NDC vs CA & DISC / Maritime Co. v.

CA

FACTS:

- Rizal Surety was the insurer of 800 packages of PVC compound loaded on the SS Doña
Nati (owned by National Development Company whereas the petitioner Martime Co
was its agent) at Yokohama and consigned to the Acme Electrical Manufacturing
Company.
- NDC had appointed petitioner Maritime as its agent to manage and operate 3 vessels
owned by it, including the SS Doña Nati for and in its behalf and account, and for a
determinate period or payment of all guarantees made by Maritime Co for account of
the vessels (ship agent under COC)
- The subject goods were never delivered to the consignee so that Rizal as insurer paid
consignee the sum of P38K.
- The cause of the non-delivery of the goods, from the evidence presented by NDC and
Martime Co. is that the SS Doña Nati was rammed by M/V Yasushima Maru, causing
damage to the hull of the SS Doña Nati and the resultant flooding of the holds damaged
beyond repair the goods of the consignee in question.
- Rizal Surety & Insurance Co. sued both defendants for the recovery of the sum of
money paid by it as insurer for the value of the goods lost in transit on board SS Doña
Nati.
- RTC dismissed the complaint and held that under the Code of Commerce, it would be
the vessel at fault in this collision that would be responsible for the damage to the cargo.
And the evidence of both Defendants, which has not been rebutted, is that the
M/V Yasushima Maru was at fault in the collision, so that the cause of action of plaintiff
should be directed to the owners of the negligent vessel. However, as Plaintiff has
brought this action in good faith, attorney's fees are not recoverable.
- Rizal Surety elevated the case to the CA. CA set aside RTC’s judgment and ordered
NDC and Maritime Co. to pay jointly and severally to Rizal Surety the sum of
P38,758.50 with legal rate of interest from the filing of the complaint.

ISSUE: W/N NDC and Maritime Co are liable to petitioner?

RULING:

YES. Under the established facts, and in accordance with Article 1734 above mentioned,
petitioner Maritime Co. and NDC, as "common carriers," are liable to Acme for "the loss,
destruction or deterioration of the goods," and may be relieved of responsibility if the loss,
etc., is due to any of the following causes only:

1. Flood, storm, earthquakes, 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.'

 Since none of the specified absolutory causes is present, the carrier's liability is clear.
The petitioner's other claim that the loss of the goods was due entirely to the fault of the
Japanese vessel, Yasushima Maru, which rammed into the Doña Nati cannot be sustained. CA
found, as a fact, after a review and study of the evidence, that the Doña Nati "did not exercise
even due diligence to avoid the collision.' Having failed to exercise extraordinary diligence to
avoid any loss of life and property, as commanded by law, not having in fact exercised "even
due diligence to avoid the collision,' it must be held responsible for the loss of the goods in
question. Besides, as remarked by the Court of Appeals, "the principal cause of action is not
derived from a maritime collision, but rather, from a contract of carriage, as evidenced by the
bill of lading."
Tatad vs Sec. Garcia GR No. 114222, April 16, 1995

FACTS:

In 1989, the government planned to build a railway transit line along EDSA. No bidding was
made but certain corporations were invited to prequalify. The only corporation to qualify was
the EDSA LRT Consortium which was obviously formed for this particular undertaking. An
agreement was then made between the government, through the Department of
Transportation and Communication (DOTC), and EDSA LRT Consortium. The agreement
was based on the Build-Operate-Transfer scheme provided for by law (RA 6957, amended by
RA 7718). Under the agreement, EDSA LRT Consortium shall build the facilities, i.e.,
railways, and shall supply the train cabs. Every phase that is completed shall be turned over
to the DOTC and the latter shall pay rent for the same for 25 years. By the end of 25 years, it
was projected that the government shall have fully paid EDSA LRT Consortium. Thereafter,
EDSA LRT Consortium shall sell the facilities to the government for $1.00.

However, Senators Francisco Tatad, John Osmeña, and Rodolfo Biazon opposed the
implementation of said agreement as they averred that EDSA LRT Consortium is a foreign
corporation as it was organized under Hongkong laws; that as such, it cannot own a public
utility such as the EDSA railway transit because this falls under the nationalized areas of
activities. The petition was filed against Jesus Garcia, Jr. in his capacity as DOTC Secretary.

ISSUE:

Can respondent EDSA LRT Corporation, Ltd., a foreign corporation own EDSA LRT III, a
public utility?

HELD:

What private respondent owns are the rail tracks, rolling stocks like the coaches, rail stations,
terminals and the power plant, not a public utility. While a franchise is needed to operate
these facilities to serve the public, they do not by themselves constitute a public utility. What
constitutes a public utility is not their ownership but their use to serve the public.

