securing international uniformity would suggest that they should not be so treated.
Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A. 1304(5).

... After quoting the statement in Leather's Best, supra, 451 F 2d at 815, that treating a container as a package is inconsistent with the
congressional purpose of establishing a reasonable minimum level of liability, Judge Beeks wrote, 414 F. Supp. at 907 (footnotes omitted):

Although this approach has not completely escaped criticism, there is, nonetheless, much to commend it. It gives needed recognition to the
responsibility of the courts to construe and apply the statute as enacted, however great might be the temptation to "modernize" or
reconstitute it by artful judicial gloss. If COGSA's package limitation scheme suffers from internal illness, Congress alone must undertake
the surgery. There is, in this regard, obvious wisdom in the Ninth Circuit's conclusion in Hartford that technological advancements,
whether or not forseeable by the COGSA promulgators, do not warrant a distortion or artificial construction of the statutory term
"package." A ruling that these large reusable metal pieces of transport equipment qualify as COGSA packages — at least where, as here,
they were carrier owned and supplied — would amount to just such a distortion.

Certainly, if the individual crates or cartons prepared by the shipper and containing his goods can rightly be considered "packages"
standing by themselves, they do not suddenly lose that character upon being stowed in a carrier's container. I would liken these containers
to detachable stowage compartments of the ship. They simply serve to divide the ship's overall cargo stowage space into smaller, more
serviceable loci. Shippers' packages are quite literally "stowed" in the containers utilizing stevedoring practices and materials analogous to
those employed in traditional on board stowage.

In Yeramex International v. S.S. Tando,, 1977 A.M.C. 1807 (E.D. Va.) rev'd on other grounds, 595 F 2nd 943 (4 Cir. 1979), another
district with many maritime cases followed Judge Beeks' reasoning in Matsushita and similarly rejected the functional economics test.
Judge Kellam held that when rolls of polyester goods are packed into cardboard cartons which are then placed in containers, the cartons
and not the containers are the packages.

The case of Smithgreyhound v. M/V Eurygenes, 18 followed the Mitsui test:

Eurygenes concerned a shipment of stereo equipment packaged by the shipper into cartons which were then placed by the shipper into a
carrier- furnished container. The number of cartons was disclosed to the carrier in the bill of lading. Eurygenes followed the Mitsui test
and treated the cartons, not the container, as the COGSA packages. However, Eurygenes indicated that a carrier could limit its liability to
$500 per container if the bill of lading failed to disclose the number of cartons or units within the container, or if the parties indicated, in
clear and unambiguous language, an agreement to treat the container as the package.

(Admiralty Litigation in Perpetuum: The Continuing Saga of Package Limitations and Third World Delivery Problems by Chester D.
Hooper & Keith L. Flicker, published in Fordham International Law Journal, Vol. 6, 1982-83, Number 1) (Emphasis supplied)

In this case, the Bill of Lading (Exhibit "A") disclosed the following data:

2 Containers
(128) Cartons)
Men's Garments Fabrics and Accessories Freight Prepaid
Say: Two (2) Containers Only.

Considering, therefore, that the Bill of Lading clearly disclosed the contents of the containers, the number of cartons or units, as well as the
nature of the goods, and applying the ruling in the Mitsui and Eurygenes cases it is clear that the 128 cartons, not the two (2) containers
should be considered as the shipping unit subject to the $500 limitation of liability.

True, the evidence does not disclose whether the containers involved herein were carrier-furnished or not. Usually, however, containers are
provided by the carrier. 19 In this case, the probability is that they were so furnished for Petitioner Carrier was at liberty to pack and carry
the goods in containers if they were not so packed. Thus, at the dorsal side of the Bill of Lading (Exhibit "A") appears the following
stipulation in fine print:

11. (Use of Container) Where the goods receipt of which is acknowledged on the face of this Bill of Lading are not already packed into
container(s) at the time of receipt, the Carrier shall be at liberty to pack and carry them in any type of container(s).

The foregoing would explain the use of the estimate "Say: Two (2) Containers Only" in the Bill of Lading, meaning that the goods could
probably fit in two (2) containers only. It cannot mean that the shipper had furnished the containers for if so, "Two (2) Containers"
appearing as the first entry would have sufficed. and if there is any ambiguity in the Bill of Lading, it is a cardinal principle in the
construction of contracts that the interpretation of obscure words or stipulations in a contract shall not favor the party who caused the
obscurity. 20 This applies with even greater force in a contract of adhesion where a contract is already prepared and the other party merely
adheres to it, like the Bill of Lading in this case, which is draw. up by the carrier. 21

On Alleged Denial of Opportunity to Present Deposition of Its Witnesses: (in G.R. No. 69044 only) Petitioner Carrier claims that the Trial
Court did not give it sufficient time to take the depositions of its witnesses in Japan by written interrogatories.

We do not agree. petitioner Carrier was given- full opportunity to present its evidence but it failed to do so. On this point, the Trial Court
found:

Indeed, since after November 6, 1978, to August 27, 1979, not to mention the time from June 27, 1978, when its answer was prepared and
filed in Court, until September 26, 1978, when the pre-trial conference was conducted for the last time, the defendant had more than nine
months to prepare its evidence. Its belated notice to take deposition on written interrogatories of its witnesses in Japan, served upon the
plaintiff on August 25th, just two days before the hearing set for August 27th, knowing fully well that it was its undertaking on July 11 the
that the deposition of the witnesses would be dispensed with if by next time it had not yet been obtained, only proves the lack of merit of
the defendant's motion for postponement, for which reason it deserves no sympathy from the Court in that regard. The defendant has told
the Court since February 16, 1979, that it was going to take the deposition of its witnesses in Japan. Why did it take until August 25, 1979,
or more than six months, to prepare its written interrogatories. Only the defendant itself is to blame for its failure to adduce evidence in
support of its defenses.

Petitioner Carrier was afforded ample time to present its side of the case. 23 It cannot complain now that it was denied due process when
the Trial Court rendered its Decision on the basis of the evidence adduced. What due process abhors is absolute lack of opportunity to be
heard. 24

On the Award of Attorney's Fees: Petitioner Carrier questions the award of attorney's fees. In both cases, respondent Court affirmed the
award by the Trial Court of attorney's fees of P35,000.00 in favor of Development Insurance in G.R. No. 69044, and P5,000.00 in favor of
NISSHIN and DOWA in G.R. No. 71478.

Courts being vested with discretion in fixing the amount of attorney's fees, it is believed that the amount of P5,000.00 would be more
reasonable in G.R. No. 69044. The award of P5,000.00 in G.R. No. 71478 is affirmed.

WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that petitioner Eastern Shipping Lines shall pay the Development
Insurance and Surety Corporation the amount of P256,039 for the twenty-eight (28) packages of calorized lance pipes, and P71,540 for the
seven (7) cases of spare parts, with interest at the legal rate from the date of the filing of the complaint on June 13, 1978, plus P5,000 as
attorney's fees, and the costs.

