Common Carriers in General Final Compilation

7/29/2019 Common Carriers in General Final Compilation

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Transportation Laws 2nd Semester, SY 2012-2013Case Digest Compilation

Professor: Atty. Jocelyn Valencia

COMMON CARRIERS IN GENERAL

Part I

Concept of common carriers

Crisostomo vs. Court of Appeals

FACTS:

A travel agency is not an entity engaged in the business of

transporting either passengers or goods and is therefore,

neither a private nor a common carrier. Respondent did not

undertake to transport petitioner from one place to another

since its covenant with its customers is simply to make travel

arrangements in their behalf. Respondents services as a

travel agency include procuring tickets and facilitating travel

permits or visas as well as booking customers for tours. It is

in this sense that the contract between the parties in this

case was an ordinary one for services and not one of

carriage. Petitioner Estela L. Crisostomo contracted the

services of respondent Caravan Travel and ToursInternational, Inc. to arrange and facilitate her booking,

ticketing, and accommodation in a tour

Dubbed Jewels of Europe. A 5% discount on the total cost

of P74,322.70 which included the airfare was given to the

petitioner. The booking fee was also waived because

petitioners niece, Meriam Menor, was respondents ticketing

manager. On June 12, 1991, Menor went to her aunts

residence to deliver petitioners travel documents and plane

tickets. In return, petitioner gave the full payment for the

package tour. Menor then told her to be at the NAIA on

Saturday, June 15, 1991, two hours before her flight on board

British Airways. Without checking her travel documents,

petitioner went to NAIA and to her dismay, 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 called up

Menor to complain and Menor suggested upon petitioner to

take another tour British Pageant. Petitioner was asked

anew to pay US$785.00. Petitioner gave respondentUS$300

as partial payment and commenced the trip.

ISSUE:

Whether or not respondent Caravan did not observe the

standard of care required of a common carrier when itinformed the petitioner wrongly of the flight schedule.

HELD: The petition was denied for lack of merit. The decision

of the Court of Appeals was affirmed. A common carrier is

defined under Article 1732 of the Civil Code 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, affecting their services

to the public. It is obvious from the above definition that

respondent is not an entity engaged in the business of

transporting either passengers or goods and is therefore,

neither a private nor a common carrier. Respondent did not

undertake to transport petitioner from one place to anothersince its covenant with its customers is simply to make travel

arrangements in their behalf. Respondents services as a

travel agency include procuring tickets and facilitating travel

permits or visas as well as booking customers for tours. It is

in this sense that the contract between the parties in this

case was an ordinary one for services and not one of

carriage. The standard of care required of respondent is that

of a good father of a family under Article 1173 of the Civil

Code. This connotes reasonable care consistent with that

which an ordinarily prudent person would have observed

when confronted with a similar situation. It is clear that

respondent performed its prestation under the contract as

well as everything else that was essential to book petitionerfor the tour. Had petitioner exercised due diligence in the

conduct of her affairs, there would have been no reason for

her to miss the flight. Needless to say, after the travel papers

were delivered to petitioners, it became incumbent upon her

to take ordinary care of her concerns. This undoubtedly

would require that she at least read the documents in order

to assure herself of the important details regarding the trip.

Pedro de Guzman vs. CA

First Philippine Pipeline Corporation vs. CA

Facts: Petitioner, First Phil. Industrial Corporation (FirstPhilfor brevity) is a grantee of a pipeline concession underRepublic Act No. 387, as amended, to contract, install andoperate oil pipelines. FirstPhil applied for a mayor's permit,but before the mayor's permit could be issued, therespondent City Treasurer required petitioner to pay a localtax pursuant to the Local Government Code. Petitioner filed aletter-protest addressed to the respondent City Treasurer,but the latter denied the same contending that petitioner

cannot be considered engaged in transportation business,thus it cannot claim exemption under Section 133 (j) of theLocal Government Code.

FirstPhil filed with the RTC Batangas a complaint for taxrefund with prayer for writ of preliminary injunction againstrespondents, contending that the imposition of tax uponthem violates Sec 133 of the Local Government Code. On theother hand, respondents assert that pipelines are notincluded in the term "common carrier" which refers solely toordinary carriers such as trucks, trains, ships and the like.Respondents further posit that the term "common carrier"under the said code pertains to the mode or manner bywhich a product is delivered to its destination.

RTC dismissed the complaint, ruling that exemption grantedunder Sec. 133 (j) encompasses only "common carriers" soas not to overburden the riding public or commuters withtaxes. And that petitioner is not a common carrier, but aspecial carrier extending its services and facilities to a singlespecific or "special customer" under a "special contract."

The case was elevated by the petitioner to the CA, but CAaffirmed the decision of the RTC. Hence this petition.

Issue:WON the petitioner is a "common carrier" and, therefore,exempt from the business tax.

Held: Petition was granted. CA decision was REVERSED andSET ASIDE.

SC ruled in this case that petitioner is a common carrier andthus, exempt from business tax.

A "common carrier" may be defined, broadly, as one whoholds himself out to the public as engaged in the business oftransporting persons or property from place to place, forcompensation, offering his services to the public generally.Art. 1732 of the Civil Code defines a "common carrier" as"any person, corporation, firm or association engaged in thebusiness of carrying or transporting passengers or goods orboth, by land, water, or air, for compensation, offering theirservices to the public."

The test for determining whether a party is a common carrierof goods is:1. He must be engaged in the business of carrying goods forothers as a public employment,2. He must hold himself out as ready to engage in thetransportation of goods for person generally as a businessand not as a casual occupation;3. He must undertake to carry by the method by which hisbusiness is conducted and over his established roads; and4. The transportation must be for hire.

Based on the above definitions and requirements, there is nodoubt that petitioner is a common carrier. It is engaged in the

business of transporting or carrying goods, i.e. petroleumproducts, for hire as a public employment. It undertakes tocarry for all persons indifferently, that is, to all persons whochoose to employ its services, and transports the goods by

Ansaldo, MN Carskit, VL Edig, LA Flores, DM Jaso, EB Morente, JN Olaguer, DA Oliva, MC Sederiosa, RA2 Sanchez Roman


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Professor: Atty. Jocelyn Valencialand and for compensation. The fact that petitioner has alimited clientele does not exclude it from the definition of acommon carrier.

