Asia Lighterage & Shipping, Inc. vs CA & Prudential Guarantee and Assurance, Inc.

Posted on November 24, 2012

G.R. No. 147246
August 19, 2003

FACTS:
Asia Lighterage and Shipping, Inc was contracted as carrier to deliver 3,150 metric tons of Better Western White
Wheat in bulk, (US$423,192.35) to the consignees (General Milling Corporation) warehouse at Bo. Ugong, Pasig
City. The cargo was transferred to its custody on July 25, 1990. The shipment was insured by Prudential Guarantee
and Assurance, Inc. against loss/damage for P14,621,771.75.

On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI III for delivery to consignee.
However, the cargo did not reach its destination.

It appears that on August 17, 1990, the transport of said cargo was suspended due to a warning of an incoming
typhoon. 5 days later, the petitioner proceeded to pull the barge to Engineering Island off Baseco to seek shelter
from the approaching typhoon. PSTSI III was tied down to other barges which arrived ahead of it while weathering
out the storm that night. A few days after, the barge developed a list because of a hole it sustained after hitting an
unseen protuberance underneath the water. It filed a Marine Protest on August 28, 1990 and also secured the
services of Gaspar Salvaging Corporation to refloat the barge. The hole was then patched with clay and cement.

The barge was then towed to ISLOFF terminal before it finally headed towards the consignees wharf on September
5, 1990. Upon reaching the Sta. Mesa spillways, the barge again ran aground due to strong current. To avoid the
complete sinking of the barge, a portion of the goods was transferred to 3 other barges.

The next day, the towing bits of the barge broke. It sank completely, resulting in the total loss of the remaining
cargo. A 2nd Marine Protest was filed on September 7, 1990. 7 days later, a bidding was conducted to dispose of
the damaged wheat retrieved & loaded on the 3 other barges. The total proceeds from the sale of the salvaged cargo
was P201,379.75.

On the same date, consignee sent a claim letter to the petitioner, and another letter dated September 18, 1990 to the
private respondent for the value of the lost cargo. On January 30, 1991, the private respondent indemnified the
consignee in the amount of P4,104,654.22. Thereafter, as subrogee, it sought recovery of said amount from the
petitioner, but to no avail.

ISSUES:
1. Whether petitioner is a common carrier.
2. Assuming petitioner is a common carrier, whether it exercised extraordinary care and diligence in its care and
custody of the consignees cargo.

HELD:

1. Petitioner is a common carrier.

Article 1732 of the Civil Code defines common carriers 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.

In De Guzman vs. CA (G.R. No. L-47822, 22 December 1988) it was held that the definition of common carriers in
Article 1732 of the Civil Code 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. There is also no distinction
between a person or enterprise offering transportation service on a regular/scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Further, Article 1732 does not distinguish between a
carrier offering its services to the general public, and one who offers services or solicits business only from a
narrow segment of the general population.Private respondent Ernesto Cendaa was considered to be a common
carrier even if his principal occupation was not the carriage of goods for others, but that of buying used bottles and
scrap metal in Pangasinan and selling these items in Manila.
To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs. CA (G.R. No. 101089, 07 April
1993, 221 SCRA 318). The test to determine a common carrier is whether the given undertaking is a part of the
business engaged in by the carrier which he has held out to the general public as his occupation rather than the
quantity or extent of the business transacted. In the case at bar, the petitioner admitted that it is engaged in the
business of shipping, lighterage and drayage, offering its barges to the public, despite its limited clientele for
carrying/transporting goods by water for compensation. Petitioner is clearly a common carrier.

Therefore, petitioner is a common carrier whether its carrying of goods is done on an irregular rather than
scheduled manner, and with an only limited clientele. A common carrier need not have fixed and publicly known
routes. Neither does it have to maintain terminals or issue tickets.

2. The findings of the lower courts should be upheld. Petitioner failed to exercise extraordinary diligence in its care
and custody of the consignees goods.

Common carriers are bound to observe extraordinary diligence in the vigilance over the goods transported by
them. They are presumed to have been at fault or to have acted negligently if the goods
are lost, destroyed or deteriorated. 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. There are,
however, exceptions to this rule. Article 1734 of the Civil Code enumerates the instances when the presumption of
negligence does not attach:

Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is
due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act/omission of the shipper/owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order/act of competent public authority.

