Coastwise Lighterage Corp. vs. CA (1995)Francisco, J.FACTS:Pag-asa Sales, Inc. entered into a contract to transport molasses from theprovince of Negros to Manila with Coastwise Lighterage Corporation(Coastwise for brevity), using the latter's dumb barges. The barges were towedin 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 buoyancycompartment was damaged, and water gushed in through a hole "two incheswide and twenty-two inches long." As a consequence, the molasses at thecargo tanks were contaminated and rendered unft for the use it wasintended. This prompted the consignee, Pag-asa Sales, Inc. to reject theshipment of molasses as a total loss. Thereafter, Pag-asa Sales, Inc. fled aformal claim with the insurer of its lost cargo, herein private respondent,Philippine General Insurance Company (PhilGen, for short) and against thecarrier, herein petitioner, Coastwise Lighterage. Coastwise Lighterage deniedthe claim and it was PhilGen which paid the consignee, Pag-asa Sales, Inc.,the amount of P700,000.00, representing the value of the damaged cargo ofmolasses.In turn, PhilGen then fled an action against Coastwise Lighterage before theRegional Trial Court of Manila, seeking to recover the amount of P700,000.00which it paid to Pag-asa Sales, Inc. for the latter's lost cargo. PhilGen nowclaims to be subrogated to all the contractual rights and claims which theconsignee may have against the carrier, which is presumed to have violatedthe contract of carriage.The RTC awarded the amount prayed for by PhilGen. On CoastwiseLighterage's appeal to the Court of Appeals, the award was afrmed.ISSUES: (1)Whether or not petitioner Coastwise Lighterage was transformed intoa private carrier, by virtue of the contract of afreightment which itentered into with the consignee, Pag-asa Sales, Inc.(2)Whether or not the insurer was subrogated into the rights of theconsignee against the carrier, upon payment by the insurer of thevalue of the consignee's goods lost while on board one of the carrier'svessels.HELD: (1) NO; (2) YESRATIO:(1) - The charter party contract is one of afreightment over the whole vessel,rather than a demise. As such, the liability of the shipowner for acts ornegligence of its captain and crew, would remain in the absence ofstipulation.- The distinction between the 2 kinds of charter parties (bareboat or demisevs. contract of afreighment):a. Under the demise or bareboat charter of the vessel, the charterer will generally be regarded as the owner for the voyage or service stipulated. The charterer mans the vessel with his own people and becomes the owner pro hac vice, subject to liability to others for damages caused by negligence. To create a demise, the owner of a vessel must completely and exclusively relinquish possession, command and navigation thereof to the charterer, anything short of such a complete transfer is a contract of afreightment (time or voyage charter party) or not a charter party at all.b. On the other hand a contract of afreightment is one in which the owner of the vessel leases part or all of its space to haul goods for others. It isa contract for special service to be rendered by the owner of the vessel and under such contract the general owner retains the possession, command andnavigation of the ship, the charterer or freighter merely having use of the space in the vessel in return for his payment of the charter hire.c.An owner who retains possession of the ship though the hold is the property of the charterer, remains liable as carrier and must answer for any breach of duty as to the care, loading and unloading of the cargo.- Although a charter party may transform a common carrier into a private one, the same however is not true in a contract of afreightment on account of the aforementioned distinctions between the two.- Petitioner admits that the contract it entered into with the consignee was one of afreightment.5 We agree. Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order to carry cargo from one point to another, but thepossession, command and navigation of the vessels remained with petitioner Coastwise Lighterage.- Pursuant therefore to the ruling in the aforecited Puromines case, CoastwiseLighterage, by the contract of afreightment, was not converted into a private carrier, but remained a common carrier and was still liable as such.(2)- It is explicitly provided in Art. 2207 of the Civil Code that the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who violated the contract.Lea Mer Industries vs. Malayan Insurance | Panganiban, J.;2005Keywords: [Contract of AFFREIGHTMENT]FACTS* Ilian Silica Mining entered into a contract of carriage with Lea MerIndustries for the shipment of silica sand valued at P565,000. It wasConsigned to Vulcan Industrial and Mining Corporation, the cargo was to betransported from Palawan to Manila.On October 25, 1991, the silica sandwas placed on board Judy VII, a barge leased by Lea Mer. During the voyage,the vessel sank, resulting in the loss of the cargo.