The definition of "common carriers" in the Civil Code makesno distinction as to the means of transporting, as long as it isby land, water or air. It does not provide that the

transportation of the passengers or goods should be bymotor vehicle. In fact, in the United States, oil pipe lineoperators are considered common carriers.

Under the Petroleum Act of the Philippines (Republic Act387), petitioner is considered a "common carrier.", and at thesame time, said act also regards petroleum operation as apublic utility. BIR likewise considers the petitioner a "commoncarrier." In so ruling, it held that, since petitioner is a pipelineconcessionaire that is engaged only in transportingpetroleum products, it is considered a common carrier underRepublic Act No. 387. Such being the case, it is not subject towithholding tax prescribed by Revenue Regulations No.13-78,as amended.

Section 133 (j), of the Local Government Code, provides:

Sec. 133. Common Limitations on the Taxing Powers of LocalGovernment Units. Unless otherwise provided herein, theexercise of the taxing powers of provinces, cities,municipalities, and barangays shall not extend to the levy ofthe following:

(j) Taxes on the gross receipts of transportation contractorsand persons engaged in the transportation of passengers orfreight by hire and common carriers by air, land or water,except as provided in this Code.

SC held that the legislative intent in excluding from the

taxing power of the local government unit the imposition ofbusiness tax against common carriers is to prevent aduplication

of the so-called "commoncarrier's tax.

2. He must undertake to carrygoods of the kind to which hisbusiness is confined;

Distinctions from Private

Carriers; Liability of

Registered Owner

Calvo vs. UCPB General

Insurance Co.

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 SanMiguel 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 SMCs warehouse at

the Tabacalera Compound,

Romualdez St., Ermita,

Manila. The cargo was

insured by respondent UCPB

General Insurance Co., Inc.

On July 14, 1990, theshipment in question,

contained in 30 metal vans,

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,

pursuant to her contract with

SMC, withdrew the cargo

from the arrastre operatorand delivered it to SMCs

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 for the

aforementioned amount. In

turn, respondent, as

subrogee of SMC, brought

suit against petitioner in the

Regional Trial Court, Branch

148, Makati City, which, on

December 20, 1995,

rendered judgment finding

petitioner liable to

respondent for the damage tothe shipment.

The trial court held: It cannot

be denied . . . that the

subject cargoes sustained

damage while in the custody

of defendants. Evidence such

as the Warehouse Entry Slip ;

the Damage Report with

entries appearing therein,

classified as TED and

TSN, which the claims

processor, Ms. Agrifina De

Luna, claimed to be tearrage

at the end and tearrage at

the middle of the subject

damaged cargoes

respectively, coupled with the

Marine Cargo Survey Report(confirms the fact of the

damaged condition of the

subject cargoes. The

surveyor[s] report in

particular, which provides

among others that: . . . we

opine that damages

sustained by shipment is

attributable to improper

handling in transit

presumably whilst in the

custody of the broker . . . .is

a finding which cannot betraversed and overturned.

The evidence adduced by the

defendants is not enough to

sustain [her] defense that

[she is] are not liable.

Defendant by reason of the

nature of [her] business

should have devised ways

and means in order to

prevent the damage to the

cargoes which it is under

obligation to take custody ofand to forthwith deliver to the

consignee. Defendant did not

present any evidence on

what precaution [she]

performed to prevent [the]

said incident, hence the

presumption is that the

moment the defendant

accepts the cargo [she] shall

perform such extraordinary

diligence because of the

nature of the cargo.

Generally speaking under

Article 1735 of the Civil Code,

if the goods are proved to

have been lost, destroyed or

deteriorated, common

carriers are presumed to

have been at fault or to have

acted negligently, unless they

prove that they have

observed the extraordinary

diligence required by law. The

burden of the plaintiff,therefore, is to prove merely

that the goods he transported



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Professor: Atty. Jocelyn Valenciahave been lost, destroyed or

deteriorated. Thereafter, the

burden is shifted to the

carrier to prove that he has

exercised the extraordinary

diligence required by law.

Thus, it has been held thatthe mere proof of delivery of

goods in good order to a

carrier, and of their arrival at

the place of destination in

bad order, makes out a prima

facie case against the carrier,

so that if no explanation is

given as to how the injury

occurred, the carrier must be

held responsible. It is

incumbent upon the carrier to

prove that the loss was due

to accident or some othercircumstances inconsistent

with its liability.

Defendant, being a customs

brother, warehouseman and

at the same time a common

carrier is supposed [to]

exercise [the] extraordinary

diligence required by law,

hence the extraordinary

responsibility lasts from the

time the goods are

unconditionally placed in thepossession of and received by

the carrier for transportation

until the same are delivered

actually or constructively by

the carrier to the consignee

or to the person who has the

right to receive the same.

The decision was affirmed by

the Court of Appeals on

appeal. Hence this petition

for review on certiorari.

Issue 1: W/N petitioner is a

common carrier and not as a

private or special carrier who

did not hold its services to

the public. COMMON

CARRIER

Held:

Petitioner contends that

contrary to the findings of the

trial court and the Court of

Appeals, she is not a common

carrier but a private carrierbecause, 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.

The contention has no merit.

In De Guzman v. Court of

Appeals, the Court dismissed

a similar contention and heldthe party to be a common

carrier, thus: 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 orgoods 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 an ancillary

activity . . . Article 1732 alsocarefully 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, andone 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.

Under Section 13, paragraph

(b) of the Public Service Act,

public service includes:

x x x every person that now

or hereafter may own,

operate, manage, or controlin the Philippines, for hire or

compensation, with general

or limited clientele, whether

permanent, occasional or

accidental, and done for

general business purposes,

any common carrier, railroad,

street railway, traction

railway, subway motor

vehicle, either for freight or

passenger, or both, with or

without fixed route and

whatever may be itsclassification, freight or

carrier service of any class,

express service, steamboat,

or steamship line, pontines,

ferries and water craft,

engaged in the transportation

of passengers or freight or

both, shipyard, marine repair

shop, wharf or dock, iceplant, ice-refrigeration plant,

canal, irrigation system, gas,

electric light, heat and power,

water supply and power

petroleum, sewerage system,

wire or wireless

communications systems,

wire or wireless broadcasting

stations and other similar

public services. x x x

There is greater reason for

holding petitioner to be acommon carrier because the

transportation of goods is an

integral part of her business.