In law, there is a clear distinction between the “operation” of a public utility and the
ownership of the facilities and equipment used to serve the public. The right to operate a
public utility may exist independently and separately from the ownership of the facilities
thereof. One can own said facilities without operating them as a public utility, or conversely,
one may operate a public utility without owning the facilities used to serve the public. The
devotion of property to serve the public may be done by the owner or by the person in control
thereof who may not necessarily be the owner thereof.
Crisostomo vs. CA, G.R. No. 138334 August 25, 2003

FACTS:

In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent

Caravan Travel and Tours International, Inc. to arrange and facilitate her booking, ticketing
and accommodation in a tour dubbed “Jewels of Europe”. The package tour included the
countries of England, Holland, Germany, Austria, Liechstenstein, Switzerland and France at
a total cost of P74,322.70.Petitioner was given a 5% discount on the amount, which included
airfare, and the booking fee was also waived because petitioner’s niece, Meriam Menor, was
respondent company’s ticketing manager.

Pursuant to said contract, Menor went to her aunt’s residence on June 12, 1991 – a
Wednesday – to deliver petitioner’s travel documents and plane tickets.Petitioner, in turn,
gave Menor the full payment for the package tour.Menor then told her to be at the Ninoy
Aquino International Airport (NAIA) on Saturday,two hours before her flight on board
British Airways.

Without checking her travel documents, petitioner went to NAIA on Saturday, June
15, 1991, to take the flight for the first leg of her journey from Manila to Hongkong. To
petitioner’s dismay, she discovered that the flight she was supposed to take had already
departed the previous day.She learned that her plane ticket was for the flight scheduled on
June 14, 1991. She thus called up Menor to complain.

Subsequently, Menor prevailed upon petitioner to take another tour – the “British
Pageant” – which included England, Scotland and Wales in its itinerary. For this tour package,
petitioner was asked anew to pay US$785.00 or P20,881.00 (at the then prevailing exchange
rate of P26.60). She gave respondent US$300 or P7,980.00 as partial payment and commenced
the trip in July 1991.

Upon petitioner’s return from Europe, she demanded from respondent the
reimbursement of P61,421.70, representing the difference between the sum she paid for
“Jewels of Europe” and the amount she owed respondent for the “British Pageant” tour.
Despite several demands, respondent company refused to reimburse the amount, contending
that the same was non-refundable.Petitioner was thus constrained to file a complaint against
respondent for breach of contract of carriage and damages, which was docketed as Civil Case
No. 92-133 and raffled to Branch 59 of the Regional Trial Court of Makati City.

After due proceedings, the trial court rendered a decision in favor of Estela Crisostomo.

But it was reversed by the Court of Appeals. Hence, this petition.

ISSUE: Is the Caravan Travel and Tours liable for reimbursement and damages?

HELD: Petition DENIED.

By definition, a contract of carriage or transportation is one whereby a certain person

or association of persons obligate themselves to transport persons, things, or news from one
place to another for a fixed price. Such person or association of persons are regarded as carriers
and are classified as private or special carriers and common or public carriers. A common
carrier is defined under Article 1732 of the Civil Code as persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or both,
by land, water or air, for compensation, offering their services to the public.

It is obvious from the above definition that respondent is not an entity engaged in the
business of transporting either passengers or goods and is therefore, neither a private nor a
common carrier. Respondent did not undertake to transport petitioner from one place to
another since its covenant with its customers is simply to make travel arrangements in their
behalf. Respondent’s services as a travel agency include procuring tickets and facilitating
travel permits or visas as well as booking customers for tours.

While petitioner concededly bought her plane ticket through the efforts of respondent
company, this does not mean that the latter ipso facto is a common carrier. At most,
respondent acted merely as an agent of the airline, with whom petitioner ultimately
contracted for her carriage to Europe. Respondent’s obligation to petitioner in this regard was
simply to see to it that petitioner was properly booked with the airline for the appointed date
and time. Her transport to the place of destination, meanwhile, pertained directly to the
airline.

The object of petitioner’s contractual relation with respondent is the latter’s service
of arranging and facilitating petitioner’s booking, ticketing and accommodation in the
package tour. In contrast, the object of a contract of carriage is the transportation of
passengers or goods. It is in this sense that the contract between the parties in this case was
an ordinary one for services and not one of carriage. Petitioner’s submission is premised on a
wrong assumption.It is thus not bound under the law to observe extraordinary diligence in
the performance of its obligation, as petitioner claims.

Since the contract between the parties is an ordinary one for services, the standard of
care required of respondent is that of a good father of a family under Article 1173 of the Civil
Code.This connotes reasonable care consistent with that which an ordinarily prudent person
would have observed when confronted with a similar situation. The test to determine
whether negligence attended the performance of an obligation is: did the defendant in doing
the alleged negligent act use that reasonable care and caution which an ordinarily prudent
person would have used in the same situation?If not, then he is guilty of negligence.