2) In G.R.No.71478,the judgment is hereby affirmed. SO ORDERED.

5. G.R. No. 119197 May 16, 1997

TABACALERA INSURANCE CO., PRUDENTIAL GUARANTEE & ASSURANCE, INC., and NEW ZEALAND INSURANCE
CO., LTD., petitioners, vs. NORTH FRONT SHIPPING SERVICES, INC., and COURT OF APPEALS, respondents.
BELLOSILLO, J.:

TABACALERA INSURANCE CO., Prudential Guarantee & Assurance, Inc., and New Zealand Insurance Co., Ltd., in this petition for
review on certiorari, assail the 22 December 1994 decision of the Court of Appeals and its Resolution of 16 February 1995 which affirmed
the 1 June 1993 decision of the Regional Trial Court dismissing their complaint for damages against North Front Shipping Services, Inc.

On 2 August 1990, 20,234 sacks of corn grains valued at P3,500,640.00 were shipped on board North Front 777, a vessel owned by North
Front Shipping Services, Inc. The cargo was consigned to Republic Flour Mills Corporation in Manila under Bill of Lading No. 001 1 and
insured with the herein mentioned insurance companies. The vessel was inspected prior to actual loading by representatives of the shipper
and was found fit to carry the merchandise. The cargo was covered with tarpaulins and wooden boards. The hatches were sealed and could
only be opened by representatives of Republic Flour Mills Corporation.
The vessel left Cagayan de Oro City on 2 August 1990 and arrived Manila on 16 August 1990. Republic Flour Mills Corporation was
advised of its arrival but it did not immediately commence the unloading operations. There were days when unloading had to be stopped
due to variable weather conditions and sometimes for no apparent reason at all. When the cargo was eventually unloaded there was a
shortage of 26.333 metric tons. The remaining merchandise was already moldy, rancid and deteriorating. The unloading operations were
completed on 5 September 1990 or twenty (20) days after the arrival of the barge at the wharf of Republic Flour Mills Corporation in Pasig
City.

Precision Analytical Services, Inc., was hired to examine the corn grains and determine the cause of deterioration. A Certificate of Analysis
was issued indicating that the corn grains had 18.56% moisture content and the wetting was due to contact with salt water. The mold
growth was only incipient and not sufficient to make the corn grains toxic and unfit for consumption. In fact the mold growth could still be
arrested by drying.

Republic Flour Mills Corporation rejected the entire cargo and formally demanded from North Front Shipping Services, Inc., payment for
the damages suffered by it. The demands however were unheeded. The insurance companies were perforce obliged to pay Republic Flour
Mills Corporation P2,189,433.40.

By virtue of the payment made by the insurance companies they were subrogated to the rights of Republic Flour Mills Corporation.
Thusly, they lodged a complaint for damages against North Front Shipping Services, Inc., claiming that the loss was exclusively
attributable to the fault and negligence of the carrier. The Marine Cargo Adjusters hired by the insurance companies conducted a survey
and found cracks in the bodega of the barge and heavy concentration of molds on the tarpaulins and wooden boards. They did not notice
any seals in the hatches. The tarpaulins were not brand new as there were patches on them, contrary to the claim of North Front Shipping
Services, Inc., thus making it possible for water to seep in. They also discovered that the bulkhead of the barge was rusty.

North Front Shipping Services, Inc., averred in refutation that it could not be made culpable for the loss and deterioration of the cargo as it
was never negligent. Captain Solomon Villanueva, master of the vessel, reiterated that the barge was inspected prior to the actual loading
and was found adequate and seaworthy. In addition, they were issued a permit to sail by the Coast Guard. The tarpaulins were doubled and
brand new and the hatches were properly sealed. They did not encounter big waves hence it was not possible for water to seep in. He
further averred that the corn grains were farm wet and not properly dried when loaded.

The court below dismissed the complaint and ruled that the contract entered into between North Front Shipping Services, Inc., and
Republic Flour Mills Corporation was a charter-party agreement. As such, only ordinary diligence in the care of goods was required of
North Front Shipping Services, Inc. The inspection of the barge by the shipper and the representatives of the shipping company before
actual loading, coupled with the Permit to Sail issued by the Coast Guard, sufficed to meet the degree of diligence required of the carrier.

On the other hand, the Court of Appeals ruled that as a common carrier required to observe a higher degree of diligence North Front 777
satisfactorily complied with all the requirements hence was issued a Permit to Sail after proper inspection. Consequently, the complaint
was dismissed and the motion for reconsideration rejected.

The charter-party agreement between North Front Shipping Services, Inc., and Republic Flour Mills Corporation did not in any way
convert the common carrier into a private carrier. We have already resolved this issue with finality in Planters Products, Inc. v. Court of
Appeals 2 thus —

A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a
specified time or use; a contract of affreightment by which the owner of a ship or other vessel lets the whole or a part of her to a merchant
or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight . . . Contract of
affreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein
the ship is leased for a single voyage. In both cases, the charter-party provides for the hire of the vessel only, either for a determinate
period of time or for a single or consecutive voyage, the ship owner to supply the ship's store, pay for the wages of the master of the crew,
and defray the expenses for the maintenance of the ship.

Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil Code. The definition extends to carriers
either by land, air or water which hold themselves out as ready to engage in carrying goods or transporting passengers or both for
compensation as a public employment and not as a casual occupation . . .

It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one
or more persons, provided the charter is limited to the shin only, as in the case of a time-charter or voyage-charter (emphasis supplied).

North Front Shipping Services, Inc., is a corporation engaged in the business of transporting cargo and offers its services indiscriminately
to the public. It is without doubt a common carrier. As such it is required to observe extraordinary diligence in its vigilance over the goods
it transports. 3 When goods placed in its care are lost or damaged, the carrier is presumed to have been at fault or to have acted negligently.
4 North Front Shipping Services, Inc., therefore has the burden of proving that it observed extraordinary diligence in order to avoid
responsibility for the lost cargo.

North Front Shipping Services, Inc., proved that the vessel was inspected prior to actual loading by representatives of the shipper and was
found fit to take a load of corn grains. They were also issued Permit to Sail by the Coast Guard. The master of the vessel testified that the
corn grains were farm wet when loaded. However, this testimony was disproved by the clean bill of lading issued by North Front Shipping
Services, Inc., which did not contain a notation that the corn grains were wet and improperly dried. Having been in the service since 1968,
the master of the vessel would have known at the outset that corn grains that were farm wet and not properly dried would eventually
deteriorate when stored in sealed and hot compartments as in hatches of a ship. Equipped with this knowledge, the master of the vessel and
his crew should have undertaken precautionary measures to avoid or lessen the cargo's possible deterioration as they were presumed
knowledgeable about the nature of such cargo. But none of such measures was taken.
In Compania Maritima v. Court of Appeals 5 we ruled —

. . . Mere proof of delivery of the goods in good order to a common carrier, and of their arrival at the place of destination in bad order,
makes out prima facie case against the common carrier, so that if no explanation is given as to how the loss, deterioration or destruction of
the goods occurred, the common carrier must be held responsible. Otherwise stated, it is incumbent upon the common carrier to prove that
the loss, deterioration or destruction was due to accident or some other circumstances inconsistent with its liability . . .