To uphold petitioners

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

petitioners business.

Issue 2: W/N petitioner is

liable for the damage to the

cargo.YES

Now, as to petitioners

liability, Art. 1733 of the Civil

Code provides: 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. .

. . In Compania Maritima v.

Court of Appeals,9 the

meaning of extraordinary


goods was explained thus:

The extraordinary diligence in

the vigilance over the goods

tendered for shipment

requires the common carrierto 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.

In the case at bar, petitioner

denies liability for the

damage to the cargo. She

claims that the spoilage orwettage 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 weredeformed, cracked, or

otherwise damaged, as noted

in the Marine Survey Report

(Exh. H), to wit:

MAXU-2062880 -

rain gutter

deformed/cracked

ICSU-363461-3 -

left side rubber

gasket on door

distorted/partly loose

PERU-204209-4 -with pinholes on roof

panel right portion

TOLU-213674-3 - wood

flooring we[t] and/or with

signs of water soaked

MAXU-201406-0 - with

dent/crack on roof panel

ICSU-412105-0 -

rubber gasket on left

side/door panel partly

detached loosened.

In addition, petitioner claims

that Marine Cargo Surveyor

Ernesto Tolentino testified

that he has no personal

knowledge on whether the

container vans were first

stored in petitioners

warehouse prior to their

delivery to the consignee.

She likewise claims that after

withdrawing the container

vans from the arrastre

operator, her driver, RicardoNazarro, immediately

delivered the cargo to SMCs

warehouse in Ermita, Manila,

which is a mere thirty-minute

drive from the Port Area

where the cargo came from.

Thus, the damage to the

cargo could not have taken

place while these were in her

custody.

Contrary to petitioners

assertion, the Survey Report(Exh. H) of the Marine Cargo

Surveyors indicates that



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Professor: Atty. Jocelyn Valenciawhen the shipper transferred

the cargo in question to the

arrastre operator, these were

covered by clean Equipment

Interchange Report (EIR) and,

when petitioners employees

withdrew the cargo from thearrastre operator, they did so

without exception or protest

either with regard to the

condition of container vans or

their contents. The Survey

Report pertinently reads:

Details of Discharge:

Shipment, provided with our

protective supervision was

noted discharged ex vessel to

dock of Pier #13 South

Harbor, Manila on 14 July1990, containerized onto 30

x 20 secure metal vans,

covered by clean EIRs.

Except for slight dents and

paint scratches on side and

roof panels, these containers

were deemed to have [been]

received in good condition.

From the [Survey Report], it

[is] clear that the shipment

was discharged from the

vessel to the arrastre, MarinaPort Services Inc., in good

order and condition as

evidenced by clean

Equipment Interchange

Reports (EIRs). Had there

been any damage to the

shipment, there would have

been a report to that effect

made by the arrastre

operator. The cargoes were

withdrawn by the defendant-

appellant from the arrastre

still in good order and

condition as the same were

received by the former

without exception, that is,

without any report of damage

or loss. Surely, if the

container vans were

deformed, cracked, distorted

or dented, the defendant-

appellant would report it

immediately to the consignee

or make an exception on the

delivery receipt or note thesame in the Warehouse Entry

Slip (WES). None of these

took place. To put it simply,

the defendant-appellant

received the shipment in

good order and condition and

delivered the same to the

consignee damaged. We can

only conclude that the

damages to the cargo

occurred while it was in the

possession of the defendant-

appellant. Whenever thething is lost (or damaged) in

the possession of the debtor

(or obligor), it shall be

presumed that the loss (or

damage) was due to his fault,

unless there is proof to the

contrary. No proof was

proffered to rebut this legal

presumption and thepresumption of negligence

attached to a common carrier

in case of loss or damage to

the goods.

Anent petitioners insistence

that the cargo could not have

been damaged while in her

custody as she immediately

delivered the containers to

SMCs compound, suffice it to

say that 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.

Nor is there basis to exempt

petitioner from liability under

Art. 1734(4), which provides:

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 notrelieved 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 ofnegligence as provided under

Art. 1735 holds.

National Steel Corporation vs.

CA

Facts:

Plaintiff National SteelCorporation (NSC) as

Charterer and defendant

Vlasons Shipping, Inc. (VSI) as

Owner, entered into a

Contract of Voyage Charter

Hire whereby NSC hired VSIs

vessel, the MV Vlasons I to

make one voyage to load

steel products at Iligan City

and discharge them at North

Harbor, Manila. The handling,

loading and unloading of the

cargoes were theresponsibility of the

Charterer.

The skids of tinplates and hot

rolled sheets shipped were

allegedly found to be wet and

rusty. Plaintiff, alleging

negligence, filed a claim for

damages against the

defendant who denied

liability claiming that the MV

Vlasons I was seaworthy in all

respects for the carriage ofplaintiffs 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 its

voyage, the vessel

encountered very rough seas.

Issue:

Whether or not the provisions

of the Civil Code on common

carriers pursuant to which

there exists a presumption of

negligence against the

common carrier in case of

loss or damage to the cargo

are applicable to a private

carrier.

Held:

No. In a contract of private

carriage, the parties may

freely stipulate their dutiesand 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 aprivate carrier.

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 afee [Mendoza vs. Philippine

Airlines, Inc., 90 Phil. 836,

842-843 (1952)]. 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.

Because the MV Vlasons I was

a private carrier, the ship

owners 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.

Loadstar Shipping vs. CA

Facts: 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 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 LOSS OF 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 theinsured in full settlement of

its claim, and the latter



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Professor: Atty. Jocelyn Valenciaexecuted a subrogation

receipt therefor.

On 4 February 1985, MIC filed

a complaint against

LOADSTAR and PGAI, alleging

that the sinking of the vesselwas 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 of the vessel directly

to MIC, said amount to be

deducted from MICs claim

from LOADSTAR.

