TRANSPORTATION LAW Case Digests (Sunday Class 3PM 5PM)

Common Carriers

De Guzman vs. CA, G.R. No. L-47822, December 22, 1988 Alvarado / Ambrosio

First Philippine Industrial Corp. vs. CA, G.R. No. 125948, December 29, 1998

Calvo vs. UCPB General Insurance, G.R. 148496, March 19, 2002

Sanchez Brokerage vs. CA, G.R. No. 147079, December 21, 2004

Schmitz Transport & Brokerage vs. Transport Venture, G.R. No.150255, April 22, 2005

Philippine Charter Insurance vs. Unknown Owner of the Vessel, G.R. No. 161833, July 8, 2005
Montes/Navarroza

Lea Mer Industries vs. Malayan Insurance, G.R. No.161745, September 30, 2005 Pagente / Ramirez

Cebu Salvage vs. Philippine Home Assurance, G.R. No. 150403, January 25, 2007 Ramos / Rasing

Spouses Cruz vs. Sun Holidays, Inc., G.R. No. 186312, June 29, 2010 Reales/Rey

National Steel Corporation vs. CA, 283 SCRA 45

Loadstar Shipping Co. vs. CA, 315 SCRA 339 UY / AGUILON

Charter Parties

Planters Producers vs. CA, 226 SCRA 476 (1993)- BARROGA / BELARMINO

Coastwise Lighterage Corporation vs. Court of Appeals, G.R. No. 114167, July 12, 1995

Valenzuela Hardwood and Industrial Supply, Inc. vs. Court of Appeals, 274 SCRA 642 , June 30, 1997

Caltex (Philippines), Inc. vs. Sulpicio Lines, Inc., 315 SCRA 709, September 30, 1999

Breach of contract of carriage-vigilance over goods

Belgian Overseas Chartering and Shipping N.V. vs. Philippine First Insurance Co., Inc., G.R. No. 143133, June
05, 2002 GEMANIL / IGMEN

FGU Insurance vs. CA, G.R. No. 137775, March 31, 2005 JUAN / LOPEZ

Sulpicio Lines, Inc. vs. First Lepanto-Taisho Insurance, G.R. No. 140349, June 29, 2005

Delsan Transport Lines vs. American Home Assurance, G.R. 149019, August 15, 2006

Phil. Am. General Insurance vs. MCG Marine Services, 378 SCRA 650

Regional Container vs. Netherland Insurance, 598 SCRA 304

Mindanao Terminal v. Phoenix Assurance, 587 SCRA 429

1. De Guzman vs. CA, G.R. No. L-47822, December 22, 1988 Alvarado / Ambrosio

2. First Philippine Industrial Corp. vs. CA, G.R. No. 125948, December 29, 1998
Facts:
Petitioner is a grantee of a pipeline concession under Republic Act No. 387. Sometime in January 1995, petitioner applied
for mayors permit in Batangas. However, the Treasurer required petitioner to pay a local tax based on gross receipts
amounting to P956,076.04. In order not to hamper its operations, petitioner paid the taxes for the first quarter of 1993
amounting to P239,019.01 under protest. On January 20, 1994, petitioner filed a letter-protest to the City Treasurer,
claiming that it is exempt from local tax since it is engaged in transportation business. The respondent City Treasurer
denied the protest, thus, petitioner filed a complaint before the Regional Trial Court of Batangas for tax refund.
Respondents assert that pipelines are not included in the term common carrier which refers solely to ordinary carriers or
motor vehicles. The trial court dismissed the complaint, and such was affirmed by the Court of Appeals.
Issue:
Whether a pipeline business is included in the term common carrier so as to entitle the petitioner to the exemption
Held:
Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their
services to the public."
The test for determining whether a party is a common carrier of goods is:
(1) He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out
as ready to engage in the transportation of goods for person generally as a business and not as a casual occupation;
(2) He must undertake to carry goods of the kind to which his business is confined;
(3) He must undertake to carry by the method by which his business is conducted and over his established roads; and
(4) The transportation must be for hire.
Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is engaged in
the business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to
carry for all persons indifferently, that is, to all persons who choose to employ its services, and transports the goods by
land and for compensation. The fact that petitioner has a limited clientele does not exclude it from the definition of a
common carrier

3. Calvo vs. UCPB General Insurance, G.R. 148496, March 19, 2002
FACTS:
Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI), a sole proprietorship
customs broker. Petitioner entered into a contract with San Miguel Corporation (SMC) for the transfer of 114 reels of semichemical fluting paper and 124 reels of kraft liner board from the Port Area in Manila to SMCs warehouse in Ermita,
Manila. The cargo was insured by respondent UCPB General Insurance Co., Inc.
On July 14, 1990, the shipments 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 operator and delivered it to SMCs warehouse. On
July 25, 1990, the goods were inspected by Marine Cargo Surveyors, who found that 15 reels of the semi-chemical fluting
paper were wet/stained/torn and 3 reels of kraft liner board were likewise torn. The damage was placed at P93, 112.00.
SMC collected payment from respondent UCPB under its insurance contract. In turn, respondent, as subrogee of SMC,
brought suit against petitioner in the Regional Trial Court of Makati City, which, on December 20, 1995, rendered judgment

finding petitioner liable to respondent for the damage to the shipment. The decision was affirmed by the Court of Appeals
on appeal.
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 carrier because, as a customs broker and warehouseman, she does not indiscriminately hold her services out to
the public but only offers the same to select parties with whom she may contract in the conduct of her business. Hence,
she should not be held liable and is not bound to exercise extra ordinary diligence as required to that of a common carrier.
In addition, petitioner claims that the Marine Cargo Surveyor 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 immediately delivered the cargo to SMCs
warehouse which is a mere thirty-minute drive from the Port Area where. Thus, the damage to the cargo could not have
taken place while these were in her custody.
Contrary to petitioners assertion, the Survey Report of the Marine Cargo Surveyors indicates that when 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 the arrastre operator, they did so without exception or
protest either with regard to the condition of container vans or their contents.
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 carrier because, as a customs broker and warehouseman, she does not indiscriminately hold her services out to
the public but only offers the same to select parties with whom she may contract in the conduct of her business.
ISSUE:
Whether or not the petitioner is a common carrier or private carrier?
HELD:
The contention has no merit. The Court affirmed the decision of CA. In a similar case, the Court dismissed a similar
contention and held the party to be a common carrier. Citing the Civil Code thus:
The Civil Code defines common carriers in the following terms:
Article1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the carrying of persons or goods
or both, and one who does such carrying only as an ancillary activity. Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering
such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the general public,i.e., the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We think that Article 1732 deliberately refrained from
making such distinctions.
Furthermore, pursuant to Article 1731, Public Service Act (Commonwealth Act No. 1416, as amended) 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 control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general
business purposes, any common carrier x x x
There is greater reason for holding petitioner to be a common carrier because the transportation of goods is an integral
part of her business. To uphold 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.
About 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 exercised due care in the handling thereof.Petitioner failed to do this. In this case, petitioner accepted the cargo

without exception despite the apparent defects in some of the container vans. Hence, for failure of petitioner to prove that
she exercised extraordinary diligence in the carriage of goods in this case or that she is exempt from liability, the
presumption of negligence as provided under Art. 1735 of the Civil Code holds.

4. Sanchez Brokerage vs. CA, G.R. No. 147079, December 21, 2004
Facts:
On July 8, 1992, Wyeth-Pharma GMBH shipped on board an aircraft of KLM Royal Dutch Airlines at Dusseldorf, Germany
oral contraceptives consisting of 86,800 Blisters Femenal tablets, 14,000 Blisters Nordiol tablets and 42,000 Blisters
Trinordiol tablets for delivery to Manila in favor of the consignee, Wyeth-Suaco Laboratories, Inc. The Femenal tablets
were placed in 124 cartons and the Nordiol tablets were placed in 20 cartons which were packed together in one (1) LD3
aluminum container, while the Trinordial tablets were packed in two pallets, each of which contained 30 cartons. WyethSuaco insured the shipment against all risks with FGU Insurance which issued Marine Risk Note No. 4995 pursuant to
Marine Open Policy No. 138. Upon arrival of the shipment on July 11, 1992 at the Ninoy Aquino International Airport
(NAIA), it was discharged "without exception" and delivered to the warehouse of the Philippine Skylanders, Inc. (PSI)
located also at the NAIA for safekeeping. In order to secure the release of the cargoes from the PSI and the Bureau of
Customs, Wyeth-Suaco engaged the services of Sanchez Brokerage. As its customs broker, Sanchez Brokerage
calculates and pays the customs duties, taxes and storage fees for the cargo and thereafter delivers it to Wyeth-Suaco.
On July 29, 1992, Mitzi Morales and Ernesto Mendoza, representatives of Sanchez Brokerage, paid PSI storage fee
amounting to P8,572.35 a receipt for which, Official Receipt No. 016992, was issued. On the receipt, another
representative of Sanchez Brokerage, M. Sison, acknowledged that he received the cargoes consisting of three pieces in
good condition. Wyeth-Suaco being a regular importer, the customs examiner did not inspect the cargoes which were
thereupon stripped from the aluminum containers and loaded inside two transport vehicles hired by Sanchez Brokerage.
Among those who witnessed the release of the cargoes from the PSI warehouse were Ruben Alonso and Tony Akas.
Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon Laboratories Inc. in Antipolo City for quality
control check. On July 31, 1992, Ronnie Likas, a representative of Wyeth-Suaco, acknowledged the delivery of the
cargoes by affixing his signature on the delivery receipt. Upon inspection, however, he, together with Ruben Alonzo of
Elite Surveyors, discovered that 44 cartons containing Femenal and Nordiol tablets were in bad order. He thus placed a
note above his signature on the delivery receipt stating that 44 cartons of oral contraceptives were in bad order. The
remaining 160 cartons of oral contraceptives were accepted as complete and in good order. The Elite Surveyors later
issued Certificate No. CS-0731-1538/92 whereon it was indicated that prior to the loading of the cargoes to the brokers
trucks at the NAIA, they were inspected and found to be in "apparent good condition." Wyeth-Suaco later demanded, by
letter of August 25,1992, from Sanchez Brokerage the payment of P191,384.25 representing the value of its loss arising
from the damaged tablets. As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco filed an insurance claim
against FGU Insurance which paid Wyeth-Suaco the amount of P181,431.49 in settlement of its claim.
Wyeth-Suaco thus issued Subrogation Receipt in favor of FGU Insurance.
Issue:
Whether or not Sanchez Brokerage is liable for the damaged goods.
Held:
Yes. Article 1732 of the Civil Code prvides:
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public.
Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez Brokerage, himself testified that the services the
firm offers include the delivery of goods to the warehouse of the consignee or importer.
Article 1732 does not distinguish between one whose principal business activity is the carrying of goods and one who
does such carrying only as an ancillary activity. In this light, petitioner as a common carrier is mandated to observe, under
Article 1733 of the Civil Code, extraordinary diligence in the vigilance over the goods it transports according to all the
circumstances of each case. In the event that the goods are lost, destroyed or deteriorated, it is presumed to have been at
fault or to have acted negligently, unless it proves that it observed extraordinary diligence.