We do not agree with the finding of the lower court that Menor’s negligence concurred
with the negligence of petitioner and resultantly caused damage to the latter. Contrary to
petitioner’s claim, the evidence on record shows that respondent exercised due diligence in
performing its obligations under the contract and followed standard procedure in rendering
its services to petitioner. As correctly observed by the lower court, the plane ticket. issued to
petitioner clearly reflected the departure date and time, contrary to petitioner’s contention.
The travel documents, consisting of the tour itinerary, vouchers and instructions, were
likewise delivered to petitioner two days prior to the trip. Respondent also properly booked
petitioner for the tour, prepared the necessary documents and procured the plane tickets. It
arranged petitioner’s hotel accommodation as well as food, land transfers and sightseeing
excursions, in accordance with its avowed undertaking. Therefore, it is clear that respondent
performed its prestation under the contract as well as everything else that was essential to
book petitioner for the tour.

Hence, petitioner cannot recover and must bear her own damage.
First Philippine Industrial Corporation vs. Court of Appeals
G.R. No. 125948 December 29, 1998
Facts:
Petitioner, First Phil. Industrial Corporation (FirstPhil for brevity) is a grantee of a
pipeline concession under Republic Act No. 387, as amended, to contract, install and operate
oil pipelines. FirstPhil applied for a mayor's permit, but before the mayor's permit could be
issued, the respondent City Treasurer required petitioner to pay a local tax pursuant to the
Local Government Code. Petitioner filed a letter-protest addressed to the respondent City
Treasurer, but the latter denied the same contending that petitioner cannot be considered
engaged in transportation business, thus it cannot claim exemption under Section 133 (j) of
the Local Government Code.
FirstPhil filed with the RTC Batangas a complaint for tax refund with prayer for writ
of preliminary injunction against respondents, contending that the imposition of tax upon
them violates Sec 133 of the Local Government Code. On the other hand, respondents assert
that pipelines are not included in the term "common carrier" which refers solely to ordinary
carriers such as trucks, trains, ships and the like. Respondents further posit that the term
"common carrier" under the said code pertains to the mode or manner by which a product is
delivered to its destination.
RTC dismissed the complaint, ruling that exemption granted under Sec. 133 (j)
encompasses only "common carriers" so as not to overburden the riding public or commuters
with taxes. And that petitioner is not a common carrier, but a special carrier extending its
services and facilities to a single specific or "special customer" under a "special contract."
The case was elevated by the petitioner to the CA, but CA affirmed the decision of the
RTC. Hence this petition.
Issue:
WON the petitioner is a "common carrier" and, therefore, exempt from the business tax.
Held: Petition was granted. CA decision was REVERSED and SET ASIDE.
SC ruled in this case that petitioner is a common carrier and thus, exempt from business
tax.
A "common carrier" may be defined, broadly, as one who holds himself out to the public
as engaged in the business of transporting persons or property from place to place, for
compensation, offering his services to the public generally. Art. 1732 of the Civil Code defines
a "common carrier" as "any person, corporation, firm or association engaged in 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.
The definition of "common carriers" in the Civil Code makes no distinction as to the
means of transporting, as long as it is by land, water or air. It does not provide that the
transportation of the passengers or goods should be by motor vehicle. In fact, in the United
States, oil pipe line operators are considered common carriers.
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered
a "common carrier.", and at the same time, said act also regards petroleum operation as a
public utility. BIR likewise considers the petitioner a "common carrier." In so ruling, it held
that, since petitioner is a pipeline concessionaire that is engaged only in transporting
petroleum products, it is considered a common carrier under Republic Act No. 387. Such
being the case, it is not subject to withholding tax prescribed by Revenue Regulations No. 13-
78, as amended.
Section 133 (j), of the Local Government Code, provides:
Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. —
Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of the following:
(j) Taxes on the gross receipts of transportation contractors and persons engaged
in the transportation of passengers or freight by hire and common carriers by air,
land or water, except as provided in this Code.
SC held that the legislative intent in excluding from the taxing power of the local
government unit the imposition of business tax against common carriers is to prevent a
duplication of the so-called "common carrier's tax."
NATIONAL STEEL CORPORATION vs. COURT OF APPEALS (1997)
Facts:
NSC hired MV Vlasons I, a private vessel owned by VSI. They entered into a 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. On
arrival and 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. NSC filed a complaint
for damages but RTC dismissed the complaint
Issues:
1. whether VSI contracted with NSC as a common carrier or as a private carrier
2. Whether or not the provisions of the Civil Code of the Philippines on common carriers
pursuant to which there exist[s] a presumption of negligence against the common
carrier in case of loss or damage to the cargo are applicable to a private carrier.
Held:
1. VSI was not a common carrier but a private carrier. It is undisputed that VSI did not
offer its services to the general public. 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. The burden of proof lies on the
part of NSC and not the VSI.
Article 1732 of the Civil Code defines a common carrier as "persons, corporations, firms
or associations engaged in the business of carrying or transporting passengers or goods or
both, by land, water or air, for compensation, offering their services to the public." It has been
held that the true test of a common carrier is the carriage of passengers or goods, provided it
has space, for all who opt to avail themselves of its transportation service for a fee. A carrier
which does not qualify under the above test is deemed a private carrier. "Generally, private
carriage is undertaken by special agreement and the carrier does not hold himself out to carry
goods for the general public. . . ."
2. Because the MV Vlason I was a private carrier, the shipowner's obligations are
governed by the provisions of the Code of Commerce and not by the Civil Code which,
as a general rule places the prima facie presumption of negligence on a common carrier.
IN A CONTRACT OF PRIVATE CARRIAGE, THE BURDEN OF PROOF IN CASE OF
ACCIDENT IS ON THE CARRIER but the court exempts VSI due to force majeure.
NSC must prove that the damage to its shipment was caused by VSI's willful negligence
or failure to exercise due diligence in making MV Vlason I seaworthy and fit for holding,
carrying and safekeeping the cargo. The burden of proof was placed on NSC by the parties'
agreement.
National Steel Corp. v. CA and Vlasons Shipping Inc.