In its answer, LOADSTAR

denied any liability for the

loss of the shippers goodsand claimed that the 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.

ISSUE 1: Is the M/VCherokee a private or a

common carrier?

Held: (1) The SC held 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 ofHome 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 ofthe 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

large is not involved, as in the

case of a ship totally

chartered for the use of a

single party. LOADSTAR alsocited 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 byLOADSTAR are not applicable

in the case at bar for 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 onlya 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 thatthe 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

ofDe 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:

Article 1732. Common

carriers are persons,

corporations, firms or

associations engaged in thebusiness of carrying or

transporting passengers or

goods or both, by land, water,

or air for compensation,


public.



whoseprincipal business



one who does such carryingonly as an ancillaryactivity

(in local idiom, as a

sideline. Article 1732 also

carefully avoids making any


or enterprise offering

transportation service on

a regular or scheduled

basis and one offering suchservice 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 segmentof the

general population. We think

that Article 1733 deliberatelyrefrained from making such

distinctions.

Issue 2: Did LOADSTAR

observe due and/or

ordinary diligence in

these premises?

Held: The SC held that the

M/V Cherokee was not

seaworthy when it embarked

on its voyage on 19November 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

LOADSTARs 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 oragent.[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 area

where it sank was determined

to be moderate. Since it wasremiss 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.

Asia Lighterage vs. CA

FACTS:

On June 13, 1990, 3,150

metric tons of Better Western

White Wheat in bulk was

shipped by Marubeni

American Corporation of

Portland, Oregon on board

the vessel M/V NEO

CYMBIDIUM V-26 for delivery

to the consignee, General

Milling Corporation in Manila.

The shipment was insured bythe private respondent

Prudential Guarantee and

Assurance, Inc. against loss

or damage.

On July 25, 1990, the carrying

vessel arrived in Manila and

the cargo was transferred to

the custody of the petitioner

Asia Lighterage and Shipping,

Inc. The petitioner was

contracted by the consignee

as carrier to deliver the cargoto consignee's warehouse at

Bo. Ugong, Pasig City.

It appears that on August 17,

1990, the transport of said

cargo was suspended due to

a warning of an incoming

typhoon. On August 22, 1990,

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. The hole was then

patched with clay and

cement.

The barge was then towed toISLOFF terminal before it

finally headed towards the

consignee's 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 three

other barges.10

The next day, September 6,

1990, the towing bits of the

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6/24


Professor: Atty. Jocelyn Valenciabarge broke. It sank

completely, resulting in the

total loss of the remaining

cargo.

Private respondent, as

insurer, indemnified theconsignee for the lost cargo

and thus, as subrogee,

sought recovery from the

petitioner. Both the trial court

and appellate court ruled in

favor of private respondent.

ISSUE 1: Whether the

petitioner is a common

carrier; and,

HELD: Yes. 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,


public.

The Court disagrees with

petitioners contention that it

is not a common carrier but aprivate carrier. Allegedly, it

has no fixed and publicly

known route, maintains no

terminals, and issues no

tickets. It points out that it is

not obliged to carry

indiscriminately for any

person. It is not bound to

carry goods unless it

consents. In short, it does not

hold out its services to the

general public.

In De Guzman vs. Court of

Appeals, we held that the

definition ofcommon

carriers in Article 1732 of the

Civil Code makes no






only as an ancillary activity.

We also did not distinguishbetween 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. Further,

we ruled that 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 narrowsegment of the general

population.

In the case at bar, the

principal business of the

petitioner is that of lighterage

and drayage and it offers its

barges to the public for

carrying or transportinggoods by water for

compensation. Petitioner is

clearly a common carrier. We

therefore hold that 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 orissue tickets.

Issue 2: Assuming the


carrier, whether it exercised

extraordinary diligence in its

care and custody of the

consignee's cargo.

Held: No. Petitioner failed to

exercise extraordinary

diligence in its care and

custody of the consignee'sgoods.

Common carriers are bound

to observe extraordinary


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 or omission of theshipper 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.

In the case at bar, the bargecompletely 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 andafter the occurrence of the

typhoon to prevent or

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.

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 thetowing 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.

PhilAmGen vs. PKS Shipping

Co.

Facts:

Davao Union Marketing

Corporation (DUMC)

contracted the services of

PKS Shipping Company (PKS

Shipping) for the shipment of75,000 bags of cement worth

P3,375,000.00 to Tacloban

City. DUMC insured the goods

for its full value with

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 nineoclock, while Limar I was

being towed by respondents

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.

Philamgen paid DUMC the full

amount of the insurance.

Philamgen soughtreimbursement 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. It was

the contention of PKS

Shipping that it is not a

common carrier and is

therefore not liable as such

for the loss of the cargo.

Issue 1: Is PKS Shipping a

common carrier or a private

carrier?

Held: PKS is a common

carrier.

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, the person or corporation

providing such service could

very well be just a private

carrier. A typical case is thatof a charter party which

includes both the vessel and



7/24


Professor: Atty. Jocelyn Valenciaits 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

voyages and gets the controlof the vessel and its

crew. 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 thanjust a casual activity on its

part. 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.

Issue 2: Is PKS Shipping liable

for the loss of the cargo?

Held: No, it is not liable.

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,


goods, common carriers are

presumed to have been at

fault or to have acted

negligently, and the burden

of proving otherwise rests on

them. The provisions of

Article 1733, notwithstanding,

common carriers are exempt

from liability for loss,

destruction, or deteriorationof 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 thegoods or defects in the

packing or in the containers;

and

(5) Order or act of competent

public authority.

The appellate court ruled,

gathered from thetestimonies and sworn

marine protests of the

respective vessel masters

ofLimar I and MT Iron Eagle,

that there was no way by

which the barges or the

tugboats crew could have

prevented the sinking

ofLimar 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 knotsresulting in the entry of water

into the barges 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 ofLimar I and

should strengthen the factual

findings of the appellate

court.

(Note: this case mentionedDe Guzman vs. CA laying

down the prevailing doctrine.