It was established that petitioner received the cargoes from the PSI warehouse in NAIA in good order and condition; and
that upon delivery by petitioner to Hizon Laboratories Inc., some of the cargoes were found to be in bad order, as noted in
the Delivery Receipt issued by petitioner, and as indicated in the Survey Report of Elite Surveyors and the Destruction
Report of Hizon Laboratories, Inc. In an attempt to free itself from responsibility for the damage to the goods, petitioner
posits that they were damaged due to the fault or negligence of the shipper for failing to properly pack them and to the
inherent characteristics of the goods; and that it should not be faulted for following the instructions of Calicdan of WyethSuaco to proceed with the delivery despite information conveyed to the latter that some of the cartons, on examination
outside the PSI warehouse, were found to be wet.
While paragraph No. 4 of Article 1734 of the Civil Code exempts a common carrier from liability if the loss or damage is
due to the character of the goods or defects in the packing or in the containers, the rule is that if the improper packing is
known to the carrier or his employees or is apparent upon ordinary observation, but he nevertheless accepts the same
without protest or exception notwithstanding such condition, he is not relieved of liability for the resulting damage. if
indeed petitioners employees only examined the cargoes outside the PSI warehouse and found some to be wet, they
would certainly have gone back to PSI, showed to the warehouseman the damage, and demanded then and there for Bad
Order documents or a certification confirming the damage. Or, petitioner would have presented, as witness, the
employees of the PSI from whom Morales and Domingo took delivery of the cargo to prove that, indeed, part of the
cargoes was already damaged when the container was allegedly opened outside the warehouse. Since petitioner
received all the cargoes in good order and condition at the time they were turned over by the PSI warehouseman, and
upon their delivery to Hizon Laboratories, Inc. a portion thereof was found to be in bad order, it was incumbent on
petitioner to prove that it exercised extraordinary diligence in the carriage of the goods. It did not, however. Hence, its
presumed negligence under Article 1735 of the Civil Code remains unrebutted.

5. Schmitz Transport & Brokerage vs. Transport Venture, G.R. No.150255, April 22, 2005
Facts:
Consignee, Little Giant Steel Pipe Corporation (Little Giant) was to receive 545 hot rolled steel sheets on board of M/V
Alexander Saveliev ( Russian vessel and owned by Black Sea) from port of IIyichevsk, Russia. The Cargo was insured by
Industrial Insurance Company (Industrial). The vessel arrived on October 24, 1991. The services of Schmitz Transport
were engaged to secure clearances, to receive the cargoes and to deliver them to Little Giants warehouse. Schmitz in
turn engaged the services of Transport Venture Inc. (TVI) to send a barge and tugboat at the shipside.
On October 26, 1991, around 4:30 pm, TVIs tugboat towed a barge to shipside and at 9pm of the same date, arrastre
operator Ocean terminal Services commenced to unload 37 of the 545 coils from the vessel unto the barge. On October
27, 1991 the unloading of the 37 coils unto the barge was accomplished but due to strong waves, the crew of the barge
abandoned it. As a result, the barge pitched and rolled over and eventually capsized, washing the 37 coils into the sea.
Little giant then filed a formal claim against Industrial Insurance which paid 5,246,113.11 Little Giant thereupon executed a
subrogation receipt in favour of Industrial Insurance. The latter, in turn, filed a complaint against Schmitz Transport, TVI,
and Black Sea for the recovery of the amount paid. It faulted the defendants for undertaking to unload the cargoes despite
the occurrence of a typhoon.
RTC rendered decision against Schmitz and CA affirmed the same in toto.
Issue:
1. Whether or not the loss of the cargoes was due to a fortuitous event, independent of any act of negligence on the part
Schmitz, Black Sea and TVI. 2. If there was negligence, whether liability for the loss may attach to Schmitz, Black Sea and
TVI.
Held:
1. No.

ART. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the
nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not
be foreseen, or which though foreseen, were inevitable.
The principle embodied in the act of God doctrine strictly requires that the act must be occasioned solely by the violence
of nature. Human intervention is to be excluded from creating or entering into the cause of the mischief. When the effect is
found to be in part the result of the participation of man, whether due to his active intervention or neglect or failure to act,
the whole occurrence is then humanized and removed from the rules applicable to the acts of God.
In the case at bar, no tugboat towed back the barge to the pier after the cargoes were completely loaded by 12:30 in the
morning is, however, a material fact which the appellate court failed to properly consider and appreciate the 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 been avoided. 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."
2. Only Schmitz and TVI are liable
Schmitz is considered a common carrier. Art. 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public. Article 1732 does not distinguish between one whose principal business activity is the
carrying of goods and one who does such carrying only as an ancillary activity. The contention, therefore, of 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 as required by law is bereft of merit. It suffices that petitioner undertakes to deliver the goods
for pecuniary consideration.
In the case of TVI, 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
carried goods. If the law or contract does not state the diligence which is to be observed in the performance, that which is
expected of a good father of a family shall be required.
TVIs failure to promptly provide a tugboat did not only increase the risk that might have been reasonably anticipated
during the shipside operation, but was the proximate cause of the loss. A man of ordinary prudence would not leave a
heavily loaded barge floating for a considerable number of hours, at such a precarious time, and in the open sea, knowing
that the barge does not have any power of its own and is totally defenseless from the ravages of the sea. That it was night
time and, therefore, the members of the crew of a tugboat would be charging overtime pay did not excuse TVI from calling
for one such tugboat.
As for Black Sea, its duty as a common carrier extended only from the time the goods were surrendered or unconditionally
placed in its possession and received for transportation until they were delivered actually or constructively to consignee
Little Giant. Parties to a contract of carriage may, however, agree upon a definition of delivery that extends the services
rendered by the carrier. In the case at bar, Bill of Lading No. 2 covering the shipment provides that delivery be made "to
the port of discharge or so near thereto as she may safely get, always afloat."59 The delivery of the goods to the consignee
was not from "pier to pier" but from the shipside of "M/V Alexander Saveliev" and into barges, for which reason the
consignee contracted the services of petitioner. Since Black Sea had constructively delivered the cargoes to Little Giant,
through petitioner, it had discharged its duty. In fine, no liability may thus attach to Black Sea.

6. Philippine Charter Insurance vs. Unknown Owner of the Vessel, G.R. No. 161833, July 8, 2005
Montes/Navarroza
FACTS:
Petitioner Philippine Charter Insurance Corporation (PCIC) is the insurer of a shipment on board the vessel M/V National
Honor, represented in the Philippines by its agent, National Shipping Corporation of the Philippines (NSCP).
The M/V National Honor arrived at the Manila International Container Terminal (MICT). The International Container
Terminal Services, Incorporated (ICTSI) was furnished with a copy of the crate cargo list and bill of lading, and it knew the

contents of the crate. The following day, the vessel started discharging its cargoes using its winch crane. The crane was
operated by Olegario Balsa, a winchman from the ICTSI, exclusive arrastre operator of MICT.
Denasto Dauz, Jr., the checker-inspector of the NSCP, along with the crew and the surveyor of the ICTSI, conducted an
inspection of the cargo. They inspected the hatches, checked the cargo and found it in apparent good condition. Claudio
Cansino, the stevedore of the ICTSI, placed two sling cables on each end of Crate No. 1. No sling cable was fastened on
the mid-portion of the crate. In Dauzs experience, this was a normal procedure. As the crate was being hoisted from the
vessels hatch, the mid-portion of the wooden flooring suddenly snapped in the air, about five feet high from the vessels
twin deck, sending all its contents crashing down hard, resulting in extensive damage to the shipment.
PCIC paid the damage, and as subrogee, filed a case against M/V National Honor, NSCP and ICTSI. Both RTC and CA
dismissed the complaint.
ISSUE:
Whether or not the presumption of negligence is applicable in the instant case.
HELD:
No.
We agree with the contention of the petitioner that common carriers, from the nature of their business and for reasons of
public policy, are mandated to observe extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case. he Court has defined extraordinary
diligence in the vigilance over the goods as follows:
The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know
and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for sale, carriage
and delivery. It requires common carriers to render service with the greatest skill and foresight and to use all reasonable
means to ascertain the nature and characteristic of goods tendered for shipment, and to exercise due care in the handling
and stowage, including such methods as their nature requires.
The common carriers duty to observe the requisite diligence in the shipment of goods lasts from the time the articles are
surrendered to or unconditionally placed in the possession of, and received by, the carrier for transportation until delivered
to, or until the lapse of a reasonable time for their acceptance, by the person entitled to receive them.] >When the goods
shipped are either lost or arrive in damaged condition, a presumption arises against the carrier of its failure to observe that
diligence, and there need not be an express finding of negligence to hold it liable. 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.
However, under Article 1734 of the New Civil Code, the presumption of negligence does not apply to any of the following
causes:
1. Flood, storm, earthquake, lightning or other natural disaster or calamity;
2. Act of the public enemy in war, whether international or civil;
3. Act or omission of the shipper or owner of the goods;
4. The character of the goods or defects in the packing or in the containers;
5. Order or act of competent public authority.
It bears stressing that the enumeration in Article 1734 of the New Civil Code which exempts the common carrier for the
loss or damage to the cargo is a closed list. To exculpate itself from liability for the loss/damage to the cargo under any of
the causes, the common carrier is burdened to prove any of the aforecited causes claimed by it by a preponderance of
evidence. If the carrier succeeds, the burden of evidence is shifted to the shipper to prove that the carrier is negligent.
Defect is the want or absence of something necessary for completeness or perfection; a lack or absence of something
essential to completeness; a deficiency in something essential to the proper use for the purpose for which a thing is to be
used. On the other hand, inferior means of poor quality, mediocre, or second rate. A thing may be of inferior quality but not
necessarily defective. In other words, defectiveness is not synonymous with inferiority.
xxx