In the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss of its cargo.
Petitioner claims that this was caused by a typhoon, hence, it should not be held liable for the loss of the cargo.
However, petitioner failed to prove that the typhoon is the proximate and only cause of the loss of the goods, and
that it has exercised due diligence before, during and after the occurrence of the typhoon to prevent/minimize the
loss. The evidence show that, even before the towing bits of the barge broke, it had already previously sustained
damage when it hit a sunken object while docked at the Engineering Island. It even suffered a hole. Clearly, this
could not be solely attributed to the typhoon. The partly-submerged vessel was refloated but its hole was patched
with only clay and cement. The patch work was merely a provisional remedy, not enough for the barge to sail
safely. Thus, when petitioner persisted to proceed with the voyage, it recklessly exposed the cargo to further
damage.

Moreover, petitioner still headed to the consignees wharf despite knowledge of an incoming typhoon. During the
time that the barge was heading towards the consignees wharf on September 5, 1990, typhoon Loleng has already
entered the Philippine area of responsibility.

Accordingly, the petitioner cannot invoke the occurrence of the typhoon as force majeure to escape liability for the
loss sustained by the private respondent. Surely, meeting a typhoon head-on falls short of due diligence required
from a common carrier. More importantly, the officers/employees themselves of petitioner admitted that when the
towing bits of the vessel broke that caused its sinking and the total loss of the cargo upon reaching the Pasig River, it
was no longer affected by the typhoon. The typhoon then is not the proximate cause of the loss of the cargo; a
human factor, i.e., negligence had intervened.
CALVO vs. UCPB GENERAL INSURANCE CO.,INC.
G.R. No. 148496, March 19, 2002
FACTS:

Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI), a sole
proprietorship customs broker.

Petitioner entered into a contract with San Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical
fluting paper and 124 reels of kraft liner board from the Port Area in Manila to SMC's warehouse at the Tabacalera
Compound, Romualdez St., Ermita, Manila. The cargo was insured by respondent UCPB General Insurance Co.,
Inc.

The shipment arrived in Manila on board "M/V Hayakawa Maru" and, after 24 hours, were unloaded from the vessel
to the custody of the arrastre operator, Manila Port Services, Inc. From July 23 to July 25, 1990, petitioner withdrew
the cargo from the arrastre operator and delivered it to SMC's warehouse in Ermita, Manila. On July 25, 1990, the
goods were inspected by Marine Cargo Surveyors, who found that 15 reels of the semi-chemical fluting paper were
"wet/stained/torn" and 3 reels of kraft liner board were likewise torn. The damage was placed at P93,112.00.
SMC collected payment from respondent UCPB under its insurance contract. In turn, respondent, as subrogee of
SMC, brought suit against petitioner.

Petitioner contends that she is not a common carrier but a private carrier because, as a customs broker and
warehouseman, she does not indiscriminately hold her services out to the public but only offers the same to select
parties with whom she may contract in the conduct of her business.

ISSUE:
Whether or not Calvo is a common carrier.
Whether or not Calvo is liable.

HELD & RATIO:

YES.

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

The abovementioned provision did not make any distinction:

between one whose principal business activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity.
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.
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.
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.
There is greater reason for holding petitioner to be a common carrier because the transportation of goods is an
integral part of her business. To uphold petitioner's contention would be to deprive those with whom she contracts
the protection which the law affords them notwithstanding the fact that the obligation to carry goods for her
customers, as already noted, is part and parcel of petitioner's business.

YES.

Applicable Provision:
Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by
them, according to all the circumstances of each case. . . .
Petitioners Contention: She denies liability for the damage to the cargo and claims that the "spoilage or wettage"
took place while the goods were in the custody of either the carrying vessel "M/V Hayakawa Maru," which
transported the cargo to Manila, or the arrastre operator, to whom the goods were unloaded and who allegedly kept
them in open air for nine days from July 14 to July 23, 1998 notwithstanding the fact that some of the containers
were deformed, cracked, or otherwise damaged.
To prove the exercise of extraordinary diligence, petitioner must do more than merely show the possibility that some
other party could be responsible for the damage. It must prove that it used "all reasonable means to ascertain the
nature and characteristic of goods tendered for [transport] and that [it] exercise[d] due care in the handling
[thereof]." Petitioner failed to do this.