Article 1732 of the Civil Code:

makes no distinction

between one





only as an ancillaryactivity

(in local idiom, as `a

sideline). carefully avoids

making any distinction

between a person or

enterprise offering

transportation service on


basis and one offering such

service on an occasional,


basis.

Article 1732 does not

distinguish between a carrier

offering its services to thegeneral public, i.e., the




business only from a narrow

segmentof the general

population.)

Caltex (Phils.) vs. Sulpicio

Lines

Facts:

On December 19, 1987,

motor tanker MT Vector left

Limay, Bataan, at about 8:00

p.m., enroute to Masbate,

loaded with 8,800 barrels of

petroleum products shipped

by petitioner Caltex. MT

Vector is a tramping motor

tanker owned and operatedby Vector Shipping

Corporation, engaged in the

business of transporting fuel

products such as gasoline,

kerosene, diesel and crude

oil. During that particular

voyage, the MT Vector carried

on board gasoline and other

oil products owned by Caltex

by virtue of a charter

contract between them. The

MV Doa Paz is a passenger

and cargo vessel owned andoperated by Sulpicio Lines,

Inc. It left the port of

Tacloban headed for Manila

on December 20, 1987, at

about 6:30 a.m., loaded with

1,493 passengers. At about

10:30 p.m. of December 20,

1987, the two vessels collided

in the open sea within the

vicinity of Dumali Point

between Marinduque and

Oriental Mindoro.

On March 22, 1988, the board

of marine inquiry in BMI Case

No. 653-87 after investigation

found that the MT Vector, its

registered operator Francisco

Soriano, and its owner and

actual operator Vector

Shipping Corporation, were at

fault and responsible for its

collision with MV Doa Paz.

On February 13, 1989,

Teresita Caezal and Sotera

E. Caezal (relatives of the

public school teacher who

died) filed with the RTC a

complaint for Damages

Arising from Breach of

Contract of Carriage against

Sulpicio Lines. Sulpicio, in

turn, filed a third party

complaint against Francisco

Soriano, Vector Shipping

Corporation and Caltex

(Philippines), Inc. alleging

that Caltex chartered MTVector with gross and evident

bad faith knowing fully well

that MT Vector was

improperly manned, ill-

equipped, unseaworthy and a

hazard to safe navigation; as

a result, it rammed against

MV Doa Paz in the open sea

setting MT Vectors highly

flammable cargo ablaze.

The RTC ruled that

only Sulpicio is liable for

damages. The CA modifiedthe ruling and included Caltex

as one of those liable. Hence,

this appeal by Caltex.

Legal Issue: Is the charterer

(Caltex) of a sea vessel liable

for damages resulting from a

collision between thechartered vessel (owned by

MT Vector) and a passenger

ship (Sulpicio)?

Held: NO. The charterer

has no liability for

damages under Philippine

Maritime laws. The

respective rights and duties

of a shipper and the carrier

depends not on whether the

carrier is public or private,

but on whether the contractof carriage is a bill of lading

or equivalent shipping

documents on the one hand,

or a charter party or similar

contract on the other. In the

case at bar, Petitioner and

Vector entered into a

contract of affreightment,

also known as a voyage

charter.

A charter party is a contract

by which an entire ship, orsome principal part thereof, is

let by the owner to another

person for a specified time or

use; a contract of

affreightment is one by which

the owner of a ship or other

vessel lets the whole or 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.

Time charter-

leased vessel is leased to the

charterer for a fixed period of

time

Voyage charter,

wherein the ship is leased for

a single voyage

Demise or bareboat

charter- the charterer mans

the vessel with his own

people and becomes, in

effect, the owner for thevoyage or service stipulated,

subject to liability for

damages caused by

negligence

MT Vector is a common

carrier as the charter

party agreement did not

convert the common

carrier into a private

carrier. It is only when the

charter includes both the

vessel and its crew, as in abareboat or demise that a

common carrier becomes



8/24


Professor: Atty. Jocelyn Valenciaprivate, at least insofar as the

particular voyage covering

the charter-party is

concerned.

Article

1732. Commoncarriers are persons,

corporations, firms or

associations engaged

in the business of

carrying or

transporting

passengers for

passengers or goods

or both, by land,

water, or air for

compensation,

offering their services

to the public.







only as an ancillaryactivity

(in local idiom, as a

sideline). Article 1732 also

carefully avoids making any


or enterprise offeringtransportation service on


basis and one offering such

services on a an occasional,


basis. Neither does Article

1732 distinguish between a

carrier offering its services to

the general public, i.e., the




business only from a

narrow segmentof the

general population.

The relationship between the

parties in this case is

governed by special

laws. Because of the implied

warranty of

seaworthiness, shippers of

goods, when transacting with

common carriers, are not

expected to inquire into thevessels seaworthiness,

genuineness of its licenses

and compliance with all

maritime laws. Thus, the

nature of the obligation of

Caltex demands ordinary

diligence like any other

shipper in shipping his

cargoes. Caltex and Vector

Shipping Corporation had

been doing business since

1985, or for about two years

before the tragic incidentoccurred in 1987. Past

services rendered showed no

reason for Caltex to observe

a higher degree of diligence.

Clearly, as a mere voyage

charterer, Caltex had the

right to presume that the ship

was seaworthy as even the

Philippine Coast Guard itselfwas convinced of its

seaworthiness.

Coastwise Lighterage

Corporation vs. CA

Facts:

Pag-asa Sales, Inc. entered

into a contract to transport

molasses from the province

of Negros to Manila withCoastwise Lighterage

Corporation (Coastwise for

brevity), using the latter's

dumb barges. The barges

were towed in tandem by the

tugboat MT Marica, which is

likewise owned by Coastwise.

Upon reaching Manila Bay,

while approaching Pier 18,

one of the barges, "Coastwise

9", struck an unknown

sunken object. The forward

buoyancy compartment wasdamaged and the molasses

at the cargo tanks were

contaminated and rendered

unfit for the use it was

intended. This prompted the

consignee, Pag-asa Sales, Inc.

to reject the shipment of

molasses as a total loss.