The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the
required precaution for avoiding damage to, or destruction of the goods entrusted to it for safe carriage and delivery. It requires common
carriers to render service with the greatest skill and foresight and "to use all reasonable means to ascertain the nature and characteristics
of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires"
(emphasis supplied).

In fine, we find that the carrier failed to observe the required extraordinary diligence in the vigilance over the goods placed in its care. The
proofs presented by North Front Shipping Services, Inc., were insufficient to rebut the prima facie presumption of private respondent's
negligence, more so if we consider the evidence adduced by petitioners.

It is not denied by the insurance companies that the vessel was indeed inspected before actual loading and that North Front 777 was issued
a Permit to Sail. They proved the fact of shipment and its consequent loss or damage while in the actual possession of the carrier. Notably,
the carrier failed to volunteer any explanation why there was spoilage and how it occurred. On the other hand, it was shown during the trial
that the vessel had rusty bulkheads and the wooden boards and tarpaulins bore heavy concentration of molds. The tarpaulins used were not
new, contrary to the claim of North Front Shipping Services, Inc., as there were already several patches on them, hence, making it highly
probable for water to enter.

Laboratory analysis revealed that the corn grains were contaminated with salt water. North Front Shipping Services, Inc., failed to rebut all
these arguments. It did not even endeavor to establish that the loss, destruction or deterioration of the goods was due to the following: (a)
flood, storm, earthquake, lightning, or other natural disaster or calamity; (b) act of the public enemy in war, whether international or civil;
(c) act or omission of the shipper or owner of the goods; (d) the character of the goods or defects in the packing or in the containers; (e)
order or act of competent public authority. 6 This is a closed list. If the cause of destruction, loss or deterioration is other than the
enumerated circumstances, then the carrier is rightly liable therefor.

However, we cannot attribute the destruction, loss or deterioration of the cargo solely to the carrier. We find the consignee Republic Flour
Mills Corporation guilty of contributory negligence. It was seasonably notified of the arrival of the barge but did not immediately start the
unloading operations. No explanation was proffered by the consignee as to why there was a delay of six (6) days. Had the unloading been
commenced immediately the loss could have been completely avoided or at least minimized. As testified to by the chemist who analyzed
the corn samples, the mold growth was only at its incipient stage and could still be arrested by drying. The corn grains were not yet toxic
or unfit for consumption. For its contributory negligence, Republic Flour Mills Corporation should share at least 40% of the loss. 7

WHEREFORE, the Decision of the Court of Appeals of 22 December 1994 and its Resolution of 16 February 1995 are REVERSED and
SET ASIDE. Respondent North Front Shipping Services, Inc., is ordered to pay petitioners Tabacalera Insurance Co., Prudential Guarantee
& Assurance, Inc., and New Zealand Insurance Co. Ltd., P1,313,660.00 which is 60% of the amount paid by the insurance companies to
Republic Flour Mills Corporation, plus interest at the rate of 12% per annum from the time this judgment becomes final until full payment.
SO ORDERED.

6. G.R. No. L-48757 May 30, 1988

MAURO GANZON, petitioner, vs. COURT OF APPEALS and GELACIO E. TUMAMBING, respondents. SARMIENTO, J.:

The private respondent instituted in the Court of First Instance of Manila 1 an action against the petitioner for damages based on culpa
contractual. The antecedent facts, as found by the respondent Court, 2 are undisputed:

On November 28, 1956, Gelacio Tumambing contracted the services of Mauro B. Ganzon to haul 305 tons of scrap iron from Mariveles,
Bataan, to the port of Manila on board the lighter LCT "Batman" (Exhibit 1, Stipulation of Facts, Amended Record on Appeal, p. 38).
Pursuant to that agreement, Mauro B. Ganzon sent his lighter "Batman" to Mariveles where it docked in three feet of water (t.s.n.,
September 28, 1972, p. 31). On December 1, 1956, Gelacio Tumambing delivered the scrap iron to defendant Filomeno Niza, captain of
the lighter, for loading which was actually begun on the same date by the crew of the lighter under the captain's supervision. When about
half of the scrap iron was already loaded (t.s.n., December 14, 1972, p. 20), Mayor Jose Advincula of Mariveles, Bataan, arrived and
demanded P5,000.00 from Gelacio Tumambing. The latter resisted the shakedown and after a heated argument between them, Mayor Jose
Advincula drew his gun and fired at Gelacio Tumambing (t.s.n., March 19, 1971, p. 9; September 28, 1972, pp. 6-7).<äre||anº•1àw> The
gunshot was not fatal but Tumambing had to be taken to a hospital in Balanga, Bataan, for treatment (t.s.n., March 19, 1971, p. 13;
September 28, 1972, p. 15).

After sometime, the loading of the scrap iron was resumed. But on December 4, 1956, Acting Mayor Basilio Rub, accompanied by three
policemen, ordered captain Filomeno Niza and his crew to dump the scrap iron (t.s.n., June 16, 1972, pp. 8-9) where the lighter was
docked (t.s.n., September 28, 1972, p. 31). The rest was brought to the compound of NASSCO (Record on Appeal, pp. 20-22). Later on
Acting Mayor Rub issued a receipt stating that the Municipality of Mariveles had taken custody of the scrap iron (Stipulation of Facts,
Record on Appeal, p. 40; t.s.n., September 28, 1972, p. 10.)

On the basis of the above findings, the respondent Court rendered a decision, the dispositive portion of which states:
WHEREFORE, the decision appealed from is hereby reversed and set aside and a new one entered ordering defendant-appellee Mauro
Ganzon to pay plaintiff-appellant Gelacio E. Tumambimg the sum of P5,895.00 as actual damages, the sum of P5,000.00 as exemplary
damages, and the amount of P2,000.00 as attorney's fees. Costs against defendant-appellee Ganzon. 3

In this petition for review on certiorari, the alleged errors in the decision of the Court of Appeals are:

I. THE COURT OF APPEALS FINDING THE HEREIN PETITIONER GUILTY OF BREACH OF THE CONTRACT OF
TRANSPORTATION AND IN IMPOSING A LIABILITY AGAINST HIM COMMENCING FROM THE TIME THE SCRAP
WAS PLACED IN HIS CUSTODY AND CONTROL HAVE NO BASIS IN FACT AND IN LAW.
II. THE APPELLATE COURT ERRED IN CONDEMNING THE PETITIONER FOR THE ACTS OF HIS EMPLOYEES IN
DUMPING THE SCRAP INTO THE SEA DESPITE THAT IT WAS ORDERED BY THE LOCAL GOVERNMENT
OFFICIAL WITHOUT HIS PARTICIPATION.
III. THE APPELLATE COURT FAILED TO CONSIDER THAT THE LOSS OF THE SCRAP WAS DUE TO A FORTUITOUS
EVENT AND THE PETITIONER IS THEREFORE NOT LIABLE FOR LOSSES AS A CONSEQUENCE THEREOF. 4

The petitioner, in his first assignment of error, insists that the scrap iron had not been unconditionally placed under his custody and control
to make him liable. However, he completely agrees with the respondent Court's finding that on December 1, 1956, the private respondent
delivered the scraps to Captain Filomeno Niza for loading in the lighter "Batman," That the petitioner, thru his employees, actually
received the scraps is freely admitted. Significantly, there is not the slightest allegation or showing of any condition, qualification, or
restriction accompanying the delivery by the private respondent-shipper of the scraps, or the receipt of the same by the petitioner. On the
contrary, soon after the scraps were delivered to, and received by the petitioner-common carrier, loading was commenced.

