Arada v.

CA

Facts: Alejandro Arada doing business under the name and style South Negros Enterprises is engaged in
the business of small scale shipping as a common carrier, servicing the hauling of cargoes of different
corporations and companies with 5 vessels it was operating. It entered into a contract with San Miguel
Corporation to transport as a common carrier cargoes of the latter from San Carlos City Negros
Occidental to Mandaue City using one of its vessels M/L Maya. The cargoes of San Mig Corp valued at
176, 824. 80.

The master crew applied for clearance to sail which was denied by the Phil Coast Guard due to a
typhoon. However, the next day, it was granted clearance as there was no storm and the sea was calm.
So, ML Maya left for Mandaue City. While it was navigating towards Cebu, a typhoon developed and
said vessel sank with whatever was left if its cargoes. The crew was rescued. The Board of Marine
Inquiry exonerated Arada and his crew from administrative liability. Meanwhile, San Miguel Corporation
filed with the RTC for the recovery of the value of its cargoes anchored on breach of contract of carriage.
The RTC rendered its decision dismissing the claim of San Miguel for recovery of the value of its cargoes.
On appeal, the CA reversed the decision of the RTC. Hence, this petition.

Issue: WON Arada is liable for the loss of the cargo of San Miguel Corporation.

Held: Yes. South Negros Enterprises was exercising its function as a common carrier when it entered into
a contract with San Miguel Corp to carry and transport the latter’s cargoes. A common carrier both from
the nature of its business and for insistent reasons of public policy is burdened by law with the duty of
exercising extraordinary diligence not only in ensuring the safety of passengers, but in caring for the
goods transported byit. The loss, or deterioration or destruction of goods turned over to the common
carrier for the conveyance to a designated destination raises instantly a presumption of fault or
negligence on the part of the carrier, save only in cases where such loss, destruction or deterioration
arises from extreme circumstances such as a natural disaster or calamity.

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

In the case at bar, Southern Negros failed to observe extraordinary diligence over the cargo in question
was negligent previous to the sinking of the carrying vessel. The master crew knew that there was a
typhoon coming before his departure but did not check where it was. He should have verified first
where the typhoon was before departing. The master crew did not ascertain where the typhoon was
headed by the use of his vessel’s barometer and radio. Neither did the captain of the vessel monitor and
record the weather conditions as required under Art.612 of the Code of Commerce.

A common carrier is obliged to observed extraordinary diligence and the failure of the master crew to
ascertain the direction of the storm and the weather condition of the path they would be traversing,
constitute lack of foresight and minimum vigilance over its cargoes taking into account the surrounding
circumstances of the case
HOME INSURANCE COMPANY vs. AMERICAN STEAMSHIP AGENCIES, INC. and LUZON STEVEDORING
CORPORATION

FACTS:

“Consorcio Pesquero del Peru of South America” shipped freight pre-paid at Peru, jute bags of Peruvian
fish meal through SS Crowborough, covered by clean bills of lading. The cargo, consigned to San Miguel
Brewery, Inc., now San Miguel Corporation, and insured by Home Insurance Company arrived in Manila
and was discharged into the lighters of Luzon Stevedoring Company. When the cargo was delivered to
consignee San Miguel Brewery Inc., there were shortages causing the latter to lay claims against Luzon
Stevedoring Corporation, Home Insurance Company and the American Steamship Agencies (shipowner),
owner and operator of SS Crowborough.

Because the others denied liability, Home Insurance Company paid SMBI the insurance value of the loss,
as full settlement of the claim. Having been refused reimbursement by both the Luzon Stevedoring
Corporation and American Steamship Agencies, Home Insurance Company, as subrogee to the
consignee, filed against them before the CFI of Manila a complaint for recovery of the payment paid
with legal interest, plus attorney’s fees.

In answer, Luzon Stevedoring Corporation alleged that it delivered with due diligence the goods in the
same quantity and quality that it had received the same from the carrier.

The CFI, after trial, absolved Luzon Stevedoring Corporation, having found the latter to have merely
delivered what it received from the carrier in the same condition and quality, and ordered American
Steamship Agencies to pay Home Insurance Company the amount demanded with legal interest plus
attorney’s fees.

Disagreeing with such judgment, American Steamship Agencies appealed directly to Us.