FACTS:

- The MV Vlasons I is a vessel which renders tramping service and, as such, does not
transport cargo or shipment for the general public. Its services are available only to
specific persons who enter into a special contract of charter party with its owner. It is
undisputed that the ship is a private carrier. And it is in the capacity that its owner,
Vlasons Shipping, Inc., entered into a contract of affreightment or contract of voyage
charter hire with National Steel Corporation.

- Plaintiff National Steel Corporation (NSC) as Charterer and defendant Vlasons

Shipping, Inc. (VSI) as Owner, entered into a Contract of Voyage Charter Hire whereby
NSC hired VSI's vessel, the MV "VLASONS I" to make one (1) voyage to load steel
products at Iligan City and discharge them at North Harbor, Manila.

- The parties stipulated in their contract that the terms and conditions of the
NONYOZAI Charter Party shall form part of their terms. The terms "F.I.O.S.T."
(Freight In and Out including Stevedoring and Trading) which is used in the shipping
business is a standard provision in said Charter Party means that the handling, loading
and unloading of the cargoes are the responsibility of the Charterer. Under Paragraph 5
of the NANYOZAI Charter Party, it states, "Charterers to load, stow and discharge the
cargo free of risk and expenses to owners.

- It also stipulated that the owners shall not be liable for loss of or damage of the cargo
arising or resulting from: unseaworthiness unless caused by want of due diligence on
the part of the owners to make the vessel seaworthy, and to secure that the vessel is
properly manned, equipped and supplied and to make the holds and all other parts of
the vessel in which cargo is carried, fit and safe for its reception, carriage and
preservation xxx

- In accordance with the Contract of Voyage Charter Hire, the MV "VLASONS I" loaded
at plaintiffs pier at Iligan City, the NSC's shipment of 1,677 skids of tinplates and 92
packages of hot rolled sheets for carriage to Manila. The shipment was placed in the 3
hatches of the ship.

- The vessel arrived with the cargo at North Harbor, Manila. The following day, when
the vessel's 3 hatches containing the shipment were opened by plaintiff's agents, nearly
all the skids of tinplates and hot rolled sheets were allegedly found to be wet and rusty.

- The cargo was discharged and unloaded by stevedores hired by the Charterer.
Unloading was completed after incurring a delay of 11 days due to the heavy rain which
interrupted the unloading operations.

- MASCO (surveyor hired by the NSC) made a report of its ocular inspection conducted
on the cargo, both while it was still on board the vessel and later at the NDC warehouse
where the cargo was taken and stored. It found wetting and rusting of the packages of
hot rolled sheets and metal covers of the tinplates; that tarpaulin hatch covers were
noted torn at various extents; that container/metal casings of the skids were rusting all
over. MASCO ventured the opinion that "rusting of the tinplates was caused by contact
 with SEA WATER sustained while still on board the vessel as a consequence of the heavy
weather and rough seas encountered while en route to destination”. It was also reported
that MASCO's surveyors drew at random samples of bad order packing materials of the
tinplates and delivered the same to the M.I.T. Testing Laboratories for analysis which
affirmed MASCO’s finding.

- On the basis of the aforesaid report, NSC filed with the defendant its claim for damages
suffered due to the downgrading of the damaged tinplates in the amount of P941K.