By the said act of delivery, the scraps were unconditionally placed in the possession and control of the common carrier, and upon their
receipt by the carrier for transportation, the contract of carriage was deemed perfected. Consequently, the petitioner-carrier's extraordinary
responsibility for the loss, destruction or deterioration of the goods commenced. Pursuant to Art. 1736, such extraordinary responsibility
would cease only upon the delivery, actual or constructive, by the carrier to the consignee, or to the person who has a right to receive them.
5 The fact that part of the shipment had not been loaded on board the lighter did not impair the said contract of transportation as the goods
remained in the custody and control of the carrier, albeit still unloaded.

The petitioner has failed to show that the loss of the scraps was due to any of the following causes enumerated in Article 1734 of the Civil
Code, namely:

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

(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.

Hence, the petitioner is presumed to have been at fault or to have acted negligently. 6 By reason of this presumption, the court is not even
required to make an express finding of fault or negligence before it could hold the petitioner answerable for the breach of the contract of
carriage. Still, the petitioner could have been exempted from any liability had he been able to prove that he observed extraordinary
diligence in the vigilance over the goods in his custody, according to all the circumstances of the case, or that the loss was due to an
unforeseen event or to force majeure. As it was, there was hardly any attempt on the part of the petitioner to prove that he exercised such
extraordinary diligence.

It is in the second and third assignments of error where the petitioner maintains that he is exempt from any liability because the loss of the
scraps was due mainly to the intervention of the municipal officials of Mariveles which constitutes a caso fortuito as defined in Article
1174 of the Civil Code. 7

We cannot sustain the theory of caso fortuito. In the courts below, the petitioner's defense was that the loss of the scraps was due to an
"order or act of competent public authority," and this contention was correctly passed upon by the Court of Appeals which ruled that:

... In the second place, before the appellee Ganzon could be absolved from responsibility on the ground that he was ordered by competent
public authority to unload the scrap iron, it must be shown that Acting Mayor Basilio Rub had the power to issue the disputed order, or that
it was lawful, or that it was issued under legal process of authority. The appellee failed to establish this. Indeed, no authority or power of
the acting mayor to issue such an order was given in evidence. Neither has it been shown that the cargo of scrap iron belonged to the
Municipality of Mariveles. What we have in the record is the stipulation of the parties that the cargo of scrap iron was accilmillated by the
appellant through separate purchases here and there from private individuals (Record on Appeal, pp. 38-39). The fact remains that the
order given by the acting mayor to dump the scrap iron into the sea was part of the pressure applied by Mayor Jose Advincula to
shakedown the appellant for P5,000.00. The order of the acting mayor did not constitute valid authority for appellee Mauro Ganzon and his
representatives to carry out.

Now the petitioner is changing his theory to caso fortuito. Such a change of theory on appeal we cannot, however, allow. In any case, the
intervention of the municipal officials was not In any case, of a character that would render impossible the fulfillment by the carrier of its
obligation. The petitioner was not duty bound to obey the illegal order to dump into the sea the scrap iron. Moreover, there is absence of
sufficient proof that the issuance of the same order was attended with such force or intimidation as to completely overpower the will of the
petitioner's employees. The mere difficulty in the fullfilment of the obligation is not considered force majeure. We agree with the private
respondent that the scraps could have been properly unloaded at the shore or at the NASSCO compound, so that after the dispute with the
local officials concerned was settled, the scraps could then be delivered in accordance with the contract of carriage.

There is no incompatibility between the Civil Code provisions on common carriers and Articles 361 8 and 362 9 of the Code of Commerce
which were the basis for this Court's ruling in Government of the Philippine Islands vs. Ynchausti & Co.10 and which the petitioner
invokes in tills petition. For Art. 1735 of the Civil Code, conversely stated, means that the shipper will suffer the losses and deterioration
arising from the causes enumerated in Art. 1734; and in these instances, the burden of proving that damages were caused by the fault or
negligence of the carrier rests upon him. However, the carrier must first establish that the loss or deterioration was occasioned by one of
the excepted causes or was due to an unforeseen event or to force majeure. Be that as it may, insofar as Art. 362 appears to require of the
carrier only ordinary diligence, the same is .deemed to have been modified by Art. 1733 of the Civil Code.

Finding the award of actual and exemplary damages to be proper, the same will not be disturbed by us. Besides, these were not sufficiently
controverted by the petitioner.

WHEREFORE, the petition is DENIED; the assailed decision of the Court of Appeals is hereby AFFIRMED. Costs against the petitioner.
This decision is IMMEDIATELY EXECUTORY.

7. G.R. No. 161833. July 8, 2005

PHILIPPINE CHARTER INSURANCE CORPORATION, Petitioners, vs. UNKNOWN OWNER OF THE VESSEL M/V
"NATIONAL HONOR," NATIONAL SHIPPING CORPORATION OF THE PHILIPPINES and INTERNATIONAL
CONTAINER SERVICES, INC., Respondents.

CALLEJO, SR., J.:

This is a petition for review under Rule 45 of the 1997 Revised Rules of Civil Procedure assailing the Decision1 dated January 19, 2004 of
the Court of Appeals (CA) in CA-G.R. CV No. 57357 which affirmed the Decision dated February 17, 1997 of the Regional Trial Court
(RTC) of Manila, Branch 37, in Civil Case No. 95-73338.

The Antecedent

On November 5, 1995, J. Trading Co. Ltd. of Seoul, Korea, loaded a shipment of four units of parts and accessories in the port of Pusan,
Korea, on board the vessel M/V "National Honor," represented in the Philippines by its agent, National Shipping Corporation of the
Philippines (NSCP). The shipment was for delivery to Manila, Philippines. Freight forwarder, Samhwa Inter-Trans Co., Ltd., issued Bill of
Lading No. SH94103062 in the name of the shipper consigned to the order of Metropolitan Bank and Trust Company with arrival notice in
Manila to ultimate consignee Blue Mono International Company, Incorporated (BMICI), Binondo, Manila.