ISSUE: Is the stipulation in the charter party of the owner’s non-liability valid so as to absolve the
American Steamship Agencies from liability for loss?

HELD: The judgment appealed from is hereby reversed and appellant is absolved from liability to
plaintiff.

YES

The bills of lading, covering the shipment of Peruvian fish meal provide at the back thereof that the bills
of lading shall be governed by and subject to the terms and conditions of the charter party, if any,
otherwise, the bills of lading prevail over all the agreements. On the bills are stamped “Freight prepaid
as per charter party. Subject to all terms, conditions and exceptions of charter party dated London, Dec.
13, 1962.”

Section 2, paragraph 2 of the charter party, provides that the owner is liable for loss or damage to the
goods caused by personal want of due diligence on its part or its manager to make the vessel in all
respects seaworthy and to secure that she be properly manned, equipped and supplied or by the
personal act or default of the owner or its manager. Said paragraph, however, exempts the owner of the
vessel from any loss or damage or delay arising from any other source, even from the neglect or fault of
the captain or crew or some other person employed by the owner on board, for whose acts the owner
would ordinarily be liable except for said paragraph..

The provisions of our Civil Code on common carriers were taken from Anglo-American law. 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 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 the case of a ship totally chartered for the use of a single party.

And furthermore, in a charter of the entire vessel, the bill of lading issued by the master to the
charterer, as shipper, is in fact and legal contemplation merely a receipt and a document of title not a
contract, for the contract is the charter party. The consignee may not claim ignorance of said charter
party because the bills of lading expressly referred to the same. Accordingly, the consignees under the
bills of lading must likewise abide by the terms of the charter party. And as stated, recovery cannot be
had thereunder, for loss or damage to the cargo, against the ship-owners, unless the same is due to
personal acts or negligence of said owner or its manager, as distinguished from its other agents or
employees. In this case, no such personal act or negligence has been proved.
TABACALERA INSURANCE vs. NORTH FRONT SHIPPING SERVICES

Facts:

Sacks of grains were loaded on board a vessel owned by North Front Shipping (common carrier); the
consignee: Republic Floor Mills. The vessel was inspected by representatives of the shipper prior to the
transport and was found fitting to carry the cargo; it was also issued a Permit to Sail. The goods were
successfully delivered but it was not immediately unloaded by the consignee. There were a shortage of
23.666 metric tons and some of the merchandise was already moldy and deteriorating. Hence, the
consignee rejected all the cargo and demanded payment of damages from the common carrier. Upon
refusal, the insurance companies (petitioners) were obliged to pay. Petitioners now allege that there
was negligence on the part of the carrier. The trial court ruled that only ordinary diligence was required
since the charter-party agreement converted North Front Shipping into a private carrier.

Issues:

WON North Front Shipping is a common carrier. If indeed, did it fail to exercise the required diligence
and thus should be held liable?

Held:

North Front Shipping is a common carrier. Thus, it has the burden of proving that it observed
extraordinary diligence in order to avoid responsibility for the lost cargo.

The charter-party agreement between North Front Shipping Services, Inc., and Republic Flour Mills
Corporation did not in any way convert the common carrier into a private carrier. 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 x x x

Having been in the service since 1968, the master of the vessel would have known at the outset that
corn grains that were farm wet and not properly dried would eventually deteriorate when stored in
sealed and hot compartments as in hatches of a ship. Equipped with this knowledge, the master of the
vessel and his crew should have undertaken precautionary measures to avoid or lessen the cargo’s
possible deterioration as they were presumed knowledgeable about the nature of such cargo.

But none of such measures was taken.

It did not even endeavor to establish that the loss, destruction or deterioration of the goods was due to
the following: (a) flood, storm, earthquake, lightning, or other natural disaster or calamity; (b) act of the
public enemy in war, whether international or civil; © act or omission of the shipper or owner of the
goods; (d) the character of the goods or defects in the packing or in the containers; (e) order or act of
competent public authority. This is a closed list. If the cause of destruction, loss or deterioration is other
than the enumerated circumstances, then the carrier is rightly liable therefor.

However, the destruction, loss or deterioration of the cargo cannot be attributed solely to the carrier.
The consignee Republic Flour Mills Corporation is guilty of contributory negligence. It was seasonably
notified of the arrival of the barge but did not immediately start the unloading operations.