In the present case, the trial court declared that based on the record, the loss of the shipment was caused by the
negligence of the petitioner as the shipper:
The same may be said with respect to defendant ICTSI. The breakage and collapse of Crate No. 1 and the total
destruction of its contents were not imputable to any fault or negligence on the part of said defendant in handling the
unloading of the cargoes from the carrying vessel, but was due solely to the inherent defect and weakness of the
materials used in the fabrication of said crate.
The crate should have three solid and strong wooden batten placed side by side underneath or on the flooring of the crate
to support the weight of its contents

7. Lea Mer Industries vs. Malayan Insurance, G.R. No.161745, September 30, 2005 Pagente / Ramirez

8. Cebu Salvage vs. Philippine Home Assurance, G.R. No. 150403, January 25, 2007
FACTS:
Petitioner Cebu Salvage Corp (as carrier) and Maria Cristina Chemicals Industries, Inc. (MCCII) (as charter) entered into
a voyage charter where petitioner was to load 800-1,100 metric tons of silica quartz on board M/T Espiritu Santo for
transport and discharge from Negros Occidental to Misamis Oriental, to consignee Ferrochrome Phils., Inc. However, the
shipment never reached its destination because the vessel sank resulting in the total loss of the cargo .MCCII filed a claim
for the loss of the shipment with its insurer, respondent Philippine Home Assurance Corp. Respondent paid the claim and
was subrogated to the rights of MCCII, after which it filed a case against petitioner for reimbursement of the amount it paid
to MCCII. The RTC and the CA ordered petitioner to pay respondent.
ISSUE:
Whether or not the carrier may be held liable for the loss of the cargo resulting from the sinking of a ship it doesnt own.
Ruling:
Yes. Petitioner 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. Petitioner and MCCII entered into a voyage charter, a.k.a contract of affreightment 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
ship owner 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 retain possession of the ship remains liable a carrier and
must answer for loss or non-delivery of the goods received for transportation. The agreement parties signed was a
contract of carriage under which the petitioner 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 or that they can observed extraordinary diligence. 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 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 common carriers.

9. Spouses Cruz vs. Sun Holidays, Inc., G.R. No. 186312, June 29, 2010
Facts:
The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000 was by virtue of a tour
package-contract with respondent that included transportation to and from the Resort and the point of departure in
Batangas.

On September 11, 2000, as it was still windy, the resort guests including Ruelito and his wife trekked to the other side of
the Coco Beach mountain that was sheltered from the wind where they boarded M/B Coco Beach III, which was to ferry
them to Batangas.
Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and into the open seas, the
rain and wind got stronger, causing the boat to tilt from side to side and the captain to step forward to the front, leaving the
wheel to one of the crew members.
The waves got more unwieldy. After getting hit by two big waves which came one after the other, M/B Coco Beach III
capsized putting all passengers underwater.
The passengers, who had put on their life jackets, struggled to get out of the boat. Upon seeing the captain, Matute and
the other passengers who reached the surface asked him what they could do to save the people who were still trapped
under the boat. The captain replied "Iligtas niyo na lang ang sarili niyo" (Just save yourselves).
Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto Galera passed by the
capsized M/B Coco Beach III. Boarded on those two boats were 22 persons, consisting of 18 passengers and four crew
members, who were brought to Pisa Island. Eight passengers, including petitioners son (Ruelito) and his wife, died during
the incident.
Issue:
Whether or not Sun Holidays is liable as a common carrier
Held:
Yes. The transportation being offered by Sun Holidays is considered a common carrier.
Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the carrying of persons or goods
or both, and one who does such carrying only as an ancillary activity (in local idiom, as "a sideline"). Article 1732 also
carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and
one who offers services or solicits business only from a narrow segment of the general population. We think that Article
1733 deliberately refrained from making such distinctions.
Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main business as to be properly
considered ancillary thereto. The constancy of respondents ferry services in its resort operations is underscored by its
having its own Coco Beach boats. And the tour packages it offers, which include the ferry services, may be availed of by
anyone who can afford to pay the same. These services are thus available to the public.
That respondent does not charge a separate fee or fare for its ferry services is of no moment. It would be imprudent to
suppose that it provides said services at a loss. The Court is aware of the practice of beach resort operators offering tour
packages to factor the transportation fee in arriving at the tour package price. That guests who opt not to avail of
respondents ferry services pay the same amount is likewise inconsequential. These guests may only be deemed to have
overpaid.
When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed that the common carrier is at
fault or negligent. In fact, there is even no need for the court to make an express finding of fault or negligence on the part
of the common carrier. This statutory presumption may only be overcome by evidence that the carrier exercised
extraordinary diligence.
The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical cyclone warnings for shipping on
September 10 and 11, 2000 advising of tropical depressions in Northern Luzon which would also affect the province of

Mindoro. By the testimony of Dr. Frisco Nilo, supervising weather specialist of PAGASA, squalls are to be expected under
such weather condition.
A very cautious person exercising the utmost diligence would thus not brave such stormy weather and put other peoples
lives at risk. The extraordinary diligence required of common carriers demands that they take care of the goods or lives
entrusted to their hands as if they were their own. This respondent failed to do.
Respondents insistence that the incident was caused by a fortuitous event does not impress either.
The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected occurrence, or the failure of the
debtors to comply with their obligations, must have been independent of human will; (b) the event that constituted the
caso fortuito must have been impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have
been such as to render it impossible for the debtors to fulfill their obligation in a normal manner; and (d) the obligor must
have been free from any participation in the aggravation of the resulting injury to the creditor.
To fully free a common carrier from any liability, the fortuitous event must have been the proximate and only cause of the
loss. And it should have exercised due diligence to prevent or minimize the loss before, during and after the occurrence of
the fortuitous event.
10. National Steel Corporation vs. CA, 283 SCRA 45
FACTS:
The cases under consideration are two separate petitions for review filed by National Steel Corporation (NSC) and
Vlasons Shipping Inc. (VSI), both assailing the decision of the Court of Appeals. The records of the case reveal that NSC
hired MV Vlasons I, a private vessel owned by VSI. They entered into a contract of affreightment or contract of voyage
charter hire wherein the contract states that NSC hired VSI's vessel to make one voyage to load steel products at Iligan
City and discharge them at North Harbor, Manila. Thereafter, in accordance with the voyage charter hire, NSC's shipment
of 1,677 skids of tinplates and 92 packages of hot rolled sheets were loaded to MV Vlasons I for carriage to Manila. The
vessel arrived safely at North Harbor, Manila but upon opening the three hatches containing the shipment, nearly all the
skids of tinplates and hot rolled sheets were allegedly found to be wet and rusty. On the basis of this incident, NSC filed a
complaint against VSI for damages due to the downgrading of the damaged tinplates in the amount of P941,145.18. After
trial on the merits, the court a quo rendered judgment dismissing the complaint and ordering NSC to pay VSI on the
counterclaim prayed for by the latter. NSC seasonably filed an appeal to the Court of Appeals, but the said court just
modified the appealed decision by reducing the award of demurrage and deleting the award of attorney's fees and
expenses of litigation. Both parties filed their separate motions for reconsideration, but the appellate court denied both
motions. Hence, this petition.
ISSUE:
Whether VSI, in carrying passengers or goods only for those it chose under a special contract of Charter party, is a private
carrier?
HELD:
The Supreme Court affirms the assailed decision of the Court of Appeals, except in respect with the demurrage. It is
undisputed that VSI did not offer its services to the general public. As correctly concluded by the Court of Appeals, MV
Vlasons I was not a common but a private carrier. Verily, the extent of VSI's responsibility and liability over NSC's cargo
are determined primarily by the stipulations in the contract of carriage or charter party and the Code of Commerce. In the
instant case, the burden of proof lies on the part of NSC and not the VSI. Additionally, the Court ruled that the since the
problems raised by NSC were all factual issues already threshed out and decided by the trial court and subsequently
affirmed by the Court of Appeals, the factual findings of both courts are binding on this Court. However, the Court
disagrees with the findings of both courts to have found and affirmed respectively that NSC incurred eleven days of delay

in unloading the cargo. In this case, the contract of voyage charter hire provided four-day laytime; it also qualified laytime
as WWDSHINC or weather working days Sundays and holidays included. Consequently, NSC cannot be held liable for
demurrage as the four-day laytime allowed it did not lapse, having been tolled by unfavorable weather condition in view of
WWDSHINC qualification agreed upon by the parties. In view thereof, the consolidated petitions are denied and the
questioned decision is affirmed with modification that the award of demurrage awarded to VSI is deleted.

11. Loadstar Shipping Co. vs. CA, 315 SCRA 339 UY / AGUILON
FACTS:
Loadstar received on board its M/V Cherokee certain goods for shipment. 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 the claim to the
insured in full, and the latter executed a subrogation receipt therefor. MIC filed a complaint against Loadstar and
Prudential Guarantee & Assurance, Inc. (insurer of the vessel), alleging that the sinking of the vessel was due to the fault
and negligence of LOADSTAR and its employees. According to said complaint, the vessel was not seaworthy because it
was undermanned on the day of the voyage. If it had been seaworthy, it could have withstood the natural and inevitable
action of the sea on 20 November1984, when the condition of the sea was moderate.
ISSUES:
1. WON M/V Cherokee a private or a common carrier;
2. WON Loadstar observed due and/or ordinary diligence in these premises
HELD:
1. M/V Cherokee 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. The Court ruled that Loadstar fits the definition of the common carrier under Article 1732 of the
Civil Code:
Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the carrying of persons or goods
or both, and one who does such carrying only as an ancillary activity (in local idiom, as a sideline. Article 1732 also
carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the general public, i.e., the general community or population, and one
who offers services or solicits business only from a narrow segment of the general population. We think that Article 1733
deliberately refrained from making such distinctions.