NSCP, for its part, issued Bill of Lading No. NSGPBSML512565 3 in the name of the freight forwarder, as shipper, consigned to the order
of Stamm International Inc., Makati, Philippines. It is provided therein that:

12. This Bill of Lading shall be prima facie evidence of the receipt of the Carrier in apparent good order and condition except as,
otherwise, noted of the total number of Containers or other packages or units enumerated overleaf. Proof to the contrary shall be
admissible when this Bill of Lading has been transferred to a third party acting in good faith. No representation is made by the Carrier as to
the weight, contents, measure, quantity, quality, description, condition, marks, numbers, or value of the Goods and the Carrier shall be
under no responsibility whatsoever in respect of such description or particulars.

13. The shipper, whether principal or agent, represents and warrants that the goods are properly described, marked, secured, and packed
and may be handled in ordinary course without damage to the goods, ship, or property or persons and guarantees the correctness of the
particulars, weight or each piece or package and description of the goods and agrees to ascertain and to disclose in writing on shipment,
any condition, nature, quality, ingredient or characteristic that may cause damage, injury or detriment to the goods, other property, the ship
or to persons, and for the failure to do so the shipper agrees to be liable for and fully indemnify the carrier and hold it harmless in respect
of any injury or death of any person and loss or damage to cargo or property. The carrier shall be responsible as to the correctness of any
such mark, descriptions or representations.4

The shipment was contained in two wooden crates, namely, Crate No. 1 and Crate No. 2, complete and in good order condition, covered by
Commercial Invoice No. YJ-73564 DTD5 and a Packing List.6 There were no markings on the outer portion of the crates except the name
of the consignee.7 Crate No. 1 measured 24 cubic meters and weighed 3,620 kgs. It contained the following articles: one (1) unit Lathe
Machine complete with parts and accessories; one (1) unit Surface Grinder complete with parts and accessories; and one (1) unit Milling
Machine complete with parts and accessories. On the flooring of the wooden crates were three wooden battens placed side by side to
support the weight of the cargo. Crate No. 2, on the other hand, measured 10 cubic meters and weighed 2,060 kgs. The Lathe Machine was
stuffed in the crate. The shipment had a total invoice value of US$90,000.00 C&F Manila. 8 It was insured for ₱2,547,270.00 with the
Philippine Charter Insurance Corporation (PCIC) thru its general agent, Family Insurance and Investment Corporation, 9 under Marine Risk
Note No. 68043 dated October 24, 1994.10

The M/V "National Honor" arrived at the Manila International Container Terminal (MICT) on November 14, 1995. The International
Container Terminal Services, Incorporated (ICTSI) was furnished with a copy of the crate cargo list and bill of lading, and it knew the
contents of the crate.11 The following day, the vessel started discharging its cargoes using its winch crane. The crane was operated by
Olegario Balsa, a winchman from the ICTSI,12 the exclusive arrastre operator of MICT.

Denasto Dauz, Jr., the checker-inspector of the NSCP, along with the crew and the surveyor of the ICTSI, conducted an inspection of the
cargo.13 They inspected the hatches, checked the cargo and found it in apparent good condition. 14 Claudio Cansino, the stevedore of the
ICTSI, placed two sling cables on each end of Crate No. 1. 15 No sling cable was fastened on the mid-portion of the crate. In Dauz’s
experience, this was a normal procedure.16 As the crate was being hoisted from the vessel’s hatch, the mid-portion of the wooden flooring
suddenly snapped in the air, about five feet high from the vessel’s twin deck, sending all its contents crashing down hard, 17 resulting in
extensive damage to the shipment.
BMICI’s customs broker, JRM Incorporated, took delivery of the cargo in such damaged condition. 18 Upon receipt of the damaged
shipment, BMICI found that the same could no longer be used for the intended purpose. The Mariners’ Adjustment Corporation hired by
PCIC conducted a survey and declared that the packing of the shipment was considered insufficient. It ruled out the possibility of taxes due
to insufficiency of packing. It opined that three to four pieces of cable or wire rope slings, held in all equal setting, never by-passing the
center of the crate, should have been used, considering that the crate contained heavy machinery. 19

BMICI subsequently filed separate claims against the NSCP,20 the ICTSI,21 and its insurer, the PCIC,22 for US$61,500.00. When the other
companies denied liability, PCIC paid the claim and was issued a Subrogation Receipt23 for ₱1,740,634.50.

On March 22, 1995, PCIC, as subrogee, filed with the RTC of Manila, Branch 35, a Complaint for Damages24 against the "Unknown
owner of the vessel M/V National Honor," NSCP and ICTSI, as defendants.

PCIC alleged that the loss was due to the fault and negligence of the defendants. It prayed, among others –
WHEREFORE, it is respectfully prayed of this Honorable Court that judgment be rendered ordering defendants to pay plaintiff,
jointly or in the alternative, the following:
1. Actual damages in the amount of ₱1,740,634.50 plus legal interest at the time of the filing of this complaint until fully paid;
2. Attorney’s fees in the amount of ₱100,000.00;
3. Cost of suit.25

ICTSI, for its part, filed its Answer with Counterclaim and Cross-claim against its co-defendant NSCP, claiming that the loss/damage of
the shipment was caused exclusively by the defective material of the wooden battens of the shipment, insufficient packing or acts of the
shipper.

At the trial, Anthony Abarquez, the safety inspector of ICTSI, testified that the wooden battens placed on the wooden flooring of the crate
was of good material but was not strong enough to support the weight of the machines inside the crate. He averred that most stevedores did
not know how to read and write; hence, he placed the sling cables only on those portions of the crate where the arrow signs were placed, as
in the case of fragile cargo. He said that unless otherwise indicated by arrow signs, the ICTSI used only two cable slings on each side of
the crate and would not place a sling cable in the mid-section.26 He declared that the crate fell from the cranes because the wooden batten
in the mid-portion was broken as it was being lifted.27 He concluded that the loss/damage was caused by the failure of the shipper or its
packer to place wooden battens of strong materials under the flooring of the crate, and to place a sign in its mid-term section where the
sling cables would be placed.

The ICTSI adduced in evidence the report of the R.J. Del Pan & Co., Inc. that the damage to the cargo could be attributed to insufficient
packing and unbalanced weight distribution of the cargo inside the crate as evidenced by the types and shapes of items found.28

The trial court rendered judgment for PCIC and ordered the complaint dismissed, thus:

WHEREFORE, the complaint of the plaintiff, and the respective counterclaims of the two defendants are dismissed, with costs against the
plaintiff. SO ORDERED.29

According to the trial court, the loss of the shipment contained in Crate No. 1 was due to the internal defect and weakness of the materials
used in the fabrication of the crates. The middle wooden batten had a hole (bukong-bukong). The trial court rejected the certification30 of
the shipper, stating that the shipment was properly packed and secured, as mere hearsay and devoid of any evidentiary weight, the affiant
not having testified.