- Plaintiff formally demanded payment of said claim but defendant VSI refused and failed
to pay. In its complaint, it claimed that it sustained losses as a result of the act, neglect
and default of the master and crew in the management of the vessel as well as the want
of due diligence on the part of the defendant to make the vessel seaworthy and to make
the holds and all other parts of the vessel in which the cargo was carried, fit and safe
for its reception, carriage and preservation — all in violation of defendant's undertaking
under their Contract of Voyage Charter Hire.

- Defendant denied liability for the alleged damage claiming that the MV "VLASONS I"
was seaworthy in all respects for the carriage of plaintiff's cargo and that said vessel was
not a "common carrier" inasmuch as she was under voyage charter contract with the
plaintiff as charterer under the charter party.

- RTC ruled in favor of defendant. It held that The MV "VLASONS I" is a vessel of
Philippine registry engaged in the tramping service and is available for hire only under
special contracts of charter party as in this particular case. It further held that defendant
cannot be held liable for it pursuant to Article 1734 of the Civil Case which exempts
the carrier from responsibility for loss or damage arising from the "character of the
goods . . ." All the 1,769 skids of the tinplates could not have been damaged by water as
claimed by plaintiff but because of its own “sweating”; and that due to the fact the vessel
encountered rough seas and bad weather on which account the master filed a Marine
Protest can be invoked as a defense of force majeure.

- CA modified the decision of the RTC by reducing the demurrage and deleting attorneys
fees and expenses.

ISSUE:

- W/N VSI is a private/common carrier? PRIVATE

- W/N defendant may be held liable on account of the damage of the cargo owned by
plaintiff? NO

RULING:

In the instant case, it is undisputed that VSI did not offer its services to the general
public. As found by the RTC, it carried passengers or goods only for those it chose under a
"special contract of charter party." The MV Vlasons I "was not a common but a private
carrier. Consequently, the rights and obligations of VSI and NSC, including their respective
liability for damage to the cargo, are determined primarily by stipulations in their contract of
private carriage or charter party.
 It is clear from the parties' Contract of Voyage Charter Hire that VSI "shall not be
responsible for losses except on proven willful negligence of the officers of the vessel." The
NANYOZAI Charter Party, which was incorporated in the parties' contract of transportation
further provided that the shipowner shall not be liable for loss of or a damage to the cargo
arising or resulting from unseaworthiness, unless the same was caused by its lack of due
diligence to make the vessel seaworthy or to ensure that the same was "properly manned,
equipped and supplied," and to "make the holds and all other parts of the vessel in which
cargo was carried, fit and safe for its reception, carriage and preservation."

Because the MV Vlasons I was a private carrier, the shipowner's obligations are
governed by the foregoing provisions of the Code of Commerce and not by the Civil Code
which, as a general rule, places the prima facie presumption of negligence on a common
carrier. It is a hornbook doctrine that: “In an action against a private carrier for loss of, or
injury to, cargo, the burden is on the plaintiff to prove that the carrier was negligent or
unseaworthy, and the fact that the goods were lost or damaged while in the carrier's custody
does not put the burden of proof on the carrier.”

Indicators of VSI’s due diligence:

a) It was drylocked and inspected by the Philippine Coast Guard before it proceeded to Iligan
City for its voyage to Manila under the contract of voyage charter hire. The vessel's voyage
from Iligan to Manila was the vessel's first voyage after drydocking. The Philippine Coast
Guard Station in Cebu cleared it as seaworthy, fitted and equipped; it met all requirements
for trading as cargo vessel.
b) The records sufficiently support VSI's contention that the ship used the old tarpaulin, only
in addition to the new one used primarily to make the ship's hatches watertight.

c) Despite encountering rough weather twice, the new tarpaulin did not give way and the
ship's hatches and cargo holds remained waterproof.

Indeed, NSC failed to discharge its burden to show negligence on the part of the officers and
the crew of MV Vlasons I. On the contrary, the records reveal that it was the stevedores of
NSC who were negligent in unloading the cargo from the ship. The stevedores employed only
a tent-like material to cover the hatches when strong rains occasioned by a passing typhoon
disrupted the unloading of the cargo. This tent-like covering, however, was clearly
inadequate for keeping rain and seawater away from the hatches of the ship.

The charter party is a normal commercial contract and its stipulations are agreed upon
in consideration of many factors, not the least of which is the transport price which is
determined not only by the actual costs but also by the risks and burdens assumed by the
shipper in regard to possible loss or damage to the cargo. In recognition of such factors, the
parties even stipulated that the shipper should insure the cargo to protect itself from the risks
it undertook under the charter party. That NSC failed or neglected to protect itself with such
insurance should not adversely affect VSI, which had nothing to do with such failure or
neglect.
VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY v. CA

FACTS:

Plaintiff shipped at Maconcon Port, Isabela 940 round logs on board M/V Seven
Ambassador, a vessel owned by defendant Seven Brothers Shipping Corporation. Plaintiff
insured the logs against loss and/or damage with defendant South Sea Surety and Insurance
Co., Inc. for P2M and the latter issued its Marine Cargo Insurance Policy on said date. In the
meantime, the M/V Seven Ambassador sank resulting in the loss of the plaintiff’s insured logs.