2. No. M/V Cherokee was not seaworthy when it embarked on its voyage. 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.
Thus, LOADSTAR cannot invoke limited liability theory in this case. The doctrine of limited liability does not apply where
there was negligence on the part of the vessel owner or agent. 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 was remiss 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.
Note:

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

12. Planters Producers vs. CA, 226 SCRA 476 (1993) BARROGA / BELARMINO
FACTS:
Lighterage
which
is
object.
The
inches
consequence,
long"
As
the
a
molasses
at
the
cargo
tanks
were
contaminated
rendered
unfit
for
the
use
it was
intended.
against
the
P700,
000.00,
money
ititIt
Court
of
Appeals
ruled
ISSUE:
against
Coastwise.
(2)
Whether
or
not
Ship-owner
the
insurer
was
is
liable
subrogated
under
a
into
Contract
the
rights
of
Affreightment?
of
consignee
against
the
carrier.
(1)
HELD:
YES
stipulation.
shipowner
transform
a
distinctions
between
a
vessels,
in
order
to
with
Coastwise
Leighterage.
The
contract
thus
entered
into
with
the
consignee
was
one
of
affreightment.
carrier
and
the
carrier.
follows
are
lost,
destroyed
or
remained
diligence,
unrebutted
in
this
case.
for
Pier
18.
Coastguard
"has
not
navigational
making
itittransported,
beyond
the
pale
of
even
the
exercise
of
extraordinary
patron
of
the
provides:
this
code,
navigation
position.
..paid,
.for
..wrongdoer
safely
claim
to
carrier,
petitioner
destruction
goods
itit2207
of
by
proof
of
its
exercise
of
extraordinary
diligence.
(2)
Article
YES
of
the
Civil
Code
is
explicit
on
this
point:
injury
or
loss
insured
the
person
who
violated
the
contract.
..the
.. .. and
damaged
to
by
the
insurer
third
whose
party
negligence
or
wrongful
act
caused
the
loss
subrogated
into
all
FACTS:
rights
which
Pag-asa
Sales,
Inc.
may
have
had
against
the
carrier,
herein
petitioner
Coastwise
Lighterage
which
is
object.
The
inches
long"
As
a
consequence,
the
molasses
at
the
cargo
tanks
were
contaminated
and
rendered
unfit
the
use
was
against
the
P700,
000.00,
money
paid,
Court
ruled
against
of
Appeals
Coastwise.
ISSUE:
Ship-owner
is
liable
under
adiligence.
Contract
of
(2)
HELD:
Whether
or
not
the
insurer
was
subrogated
into
the
rights
of
the
consignee
against
the
carrier.
(1)
YES
stipulation.
shipowner
transform
a
distinctions
between
a
vessels,
in
order
to
Leighterage.
with
The
Coastwise
contract
thus
entered
into
with
the
consignee
was
one
of
carrier
and
the
carrier.
follows
are
lost,
destroyed
or
diligence,
remained
unrebutted
in
this
case.
for
Pier
18.
Coastguard
"has
not
navigational
making
the
pale
of
beyond
even
the
exercise
of
extraordinary
diligence.
patron
of
the
provides:
this
code,
navigation
position.
safely
claim
to
carrier,
petitioner
destruction
of
goods
(2)
YES
proof
of
its
exercise
of
extraordinary
diligence.
Article
of
the
Civil
Code
is
explicit
on
this
point:
injury
or
loss
insured
the
person
who
violated
the
contract.
damaged
to
by
insurer
third
party
whose
negligence
or
wrongful
act
caused
the
loss
subrogated
rights
which
into
all
Pag-asa
Sales,
Inc.
may
have
had
against
the
petitioner
Coastwise
Lighterage.
FACTS:
Lighterage
which
is
object.
The
inches
consequence,
long"
As
the
a
molasses
at
the
cargo
were
contaminated
rendered
unfit for
for
the
use itit Lighterage.
was intended.
intended.
against
the
P700,
000.00,
money
itIt
Court
of
Appeals
ruled
ISSUE:
against
Coastwise.
(2)
Whether
or
not
Ship-owner
the
was
is
liable
subrogated
under
into
Contract
the
rights
of Affreightment?
Affreightment?
of carrier,
consignee
against
the
carrier.
(1)
HELD:
YES
stipulation.
shipowner
for
transform
a..for
distinctions
between
aby
vessels,
in
order
to
with
Coastwise
Leighterage.
The
contract
thus
entered
into
with
the
consignee
was
oneherein
of affreightment.
affreightment.
carrier
and
the
carrier.
It
follows
are
lost,
destroyed
or
remained
diligence,
unrebutted
ininsurer
this
case.
for the
Pier
18.
Coastguard
"has
not
navigational
making
ittransported,
beyond
pale
of
even
the
exercise
of
extraordinary
patron
of
the
provides:
this
code,
navigation
position.
.paid,
.wrongdoer
safely
claim
to
carrier,
petitioner
destruction
goods
it2207
transported,
of
by
proof
of
its
exercise
ofadiligence.
extraordinary
diligence.
(2)
Article
YES
2207
of
the
Civil
Code
is
explicit
ontanks
this
point:
injury
or
loss
insured
against
the
wrongdoer
the
person
who
violated
the
contract.
.the
. . and
damaged
to
by
the
insurer
third
whose
party
negligence
or
wrongful
act
caused
the
loss
subrogated
into
all
the
Facts:
rights
which
Pag-asa
Sales,
Inc.
may
have
had
against
the
carrier,
herein
petitioner
Coastwise
Lighterage
Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of New York, U.S.A.,
9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk on 16 June 1974 aboard the cargo
vessel M/V "Sun Plum" owned by private respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A.,
to Poro Point, San Fernando, La Union, Philippines, as evidenced by Bill of Lading No. KP-1 signed by the master of the
vessel and issued on the date of departure.
On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant to the Uniform
General Charter was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan.
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.
It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th, 14th and 18th). A
private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was hired by PPI to determine the
"outturn" of the cargo shipped, by taking draft readings of the vessel prior to and after discharge. The survey report
submitted by CSCI to the consignee (PPI) dated 19 July 1974 revealed a shortage in the cargo of 106.726 M/T and that a
portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt. The same results were contained in a
Certificate of Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which showed that the cargo delivered was
indeed short of 94.839 M/T and about 23 M/T were rendered unfit for commerce, having been polluted with sand, rust
and
dirt.
Consequently, PPI sent a claim letter dated 18 December 1974 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. 13
Respondent 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 the discharge of the shipment." Hence, on 18 July 1975, 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. The court a quo however sustained the claim of the plaintiff against the defendant carrier
for the value of the goods lost or damaged.
On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from liability for the value of the
cargo that was lost or damaged. Relying on the 1968 case of Home Insurance Co. v. American Steamship Agencies,
Inc., the appellate court ruled that the cargo vessel M/V "Sun Plum" owned by private respondent KKKK was a private
carrier and not a common carrier by reason of the time charterer-party.
Issue:
Whether a common carrier becomes a private carrier by reason of a charter-party; in the negative, whether the shipowner
in the instant case was able to prove that he had exercised that degree of diligence required of him under the law.
Held:
A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to
another person for a specified time or use; a contract of affreightment by which the owner of a ship or other vessel lets the
whole or a part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration

of the payment of freight; 21 Charter parties are of two types: (a) contract of affreightment which involves the use of
shipping space on vessels leased by the owner in part or as a whole, to carry goods for others; and, (b) charter by demise
or bareboat charter, by the terms of which the whole vessel 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. Contract of affreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed
period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides
for the hire of 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.
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 the shipowner 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 any control 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 voyagecharter.
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 the same 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 overcome, by
clear and convincing proof, the prima facie presumption of negligence.
Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like fertilizer carries with it the risk of
loss or damage. More so, with a variable weather condition prevalent during its unloading, as was the case at bar. This is
a risk the shipper or the owner of the goods has to face. Clearly, respondent carrier has sufficiently proved the inherent
character of the goods which makes it highly vulnerable to deterioration; as well as the inadequacy of its packaging which
further contributed to the loss. On the other hand, no proof was adduced by the petitioner showing that the carrier was
remise in the exercise of due diligence in order to minimize the loss or damage to the goods it carried.
The petition is DISMISSED. The assailed decision of the Court of Appeals, which reversed the trial court, is AFFIRMED.

13. Coastwise Lighterage Corporation vs. Court of Appeals, G.R. No. 114167, July 12, 1995
FACTS:
Pag-asa Sales, Inc. entered into a contract to transport molasses from the province of Negros to Manila with Coastwise
LighterageCorporation (Coastwise for brevity), using the latter's dumb barges, that were towed in tandem by the tugboat
MT Marica, which islikewise owned by Coastwise. Upon reaching Manila Bay, one of the barges, "Coastwise 9", struck an
unknown sunken object. Theforward buoyancy compartment was damaged, and water gushed in through a hole "two
inches wide and twenty-two inches long" As aconsequence, the molasses at the cargo tanks were contaminated and
rendered unfit for the use it was intended. Pag-asa Sales, Inc. filed a formal claim with the insurer, Philippine General
Insurance Company (PhilGen, for short) and against thecarrier. Coastwise Lighterage denied the claim and it was
PhilGen which paid Pag-asa Sales, Inc., the amount of P700, 000.00,representing the value of the damaged cargo of
molasses. Philgen then filed an action against Coastwise to recover the money it paid,claiming to be subrogated to the
claims which the consignee may have against the carrier. Both the trial court and the Court of Appealsruled against
Coastwise.
ISSUE:
(1) Whether or not Ship-owner is liable under a Contract of Affreightment?