Another contention: She denies liabilty by invoking Art. 1734 (4) which provides that: 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: . . . .
(4) The character of the goods or defects in the packing or in the containers.
For this provision to apply, the rule is that if the improper packing or, in this case, the defect/s in the container,
is/are known to the carrier or his employees or apparent upon ordinary observation, but he nevertheless accepts the
same without protest or exception notwithstanding such condition, he is not relieved of liability for damage resulting
therefrom. In this case, petitioner accepted the cargo without exception despite the apparent defects in some of the
container vans. Hence, for failure of petitioner to prove that she exercised extraordinary diligence in the carriage of
goods in this case or that she is exempt from liability, the presumption of negligence as provided under Art.
1735 holds.

A.F. SANCHEZ BROKERAGE INC., v. THE HON. COURT OF APPEALS and FGU INSURANCE
CORPORATION
447 SCRA 427 (2004)

A common carrier is liable to the resulting damage to the goods if the improper packaging is known to the carrier
or his employees or is apparent upon ordinary observation, but he nevertheless accepts the same without protest or
exception.

Respondent FGU Insurance Corporation (FGU) brought an action for reimbursement against petitioner A.F. Sanchez
Brokerage Inc. (Sanchez Brokerage) to collect the amount paid by the former to Wyeth-Suaco Laboratories Inc.
(Wyeth-Suaco) as insurance payment for the goods delivered in bad condition.

A.F. Brokerage refused to admit liability for the damaged goods which it delivered from Philippines Skylanders,
Inc. (PSI) to Wyeth-Suaco as it maintained that the damage was due to improper and insufficient export packaging,
discovered when the sealed containers were opened outside the PSI warehouse.

The Regional Trial Court of Makati dismissed the said complaint; however, the decision was subsequently reversed
and set aside by the Court of Appeals, finding that Sanchez Brokerage is liable for the carriage of cargo as a
common carrier by definition of the New Civil Code.

ISSUE:
Whether or not the FGU Insurance is liable for the delivery of the damaged goods

HELD:
Yes. As defined under Article 1732 of the Civil Code, 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. It does not distinguish between one whose principal business
activity is the carrying of goods and one who does such carrying only as an ancillary activity.
The contention therefore of Sanchez Brokerage that it is not a common carrier but a customs broker whose principal
function is to prepare the correct customs declaration and proper shipping documents as required by law is bereft
of merit. It suffices that petitioner undertakes to deliver the goods for pecuniary consideration.

In this light, Sanchez Brokerage as a common carrier is mandated to observe, under Article 1733 of the Civil Code,
extraordinary diligence in the vigilance over the goods it transports according to all the circumstances of each case.
In the event that the goods are lost, destroyed or deteriorated, it is presumed to have been at fault or to have acted
negligently, unless it proves that it observed extraordinary diligence.

The concept of extra-ordinary diligence was explained in Compania Maritima v. Court of Appeals. 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 characteristics of goods tendered for shipment and to exercise due
care in the handling and storage including such methods as their nature requires.

It was established that Sanchez Brokerage received the cargoes from the PSI warehouse in good order and
condition and that upon delivery by petitioner some of the cargoes were found to be in bad order as noted in the
Delivery Receipt and as indicated in the Survey and Destruction Report.

While paragraph no. 4 of Article 1734 of the Civil Code exempts a common carrier from liability if the loss or
damage is due to the character of the goods or defects in the packaging or in the containers, the rule is that if the
improper packaging is known to the carrier or his employees or is apparent upon ordinary observation, but he
nevertheless accepts the same without protest or exception notwithstanding such condition, he is not relieved of
liability for the resulting damage. If the claim of Sanchez Brokerage that some of the cartons were already damaged
upon delivery to it were true, then it should naturally have received the cargo under protest or with reservation duly
noted on the receipt issued by PSI but it made no such protest or reservation.

FGU Insurance Corporation vs. G.P. Sarmiento Trucking Corporation and Lambert Eroles
G.R. No. 141910
August 6, 2002

FACTS:

G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on June 18, 1994, 30 units of Condura S.D. white
refrigerators aboard its Isuzu truck driven by Lambert Eroles, to the Central Luzon Appliances in Dagupan City.
While traversing the North Diversion Road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it
collided with an unidentified truck, causing it to fall into a deep canal, resulting in damage to the cargoes.

FGU, an insurer of the shipment, paid the value of the covered cargoes (P204,450.00) to Concepcion Industries,
Inc.,. Being subrogee of CIIs rights & interests, FGU, in turn, sought reimbursement from GPS. Since GPS failed to
heed the claim, FGU filed a complaint for damages & breach of contract of carriage against GPS and Eroles with the
RTC. In its answer, respondents asserted that GPS was only the exclusive hauler of CII since 1988, and it was not so
engaged in business as a common carrier. Respondents further claimed that the cause of damage was purely
accidental.