Not satisfied, PCIC appealed31 to the CA which rendered judgment on January 19, 2004 affirming in toto the appealed decision, with this
fallo –

WHEREFORE, the decision of the Regional Trial Court of Manila, Branch 35, dated February 17, 1997, is AFFIRMED. SO ORDERED.32

The appellate court held, inter alia, that it was bound by the finding of facts of the RTC, especially so where the evidence in support
thereof is more than substantial. It ratiocinated that the loss of the shipment was due to an excepted cause – "[t]he character of the goods or
defects in the packing or in the containers" and the failure of the shipper to indicate signs to notify the stevedores that extra care should be
employed in handling the shipment.33 It blamed the shipper for its failure to use materials of stronger quality to support the heavy machines
and to indicate an arrow in the middle portion of the cargo where additional slings should be attached. 34 The CA concluded that common
carriers are not absolute insurers against all risks in the transport of the goods. 35

Hence, this petition by the PCIC, where it alleges that:

I.THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN NOT HOLDING THAT RESPONDENT COMMON
CARRIER IS LIABLE FOR THE DAMAGE SUSTAINED BY THE SHIPMENT IN THE POSSESSION OF THE ARRASTRE
OPERATOR.

II.THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN NOT APPLYING THE STATUTORY PRESUMPTION
OF FAULT AND NEGLIGENCE IN THE CASE AT BAR.

III.THE COURT OF APPEALS GROSSLY MISCOMPREHENDED THE FACTS IN FINDING THAT THE DAMAGE SUSTAINED
BY THE [SHIPMENT] WAS DUE TO ITS DEFECTIVE PACKING AND NOT TO THE FAULT AND NEGLIGENCE OF THE
RESPONDENTS.36
The petitioner asserts that the mere proof of receipt of the shipment by the common carrier (to the carrier) in good order, and their arrival
at the place of destination in bad order makes out a prima facie case against it; in such case, it is liable for the loss or damage to the cargo
absent satisfactory explanation given by the carrier as to the exercise of extraordinary diligence. The petitioner avers that the shipment was
sufficiently packed in wooden boxes, as shown by the fact that it was accepted on board the vessel and arrived in Manila safely. It
emphasizes that the respondents did not contest the contents of the bill of lading, and that the respondents knew that the manner and
condition of the packing of the cargo was normal and barren of defects. It maintains that it behooved the respondent ICTSI to place three to
four cables or wire slings in equal settings, including the center portion of the crate to prevent damage to the cargo:

… [A] simple look at the manifesto of the cargo and the bill of lading would have alerted respondents of the nature of the cargo consisting
of thick and heavy machinery. Extra-care should have been made and extended in the discharge of the subject shipment. Had the
respondent only bothered to check the list of its contents, they would have been nervous enough to place additional slings and cables to
support those massive machines, which were composed almost entirely of thick steel, clearly intended for heavy industries. As indicated in
the list, the boxes contained one lat[h]e machine, one milling machine and one grinding machine-all coming with complete parts and
accessories. Yet, not one among the respondents were cautious enough. Here lies the utter failure of the respondents to observed
extraordinary diligence in the handling of the cargo in their custody and possession, which the Court of Appeals should have readily
observed in its appreciation of the pertinent facts.37

The petitioner posits that the loss/damage was caused by the mishandling of the shipment by therein respondent ICTSI, the arrastre
operator, and not by its negligence.

The petitioner insists that the respondents did not observe extraordinary diligence in the care of the goods. It argues that in the performance
of its obligations, the respondent ICTSI should observe the same degree of diligence as that required of a common carrier under the New
Civil Code of the Philippines. Citing Eastern Shipping Lines, Inc. v. Court of Appeals,38 it posits that respondents are liable in solidum to
it, inasmuch as both are charged with the obligation to deliver the goods in good condition to its consignee, BMICI.

Respondent NSCP counters that if ever respondent ICTSI is adjudged liable, it is not solidarily liable with it. It further avers that the
"carrier cannot discharge directly to the consignee because cargo discharging is the monopoly of the arrastre." Liability, therefore, falls
solely upon the shoulder of respondent ICTSI, inasmuch as the discharging of cargoes from the vessel was its exclusive responsibility.
Besides, the petitioner is raising questions of facts, improper in a petition for review on certiorari.39

Respondent ICTSI avers that the issues raised are factual, hence, improper under Rule 45 of the Rules of Court. It claims that it is merely a
depository and not a common carrier; hence, it is not obliged to exercise extraordinary diligence. It reiterates that the loss/damage was
caused by the failure of the shipper or his packer to place a sign on the sides and middle portion of the crate that extra care should be
employed in handling the shipment, and that the middle wooden batten on the flooring of the crate had a hole. The respondent asserts that
the testimony of Anthony Abarquez, who conducted his investigation at the site of the incident, should prevail over that of Rolando
Balatbat. As an alternative, it argues that if ever adjudged liable, its liability is limited only to ₱3,500.00 as expressed in the liability clause
of Gate Pass CFS-BR-GP No. 319773.

The petition has no merit. The well-entrenched rule in our jurisdiction is that only questions of law may be entertained by this Court in a
petition for review on certiorari. This rule, however, is not ironclad and admits certain exceptions, such as when (1) the conclusion is
grounded on speculations, surmises or conjectures; (2) the inference is manifestly mistaken, absurd or impossible; (3) there is grave abuse
of discretion; (4) the judgment is based on a misapprehension of facts; (5) the findings of fact are conflicting; (6) there is no citation of
specific evidence on which the factual findings are based; (7) the findings of absence of facts are contradicted by the presence of evidence
on record; (8) the findings of the Court of Appeals are contrary to those of the trial court; (9) the Court of Appeals manifestly overlooked
certain relevant and undisputed facts that, if properly considered, would justify a different conclusion; (10) the findings of the Court of
Appeals are beyond the issues of the case; and (11) such findings are contrary to the admissions of both parties. 40

We have reviewed the records and find no justification to warrant the application of any exception to the general rule. We agree with the
contention of the petitioner that common carriers, from the nature of their business and for reasons of public policy, are mandated to
observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all
the circumstances of each case.41 The Court has defined extraordinary diligence in the vigilance over the goods as follows:

The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the
required precaution for avoiding damage to, or destruction of the goods entrusted to it for sale, carriage and delivery. It requires common
carriers to render service with the greatest skill and foresight and "to use all reasonable means to ascertain the nature and characteristic of
goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires."42

The common carrier’s duty to observe the requisite diligence in the shipment of goods lasts from the time the articles are surrendered to or
unconditionally placed in the possession of, and received by, the carrier for transportation until delivered to, or until the lapse of a
reasonable time for their acceptance, by the person entitled to receive them. 43 When the goods shipped are either lost or arrive in damaged
condition, a presumption arises against the carrier of its failure to observe that diligence, and there need not be an express finding of
negligence to hold it liable.44 To overcome the presumption of negligence in the case of loss, destruction or deterioration of the goods, the
common carrier must prove that it exercised extraordinary diligence.45