(2) Whether or not the insurer was subrogated into the rights of the consignee against the carrier.
HELD:
(1) YESThe Liability of shipowner in contract of affreightment over vessels, as common carrier, remains in the absence of
the stipulation.When the charter party contract is one of affreightment over the whole vessels, rather than a demise, the
liability of the shipowner foracts or negligence of its captain and crew, would remain in the absence of stipulation.
Although a charter party may transform acommon carrier into a private one, the same however is not true in a contract of
affreightment on account of the distinctions between acontract of affreightment and a bareboat charter. Herein, Pag-asa
Sales only leased three of Coastwise Lighterages vessels, in order tocarry cargo from one point to another, but
the possession, command mid navigation of the vessels remained with CoastwiseLeighterage. The contract
thus entered into with the consignee was one of affreightment.The law and jurisprudence on common carriers both hold
that the mere proof of delivery of goods in good order to a carrier and thesubsequent arrival of the same goods at the
place of destination in bad order makes for a prima facie case against the carrier. It followsthen that the presumption
of negligence that attaches to common carriers, once the goods it transports are lost, destroyed
ordeteriorated, applies to the petitioner. This presumption, which is overcome only by proof of the exercise of
extraordinary diligence,remained unrebutted in this case. The records show that the damage to the barge was caused by
its hitting a submerged derelict vessel as it was heading for Pier 18.Petitioner contends that this navigational hazard was
the efficient cause of the accident and that the Philippine Coastguard "has notexerted any effort to prepare a chart to
indicate the location of sunken derelicts within Manila North Harbor to avoid navigationalaccidents". Thus, being
unaware of the hidden danger that lies in its path, nothing could have prevented the event, making it beyondthe pale of
even the exercise of extraordinary diligence.However, petitioner's assertion is belied by the evidence on record where it
appeared that Jesus R. Constantino, the patron of thevessel "Coastwise 9" admitted that he was not licensed. The Code
of Commerce, which subsidiarily governs common provides:Art. 609. Captains, masters, or patrons of vessels must be
Filipinos, have legal capacity to contract in accordance with this code,and prove the skill capacity and qualifications
necessary to command and direct the vessel, as established by marine and navigationlaws, ordinances or regulations,
and must not be disqualified according to the same for the discharge of the duties of the position. . . .Clearly, petitioner
Coastwise Lighterage's embarking on a voyage with an unlicensed patron violates this rule. It cannot safely claim tohave
exercised extraordinary diligence, by placing a person whose navigational skills are questionable. As a common carrier,
petitioneris liable for breach of the contract of carriage, having failed to overcome the presumption of negligence with the
loss and destruction ofgoods it transported, by proof of its exercise of extraordinary diligence.
(2) YESArticle 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 lossarising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to the rights of the insuredagainst the wrongdoer or the
person who violated the contract. . . .Article 2207 of the Civil Code is founded on the well-settled principle of subrogation.
If the insured property is destroyed or damagedthrough the fault or negligence of a party other than the assured, then the
insurer, upon payment to the assured will be subrogated tothe rights of the assured to recover from the wrongdoer to the
extent that the insurer has been obligated to pay. Payment by the insurerto the assured operated as an equitable
assignment to the former of all remedies which the latter may have against the third partywhose negligence or wrongful
act caused the lossUpon payment by respondent insurer PhilGen of the amount of P700, 000.00 to Pag-asa Sales, Inc.,
the former was subrogated into allthe rights which Pag-asa Sales, Inc. may have had against the carrier, herein petitioner
Coastwise Lighterage

14. Valenzuela Hardwood and Industrial Supply, Inc. vs. Court of Appeals, 274 SCRA 642 , June 30, 1997
SUMMARY:
Shipper demands damages from shipping company due to the loss of its logs caused by the negligence of shipping
companys captain. However, there is a stipulation in the contract between the shipper and shipping company exempting
the latter from liability arising from the captains negligence. The trial court said that the stipulation was void for being
contrary to Art. 1745. The Court of Appeals disagreed saying that the shipping company acted as a private carrier and that
Art. 1745 only applies to common carriers and not to private carriers, hence, a stipulation exempting the owner from
liability even for the negligence of its agent is valid if applied to a private carrier. The Supreme Court upheld the Court of
Appeals ruling saying that the shipping company acted as a private carrier.

FACTS:

TRIAL COURT
On 16 January 1984, plaintiff (Valenzuela Hardwood and Industrial Supply, Inc. the shipper) entered into an agreement
with the defendant Seven Brothers (the Shipping Corporation) whereby the latter undertook to load on board its vessel
M/V Seven Ambassador the formers lauan round logs numbering 940 at the port of Maconacon, Isabela for shipment to
Manila.
Plaintiff (Valenzuela Hardwood) insured the logs against loss and/or damage with defendant South Sea Surety and
Insurance Co., Inc. for P2,000,000.00 and the latter issued its Marine Cargo Insurance Policy for P2,000,000.00.
The said vessel M/V Seven Ambassador sank on 25 January 1984 resulting in the loss of the plaintiffs insured logs.
A check for P5,625.00 to cover payment of the premium and documentary stamps due on the policy was tendered due to
the insurer (South Sea Surety) but was not accepted. Instead, the South Sea Surety and Insurance Co., Inc. cancelled the
insurance policy.
Plaintiff demanded from South Sea Surety and Insurance Co., Inc. the payment of the proceeds of the policy but the latter
denied liability.
Plaintiff likewise filed a formal claim with defendant Seven Brothers Shipping Corporation for the value of the lost logs but
the latter denied the claim.
The trial court rendered judgment in favor of plaintiff Valenzuela Hardwood and against defendants Seven Brothers and
South Sea Surety. Both defendants appealed.
COURT OF APPEALS
The issue resolved by the Court of appeals was whether defendants shipping corporation and the surety company are
liable to the plaintiff for the latters lost logs.
The Court of Appeals affirmed the RTC judgment against South Sea Surety and Insurance Company by saying that said
insurance company is still liable to the plaintiff Valenzuela Hardwood.
It however modified the RTC ruling against Seven Brothers Shipping Corporation saying that it was not liable for the lost
cargo.
According to the Court of Appeals, it appears that there is a stipulation in the charter party that the ship owner would be
exempted from liability in case of loss.
It further held that the trial court erred in applying the provisions of the Civil Code (specifically Art. 1745) on common
carriers to establish the liability of the shipping corporation. The provisions on common carriers should not be applied
where the carrier is not acting as such but as a private carrier.
Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person
only, becomes a private carrier.
As a private carrier, a stipulation exempting the owner from liability even for the negligence of its agent is valid (Home
Insurance Company, Inc. vs. American Steamship Agencies, Inc., 23 SCRA 24).
The shipping corporation should not therefore be held liable for the loss of the logs.
Plaintiff Valenzuela Hardwood is assailing the Court of Appeals judgment before the Supreme Court with the following
issue.
ISSUE:
Whether or not a stipulation in the charter party exempting the shipping corporation (Seven Brothers) from liability for the
loss of the shippers (Valenzuela Hardwood) logs arising from the negligence of said Shipping Corporations captain is
valid.
RULING:
Yes, it is valid. Valenzuela Hardwoods petition is NOT meritorious.

The charter party between the Valenzuela Hardwood (shipper) and Seven Brothers (shipping company) stipulated that the
owners shall not be responsible for loss, split, short-landing, breakages and any kind of damages to the cargo.
It should be noted at the outset that the proximate cause of the sinking of M/V Seven Ambassadors resulting in the loss of
its cargo was the snapping of the iron chains and the subsequent rolling of the logs to the portside due to the negligence
of the captain in stowing and securing the logs and not due to fortuitous event. Likewise undisputed is the status of Private
Respondent Seven Brothers as a private carrier when it contracted to transport the cargo of Petitioner Valenzuela.
The trial court deemed the charter party stipulation void for being contrary to public policy, citing Article 1745 of the Civil
Code which provides:
Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public
policy:
(1) That the goods are transported at the risk of the owner or shipper;
(2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods;
(3) That the common carrier need not observe any diligence in the custody of the goods;
(4) That the common carrier shall exercise a degree of diligence less than that of a good father of a family, or of
a man of ordinary prudence in the vigilance over the movables transported;
(5) That the common carrier shall not be responsible for the acts or omissions of his or its employees;
(6) That the common carriers liability for acts committed by thieves, or of robbers who do not act with grave or
irresistible threat, violence or force, is dispensed with or diminished;
(7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on account of
the defective condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage.
As adverted to earlier, it is undisputed that private respondent had acted as a private carrier in transporting petitioners
lauan logs. Thus, Article 1745 and other Civil Code provisions on common carriers which were cited by petitioner may not
be applied unless expressly stipulated by the parties in their charter party
In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on the
charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence of the
ship captain. Pursuant to Article 1306 of the Civil Code, such stipulation is valid because it is freely entered into by the
parties and the same is not contrary to law, morals, good customs, public order, or public policy. Indeed, their contract of
private carriage is not even a contract of adhesion. We stress that in a contract of private carriage, the parties may freely
stipulate their duties and obligations which perforce would be binding on them. Unlike in a contract involving a common
carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on common
carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private
carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a charter party that lessen
or remove the protection given by law in contracts involving common carriers.
As a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is not against public
policy, and is deemed valid. Such doctrine We find reasonable. The Civil Code provisions on common carriers should not
be applied where the carrier is not acting as such but as a private carrier. The stipulation in the charter party absolving the
owner from liability for loss due to the negligence of its agent would be void only if the strict public policy governing
common carriers is applied. Such policy has no force where the public at large is not involved, as in this case of a ship
totally chartered for the use of a single party.
In fine, the respondent appellate court aptly stated that [in the case of] a private carrier, a stipulation exempting the owner
from liability even for the negligence of its agent is valid.
The general public enters into a contract of transportation with common carriers without a hand or a voice in the
preparation thereof. The riding public merely adheres to the contract; even if the public wants to, it cannot submit its own
stipulations for the approval of the common carrier. Thus, the law on common carriers extends its protective mantle
against one-sided stipulations inserted in tickets, invoices or other documents over which the riding public has no

understanding or, worse, no choice. Compared to the general public, a charterer in a contract of private carriage is not
similarly situated. It can -- and in fact it usually does -- enter into a free and voluntary agreement. In practice, the parties in
a contract of private carriage can stipulate the carriers obligations and liabilities over the shipment which, in turn,
determine the price or consideration of the charter. Thus, a charterer, in exchange for convenience and economy, may opt
to set aside the protection of the law on common carriers. When the charterer decides to exercise this option, he takes a
normal business risk.
Petitioner Valenzuela insists that the charter party stipulation is contrary to Articles 586 and 587 of the Code of Commerce
which confer on petitioner the right to recover damages from the shipowner and ship agent for the acts or conduct of the
captain. We are not persuaded. Whatever rights petitioner may have under the aforementioned statutory provisions were
waived when it entered into the charter party. Article 6 of the Civil Code provides that (r)ights may be waived, unless the
waiver is contrary to law, public order, public policy, morals, or good customs, or prejudicial to a person with a right
recognized by law.