Thereafter, Pag-asa Sales,

Inc. filed a formal claim with

the insurer of its lost cargo,

herein private respondent,

Philippine General Insurance

Company (PhilGen, for short)

and against the carrier,

herein petitioner, Coastwise

Lighterage. PhilGen paid the

P700 thou (damages) then it

filed an action against

Coastwise (for recovery of the

P700T) claiming it was

subrogated to all the

contractual rights and claims

which the consignee may

have against the carrier,which is presumed to have

violated the contract of

carriage.

Issue 1: WON petitioner

Coastwise Lighterage was

transformed into a private

carrier, by virtue of the

contract of affreightment?

Held: NO.

Although a charter party maytransform a common carrier

into a private one, the same

however is not true in a

contract of affreightment.

Pag-asa Sales, Inc. only

leased three of petitioner's

vessels, in order to carry

cargo from one point to

another, but the possession,command and navigation of

the vessels remained with

petitioner Coastwise

Lighterage (What was

entered into was a contract of

affreightment). Coastwise

Lighterage, by the contract of

affreightment, was not

converted into a private

carrier, but remained a

common carrier and was still

liable as such. The law and

jurisprudence on commoncarriers both hold that the

mere proof of delivery of

goods in good order to a

carrier and the subsequent

arrival of the same goods at

the place of destination in

bad order makes for a prima

faciecase against the carrier.

The presumption of

negligence that attaches to

common carriers, once the

goods it transports are lost,

destroyed or deteriorated,applies to the petitioner. This

presumption, which is

overcome only by proof of the

exercise of extraordinary

diligence, remained

unrebutted in this case.

There was negligence on the

part of Coastwise (Jesus R.

Constantino, the patron of the

vessel "Coastwise 9"

admitted that he was not

licensed, in acc with Art 609

of Code of Commerce)

Issue 2: WON the insurer was

subrogated into the rights of

the consignee against the

carrier, upon payment by the

insurer of the value of the

consignee's goods lost while

on board one of the carrier's

vessels?

Held: YES

Article 2207 of the

Civil Code is explicit

on this point:

Art. 2207. If the

plaintiffs property has

been insured, and he

has received

indemnity from the

insurance company

for the injury or loss

arising out of the

wrong or breach ofcontract complained

of, the insurance

company shall be

subrogated to the

rights of the insured

against the

wrongdoer or the

person who violated

the contract. . . .

Payment by the insurer to the

assured operated as an

equitable assignment to the

former of all remedies which

the latter may have against

the third party whose

negligence or wrongful act

caused the loss. The right of

subrogation is not dependent

upon, nor does it grow out of,

any privity of contract or

upon written assignment ofclaim. It accrues simply upon

payment of the insurance

claim by the insurer.

Undoubtedly, upon payment

by respondent insurer

PhilGen of the amount of

P700,000.00 to Pag-asa

Sales, Inc., the consignee of

the cargo of molasses totally

damaged while being

transported by petitioner

Coastwise Lighterage, theformer was subrogated into

all the rights which Pag-asa

Sales, Inc. may have had

against the carrier, herein

petitioner Coastwise

Lighterage.

Planters Products Inc. vs. CA

Definition of terms:

Charter-party

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.

Two types:

(a) Contract of affreightment

- 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 ofthe payment of freight. It

involves the use of shipping

space on vessels leased by

the owner in part or as a

whole, to carry goods for

others. May either be:oTime charter -

the vessel is leased to the

charterer for a fixed period of

time.o Voyage

charter - the ship is leased for

a single voyage.(b) Charter by demise or

bareboat charter - the whole



9/24


Professor: Atty. Jocelyn Valenciavessel is let to the charterer

with a transfer to him of its

entire command and

possession and consequent

control over its navigation,

including the master and the

crew, who are his servants.In both cases, the charter-

party provides for the hire of

vessel only, either for a

determinate period of time or

for a single or consecutive

voyage, the shipowner to

supply the ship's stores, pay

for the wages of the master

and the crew, and defray the

expenses for the

maintenance of the ship.

Facts: Planters Products Inc.(PPI) purchased from

Mitsubishi International

Corporation of New York more

than 9,000 Metric Tons of

urea 46% fertilizer. Mitsubishi

shipped the fertilizers in bulk

aboard the cargo vessel M/V

Sun Plum owned by Kyosei

Kisen Kabushiki Kaisha

(KKKK) from Alaska, USA to

San Fernando, La Union,

Philippines.

Before the voyage, a time-

charter party on M/V Sun

Plum was entered into

between Mitsubishi as the

charterer/shipper and KKKK

as shipowner. Before loading

the fertilizer aboard the

vessel, four (4) of her holds

were all presumably

inspected by the charterer's

representative and found fit

to take a load of urea in bulk

pursuant to par. 16 of the

charter-party.

After the Urea fertilizer was

loaded in bulk by stevedores

hired by and under the

supervision of the Mitsubishi,

the steel hatches were closed

with heavy iron lids, covered

with three (3) layers of

tarpaulin, and then tied with

steel bonds. The hatches

remained closed and tightlysealed throughout the entire

voyage.

Upon the arrival of the cargo,

the steel pontoon hatches

were opened with the use of

the vessel's boom. PPI

unloaded the cargo from the

holds into its steelbodied

dump trucks which were

parked alongside the berth,

using metal scoops attached

to the ship, pursuant to theterms and conditions of the

charter-party. The hatches

remained open throughout

the duration of the discharge.

The port area was windy,

certain portions of the route

to the warehouse were sandy

and the weather wasvariable, raining occasionally

while the discharge was in

progress. PPIs warehouse

was made of corrugated

galvanized iron (GI) sheets,

with an opening at the front

where the dump trucks

entered and unloaded the

fertilizer on the warehouse

floor. Tarpaulins and GI

sheets were placed in-

between and alongside the

trucks to contain spillages ofthe fertilizer.

It took 11 days to finish the

unloading of the cargo. PPI

hired a private marine and

cargo surveyor who revealed

that there was shortage in

the cargo of more than 100

Metric Tons and that a

portion of the urea fertilizer

amounting to 18 Metric Tons

was contaminated with dirt.

These results were containedin a Certificate of

Shortage/Damaged Cargo

prepared by PPI.