* Malayan Insurance Co., Inc., as insurer, paid Vulcan the value ofthe lost cargo. Malayan demanded reimbursement from Lea Mer, whichrefused to comply.Consequently, Malayan instituted a Complaint for thecollection of P565,000.* Trial Court: dismissed the Complaint, upon fnding that the causeof the loss was a fortuitous event; the vessel had sunk because of the badweather condition brought about by Typhoon Trining.The court ruled thatpetitioner had no advance knowledge of the incoming typhoon, and that thevessel had been cleared by the Philippine Coast Guard to travel.* CA: REVERSED; held that the vessel was not seaworthy when itsailed for Manila.Thus, the loss of the cargo was occasioned by petitionersfault, not by a fortuitous event.ISSUES & ARGUMENTS(1) Whether petitioner is liable for the loss of the cargo.(2) Whether the loss of the cargo was due to a fortuitous event.HELD(1)YES. Lea Mer is liable to pay Malayan Insurance.(2)No. Lea Mer was negligent.RATIONALE I. * Common carriers are persons, corporations, frms or associations engagedin the business of carrying or transporting passengers or goods, or both,when this service is ofered to the public for compensation.* Petitioner is clearly a common carrier, because it ofers to the public itsbusiness of transporting goods through its vessels. Thus, the Court correctsthe trial courts fnding that petitioner became a private carrier when Vulcanchartered it.* Charter parties are classifed as contracts of demise (or bareboat) andafreightment, which are distinguished as follows: Under the demise or bareboat charter of thevessel, the charterer will generally be considered as owner forthe voyage or service stipulated.The charterer mans thevessel with his own people and becomes, in efect, the ownerpro hac vice (for this occasion; for this event; literally, forthis turn), subject to liability to others for damages causedby negligence.To create a demise, the owner of a vesselmust completely and exclusively relinquish possession,command and navigation thereof to the charterer; anythingshort of such a complete transfer is a contract ofafreightment (time or voyage charter party) or not a charterparty at all.* The distinction is signifcant, because a demise or bareboatcharter indicates a business undertaking that is private in character.Consequently, the rights and obligations of the parties to a contract of privatecarriage are governed principally by their stipulations, not by the law oncommon carriers. * The Contract in the present case was one of afreightment, asshown by the fact that it was petitioners crew that manned the tugboat M/VAyalit and controlled the barge Judy VII. Necessarily, petitioner was acommon carrier, and the pertinent law governs the present factualcircumstances.II. * As the common carrier, petitioner bore the burden of proving that it hadexercised extraordinary diligence to avoid the loss, or that the loss had beenoccasioned by a fortuitous event. It was not enough for Lea Mer to show thatthere was an unforeseen or unexpected occurrence.It had to show that itwas free from any fault -- a fact it miserably failed to prove:First, petitioner presented no evidence that it had attempted to minimize orprevent the loss before, during or after the alleged fortuitous event.Second, the alleged fortuitous event was not the sole and proximate cause ofthe loss.There is a preponderance of evidence that the barge was notseaworthy when it sailed for Manila. Respondent was able to prove that, inthe hull of the barge, there were holes that might have caused or aggravatedthe sinking.Loadstar Shipping vs. Pioneer Asia Insurance CorpFacts: Loadstar is the registered owner and operator of the vessel M/V Weasel. It entered into a voyage-charter with Northern Mindanao Transport Company for the carriage of 65,000 bags of cement from Iligan to Manila. The shipper was Iligan Cement, while the consignee in Manila was Market Developers. On June 24, 1984, 67,500 bags of cement were loaded on board M/VWeasel and stowed in the cargo holds for delivery to the consignee. The shipment was covered by petitioners Bill of lading. Prior to the voyage, the consignee, Market Developers insured the shipment of cement with respondent Pioneer Asia Insurance for 1.4M. A Marine Open Policy was issued. The vessel was ordered to be force aground upon leaving Iligan despite the good weather. Thus, the bags of cement were lost due to exposure to sea water. As a result it was not delivered to Market Developers, the consignee. Consequently the consignee demanded payment from Loadstar but tono avail. They subsequently recovered the indemnity from Pioneer and subrogated them to their rights. Pioneer then went after Loadstar to recover what they have paid to the consignee, arguing that the lost was due to the negligence of loadstar who is a common carrier and thus required to observe extra-ordinary diligence which they failed to do so. Loadstar argued that the lost was due to a fortuitous event and they therefore could not be held liable. Moreover, they contend that they are acting as a private carrier by virtue of the voyage chartered they contracted with Northern Mindanao. RTC ruled in favor of Pioneer. CA afrmedIssues:(1)Given the circumstances of this case, is petitioner a common carrier or a private carrier? And (2) in either case, did petitioner exercise therequired diligence i.e., the extraordinary diligence of a common carrier or the ordinary diligence of a private carrier?Held: NoRatio:*Article 1732. Common carriers are persons, corporations, frms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, ofering other services to the public.