15. Caltex (Philippines), Inc. vs. Sulpicio Lines, Inc., 315 SCRA 709, September 30, 1999
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
operated by 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.
On December 20, 1987, at about 6:30 a.m., the passenger ship MV Doa Paz left the port of Tacloban headed for Manila
with a complement of 59 crew members including the master and his officers, and passengers totaling 1,493 as indicated
in the Coast Guard Clearance (but in fact carried about 4,000 passengers as many were not in the passenger manifest.
The MV Doa Paz is a passenger and cargo vessel owned and operated by Sulpicio Lines, Inc.
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, the heirs of deceased unmanifested passengers, filed with the RTC, Branch 8, Manila, a complaint
for Damages Arising from Breach of Contract of Carriage against Sulpicio Lines, Inc. Sulpicio, in turn, filed a third party
complaint against Francisco Soriano, Vector Shipping Corporation and Caltex (Philippines), Inc. alleging that Caltex
chartered MT Vector with gross and evident bad faith knowing fully well that MT Vector was improperly manned, illequipped, 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 trial court dismissed the third party complaint against Caltex but the Court of Appeals modified the trial courts ruling
and included petitioner Caltex as one of the those liable for damages for being the charterer that negligently caused the
shipping of combustible cargo aboard an unseaworthy vessel.
ISSUE:
WON the charterer of a sea vessel is liable for damages resulting from a collision between the chartered vessel and a
passenger ship?
HELD:
NO. The charterer, under a contract of affreightment, has no liability for damages under Philippine Maritime laws.
Petitioner and Vector entered into a contract of affreightment, also known as a voyage charter.[10]
A charter party is a contract by which an entire ship, or some principal part thereof, is let by the owner to another person
for a specified time or use; a contract of affreightment 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.[11]

A contract of affreightment may be either time charter, wherein the leased vessel is leased to the charterer for a fixed
period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides
for the hire of the vessel only, either for a determinate period of time or for a single or consecutive voyage, the ship owner
to supply the ships store, pay for the wages of the master of the crew, and defray the expenses for the maintenance of the
ship.[12]
Under a demise or bareboat charter on the other hand, the charterer mans the vessel with his own people and becomes,
in effect, the owner for the voyage or service stipulated, subject to liability for damages caused by negligence.
If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as owner for the
voyage, the rights and the responsibilities of ownership rest on the owner. The charterer is free from liability to third
persons in respect of the ship.

16. Belgian Overseas Chartering and Shipping N.V. vs. Philippine First Insurance Co., Inc., G.R. No. 143133, June
05, 2002
FACTS: On June 13, 1990, CMC Trading A.G. shipped on board the M/V 'Anangel Sky' at Hamburg, Germany 242coils of
various Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine Steel Trading Corporation.
On July 28, 1990, M/V Anangel Sky arrived at the port of Manila and, within the subsequent days, discharged the subject
cargo. Four (4) coils were found to be in bad order. Finding the four (4) coils in their damaged state to be unfit for the
intended purpose, the consignee Philippine Steel Trading Corporation declared the same as total loss. Petitioners refused
to submit to the consignee's claim. Consequently, respondent paid the consignee and was subrogated to the latter's
rights. Subsequently, respondent instituted this complaint for recovery of the amount paid by them, to the consignee as
insured. Petitioners imputed that the damage and/or loss was due to pre-shipment damage. In addition thereto, they
argued that their liability, if there be any, should not exceed the limitations of liability provided for in the bill of lading and
other pertinent laws. Finally, they averred that, in any event, they exercised due diligence and foresight required by law to
prevent any damage/loss to said shipment. RTC dismissed the Complaint because respondent had failed to prove its
claims. In reversing the trial court, the CA ruled that petitioners were liable for the loss or the damage of the goods
shipped, because they had failed to overcome the presumption of negligence imposed on common carriers.
ISSUES:
1. Whether or not a notation in the bill of lading at the time of loading is sufficient to show pre-shipment damage and
to exempt herein defendants from liability.
2. Whether or not the consignee/ plaintiff filed the required notice of loss within the time required by law.
3. Whether or not the "PACKAGE LIMITATION" of liability under Section 4 (5) of COGSA is applicable.
DECISION:
1. No, mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order at their
destination constitutes a prima facie case of fault or negligence against the carrier. If no adequate explanation is
given as to how the deterioration, the loss or the destruction of the goods happened, the transporter shall be held
responsible. Petitioners failed to rebut the prima facie presumption of negligence in the case at bar. True, the
words "metal envelopes rust stained and slightly dented" were noted on the Bill of Lading; however, there is no
showing that petitioners exercised due diligence to forestall or lessen the loss. Having failed to discharge the
burden of proving that they have exercised the extraordinary diligence required by law, petitioners cannot escape
liability for the damage to the four coils
2. Yes, pursuant to Section 3, paragraph 6 of the Carriage of Goods by Sea Act (COGSA), a failure to file a notice of
claim within three days will not bar recovery if it is nonetheless filed within one year. This one-year prescriptive
period also applies to the shipper, the consignee, the insurer of the goods or any legal holder of the bill of lading.
In the present case, the cargo was discharged on July 31, 1990, while the Complaint was filed by respondent on
July 25, 1991, within the one-year prescriptive period.
Yes, since there was no stipulation in the Bill of Lading limiting the carrier's liability and shipper did not declare a higher
valuation of the goods to be shipped. This fact notwithstanding, the insertion of the words "L/C No. 90/02447 cannot be
the basis for petitioners' liability. A notation in the Bill of Lading which indicated the amount of the Letter of Credit obtained
by the shipper for the importation of steel sheets did not effect a declaration of the value of the goods as required by the

bill. In the light of the foregoing, petitioners' liability should be computed based on US$500 per package and not on the per
metric ton price declared in the Letter of Credit.

contract,
for
Delbros,
Inc.
to
atendered
shipment
of
goods
from
Cebu
City
to
Singapore.
For
owned
the
and
carriage
operated
of
said
by
shipment
Sulpicio
Lines,
from
Cebu
Inc.
(carrier).
City
to
Manila,
The
vessel
Delbros,
arrived
Inc.
at
engaged
the
North
the
Harbor,
services
Manila.
of
the
During
vessel
the
unloading
goods
examined
of
the
shipment,
the
dropped
one
cargo,
of
the
crates
dropped
an
alleged
from
finding
the
cargo
that
hatch
the
contents
to
the
pier
of
the
apron.
crate
The
were
owner
no
longer
owner
usable
of
the
for
their
goods
intended
filed
a
claim
purpose,
with
they
Sulpicio
were
Lines,
rejected
Inc
as
for
athe
total
recovery
loss
and
of
returned
the
value
to
of
Cebu
the
rejected
City.
cargo
Lepanto-Taisho
which
was
Insurance
refused
Corporation
by
the
latter.
(insurer)
Thereafter,
under
autmost
marine
the
owner
insurance
of
the
policy
goods
issued
sought
to
the
payment
former.
Insurer
from
Firstfor
paid
payment
the
claim
of
less
the
thirty-five
insurance
percent
claim
by
(35%)
insurer
salvage
subrogated
value.
the
owner
of
the
goods
to
whatever
right
or
legal
Taisho
action
Insurance
the
owner
Corporation
of
the
then
filed
may
claims
have
against
for
reimbursement
Delbros,
Inc.
from
and
Delbros,
Sulpicio
Inc.
Lines,
and
Inc.
petitioner-carrier
Thus,
LepantoSulpicio
ACTS:
Lines,
Inc.
Taiyo
which
contends
Yuden
were
that
Philippines,
subsequently
its
liability,
Inc.
if1733
denied.
(owner
any,
is
only
of
the
to
goods)
the
extent
of
Delbros,
cargo
Inc.
damage
(shipper)
or
entered
loss
into
aofthe
should
ISSUES:
not
Whether
include
the
or
lack
not,
of
fitness
Taiyo
of
Yuden
the
shipment
Philippines,
for
transport
Inc.,
to
Singapore
due
Insurance
to
the
damaged
Corporations
packing.
predecessor-in-interest,
incur
damages,
and
ifupon
so,
whether
or
not
Sulpicio
Lines,
Inc.
liable
for
the
same.