GPS filed a motion to dismiss the complaint by way of demurrer to evidence on the ground that petitioner had failed
to prove that it was a common carrier.

The RTC granted the motion to dismiss on April 30, 1996. It subsequently dismissed the complaint holding that
GPS was not a common carrier defined under the law & existing jurisprudence. The subsequent motion for
reconsideration having been denied, FGU interposed an appeal to the CA. The CA rejected the FGUs appeal &
ruled in favor of GPS. It also denied petitioners motion for reconsideration.
ISSUES:
1. WON GPS may be considered a common carrier as defined under the law & existing jurisprudence.
2. WON GPS, either as a common carrier or a private carrier, may be presumed to have been negligent when the
goods it undertook to transport safely were subsequently damaged while in its protective custody & possession.

HELD:
1. The SC finds the conclusion of the RTC and the CA to be amply justified. GPS, being an exclusive contractor &
hauler of Concepcion Industries, Inc., rendering/offering its services to no other individual or entity, cannot be
considered a common carrier. 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 hire or compensation,
offering their services to the public, whether to the public in general or to a limited clientele in particular, but never
on an exclusive basis. The true test of a common carrier is the carriage of passengers/goods, providing space for
those who opt to avail themselves of its transportation service for a fee. Given accepted standards, GPS scarcely
falls within the term common carrier.

2. GPS cannot escape from liability. In culpa contractual, the mere proof of the existence of the contract & the
failure of its compliance justify, prima facie, a corresponding right of relief. The law will not permit a party to be set
free from liability for any kind of misperformance of the contractual undertaking or a contravention of the tenor
thereof. A breach upon the contract confers upon the injured party a valid cause for recovering that which may have
been lost/suffered. The remedy serves to preserve the interests of the promisee that may include his:
1. Expectation interest interest in having the benefit of his bargain by being put in as good a position as he would
have been in had the contract been performed;
2. Reliance interest interest in being reimbursed for loss caused by reliance on the contract by being put in as good
a position as he would have been in had the contract not been made;
3. Restitution interest interest in having restored to him any benefit that he has conferred on the other party.
Agreements can accomplish little unless they are made the basis for action. The effect of every infraction is to create
a new duty, or to make recompense to the one who has been injured by the failure of another to observe his
contractual obligation unless he can show extenuating circumstances, like proof of his exercise of due diligence
(normally that of the diligence of a good father of a family or, exceptionally by stipulation or by law such as in the
case of common carriers, that of extraordinary diligence) or of the attendance of fortuitous event, to excuse him
from his ensuing liability.

A default on, or failure of compliance with, the obligation gives rise to a presumption of lack of care &
corresponding liability on the part of the contractual obligor the burden being on him to establish otherwise. GPS
has failed to do so.

Eroles, on the other hand, may not be ordered to pay petitioner without concrete proof of his negligence/fault. The
driver, not being a party to the contract of carriage between petitioners principal and defendant, may not be held
liable under the agreement. A contract can only bind the parties who have entered into it or their successors who
have assumed their personality/juridical position. Consonantly with the axiom res inter alios acta aliis neque nocet
prodest, such contract can neither favor nor prejudice a third person. Petitioners civil action against the driver can
only be based on culpa aquiliana, which would require the claimant for damages to prove the defendants
negligence/fault.

Crisostomo v. CA, 409 SCRA 528

Facts:

Estela L. Crisostomo contracted the services of Caravan Travel and Tours International, Inc. to arrange and facilitate
her booking, ticketing and accommodation in a tour dubbed "Jewels of Europe". The package tour cost her P74,
322.70. She was given a 5% discount on the amount, which included airfare, and the booking fee was also waived
because petitioners niece, Meriam Menor, was formers companys ticketing manager.
Menor went to her aunts residence on a Wednesday to deliver petitioners travel documents and plane tickets.
Estela, in turn, gave Menor the full payment for the package tour. Menor then told her to be at the Ninoy Aquino
International Airport (NAIA) on Saturday, two hours before her flight on board British Airways.

Without checking her travel documents, Estela went to NAIA on Saturday, to take the flight for the first leg of her
journey from Manila to Hongkong. She discovered that the flight she was supposed to take had already departed the
previous day. She learned that her plane ticket was for the flight scheduled on June 14, 1991. She thus called up
Menor to complain.