* In this case, Loadstar is a corporation engaged in the business of transporting cargo by water and for compensation, ofering its services indiscriminately to the public.* The voyage-charter agreement between loadstar and Northern Mindanao didnot convert the common carrier into a private carrier since the said charter is limited to the ship only and does not involve both the vessel and its crew.* As a common carrier, loadstar is required to observe extraordinary diligencein the vigilance over the goods it transports. When the goods placed in its care are lost, loadstar is presumed to have been at fault or to have acted negligently. Petitioner Loadstar has the burden of proving that it observed extraordinary diligence.* Loadstar failed to prove that they exercised the extraordinary diligence required of them. The ship took a shortcut despite the calm orthodox route thereby exposing the voyage to unexpected hazard. Petitioner has only itself to blame for its misjudgment.Cebu Salvage Corporation vs Philippine Home AssuranceCorp. | Corona, J. January 25, 2007| NATUREPetition for review on certiorari to review CAs decisionFACTS- Petitioner Cebu Salvage Corp. (as carrier) and Maria Cristina ChemicalsIndustries, Inc. [MCCII] (as charterer) entered into a voyage charter wherepetitioner was to load 800-1,100 metric tons of silica quartz on board M/TEspiritu Santo for transport and discharge from Negros Occidental toMisamis Oriental, to consignee Ferrochrome Phils., Inc.-However, the shipment never reached its destination because the vesselsank resulting in the total loss of the cargo.-MCII fled a claim for the loss of the shipment with its insurer, respondentPhilippine Home Assurance Corp.-Respondent paid the claim and was subrogated to the rights of MCCII, afterwhich it fled a case against petitioner for reimbursement of the amount itpaid MCCII.-TC and CA: ordered petitioner to pay respondentISSUES & ARGUMENTSWoN a carrier may be held liable for the loss of cargo resulting from the sinking of a ship it doesnt own? YESPetitioner argues the agreement was just a contract of hire where MCCII hired the vessel from its owner, ALS Timber. Since it wasnt the owner of the vessel, it didnt have control and supervision over it and its crew. Thus, it shouldnt be held liable.RATIONALE1. Petitioner and MCCII entered into a voyage charter, a.k.a contract of afreightment where the ship was leased for a single voyage for the conveyance of the goods, in consideration of the payment of freight. Under a voyage charter, the shipowner retains possession, command and navigation of the ship, the charterer/freighter just has the use of the space in the vessel in return for his payment of freight. An owner who retains possession of the ship remains liable as carrier and must answer for loss or non-delivery of the goods received for transportation. 2. The agreement parties signed was a contract of carriage under which thepetitioner was a common carrier. From the nature of their business and reasons of public policy, common carriers are bound to observe extraordinary diligence over the goods they transport according to the circumstances of each case. In case of loss of the goods, the common carriers are responsible, unless they can prove the causes under Art. 1734 CC or that they observed extraordinary diligence.3. In this case, Petitioner was the one which contracted with MCCII for the transport of the cargo. It had control over what vessel it would use. The fact that it did not own the vessel it decided to use to consummate the contract of carriage didnt negate its character and duties as a common carrier. The bill of lading issued by ALS was just a receipt to evidence the fact that the goods have been received for transportation. It is true that a bill of lading may serve as the contract of carriage between the parties but it cannot prevail over the express provision of the voyage charter.The voyage charter stipulated that cargo insurance was for the charterers account, accdg to petitioner. This just means that the charterer would have the goods insured. It couldnt exculpate the carrierfrom liability for the breach of its contract of carriage.MCCII never dealt with ALS and yet petitioner insists that MCCII should sue ALS for reimbursement for its loss. To permit a common carrier to escape its responsibility for the goods it agreed to transport would derogate from the carriers duty of extraordinary diligence.