The

falling
of
the
crate
during
the
unloading
is
evidence
of
Sulpicio
Lines,
Inc.s
negligence
in
handling
the
cargo.
in
its
possession
As
a
common
for
transport.
carrier,
itgoods
is
A
common
expected
carrier
to
observe
is
bound
extraordinary
transport
diligence
its
cargo
in
and
the
handling
its
passengers
of
goods
safely
placed
"as
far
regard
as
human
to
all
care
circumstances."
and
foresight
can
The
provide,
extraordinary
using
the
diligence
diligence
inLepanto-Taisho
the
of
vigilance
adelivery.
very
cautious
over
the
person,
with
tendered
due
shipment
damage
to,
requires
or
destruction
the
common
of,
the
goods
carrier
entrusted
to
know
to
and
itthe
for
to
safe
follow
carriage
the
required
and
precaution
Itis
requires
common
avoiding
the
carriers
nature
to
render
and
characteristic
service
with
of
the
goods
greatest
skill
and
for
shipment,
foresight
and
and
"to
to
exercise
use
all
reasonable
due
care
in
means
the
handling
to
ascertain
and
stowage,
Thus,
when
including
the
shipment
such
methods
suffered
as
damages
their
nature
as
itbeen
requires."
was
being
unloaded,
petitioner-carrier
is
presumed
to
have
been
common
negligent
carriers
in
the
are
handling
presumed
of
the
to
damaged
have
cargo.
Under
at
fault
Articles
or
to
1735
have
and
1752
acted
of
negligently
the
Civil
Code,
inand
case
goods
transported
destruction
or
by
deterioration
them
are
lost,
oftransport
destroyed
goods
under
or
had
Article
deteriorated.
1735,
the
common
To
overcome
carrier
must
presumption
prove
that
of
they
liability
observed
for
loss,
extraordinary
diligence
as
required
in
Article
of
Civil
Code.
miserably
to
adduce
any in
shred
of evidence
thefor
required
extraordinary
diligence
to overcome
Sulpicio
theInc.
presumption
is
liable to failed
that
pay itthe
was
amount
negligent
paid
bytransporting
respondent-insurer
the of
cargo.
the damages
sustained
by the
owner
ofLines,
the goods.
17. FGU Insurance vs. CA, G.R. No. 137775, March 31, 2005
FACTS:

Anco Enterprises Company (ANCO), a partnership between Ang Gui and Co To, was engaged in the shipping
business operating two common carriers

M/T ANCO tugboat

D/B Lucio barge - no engine of its own, it could not maneuver by itself and had to be towed by a tugboat
for it to move from one place to another.

September 23 1979: San Miguel Corporation (SMC) shipped from Mandaue City, Cebu, on board the D/B Lucio,
for towage by M/T ANCO:

25,000 cases Pale Pilsen and 350 cases Cerveza Negra - consignee SMCs Beer Marketing Division
(BMD)-Estancia Beer Sales Office, Estancia, Iloilo

15,000 cases Pale Pilsen and 200 cases Cerveza Negra - consignee SMCs BMD-San Jose Beer Sales
Office, San Jose, Antique

September 30, 1979: D/B Lucio was towed by the M/T ANCO arrived and M/T ANCO left the barge immediately
The clouds were dark and the waves were big so SMCs District Sales Supervisor, Fernando Macabuag,
requested ANCOs representative to transfer the barge to a safer place but it refused so around the midnight, the
barge sunk along with 29,210 cases of Pale Pilsen and 500 cases of Cerveza Negra totalling to P1,346,197

When SMC claimed against ANCO it stated that they agreed that it would not be liable for any losses or damages
resulting to the cargoes by reason of fortuitous event and it was agreed to be insured with FGU for 20,000 cases
or P858,500

ANCO filed against FGU

FGU alleged that ANCO and SMC failed to exercise ordinary diligence or the diligence of a good father of
the family in the care and supervision of the cargoes

RTC: ANCO liable to SMC and FGU liable for 53% of the lost cargoes

CA affirmed

ISSUE: W/N FGU should be exempted from liability to ANCO for the lost cargoes because of a fortuitous event and
negligence of ANCO

HELD: YES. Affirmed with modification. Third-party complainant is dismissed.

Art. 1733. Common carriers, from the nature of their business and for reasons of public policy are bound to
observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by

them, according to all the circumstances of each case.

Such extraordinary diligence in vigilance over the goods is further expressed in Articles 1734, 1735, and 1745 Nos. 5, 6,
and 7 . . .

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;

. . .

Art. 1739. In order that the common carrier may be exempted from responsibility, the natural disaster must have
been the proximate and only cause of the loss. However, the common carrier must exercise due diligence to prevent
or minimize loss before, during and after the occurrence of flood, storm, or other natural disaster in order that the
common carrier may be exempted from liability for the loss, destruction, or deterioration of the goods . . .

Caso fortuito or force majeure

extraordinary events not foreseeable or avoidable, events that could not be foreseen, or which though
foreseen, were inevitable

not enough that the event should not have been foreseen or anticipated, as is commonly believed but it
must be one impossible to foresee or to avoid - not in this case

other vessels in the port of San Jose, Antique, managed to transfer to another place
To be exempted from responsibility, the natural disaster should have been the proximate and only cause of the
loss. There must have been no contributory negligence on the part of the common carrier.

there was blatant negligence on the part of M/T ANCOs crewmembers, first in leaving the engine-less
barge D/B Lucio at the mercy of the storm without the assistance of the tugboat, and again in failing to heed the
request of SMCs representatives to have the barge transferred to a safer place

When evidence show that the insureds negligence or recklessness is so gross as to be sufficient to constitute a
willful act, the insurer must be exonerated.

ANCOs employees is of such gross character that it amounts to a wrongful act which must exonerate FGU from
liability under the insurance contract

both the D/B Lucio and the M/T ANCO were blatantly negligent
18. Sulpicio Lines, Inc. vs. First Lepanto-Taisho Insurance, G.R. No. 140349, June 29, 2005
FACTS: Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros, Inc. (shipper) entered into acontract, for
Delbros, Inc. to transport a shipment of goods from Cebu City to Singapore.For the carriage of said shipment from Cebu
City to Manila, Delbros, Inc. engaged the services of the vesselowned and operated by Sulpicio Lines, Inc. (carrier). The
vessel arrived at the North Harbor, Manila. Duringthe unloading of the shipment, one of the crates dropped from the cargo
hatch to the pier apron. The owner ofthe goods examined the dropped cargo, and upon an alleged finding that the

contents of the crate were nolonger usable for their intended purpose, they were rejected as a total loss and returned to
Cebu City.The owner of the goods filed a claim with Sulpicio Lines, Inc for the recovery of the value of the rejectedcargo
which was refused by the latter. Thereafter, the owner of the goods sought payment from FirstLepantoTaisho Insurance Corporation (insurer) under a marine insurance policy issued to the former. Insurerpaid the claim less
thirty-five percent (35%) salvage value.The payment of the insurance claim by the insurer subrogated the owner of the
goods to whatever right orlegal action the owner of the goods may have against Delbros, Inc. and Sulpicio Lines, Inc.
Thus, Lepanto-Taisho Insurance Corporation then filed claims for reimbursement from Delbros, Inc. and petitionercarrierSulpicio Lines, Inc. which were subsequently denied.Sulpicio Lines, Inc. contends that its liability, if any, is only to
the extent of the cargo damage or loss andshould not include the lack of fitness of the shipment for transport to Singapore
due to the damaged packing.
ISSUES: Whether or not, Taiyo Yuden Philippines, Inc., Lepanto-Taisho Insurance Corporationspredecessorin-interest, incur damages, and if so, whether or not Sulpicio Lines, Inc. is liable for the same.
HELD:
The falling of the crate during the unloading is evidence of Sulpicio Lines, Inc.s negligence in handling thecargo. As a
common carrier, it is expected to observe extraordinary diligence in the handling of goods placedin its possession for
transport. A common carrier is bound to transport its cargo and its passengers safely "asfar as human care and foresight
can provide, using the utmost diligence of a very cautious person, with dueregard to all circumstances." The
extraordinary diligence in the vigilance over the goods tendered forshipment requires the common carrier to
know and to follow the required precaution for avoiding thedamage to, or destruction of, the goods entrusted to it for
safe carriage and delivery. It requires commoncarriers to render service with the greatest skill and foresight and "to use all
reasonable means to ascertainthe nature and characteristic of goods tendered for shipment, and to exercise due care in
the handling andstowage, including such methods as their nature requires."Thus, when the shipment suffered damages
as it was being unloaded, petitioner-carrier is presumed to havebeen negligent in the handling of the damaged cargo.
Under Articles 1735 and 1752 of the Civil Code,common carriers are presumed to have been at fault or to
have acted negligently in case the goodstransported by them are lost, destroyed or had deteriorated. To overcome
the presumption of liability for loss,destruction or deterioration of goods under Article 1735, the common carrier must
prove that they observedextraordinary diligence as required in Article 1733 of the Civil Code.
Sulpicio Lines, Inc. miserably failed to adduce any shred of evidence of the required extraordinary diligenceto overcome
the presumption that it was negligent in transporting the cargo.Sulpicio Lines, Inc. is liable to pay the amount paid by
respondent-insurer for the damages sustained by theowner of the goods.
19. Delsan Transport Lines vs. American Home Assurance, G.R. 149019, August 15, 2006
FACTS:
Caltex engaged into a contract of affreightment with the petitioner, Delsan Transport Lines, Inc.(Delsan), for a period of
one year whereby the said common carrier agreed to transport Caltexs industrial fuel oil from the Batangas-Bataan
Refinery to different parts of the country. Under the contract, petitioner took on board its vessel, MT Maysun, 2,277.314
kiloliters of industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City. The shipment was
insured with private respondent, American Home Assurance Corporation (American Home) The vessel sank in the early
morning of August 15, 1986 near Panay Gulf in the Visayas taking with it the entire cargo of fuel oil. Subsequently,
American Home paid Caltex the sum of Php 5,096,635.57 representing the insured value of the cargo. Exercising its right
to subrogation under Article 2207 of the New Civil Code, the American Home demanded the Delsan the same amount it
paid to Caltex. Due to its failure to collect from Delsan despite prior demand, American Home filed a complaint with the
RTC of Makati for collection of a sum of money. The trial court dismissed the complaint against Delsan. It ruled that the
vessel, MT Maysun, was seaworthy and that the incident was caused by unexpected inclement weather condition or force
majeure, thus exempting the common carrier from liability for the loss of its cargo. The CA reversed. It gave credence to
the weather report issued by PAGASA which stated that the waves were only .7 to 2 meters in height in the vicinity of the
Panay Gulf at the day the ship sank, in contrast to the claim of the crew of the ship that the waves were 20 feet high.
Delsan contends the following: 1. Delsan theorized that when the American Home paid Caltex the value 2. Delsan avers
that although chief officer had merely a 2 nd officers American Home was not legally liable to Caltex due to the latters
breach of implied warranty under the marine insurance policy that the vessel was seaworthy, license, he was qualified to
act as the vessels chief officer. In fact, all the crew and officers of MTT Maysun were exonerated in the administrative
investigation of its lost cargo, the act of American Home is equivalent to a tacit recognition that the ill-fated vessel was
seaworthy; otherwise,