Plaintiff demanded from defendant South Sea Surety and Insurance Co., Inc. the
payment of the proceeds of the policy but the latter denied liability under the policy. 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.

Court of Appeals affirmed in part the RTC judgment by sustaining the liability of South
Sea Surety and Insurance Company ("South Sea"), but modified it by holding that Seven
Brothers Shipping Corporation ("Seven Brothers") was not liable for the lost cargo.

ISSUE:

Whether defendants shipping corporation and the surety company are liable to the
plaintiff for the latter's lost logs.

HELD:

The charter party between the petitioner and private respondent stipulated that the
"(o)wners shall not be responsible for loss, split, short-landing, breakages and any kind of
damages to the cargo" –VALID

There is no dispute between the parties 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 on board the vessel 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. Even the latter admits this in its
petition.

Private respondent had acted as a private carrier in transporting petitioner's 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 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.

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 this case of a ship totally chartered for the use of a single party. (Home
Insurance Co. vs. American Steamship Agencies Inc., 23 SCRA 24, April 4, 1968)
Valenzuela Hardwood and Industrial Supply v. CA

FACTS:

- Valenzuela Hardwood and Industrial Supply, Inc. (VHIS) entered into an agreement
with the defendant Seven Brothers (Shipping Corporation) whereby the latter
undertook to load on board its vessel M/V Seven Ambassador the VHIS’ lauan round
logs numbering 940 at the port of Maconacon, Isabela for shipment to Manila.

- VIHS insured the logs against loss and/or damage with defendant South Sea Surety and
Insurance Co., Inc. for P2M and the latter issued its Marine Cargo Insurance Policy No.

- In the meantime, the said vessel M/V Seven Ambassador sank on Jan 25 resulting in the
loss of the plaintiff's insured logs.

- A check for P5625 to cover payment of the premium and documentary stamps due on
the policy was tendered due to the insurer but was not accepted. Instead, the South Sea
Surety and Insurance Co., Inc. cancelled the insurance policy it issued as of the date of
the inception for non-payment of the premium due in accordance with Section 77 of
the Insurance Code.

- Plaintiff demanded from defendant South Sea Surety and Insurance Co., Inc. the
payment of the proceeds of the policy but the latter denied liability under the policy.
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.

- RTC rendered judgment in favor of plaintiff and against defendants. The trial court
deemed the charter party stipulation exempting owners from liability for loss or any
type of breakage void for being contrary to public policy, citing Article 1745 of the Civil
Code.

- Both defendants shipping corporation and the surety company appealed.

- CA affirmed in part the RTC judgment by sustaining the liability of South Sea Surety
and Insurance Company but modified it by holding that Seven Brothers Shipping
Corporation ("Seven Brothers") was not liable for the lost cargo. It upheld the
stipulation in the charter party that the ship owner would be exempted from liability
in case of loss. It also held that the RTC erred in applying the provisions of the Civil
Code 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. The shipping corporation should not therefore be held
liable for the loss of the logs.

- It should be noted at the outset that there is no dispute between the parties 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 on board
the vessel and not due to fortuitous event."

ISSUE:
 - Whether the stipulation in the subject charter party exempting owners for loss, split,
short-landing, breakages and any kind of damages to the cargo valid?

- Whether defendants shipping corporation and the surety company are liable to the
plaintiff for the latter's lost logs?

RULING:

1. YES. It is undisputed that private respondent had acted as a private carrier in transporting
petitioner's 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. 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.

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 carrier's obligations and liabilities over the shipment which, in turn,
determine the price or consideration of the charter.

2. YES. In view of the above disquisition upholding the validity of the questioned
charter party stipulation and holding that petitioner may not recover from private
respondent, the present issue is moot and academic. It suffices to state that the Resolution of
this Court dated June 2, 1995 affirming the liability of South Sea does not, by itself, necessarily
preclude the petitioner from proceeding against private respondent. An aggrieved party may
still recover the deficiency for the person causing the loss in the event the amount paid by
the insurance company does not fully cover the loss by virtue of Article 2207 of the Civil
Code.
Loadstar Shipping Co. v. CA and Manila Insurance Co.

FACTS:

- LOADSTAR received on board its M/V "Cherokee" the following goods for shipment:
a) 705 bales of lawanit hardwood; b) 27 boxes and crates of tilewood assemblies and the
others; and c) 49 bundles of mouldings R & W (d) Apitong Bolidenized.

