G.R. No. 161745 September 30, 2005 Palawan to Manila.

On October 25, 1991, the silica sand was

placed on board Judy VII, a barge leased by Lea Mer. During the
LEA MER INDUSTRIES, INC., Petitioners, voyage, the vessel sank, resulting in the loss of the cargo.
vs.
MALAYAN INSURANCE CO., INC.,* Respondent. Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of
the lost cargo. To recover the amount paid and in the exercise of
DECISION its right of subrogation, Malayan demanded reimbursement
from Lea Mer, which refused to comply. Consequently, Malayan
PANGANIBAN, J.: instituted a Complaint with the Regional Trial Court (RTC) of
Manila on September 4, 1992, for the collection of P565,000
ommon carriers are bound to observe extraordinary diligence in representing the amount that respondent had paid Vulcan.
their vigilance over the goods entrusted to them, as required by
the nature of their business and for reasons of public policy. On October 7, 1999, the trial court dismissed the Complaint,
Consequently, the law presumes that common carriers are at upon finding that the cause of the loss was a fortuitous
fault or negligent for any loss or damage to the goods that they event. The RTC noted that the vessel had sunk because of the
transport. In the present case, the evidence submitted by bad weather condition brought about by Typhoon Trining. The
petitioner to overcome this presumption was sorely insufficient. court ruled that petitioner had no advance knowledge of the
incoming typhoon, and that the vessel had been cleared by the
The Case Philippine Coast Guard to travel from Palawan to Manila.
Before us is a Petition for Review under Rule 45 of the Rules of Ruling of the Court of Appeals
Court, assailing the October 9, 2002 Decision and the December
29, 2003 Resolution of the Court of Appeals (CA) in CA-GR CV Reversing the trial court, the CA held that the vessel was not
No. 66028. The challenged Decision disposed as follows: seaworthy when it sailed for Manila. Thus, the loss of the cargo
was occasioned by petitioner’s fault, not by a fortuitous event.
"WHEREFORE, the appeal is GRANTED. The December 7,
1999 decision of the Regional Trial Court of Manila, Branch 42 Hence, this recourse.
in Civil Case No. 92-63159 is
hereby REVERSED and SETASIDE. [Petitioner] is ordered to The Issues
pay the [herein respondent] the value of the lost cargo in the
amount of P565,000.00. Costs against the [herein petitioner]." Petitioner states the issues in this wise:

The assailed Resolution denied reconsideration. "A. Whether or not the survey report of the cargo surveyor,
Jesus Cortez, who had not been presented as a witness of the
The Facts said report during the trial of this case before the lower court
can be admitted in evidence to prove the alleged facts cited in
Ilian Silica Mining entered into a contract of carriage with Lea the said report.
Mer Industries, Inc., for the shipment of 900 metric tons of
silica sand valued at P565,000. Consigned to Vulcan Industrial "B. Whether or not the respondent, Court of Appeals, had validly
and Mining Corporation, the cargo was to be transported from or legally reversed the finding of fact of the Regional Trial Court
which clearly and unequivocally held that the loss of the cargo Common carriers are persons, corporations, firms or
subject of this case was caused by fortuitous event for which associations engaged in the business of carrying or transporting
herein petitioner could not be held liable. passengers or goods, or both -- by land, water, or air -- when this
service is offered to the public for compensation. Petitioner is
"C. Whether or not the respondent, Court of Appeals, had clearly a common carrier, because it offers to the public its
committed serious error and grave abuse of discretion in business of transporting goods through its vessels.
disregarding the testimony of the witness from the MARINA,
Engr. Jacinto Lazo y Villegal, to the effect that the vessel ‘Judy Thus, the Court corrects the trial court’s finding that petitioner
VII’ was seaworthy at the time of incident and further in became a private carrier when Vulcan chartered it. Charter
disregarding the testimony of the PAG-ASA weather specialist, parties are classified as contracts of demise (or bareboat) and
Ms. Rosa Barba y Saliente, to the effect that typhoon ‘Trining’ affreightment, which are distinguished as follows:
did not hit Metro Manila or Palawan."
"Under the demise or bareboat charter of the vessel, the
In the main, the issues are as follows: (1) whether petitioner is charterer will generally be considered as owner for the voyage or
liable for the loss of the cargo, and (2) whether the survey report service stipulated. The charterer mans the vessel with his own
of Jesus Cortez is admissible in evidence. people and becomes, in effect, the owner pro hac vice, subject to
liability to others for damages caused by negligence. To create a
The Court’s Ruling demise, the owner of a vessel must completely and exclusively
relinquish possession, command and navigation thereof to the
The Petition has no merit. charterer; anything short of such a complete transfer is a
contract of affreightment (time or voyage charter party) or not a
First Issue: charter party at all."
Liability for Loss of Cargo The distinction is significant, because a demise or bareboat
charter indicates a business undertaking that is private in
Question of Fact
character. Consequently, the rights and obligations of the parties
The resolution of the present case hinges on whether the loss of to a contract of private carriage are governed principally by their
the cargo was due to a fortuitous event. This issue involves stipulations, not by the law on common carriers.
primarily a question of fact, notwithstanding petitioner’s claim
The Contract in the present case was one of affreightment, as
that it pertains only to a question of law. As a general rule,
shown by the fact that it was petitioner’s crew that manned the
questions of fact may not be raised in a petition for review. The
tugboat M/V Ayalit and controlled the barge Judy
present case serves as an exception to this rule, because the
VII. Necessarily, petitioner was a common carrier, and the
factual findings of the appellate and the trial courts vary. This
pertinent law governs the present factual circumstances.
Court meticulously reviewed the records, but found no reason to
reverse the CA. Extraordinary Diligence Required
Rule on Common Carriers Common carriers are bound to observe extraordinary diligence
in their vigilance over the goods and the safety of the passengers
they transport, as required by the nature of their business and
for reasons of public policy. Extraordinary diligence requires render it impossible for the debtors to fulfill their
rendering service with the greatest skill and foresight to avoid obligation in a normal manner; and (d) the obligor
damage and destruction to the goods entrusted for carriage and must have been free from any participation in the
delivery. aggravation of the resulting injury to the creditor.29