PPI sent a claim letter to

Soriamont Steamship

Agencies (SSA), the resident

agent of the carrier, KKKK, for

P245,969.31 representing the

cost of the alleged shortage

in the goods shipped and the

diminution in value of that

portion said to have been

contaminated with dirt. SSA

explained that they were not

able to respond to the

consignee's claim for

payment because, according

to them, what they received

was just a request for

shortlanded certificate and

not a formal claim, and that

this "request" was denied by

them because they "had

nothing to do with thedischarge of the shipment."

So, PPI filed an action for

damages with the Court of

First Instance of Manila. The

defendant carrier argued that

the strict public policy

governing common carriers

does not apply to them

because they have become

private carriers by reason of

the provisions of the charter-

party.

Issue 1: Did KKKK become a

private carrier by reason of

the charter-party?

Held: No, it did not become a

private carrier.

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. 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 a single

transaction, not a part of the

general business or

occupation, although

involving the carriage of

goods for a fee, the person or

corporation offering such

service is a private carrier.

Article 1733 of the New Civil

Code mandates that common

carriers, by reason of the

nature of their business,

should observe extraordinary


the goods they carry. In the

case of private carriers,

however, the exercise of

ordinary diligence in the

carriage of goods will suffice.

Moreover, in the case of loss,


the goods, common carriers

are presumed to have been

at fault or to have acted

negligently, and the burden

of proving otherwise rests on

them. On the contrary, no

such presumption applies to

private carriers, for

whosoever alleges damage to

or deterioration of the goods

carried has the onus of

proving that the cause wasthe negligence of the carrier.

It is not disputed that

respondent carrier, in the

ordinary course of business,

operates as a common

carrier, transporting goods

indiscriminately for all

persons. When petitioner

chartered the vessel M/V

"Sun Plum", the ship captain,

its officers and compliment

were under the employ of theshipowner and therefore

continued to be under its

direct supervision and

control. Hardly then can we

charge the charterer, a

stranger to the crew and to

the ship, with the duty of

caring for his cargo when the

charterer did not have anycontrol of the means in doing

so. This is evident in the

present case considering that

the steering of the ship, the

manning of the decks, the

determination of the course

of the voyage and other

technical incidents of

maritime navigation were all

consigned to the officers and

crew who were screened,

chosen and hired by the

shipowner.

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 ship

only, as in the case of a time-

charter or voyage-charter. It

is only when the charter

includes both the vessel and

its crew, as in a bareboat ordemise that a common

carrier becomes private, at

least insofar as the particular

voyage covering the charter-

party is concerned.

Indubitably, a shipowner in a

time or voyage charter

retains possession and

control of the ship, although

her holds may, for the

moment, be the property of

the charterer.

Issue 2: Is KKKK liable for

damages?

Held: No, it is not liable.

In an action for recovery of

damages against a common

carrier on the goods shipped,

the shipper or consignee

should first prove the fact of

shipment and its consequent

loss or damage while thesame was in the possession,

actual or constructive, of the

carrier. Thereafter, the

burden of proof shifts to

respondent to prove that he

has exercised extraordinary

diligence required by law or

that the loss, damage or

deterioration of the cargo was

due to fortuitous event, or

some other circumstances

inconsistent with its liability.

To our mind, respondent

carrier has sufficiently



10/24


Professor: Atty. Jocelyn Valenciaovercome, by clear and

convincing proof, theprima

facie presumption of

negligence.

The master of the carrying

vessel, Captain Lee Tae Bo, inhis deposition taken on 19

April 1977 before the

Philippine Consul and Legal

Attache in the Philippine

Embassy in Tokyo, Japan,

testified that before the

fertilizer was loaded, the four

(4) hatches of the vessel

were cleaned, dried and

fumigated. After completing

the loading of the cargo in

bulk in the ship's holds, the

steel pontoon hatches wereclosed and sealed with iron

lids, then covered with three

(3) layers of serviceable

tarpaulins which were tied

with steel bonds. The hatches

remained close and tightly

sealed while the ship was in

transit as the weight of the

steel covers made it

impossible for a person to

open without the use of the

ship's boom.

It was also shown during the

trial that the hull of the vessel

was in good condition,

foreclosing the possibility of

spillage of the cargo into the

sea or seepage of water

inside the hull of the vessel.

When M/V "Sun Plum" docked

at its berthing place,

representatives of the

consignee boarded, and in

the presence of a

representative of the

shipowner, the foreman, the

stevedores, and a cargo

surveyor representing CSCI,

opened the hatches and

inspected the condition of the

hull of the vessel. The

stevedores unloaded the

cargo under the watchful

eyes of the shipmates who

were overseeing the whole

operation on rotation basis.

Verily, the presumption of

negligence on the part of the

respondent carrier has been

efficaciously overcome by the

showing of extraordinary zeal

and assiduity exercised by

the carrier in the care of the

cargo.

Issue 3: When should a

common carrier observe the

degree of diligence required

of it?

Held: The period during which

private respondent was to

observe the degree of

diligence required of it as a

public carrier began from the

time the cargo was

unconditionally placed in itscharge after the vessel's

holds were duly inspected

and passed scrutiny by the

shipper, up to and until the

vessel reached its destination

and its hull was reexamined

by the consignee, but prior to

unloading. This is clear from

the limitation clause agreed

upon by the parties in the

Addendum to the standard

"GENCON" time charter-party

which provided for an F.I.O.S.,meaning, that the loading,

stowing, trimming and

discharge of the cargo was to

be done by the charterer,

free from all risk and expense

to the carrier. Moreover, a

shipowner is liable for

damage to the cargo

resulting from improper

stowage only when the

stowing is done by

stevedores employed by him,

and therefore under hiscontrol and supervision, not

when the same is done by the

consignee or stevedores

under the employ of the

latter.

Schmitz Transport vs.

Transport Venture Inc.

FACTS:

On September 25, 1991,

SYTCO Pte Ltd. Singapore

shipped from the port of

Ilyichevsk, Russia on board

M/V "Alexander Saveliev" (a

vessel of Russian registry and

owned by Black Sea) 545 hot

rolled steel sheets in coil

weighing 6,992,450 metric

tons.