- The goods, amounting to P6M were insured for the same amount with respondent MIC
against various risks including "TOTAL LOSS BY TOTAL OF THE LOSS THE VESSEL."
The vessel, in turn, was insured by Prudential Guarantee & Assurance, Inc. (hereafter
PGAI) for P4 million.

- 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 P6M to the insured in full settlement of its claim, and the
latter executed a subrogation receipt therefor.

- MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking of the
vessel was due to the fault and negligence of LOADSTAR and its employees. It also
prayed that PGAI be ordered to pay the insurance proceeds from the loss the vessel
directly to MIC, said amount to be deducted from MIC's claim from LOADSTAR.

- LOADSTAR denied any liability for the loss of the shipper's goods and claimed that
sinking of its vessel was due to force majeure. PGAI, on the other hand, averred that
MIC had no cause of action against it, LOADSTAR being the party insured. In any
event, PGAI was later dropped as a party defendant after it paid the insurance proceeds
to LOADSTAR.

- RTC rendered judgment in favor of MIC, prompting LOADSTAR to elevate the matter
to the court of Appeals, which, however, agreed with the trial court and affirmed its
decision in toto.

- LOADSTAR submits that the vessel was a private carrier because it was not issued a
certificate of public convenience, it did not have a regular trip or schedule nor a fixed
route, and there was only one shipper, one consignee for a special cargo.

ISSUE: W/N LOADSTAR is a private/common carrier?

RULING:

LOADSTAR is a common carrier. It is not necessary that the carrier be issued a

certificate of public convenience, and this public character is not altered by the fact that the
carriage of the goods in question was periodic, occasional, episodic or unscheduled.

In support of its position, LOADSTAR relied on the 1968 case of Home Insurance Co.
v. American Steamship Agencies, Inc., where this Court held that a common carrier
transporting special cargo or chartering the vessel to a special person becomes a private carrier
that is not subject to the provisions of the Civil Code. Any stipulation in the charter party
absolving the owner from liability for loss due to the negligence of its agent is void only if the
strict policy governing common carriers is upheld. Such policy has no force where the public
at is not involved, as in the case of a ship totally chartered for the use of a single party.
LOADSTAR also cited Valenzuela Hardwood and Industrial Supply, Inc. v. Court of Appeals
and National Steel Corp. v. Court of Appeals, both of which upheld the Home Insurance
doctrine.

These cases invoked by LOADSTAR are not applicable in the case at bar for the simple
reason that the factual settings are different. The records do not disclose that the M/V
"Cherokee," on the date in question, undertook to carry a special cargo or was chartered to a
special person only. There was no charter party. The bills of lading failed to show any special
arrangement, but only a general provision to the effect that the M/V"Cherokee" was a "general
cargo carrier." Further, the bare fact that the vessel was carrying a particular type of cargo for
one shipper, which appears to be purely coincidental, is not reason enough to convert the
vessel from a common to a private carrier, especially where, as in this case, it was shown that
the vessel was also carrying passengers.

Under the facts and circumstances obtaining in this case, LOADSTAR fits the definition
of a common carrier under Article 1732 of the Civil Code. The SC upheld the doctrine
enshrined in De Guzman v. Court of Appeals, where the Court juxtaposed the statutory
definition of "common carriers" with the peculiar circumstances of that case. Art. 1732 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 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.

A certificate of public convenience is not a requisite for the incurring of liability under
the Civil Code provisions governing common carriers. That liability arises the moment a person
or firm acts as a common carrier, without regard to whether or not such carrier has also
complied with the requirements of the applicable regulatory statute and implementing
regulations and has been granted a certificate of public convenience or other franchise.

As regards the issue of seaworthiness of M/V Cherokee, the Court found that the subject
vessel was not seaworthy when it embarked on its voyage on 19 November 1984. The vessel
was not even sufficiently manned at the time. "For a vessel to be seaworthy, it must be
adequately equipped for the voyage and manned with a sufficient number of competent
officers and crew. The failure of a common carrier to maintain in seaworthy condition its
vessel involved in a contract of carriage is a clear breach of its duty prescribed in Article 1755
of the Civil Code."
LOADSTAR SHIPPING CO., INC., vs. COURT OF APPEALS

Facts:

On 19 November 1984, LOADSTAR received on board a) 705 bales of lawanit

hardwood; b) 27 boxes and crates of tilewood assemblies and the others ;and c) 49 bundles of
mouldings R & W (3) Apitong Bolidenized. 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. MIC filed a complaint against LOADSTAR and PGAI, alleging that the
sinking of the vessel was due to the fault and negligence of LOADSTAR and its employees.
LOADSTAR denied any liability for the loss of the shipper's goods and claimed that sinking
of its vessel was due to force majeure. LOADSTAR submits that the vessel was a private carrier
because it was not issued certificate of public convenience, it did not have a regular trip or
schedule nor a fixed route, and there was only "one shipper, one consignee for a special cargo.