Common carriers are presumed to have been at fault or to have To excuse the common carrier fully of any liability, the
acted negligently for loss or damage to the goods that they have fortuitous event must have been the proximate and
transported. This presumption can be rebutted only by proof only cause of the loss.30 Moreover, it should have
that they observed extraordinary diligence, or that the loss or exercised due diligence to prevent or minimize the loss
damage was occasioned by any of the following causes: before, during and after the occurrence of the
fortuitous event.31
"(1) Flood, storm, earthquake, lightning, or other natural
disaster or calamity; Loss in the Instant Case

"(2) Act of the public enemy in war, whether international or There is no controversy regarding the loss of the cargo
civil; in the present case. As the common carrier, petitioner
bore the burden of proving that it had exercised
"(3) Act or omission of the shipper or owner of the goods; extraordinary diligence to avoid the loss, or that the
loss had been occasioned by a fortuitous event -- an
"(4) The character of the goods or defects in the packing or in exempting circumstance.
the containers;
It was precisely this circumstance that petitioner cited
"(5) Order or act of competent public authority." to escape liability. Lea Mer claimed that the loss of the
cargo was due to the bad weather condition brought
Rule on Fortuitous Events about by Typhoon Trining. Evidence was presented to
show that petitioner had not been informed of the
Article 1174 of the Civil Code provides that "no person
incoming typhoon, and that the Philippine Coast Guard
shall be responsible for a fortuitous event which could
had given it clearance to begin the voyage. On October
not be foreseen, or which, though foreseen, was
25, 1991, the date on which the voyage commenced and
inevitable." Thus, if the loss or damage was due to such
the barge sank, Typhoon Trining was allegedly far from
an event, a common carrier is exempted from liability.
Palawan, where the storm warning was only "Signal
Jurisprudence defines the elements of a "fortuitous No. 1."
event" as follows: (a) the cause of the unforeseen and
The evidence presented by petitioner in support of its
unexpected occurrence, or the failure of the debtors to
defense of fortuitous event was sorely insufficient. As
comply with their obligations, must have been
required by the pertinent law, it was not enough for the
independent of human will; (b) the event that
common carrier to show that there was an unforeseen
constituted the caso fortuito must have been
or unexpected occurrence. It had to show that it was
impossible to foresee or, if foreseeable, impossible to
free from any fault -- a fact it miserably failed to prove.
avoid; (c) the occurrence must have been such as to
First, petitioner presented no evidence that it had seaworthy when it sailed for Manila. Respondent was
attempted to minimize or prevent the loss before, able to prove that, in the hull of the barge, there were
during or after the alleged fortuitous event. Its witness, holes that might have caused or aggravated the
Joey A. Draper, testified that he could no longer sinking. Because the presumption of negligence or
remember whether anything had been done to fault applied to petitioner, it was incumbent upon it to
minimize loss when water started entering the show that there were no holes; or, if there were, that
barge. This fact was confirmed during his cross- they did not aggravate the sinking.
examination, as shown by the following brief exchange:
Petitioner offered no evidence to rebut the existence of
"Atty. Baldovino, Jr.: the holes. Its witness, Domingo A. Luna, testified that
the barge was in "tip-top" or excellent condition, but
Other than be[a]ching the barge Judy VII, were there that he had not personally inspected it when it left
other precautionary measure[s] exercised by you and Palawan.
the crew of Judy VII so as to prevent the los[s] or