The cargoes, which were to

be discharged at the port of

Manila in favor of the

consignee, Little Giant SteelPipe Corporation (Little

Giant), were insured against

all risks with Industrial

Insurance Company Ltd.

(Industrial Insurance).

The vessel arrived at the port

of Manila on October 24,

1991 and the Philippine Ports

Authority (PPA) assigned it a

place of berth at the outside

breakwater at the Manila

South Harbor.

Schmitz Transport, whoseservices the consignee

engaged to secure the

requisite clearances, to

receive the cargoes from the

shipside, and to deliver them

to its (the consignees)

warehouse at Cainta, Rizal, in

turn engaged the services of

TVI to send a barge andtugboat at shipside.

On October 26, 1991, around

4:30 p.m., TVIs tugboat

"Lailani" towed the barge

"Erika V" to shipside.8

By 7:00 p.m. also of October

26, 1991, the tugboat, after

positioning the barge

alongside the vessel, left and

returned to the port

terminal.9 At 9:00 p.m.,

arrastre operator Ocean

Terminal Services Inc.commenced to unload 37 of

the 545 coils from the vessel

unto the barge.

By 12:30 a.m. of October 27,

1991 during which the

weather condition had

become inclement due to an

approaching storm, the

unloading unto the barge of

the 37 coils was

accomplished. No tugboat

pulled the barge back to the

pier, however.At around 5:30 a.m. of

October 27, 1991, due to

strong waves, the crew of the

barge abandoned it and

transferred to the vessel. The

barge pitched and rolled with

the waves and eventually

capsized, washing the 37

coils into the sea. At 7:00

a.m., a tugboat finally arrived

to pull the already empty and

damaged barge back to the

pier.

Earnest efforts on the part of

both the consignee Little

Giant and Industrial Insurance

to recover the lost cargoes

proved futile.

Little Giant thus filed a formal

claim against Industrial

Insurance which paid it the

amount of P5,246,113.11.

Little Giant thereupon

executed a subrogation

receipt in favor of IndustrialInsurance.

Industrial Insurance later filed

a complaint against Schmitz

Transport, TVI, and Black Sea

through its representative

Inchcape (the defendants)

before the RTC of Manila, for

the recovery of the amount it

paid to Little Giant plus

adjustment fees, attorneys

fees, and litigation expenses.

ISSUE 1: Whether the loss of

the cargoes was due to afortuitous event, independent

of any act of negligence on

the part of petitioner Black

Sea and TVI.

HELD: No. The loss of the

cargoes was not due to a

fortuitous event.

That no tugboat towed back

the barge to the pier after thecargoes were completely

loaded by 12:30 in the

morning is, however, a

material fact which the

appellate court failed to

properly consider and

appreciatethe proximate

cause of the loss of the

cargoes. Had the barge been

towed back promptly to the

pier, the deteriorating sea

conditions notwithstanding,

the loss could have beenavoided. But the barge was

left floating in open sea until

big waves set in at 5:30 a.m.,

causing it to sink along with

the cargoes. The loss thus

falls outside the "act of God

doctrine."

Issue 2: If there was

negligence, whether liability

for the loss may attach to

Black Sea, petitioner and TVI.

Held: Contrary to petitioners

insistence, this Court, as didthe appellate court, finds that


carrier. For it undertook to

transport the cargoes from

the shipside of "M/V

Alexander Saveliev" to the

consignees warehouse at

Cainta, Rizal. As the appellate

court put it, "as long as a

person or corporation holds

[itself] to the public for the

purpose of transporting

goods as [a] business, [it] is

already considered a

common carrier regardless if

[it] owns the vehicle to be

used or has to hire one." That


carrier, the testimony of its

own Vice-President and

General Manager Noel Aro

that part of the services it

offers to its clients as a

brokerage firm includes the

transportation of cargoesreflects so.

It has been settled that under

the given set of facts,

Schmitz Transport is a

customs broker and as such

customs broker, it may be

regarded as a common

carrier.

Article 1732 does not

distinguish between one



goods and one who does suchcarrying only as an ancillary

activity. The contention,

http://www.lawphil.net/judjuris/juri2005/apr2005/gr_150255_2005.html#fnt8http://www.lawphil.net/judjuris/juri2005/apr2005/gr_150255_2005.html#fnt8http://www.lawphil.net/judjuris/juri2005/apr2005/gr_150255_2005.html#fnt9http://www.lawphil.net/judjuris/juri2005/apr2005/gr_150255_2005.html#fnt9http://www.lawphil.net/judjuris/juri2005/apr2005/gr_150255_2005.html#fnt8http://www.lawphil.net/judjuris/juri2005/apr2005/gr_150255_2005.html#fnt9


11/24


Professor: Atty. Jocelyn Valenciatherefore, of petitioner 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 asrequired by law is bereft of

merit. It suffices that

petitioner undertakes to

deliver the goods for

pecuniary consideration.

Petitioner was the broker-

agent of Little Giant in

securing the release of the

cargoes. In effecting the

transportation of the cargoes

from the shipside and into

Little Giants warehouse,

however, petitioner wasdischarging its own personal

obligation under a contact of

carriage. Petitioner, which did

not have any barge or

tugboat, engaged the

services of TVI as handlerto

provide the barge and the

tugboat. In their Service

Contract,while Little Giant

was named as the consignee,

petitioner did not disclose

that it was acting on

commission and waschartering the vessel for Little

Giant.http://www.lawphil.net/j

udjuris/juri2005/apr2005/gr_1

50255_2005.html -

fnt50 Little Giant did not thus

automatically become a party

to the Service Contract and

was not, therefore, bound by

the terms and conditions

therein.

Not being a party to the

service contract, Little Giant

cannot directly sue TVI based

thereon but it can maintain a

cause of action for

negligence.

In the case ofTVI, while it

acted as a private carrier for

which it was under no duty to

observe extraordinary

diligence, it was still required

to observe ordinary diligence

to ensure the proper and

careful handling, care and

discharge of the carriedgoods. As can be seen from

the facts of the case, TVI has

not observed such diligence

required of it.

TVIs failure to promptly

provide a tugboat did not

only increase the risk that

might have been reasonably

anticipated during the

shipside operation, but

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