However, under Article 1734 of the New Civil Code, the presumption of negligence does not apply to any of the following causes:
1. Flood, storm, earthquake, lightning or other natural disaster or calamity;
2. Act of the public enemy in war, whether international or civil;
3. Act or omission of the shipper or owner of the goods;
4. The character of the goods or defects in the packing or in the containers;
5. Order or act of competent public authority.
It bears stressing that the enumeration in Article 1734 of the New Civil Code which exempts the common carrier for the loss or damage to
the cargo is a closed list.46 To exculpate itself from liability for the loss/damage to the cargo under any of the causes, the common carrier is
burdened to prove any of the aforecited causes claimed by it by a preponderance of evidence. If the carrier succeeds, the burden of
evidence is shifted to the shipper to prove that the carrier is negligent. 47

"Defect" is the want or absence of something necessary for completeness or perfection; a lack or absence of something essential to
completeness; a deficiency in something essential to the proper use for the purpose for which a thing is to be used. 48 On the other hand,
inferior means of poor quality, mediocre, or second rate. 49 A thing may be of inferior quality but not necessarily defective. In other words,
"defectiveness" is not synonymous with "inferiority."

In the present case, the trial court declared that based on the record, the loss of the shipment was caused by the negligence of the petitioner
as the shipper:

The same may be said with respect to defendant ICTSI. The breakage and collapse of Crate No. 1 and the total destruction of its contents
were not imputable to any fault or negligence on the part of said defendant in handling the unloading of the cargoes from the carrying
vessel, but was due solely to the inherent defect and weakness of the materials used in the fabrication of said crate.

The crate should have three solid and strong wooden batten placed side by side underneath or on the flooring of the crate to support the
weight of its contents. However, in the case of the crate in dispute, although there were three wooden battens placed side by side on its
flooring, the middle wooden batten, which carried substantial volume of the weight of the crate’s contents, had a knot hole or "bukong-
bukong," which considerably affected, reduced and weakened its strength. Because of the enormous weight of the machineries inside this
crate, the middle wooden batten gave way and collapsed. As the combined strength of the other two wooden battens were not sufficient to
hold and carry the load, they too simultaneously with the middle wooden battens gave way and collapsed (TSN, Sept. 26, 1996, pp. 20-24).

Crate No. 1 was provided by the shipper of the machineries in Seoul, Korea. There is nothing in the record which would indicate that
defendant ICTSI had any role in the choice of the materials used in fabricating this crate. Said defendant, therefore, cannot be held as
blame worthy for the loss of the machineries contained in Crate No. 1. 50

The CA affirmed the ruling of the RTC, thus:

The case at bar falls under one of the exceptions mentioned in Article 1734 of the Civil Code, particularly number (4) thereof, i.e., the
character of the goods or defects in the packing or in the containers. The trial court found that the breakage of the crate was not due to the
fault or negligence of ICTSI, but to the inherent defect and weakness of the materials used in the fabrication of the said crate.

Upon examination of the records, We find no compelling reason to depart from the factual findings of the trial court.

It appears that the wooden batten used as support for the flooring was not made of good materials, which caused the middle portion thereof
to give way when it was lifted. The shipper also failed to indicate signs to notify the stevedores that extra care should be employed in
handling the shipment.

Claudio Cansino, a stevedore of ICTSI, testified before the court their duties and responsibilities:
"Q: With regard to crates, what do you do with the crates?
A: Everyday with the crates, there is an arrow drawn where the sling is placed, Ma’am.
Q: When the crates have arrows drawn and where you placed the slings, what do you do with these crates?
A: A sling is placed on it, Ma’am.
Q: After you placed the slings, what do you do with the crates?
A: After I have placed a sling properly, I ask the crane (sic) to haul it, Ma’am.
…
Q: Now, what, if any, were written or were marked on the crate?
A: The thing that was marked on the cargo is an arrow just like of a chain, Ma’am.
Q: And where did you see or what parts of the crate did you see those arrows?
A: At the corner of the crate, Ma’am.
Q: How many arrows did you see?
A: Four (4) on both sides, Ma’am.
…
Q: What did you do with the arrows?
A: When I saw the arrows, that’s where I placed the slings, Ma’am.
…
Q: Now, did you find any other marks on the crate?
A: Nothing more, Ma’am.
Q: Now, Mr. Witness, if there are no arrows, would you place slings on the parts where there are no arrows?
A: You can not place slings if there are no arrows, Ma’am."

Appellant’s allegation that since the cargo arrived safely from the port of [P]usan, Korea without defect, the fault should be attributed to
the arrastre operator who mishandled the cargo, is without merit. The cargo fell while it was being carried only at about five (5) feet high
above the ground. It would not have so easily collapsed had the cargo been properly packed. The shipper should have used materials of
stronger quality to support the heavy machines. Not only did the shipper fail to properly pack the cargo, it also failed to indicate an arrow
in the middle portion of the cargo where additional slings should be attached. At any rate, the issue of negligence is factual in nature and in
this regard, it is settled that factual findings of the lower courts are entitled to great weight and respect on appeal, and, in fact, accorded
finality when supported by substantial evidence.51

We agree with the trial and appellate courts.

 The petitioner failed to adduce any evidence to counter that of respondent ICTSI. The petitioner failed to rebut the testimony of Dauz, that
the crates were sealed and that the contents thereof could not be seen from the outside. 52 While it is true that the crate contained
machineries and spare parts, it cannot thereby be concluded that the respondents knew or should have known that the middle wooden
batten had a hole, or that it was not strong enough to bear the weight of the shipment.

There is no showing in the Bill of Lading that the shipment was in good order or condition when the carrier received the cargo, or that the
three wooden battens under the flooring of the cargo were not defective or insufficient or inadequate. On the other hand, under Bill of
Lading No. NSGPBSML512565 issued by the respondent NSCP and accepted by the petitioner, the latter represented and warranted that
the goods were properly packed, and disclosed in writing the "condition, nature, quality or characteristic that may cause damage, injury or
detriment to the goods." Absent any signs on the shipment requiring the placement of a sling cable in the mid-portion of the crate, the
respondent ICTSI was not obliged to do so.

The statement in the Bill of Lading, that the shipment was in apparent good condition, is sufficient to sustain a finding of absence of
defects in the merchandise. Case law has it that such statement will create a prima facie presumption only as to the external condition and
not to that not open to inspection.53

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. SO ORDERED.

8. G.R. No. L-16629 January 31, 1962

SOUTHERN LINES, INC., petitioner, vs. COURT OF APPEALS and CITY OF ILOILO, respondents. DE LEON, J.:

This is a petition to review on certiorari the decision of the Court of Appeals in CA-G.R. No. 15579-R affirming that of the Court of First
Instance of Iloilo which sentenced petitioner Southern Lines, Inc. to pay respondent City of Iloilo the amount of P4,931.41.