Subsequently, Menor prevailed upon Estela to take another tour the "British Pageant, which cost P20, 881.00. She
gave caravan travel and tours P7, 980.00 as partial payment and commenced the trip in July 1991.

Upon petitioners return from Europe, she demanded from respondent the reimbursement of P61, 421.70,
representing the difference between the sum she paid for "Jewels of Europe" and the amount she owed respondent
for the "British Pageant" tour. Despite several demands, respondent company refused to reimburse the amount,
contending that the same was non-refundable.

Estela filed a complaint against Caravan travel and Tours for breach of contract of carriage and damages.

Issues:
A) Will the action prosper?
B) Will she be entitled to damages? (additional info)

Ruling:
No, for there was no contract of carriage.

By definition, a contract of carriage or transportation is one whereby a certain person or association of persons
obligate themselves to transport persons, things, or news from one place to another for a fixed price.

From the above definition, Caravan Travel and Tours is not an entity engaged in the business of transporting either
passengers or goods and is therefore, neither a private nor a common carrier. Caravan Travel and Tours did not
undertake to transport Estela from one place to another since its covenant with its customers is simply to make travel
arrangements in their behalf. Caravan travel and tours services as a travel agency include procuring tickets and
facilitating travel permits or visas as well as booking customers for tours.

While Estela concededly bought her plane ticket through the efforts of respondent company, this does not mean that
the latter ipso facto is a common carrier. At most, Caravan Travel and Tours acted merely as an agent of the airline,
with whom the former ultimately contracted for her carriage to Europe.

B) No. The negligence of the obligor in the performance of the obligation renders him liable for damages for the
resulting loss suffered by the obligee. Fault or negligence of the obligor consists in his failure to exercise due care
and prudence in the performance of the obligation as the nature of the obligation so demands.

In the case at bar, Caravan Travel and Tours exercised due diligence in performing its obligations under the contract
and followed standard procedure in rendering its services to Estela. The plane ticket issued to petitioner clearly
reflected the departure date and time, contrary to Estelas contention. The travel documents, consisting of the tour
itinerary, vouchers and instructions, were likewise delivered to her two days prior to the trip. The Caravan Travel
and Tours also properly booked Estela for the tour, prepared the necessary documents and procured the plane
tickets. It arranged Estelas hotel accommodation as well as food, land transfers and sightseeing excursions, in
accordance with its avowed undertaking.

From the foregoing, it is clear that the Caravan Travel and Tours performed its prestation under the contract as well
as everything else that was essential to book Estela for the tour.
Hence, Estela cannot recover and must bear her own damage.
Spouses Teodoro and Nanette Perena, vs. Spouses Nicolas and Teresita Zarate
GR No. 157917 August 29, 2012

The facts of the case are as follows:

Spouses Perena were engaged in school bus service, transporting students from Paranaque to Don Bosco
Technical Institute in Makati. In June 1996, spouses Zarate contracted spouses Perena to transport their son, Aaron
Zarate, from their residence in Paranaque to Don Bosco. As on the usual days of school in August 22, 1996, the van
picked-up Aaron in their house, he then took the left side seat near the rear door of the said vehicle. Considering that
the students were due by 7:15am at Don Bosco, and because of heavy traffic at the South Superhighway, the driver,
Clemente Alfaro, decided to take the narrow path underneath the Magallanes interchange which then is being used
by Makati bound vehicles as short cut. The said narrow path has a railroad crossing, and while traversing the said
narrow path, closely tailing a huge passenger bus, the driver of the school service decided to overtake the said bus at
about 50 meters away from the railroad crossing. Considering that the stereo is playing loudly and blinded by the
bus, he did not hear the blowing of horn of the oncoming train as a warning to the vehicles. The bus successfully
crossed the railroad crossing but the van did not. The train hit the rear side of the van and the impact threw 9 of the
12 students including Aaron. His body landed in the path of the train, which dragged him, severed his head,
instantaneously killing him. Devastated by the sudden death of their son, spouses Zarate commenced this action for
damages. The Regional Trial Court ruled in favor of the spouses Zarate. On appeal, The Court of Appeals affirmed
the decision of the lower court but lowered the moral damages to php 2,500,000.00.

ISSUE:
Whether or not there is a breach of contract of a common carrier and whether there is negligence.

HELD:

The Supreme Court ruled in favor spouses Zarate, affirming the decision of the Court of Appeals.

In this case, the Supreme Court, once and for all lay the matter to rest that the school service is a common
carrier and not a private carrier, and as such, they are required to observe the extraordinary diligence as provided
under Article 1733 of the Civil Code.