ISSUES
1. 1W/N the payment made by American Home to Caltex for the insured value of the lost cargo amounted to an admission
that the vessel was seaworthy, thus precluding any action for recovery against the petitioner. NO
2. W/N the non-presentation of the marine insurance policy bars the complaint for recovery of sum of money for lack of
cause of action. NO
RULING
First Issue: The payment made by American Home for the insured value of the lost cargo operates as waiver of its right to
enforce the term of the implied warranty against Caltex under the marine insurance policy. However, the same cannot be
validly interpreted as an automatic admission of the vessels seaworthiness by American Home as to foreclose recourse
against Delsan for any liability under its contractual obligation as a common carrier. The fact of payment grants American
Home subrogatory right which enables it to exercise legal remedies that would otherwise be available to Caltex as owner
of the lost cargo against Delsan, the common carrier. From the nature of their business and for reasons of public policy,
common carriers are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of
passengers transported by them, according to all the circumstances of each case. In the event of loss, destruction or
deterioration of the insured goods, common carriers shall be responsible unless the same is brought about, among others,
by flood, storm, earthquake, lightning or other natural disaster or calamity. In all other cases, if the goods are lost,
destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they
prove they observed extraordinary diligence. In order to escape liability for the loss of its cargo of industrial fuel oil
belonging to Caltex, Delsan attributes the sinking of MT Maysun to fortuitous event or force majeure. Although the
testimony of the captain and chief mate that there were strong winds and waves 20 feet high was effectively rebutted and
belied by the weather report of PAGASA. Thus, as the CA correctly ruled, Delsans vessel, MT Maysun, sank with its
entire cargo for the reason that it was not seaworthy. There was no squall or bad weather or extremely poor sea condition
in the vicinity where the said vessel sank. Additionally, the exoneration of MT Maysuns officers and crew merely concern
their respective administrative liabilities. It does not in any way operate to absolve Delsan the common carrier from its civil
liability arising from its failure to observe extraordinary diligence in the vigilance over the goods it was transporting and for
the negligent acts or omissions of its employees, the determination of which properly belongs to the courts. In the case at
bar, Delsan is liable for the insured value of the lost cargo of industrial fuel oil belonging to Caltex for its failure to rebut the
presumption of fault or negligence as common carrier occasioned by the unexplained sinking of its vessel, MT Maysun,
while in transit. Second Issue: It is the view of the SC that the presentation in evidence of the marine insurance policy is
not indispensable in this case before the insurer may recover from the common carrier the insured value of the lost cargo
in the exercise of its subrogatory right. The subrogation receipt, by itself, is sufficient to establish not only the relationship
of American Home as insurer and Caltex, as the assured shipper of the Nlost cargo of industrial fuel oil, but also the
amount paid to settle the insurance claim. The right of subrogation accrues simply upon payment by the insurance
company of the insurance claim.

20. Phil. Am. General Insurance vs. MCG Marine Services, 378 SCRA 650
Facts:
(P) herein is an insurance company of the San Miguel Corp who sustained a loss due to the sinking of the (R) M/V
Peatheray Patrick-G Ship. Being the insurer, it was subrogated with San Miguel's right to claim over the (R), upon its
performance of its obligation in the insurance contract. In effect, (P) is asking for money claim from the (R) for the loss of
the cargo caused by the sinking of the latter's ship.
The Board of Marine Inquiry, an administrative body who is an expert in matters concerning marine casualties, conducted
an investigation and found out that the proximate and only cause of the sinking of the vessel was due to to a fortuitous
event.
Issue:
Whether (R) is exonerated from liability on the ground that "the proximate and only cause of the lost of the ship is by a
fortuitous event"?

Held:
YES.
A fortuitous event has been defined as one which could not be foreseen, or which though foreseen, is inevitable
The results of its investigation clearly indicate that the loss of the cargo was due solely to the attendance of strong winds
and huge waves which caused the vessel to accumulate water, tilt to the port side and to eventually keel over.
Since the presence of strong winds and enormous waves at Cortes, Surigao del Sur on March 3, 1987 was shown to be
the proximate and only cause of the sinking of the M/V Peatheray Patrick-G and the loss of the cargo belonging to San
Miguel Corporation, private respondents cannot be held liable for the said loss.
note:
even in cases where a natural disaster is the proximate and only cause of the loss, a common carrier is still required to
exercise due diligence to prevent or minimize loss before, during and after the occurrence of the natural disaster, for it to
be exempt from liability under the law for the loss of the goods. If a common carrier fails to exercise due diligenceor that
ordinary care which the circumstances of the particular case demandto preserve and protect the goods carried by it on
the occasion of a natural disaster, it will be deemed to have been negligent, and the loss will not be considered as having
been due to a natural disaster under Article 1734(1).
21. Regional Container vs. Netherland Insurance, 598 SCRA 304
FACTS:
405 cartons of Epoxy molding compound were consigned to be shipped from Singapore to Manila for TEMIC. U-Freight
Singapore contracted Pacific Eagle to transport cargo. It was stored in its refrigerated container as cargo is highly
presihable. The temperature was 0 Celsius. Pacific Eagle loaded it to M/V Piya Bhum owned by RCL which the former
had a slot charter agreement with. RCL issued Bill of Lading in favor of Pacific Eagle. Netherlands Insurance issued a
Marine Open Policy to insure cargo in favor of Temic to cover loss/damages. Upon arrival at Manila, the cargoes were
surveyed and it was found to be at the constant required temperature for several days. But later on, it was found out that
the temperature changed when the cargo had already been unloaded, to 33 Celsius. Surveyor believed the fluctuation
was caused by the burnt condenser fan motor of the refrigerated container. Temic received the shipment and found it to be
damaged. Temic filed a claim for cargo loss against Netherlands Insurance, with supporting claims documents. The
Netherlands Insurance paid Temic the sum ofP1,036,497.00 under the terms of the Marine Open Policy. Temic then
executed a loss and subrogation receipt in favor of Netherlands Insurance.
Seven months from delivery of the cargo - Netherlands Insurance filed a complaint for subrogation of insurance settlement
with the Regional Trial Court, RCL and TMS Ship Agencies (TMS) thought to be the local agent of M/V Piya, EDSA
Shipping, Eagle Liner Shipping Agencies, U-Freight Singapore, and U-Ocean (Phils.), Inc. (U-Ocean). RCL and EDSA
Shipping filed motion to dismiss based on demurer to evidence. They attributed negligence to their co-defendants, that
fluctuation of temperature occurred after cargo has been discharged from vessel but in the reefer van and that
Netherlands is not party in interest hence has no cause of action. RTC found RCL and EDSA Shipping not liable but this
was reversed by CA and barred them from presenting evidence since they filed for demurer.
ISSUE:
Whether the CA correctly held RCL and EDSA Shipping liable as common carriers under the theory of presumption of
negligence.

RULING:
Yes CA is correct. RCL and EDSA Shipping failed to satisfy this standard of evidence and in fact offered no evidence at all
on this point; a reversal of a dismissal based on a demurrer to evidence bars the defendant from presenting evidence
supporting its allegations. The CA correctly ruled that they are deemed to have waived their right to present evidence, and
the presumption of negligence must stand. It is for this reason as well that the court finds RCL and EDSA Shippings claim
that the loss or damage to the cargo was caused by a defect in the packing or in the containers.
22. Mindanao Terminal v. Phoenix Assurance, 587 SCRA 429
Facts:
Del Monte Philippines Inc. (Del Monte) contracted the services of Mindanao Terminal and Brokerage Service, Inc.
(Mindanao Terminal), a stevedoring company, to load and stow 146,288 cartons of bananas and 15,202 cartons of
pineapple to the vessel Mistrau to be transported to Inchon Korea. Del Monte Produce insured the said cargoes in an
open policy with Phoenix Assurance Company of New York (Phoenix). Upon arrival to Korea, it was found out that 16,069
cartons of banana and 2,185 cartons of pineapple were damaged and could not be commercially used. Therefore, Del
Monte produce filed a claim under the open claim policy, thereafter, a check for the recommended amount was sent by
McGees Marine Insurance claim and Phoenix. Phoenix filed a claim for damages against Mindanao Terminal for the
damages of the shipment.
The RTC of Davao ruled in favor of Mindanao Terminal, ruling that the latter cannot be held liable for damages for its
contract is with Del Monte, not with Del Monte Produce, the two being separate juridical entities. Also, it held that when
the vessel receive the cargo under the condition that it will not be signed unless the same is properly arranged and tightly
secured. The RTC likewise noted that the cause of the damage of the vessel is the typhoon due to the voyage.
The CA reversed the RTC Decision, ruling that Mindanao Terminals improper stowage of the cargoes was the reason of
the damage and that by virtue of Quasi-Delict, it is liable to De Monte Produce, even if no contract existed between them.
Issue:
w/n Mindanao Terminal should be held liable for the damage of the cargoes?
Held:
No. Mindanao Terminal, being a labor provider, was expected to observe the ordinary diligence or that of the good father
of the family in the loading of the cargoes, there being no provision in the law or stipulation in the contract requiring a
higher degree of diligence. However, the CA misapplied the case of Summa Insurance Corp v. CA, in that it required a
higher degree of diligence as that of arrastre services. It is said that arrastre service and stevedoring service are two
different services with different degree of diligence, for the arrastres operation end upon the receipt of the cargo by the
consignee while that of stevedoring ends upon the loading and stowing of the cargo to the vessel. The higher degree of
diligence required in warehouseman and common carrier is not applicable to stevedoring services, which function merely
provides labor in loading and stowing of cargoes for its client. In this case, Mindanao Terminal loaded the cargoes under
the plan made by Del Monte Produce and M.V Mistrau and was under the supervision of the ship officer. It observed the
ordinary diligence required from it in loading the cargoes. From the records, it was seen that the cause of the damage is
the bad weather, which therefore causes the collapse of cargo and damage thereof.