Sometime in 1948, the City of Iloilo requisitioned for rice from the National Rice and Corn Corporation (hereafter referred to as NARIC)
in Manila. On August 24 of the same year, NARIC, pursuant to the order, shipped 1,726 sacks of rice consigned to the City of Iloilo on
board the SS "General Wright" belonging to the Southern Lines, Inc. Each sack of rice weighed 75 kilos and the entire shipment as
indicated in the bill of lading had a total weight of 129,450 kilos. According to the bill of lading, the cost of the shipment was P63,115.50
itemized and computed as follows: .

Unit Price per bag P36.25 P62,567.50

Handling at P0.13 per bag 224.38
Trucking at P2.50 per bag 323.62
T o t a l . . . . . .. . . . .
63,115.50

On September 3, 1948, the City of Iloilo received the shipment and paid the amount of P63,115.50. However, it was noted that the foot of
the bill of lading that the City of Iloilo 'Received the above mentioned merchandise apparently in same condition as when shipped, save as
noted below: actually received 1685 sacks with a gross weight of 116,131 kilos upon actual weighing. Total shortage ascertained 13,319
kilos." The shortage was equivalent to 41 sacks of rice with a net weight of 13,319 kilos, the proportionate value of which was P6,486.35.

On February 14, 1951 the City of Iloilo filed a complaint in the Court of First Instance of Iloilo against NARIC and the Southern Lines,
Inc. for the recovery of the amount of P6,486.35 representing the value of the shortage of the shipment of rice. After trial, the lower court
absolved NARIC from the complaint, but sentenced the Southern Lines, Inc. to pay the amount of P4,931.41 which is the difference
between the sum of P6,486.35 and P1,554.94 representing the latter's counterclaim for handling and freight.

The Southern Lines, Inc. appealed to the Court of Appeals which affirmed the judgment of the trial court. Hence, this petition for review.

The only question to be determined in this petition is whether or not the defendant-carrier, the herein petitioner, is liable for the loss or
shortage of the rice shipped.

Article 361 of the Code of Commerce provides: .

ART. 361. — The merchandise shall be transported at the risk and venture of the shipper, if the contrary has not been expressly
stipulated.
As a consequence, all the losses and deteriorations which the goods may suffer during the transportation by reason of fortuitous event,
force majeure, or the inherent nature and defect of the goods, shall be for the account and risk of the shipper.1äwphï1.ñët
Proof of these accidents is incumbent upon the carrier.
Article 362 of the same Code provides: .

ART. 362. — Nevertheless, the carrier shall be liable for the losses and damages resulting from the causes mentioned in the preceding
article if it is proved, as against him, that they arose through his negligence or by reason of his having failed to take the precautions which
usage his establisbed among careful persons, unless the shipper has committed fraud in the bill of lading, representing the goods to be of a
kind or quality different from what they really were.

If, notwithstanding the precautions referred to in this article, the goods transported run the risk of being lost, on account of their nature or
by reason of unavoidable accident, there being no time for their owners to dispose of them, the carrier may proceed to sell them, placing
them for this purpose at the disposal of the judicial authority or of the officials designated by special provisions.

Under the provisions of Article 361, the defendant-carrier in order to free itself from liability, was only obliged to prove that the damages
suffered by the goods were "by virtue of the nature or defect of the articles." Under the provisions of Article 362, the plaintiff, in order to
hold the defendant liable, was obliged to prove that the damages to the goods by virtue of their nature, occurred on account of its
negligence or because the defendant did not take the precaution adopted by careful persons. (Government v. Ynchausti & Co., 40 Phil.
219, 223).

Petitioner claims exemption from liability by contending that the shortage in the shipment of rice was due to such factors as the shrinkage,
leakage or spillage of the rice on account of the bad condition of the sacks at the time it received the same and the negligence of the agents
of respondent City of Iloilo in receiving the shipment. The contention is untenable, for, if the fact of improper packing is known to the
carrier or his servants, or apparent upon ordinary observation, but it accepts the goods notwithstanding such condition, it is not relieved of
liability for loss or injury resulting thereform. (9 Am Jur. 869.) Furthermore, according to the Court of Appeals, "appellant (petitioner)
itself frankly admitted that the strings that tied the bags of rice were broken; some bags were with holes and plenty of rice were spilled
inside the hull of the boat, and that the personnel of the boat collected no less than 26 sacks of rice which they had distributed among
themselves." This finding, which is binding upon this Court, shows that the shortage resulted from the negligence of petitioner.

Invoking the provisions of Article 366 of the Code of Commerce and those of the bill of lading, petitioner further contends that respondent
is precluded from filing an action for damages on account of its failure to present a claim within 24 hours from receipt of the shipment. It
also cites the cases of Government v. Ynchausti & Co., 24 Phil. 315 and Triton Insurance Co. v. Jose, 33 Phil. 194, ruling to the effect that
the requirement that the claim for damages must be made within 24 hours from delivery is a condition precedent to the accrual of the right
of action to recover damages. These two cases above-cited are not applicable to the case at bar. In the first cited case, the plaintiff never
presented any claim at all before filing the action. In the second case, there was payment of the transportation charges which precludes the
presentation of any claim against the carrier. (See Article 366, Code of Commerce.) It is significant to note that in the American case of
Hoye v. Pennsylvania Railroad Co., 13 Ann. Case. 414, it has been said: .

... "It has been held that a stipulation in the contract of shipment requiring the owner of the goods to present a notice of his claim to the
carrier within a specified time after the goods have arrived at their destination is in the nature of a condition precedent to the owner's right
to enforce a recovery, that he must show in the first instance that be has complied with the condition, or that the circumstances were such
that to have complied with it would have required him to do an unreasonable thing. The weight of authority, however, sustains the view
that such a stipulation is more in the nature of a limitation upon the owner's right to recovery, and that the burden of proof is accordingly
on the carrier to show that the limitation was reasonable and in proper form or within the time stated." (Hutchinson on Carrier, 3d ed., par.
44) Emphasis supplied.

In the case at bar, the record shows that petitioner failed to plead this defense in its answer to respondent's complaint and, therefore, the
same is deemed waived (Section 10, Rule 9, Rules of Court), and cannot be raised for the first time at the trial or on appeal. (Maxilom v.
Tabotabo, 9 Phil. 390.) Moreover, as the Court of Appeals has said: .

... the records reveal that the appellee (respondent) filed the present action, within a reasonable time after the short delivery in the shipment
of the rice was made. It should be recalled that the present action is one for the refund of the amount paid in excess, and not for damages or
the recovery of the shortage; for admittedly the appellee (respondent) had paid the entire value of the 1726 sacks of rice, subject to
subsequent adjustment, as to shortages or losses. The bill of lading does not at all limit the time for filing an action for the refund of money
paid in excess.

WHEREFORE, the decision of the Court of Appeals is hereby affirmed in all respects and the petition for certiorari denied. With costs
against the petitioner.