sinking of barge Judy VII? The submission of the Philippine Coast Guard’s
Certificate of Inspection of Judy VII, dated July 31,
xxxxxxxxx 1991, did not conclusively prove that the barge was
seaworthy. The regularity of the issuance of the
Atty. Baldovino, Jr.: Certificate is disputably presumed. It could be
contradicted by competent evidence, which respondent
Your Honor, what I am asking [relates to the] action offered. Moreover, this evidence did not necessarily
taken by the officers and crew of tugboat Ayalit and take into account the actual condition of
barge Judy VII x x x to prevent the sinking of barge the vessel at the time of the commencement of the
Judy VII? voyage.
xxxxxxxxx Second Issue:
Court: Admissibility of the Survey Report
Mr. witness, did the captain of that tugboat give any Petitioner claims that the Survey Report prepared by
instruction on how to save the barge Judy VII? Jesus Cortez, the cargo surveyor, should not have been
admitted in evidence. The Court partly agrees. Because
Joey Draper:
he did not testify during the trial, then the Report that
I can no longer remember sir, because that happened he had prepared was hearsay and therefore
[a] long time ago." inadmissible for the purpose of proving the truth of its
contents.
Second, the alleged fortuitous event was not the sole
and proximate cause of the loss. There is a The Survey Report Not the Sole Evidence
preponderance of evidence that the barge was not
The facts reveal that Cortez’s Survey Report was used a person is admissible if it is intended to prove the
in the testimonies of respondent’s witnesses -- Charlie tenor, not the truth, of the statements. Independent of
M. Soriano; and Federico S. Manlapig, a cargo marine the truth or the falsity of the statement given in the
surveyor and the vice-president of Toplis and Harding report, the fact that it has been made is relevant. Here,
Company. Soriano testified that the Survey Report had the hearsay rule does not apply.
been used in preparing the final Adjustment Report
conducted by their company. The final Report showed In the instant case, the challenged Survey Report
that the barge was not seaworthy because of the prepared by Cortez was admitted only as part of the
existence of the holes. Manlapig testified that he had testimonies of respondent’s witnesses. The referral to
prepared that Report after taking into account the Cortez’s Report was in relation to Manlapig’s final
findings of the surveyor, as well as the pictures and the Adjustment Report. Evidently, it was the existence of
sketches of the place where the sinking the Survey Report that was testified to. The
occurred. Evidently, the existence of the holes was admissibility of that Report as part of the testimonies
proved by the testimonies of the witnesses, not merely of the witnesses was correctly ruled upon by the trial
by Cortez’ Survey Report. court.

Rule on Independently At any rate, even without the Survey Report, petitioner
has already failed to overcome the presumption of fault
Relevant Statement that applies to common carriers.

That witnesses must be examined and presented WHEREFORE, the Petition is DENIEDand the assailed
during the trial, and that their testimonies must be Decision and Resolution are AFFIRMED. Costs against
confined to personal knowledge is required by the petitioner.
rules on evidence, from which we quote:
SO ORDERED.
"Section 36. Testimony generally confined to personal
knowledge; hearsay excluded. -A witness can testify
only to those facts which he knows of his personal
knowledge; that is, which are derived from his own
perception, except as otherwise provided in these
rules."

On this basis, the trial court correctly refused to admit

Jesus Cortez’s Affidavit, which respondent had offered
as evidence. Well-settled is the rule that, unless the
affiant is presented as a witness, an affidavit is
considered hearsay.

An exception to the foregoing rule is that on

"independently relevant statements." A report made by