Issues:

(1) Is the M/V "Cherokee" a private or a common carrier?

(2) Did LOADSTAR observe due and/or ordinary diligence in these premises.

Held: Petition is dismissed:

SC hold that LOADSTAR is a common carrier. It is not necessary that the carrier be
issued a certificate of public convenience, and this public character is not altered by the fact
that the carriage of the goods in question was periodic, occasional, episodic or unscheduled.
The bills of lading failed to show any special arrangement, but only a general provision to the
effect that the M/V"Cherokee" was a "general cargo carrier." 14 Further, the bare fact that the
vessel was carrying a particular type of cargo for one shipper, which appears to be purely
coincidental, is not reason enough to convert the vessel from a common to a private carrier,
especially where, as in this case, it was shown that the vessel was also carrying passengers.
Under Article 1732 of the Civil Code the Civil Code defines "common carriers" in the
following terms:

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.

On to the second assigned error, we find that the M/V "Cherokee" was not seaworthy
when it embarked on its voyage on 19 November 1984. The vessel was not even sufficiently
manned at the time. "For a vessel to be seaworthy, it must be adequately equipped for the
voyage and manned with a sufficient number of competent officers and crew. The failure of
a common carrier to maintain in seaworthy condition its vessel involved in a contract of
carriage is a clear breach of its duty.
Sarkies Tours Phils v. CA

FACTS:

- On August 31, 1984, Fatima boarded petitioner's De Luxe Bus No. 5 in Manila on her
way to Legazpi City. Her brother Raul helped her load three pieces of luggage
containing all of her optometry review books, materials and equipment, trial lenses,
trial contact lenses, passport and visa, as well as her mother Marisol's U.S. immigration
(green) card, among other important documents and personal belongings.

- Her belongings were kept in the baggage compartment of the bus, but during a stopover
at Daet, it was discovered that only one bag remained in the open compartment. The
others, including Fatima's things, were missing and might have dropped along the way.
Some of the passengers suggested retracing the route of the bus to try to recover the lost
items, but the driver ignored them and proceeded to Legazpi City.

- Fatima immediately reported the loss to her mother who, in turn, went to Sarkies
Tours’ office in Legazpi City and later at its head office in Manila. Petitioner, however,
merely offered her P1K (this was yr 1997) for each piece of luggage lost, which she
turned down.

- After returning to Bicol, respondents asked assistance from the radio stations and even
from Philtranco bus drivers who plied the same route on August 31st. The effort paid
off when one of Fatima's bags was recovered. Marisol further reported the incident to
the NBI field office in Legazpi City and to the local police.

- Eventually respondents, through counsel, formally demanded satisfaction of their

complaint from petitioner.

- In a letter dated October 1, 1984, Sarkies Tours apologized for the delay and said that
"a team has been sent out to Bicol for the purpose of recovering or at least getting the
full detail" of the incident.

- After more than nine months of fruitless waiting, respondents decided to file the case
below to recover the value of the remaining lost items, as well as moral and exemplary
damages, attorney's fees and expenses of litigation. They claimed that the loss was due
to petitioner's failure to observe extraordinary diligence in the care of Fatima's luggage
and that petitioner dealt with them in bad faith from the start. Petitioner, on the other
hand, disowned any liability for the loss on the ground that Fatima allegedly did not
declare any excess baggage upon boarding its bus.

- RTC ordered Sarkies Tours to pay respondents P30K for value of lost belongings, P90K
for transpo expenses, attorneys fees, damages, litigation expenses.

- CA affirmed but deleted award for damages.

- Petitioner claims that Fatima did not bring any piece of luggage with her, and even if
she did, none was declared at the start of the trip.
ISSUE: W/N petitioner is liable for the loss of the personal belongings of its passenger
(respondent)? YES

RULING:

Under the Civil Code, "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
transported by them," and this liability "lasts from the time the goods are unconditionally
placed in the possession of, and received by the carrier for transportation until the same are
delivered, actually or constructively, by the carrier to the person who has a right to receive
them," unless the loss is due to any of the excepted causes under Article 1734 thereof.

The cause of the loss in the case at bar was petitioner's negligence in not ensuring that the
doors of the baggage compartment of its bus were securely fastened. As a result of this lack of
care, almost all of the luggage was lost, to the prejudice of the paying passengers. As the Court
of Appeals correctly observed:

. . . . Where the common carrier accepted its passenger's baggage for transportation and even
had it placed in the vehicle by its own employee, its failure to collect the freight charge is the
common carrier's own lookout. It is responsible for the consequent loss of the baggage. In the
instant case, defendant appellant's employee even helped Fatima Minerva Fortades and her
brother load the luggages/baggages in the bus' baggage compartment, without asking that
they be weighed, declared, receipted or paid for.