According to the Supreme Court, the true test for a common carrier is not the quantity or extent of the
business actually transacted, or the number and character of the conveyances used in the activity, but whether the
undertaking is a part of the activity engaged in by the carrier that he has held out to the general public as his business
or occupation. Otherwise stated, making the activity or holding himself or itself out to the public as a ready to act for
all who may desire his or its services to transport goods or persons for a fee.

Applying the considerations mentioned above, there is no question that Perenas as the operators of a school service
were: a) engaged in transporting passengers generally as a business not just as a casual occupation; b) undertaking to
carry passengers over established roads; c) transporting students for a fee. Despite catering limited clientele, the
Perenas operated as a common carrier because they hold themselves out as a ready transportation indiscriminately to
the students of a particular school living within or near where they operated the service and for a fee.

On the second issue, Article 1756 of the Civil code provides that, In case of death of or injuries to
passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence as prescribed in articles 1733 and 1755. In this case, Aaron Zarate died, and
thus as provided under the above-mentioned law, they are negligent.

There is no question that the Pereas did not overturn the presumption of their negligence by credible evidence.
Their defense of having observed the diligence of a good father of a family in the selection and supervision of their
driver was not legally sufficient. According to Article 1759 of the Civil Code, their liability as a common carrier did
not cease upon proof that they exercised all the diligence of a good father of a family in the selection and
supervision of their employee. The Pereas were liable for the death of Aaron despite the fact that their driver might
have acted beyond the scope of his authority or even in violation of the orders of the common carrier In this
connection, the records showed their drivers actual negligence.

Valenzuela Hardwood vs. CA

(GR 102316, 30 June 1997)

FACTS:
Valenzuela Hardwood and Industrial Supply, Inc. (VHIS) entered into an agreement with the Seven Brothers
whereby the latter undertook to load on board its vessel M/V Seven Ambassador the formers lauan round logs
numbering 940 at the port of Maconacon, Isabela for shipment to Manila. VHIS insured the logs against loss and/or
damage with South Sea Surety and Insurance Co.

The said vessel sank resulting in the loss of VHIS insured logs. VHIS demanded from South Sea Surety the
payment of the proceeds of the policy but the latter denied liability under the policy for non-payment of premium.
VHIS likewise filed a formal claim with Seven Brothers for the value of the lost logs but the latter denied the claim.

The RTC ruled in favor of the petitioner. Both Seven Brothers and South Sea Surety appealed. The Court of Appeals
affirmed the judgment except as to the liability of Seven Brothers. South Sea Surety and VHIS filed separate
petitions for review before the Supreme Court. In a Resolution dated 2 June 1995, the Supreme Court denied the
petition of South Sea Surety. The present decision concerns itself to the petition for review filed by VHIS.

ISSUE:
Is a stipulation in a charter party that the (o)wners shall not be responsible for loss, split, short-landing, breakages
and any kind of damages to the cargo valid?

HELD:
Yes. Xxx [I]t is undisputed that private respondent had acted as a private carrier in transporting petitioners lauan
logs. Thus, Article 1745 and other Civil Code provisions on common carriers which were cited by petitioner may
not be applied unless expressly stipulated by the parties in their charter party.

In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on the
charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence
of the ship captain. Pursuant to Article 1306 of the Civil Code, such stipulation is valid because it is freely entered
into by the parties and the same is not contrary to law, morals, good customs, public order, or public policy. Indeed,
their contract of private carriage is not even a contract of adhesion. We stress that in a contract of private carriage,
the parties may freely stipulate their duties and obligations which perforce would be binding on them. Unlike in 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.

xxx

The general public enters into a contract of transportation with common carriers without a hand or a voice in the
preparation thereof. The riding public merely adheres to the contract; even if the public wants to, it cannot submit its
own stipulations for the approval of the common carrier. Thus, the law on common carriers extends its protective
mantle against one-sided stipulations inserted in tickets, invoices or other documents over which the riding public
has no understanding or, worse, no choice. Compared to the general public, a charterer in a contract of private
carriage is not similarly situated. It can -- and in fact it usually does -- enter into a free and voluntary agreement. In
practice, the parties in a contract of private carriage can stipulate the carriers obligations and liabilities over the
shipment which, in turn, determine the price or consideration of the charter. Thus, a charterer, in exchange for
convenience and economy, may opt to set aside the protection of the law on common carriers. When the charterer
decides to exercise this option, he takes a normal business risk.