FIRST PHILIPPINE - INDUSTRIAL CORPVS Court of Appeals

FACTS:

Respondents assert that pipelines are not included in the term “common carrier” which refers
solely to ordinary carriers or motor vehicles.

Trial Court – dismissed complaint

CA – affirmed –

ISSUE: Whether or not a pipeline operator is a common carrier

HELD:

YES.

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.

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.

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.- The fact that petitioner has a limited clientele does not
exclude it from the definition of a common carrier.- Common service coincides with public
service- The law does not distinguish as to the means of transportation, as long as it is by and,
water or air. It does not provide that the transportation of the passengers or goods should be by
motor vehicle.

Public service – includes 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, railroad, street railway, traction railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and whatever may be its classification, freight or
carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and
water craft, engice plant, ice-refrigeration plant, canal, irrigation system gas, electric light heat
and power, water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other similar public services
(CA No. 1416, as amended, otherwise known as the Public Service Act)

FPIC - considered a common carrier under Art. 86 of the Petroleum Act of the Philippines (RA
387), which provides that: Art. 86. Pipe line concessionaire as common carrier. — A pipe line shall
have the preferential right to utilize installations for the transportation of petroleum owned by
him, but is obligated to utilize the remaining transportation capacity pro rata for the
transportation of such other petroleum as may be offered by others for transport, and to charge
without discrimination such rates as may have been approved by the Secretary of Agriculture
and Natural Resources.

FPIC is also a public utility pursuant to Art. 7 of RA 387 which states that “everything relating to
the exploration for and exploitation of petroleum . . . and everything relating to the manufacture,
refining, storage, or transportation by special methods of petroleum, is hereby declared to be a
public utility”

Hence, it is EXEMPT FROM TAXATION.o Legal basis is Section 133 (j), of the Local Government
Code which provides that “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:
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”.

Reason for the exemption: to avoid duplication of tax aged in the transportation of passengers or
freight or both, shipyard, marine repair shop, wharf or dock,

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.

The SC ruled that pipeline operators are common carriers. The SC ruled that a corporation that is
engaged in the business of transporting oil and other petroleum products through its pipes can
be considered a common carrier. The law does not distinguish as to the means of transportation,
as long as it is by and, water or air. It does not provide that the transportation of the passengers
or goods should be by motor vehicle.

CALTEX PHILS VS SULPICIO LINERS

FACTS:

December 19, 1987 8 pm: motor tanker MT Vector owned and operated by Vector Shipping
Corporation carried 8,800 barrels of petroleum products of Caltex by virtue of a charter contract

December 20, 1987 6:30 am: MV Doña Paz passenger and cargo vessel owned and operated by
Sulpicio Lines, Inc. left the port of Tacloban headed for Manila with 1,493 passengers indicated in
the Coast Guard Clear December 20, 1987: MT Vector collided with MV Doña Paz in the open sea
within the vicinity of Dumali Point between Marinduque and Oriental Mindoro, killing almost
all the passengers and crew members of both ships except for 24 survivors.

MV Doña Paz carried an estimated 4,000 passengers most were not in the passenger manifest

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 Doña Paz

February 13, 1989: Teresita Cañezal and Sotera E. Cañezal, Sebastian Cañezal’s wife and mother
respectively, filed a complaint for “Damages Arising from Breach of Contract of Carriage”
against Sulpicio Lines, Inc. for the death of Sebastian E. Cañezal (public school teacher 47 years
old) and his 11-year old daughter Corazon G. Cañezal

Sulpicio, in turn, filed a 3rd party complaint against Francisco Soriano, Vector Shipping
Corporation and Caltex

Sulpicio alleged that Caltex chartered MT Vector with gross and evident bad faith knowing fully
well that MT Vector was improperly manned, ill-equipped, unseaworthy and a hazard to safe
navigation

RTC: dismissed the third party complaint and favored the Cañezal's against Sulpicio Lines.

ISSUE:

W/N the charterer of a sea vessel is liable for damages from a collision between the chartered
vessel and a passenger ship

HELD:

THE CHARTER HAS NO LIABILITY FOR DAMAGES UNDER PHIL MARITIME LAWS

Petitioner and Vector entered into a contract of affreightment, also known as a voyage charter.

A charter party is a contract by which an entire ship, 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.

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 ship’s store,
pay for the wages of the master of the crew, and defray the expenses for the maintenance of the
ship.

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. MT VECTOR IS A
COMMON CARRIER

The charter party agreement did not convert the common carrier into a private carrier.

The parties entered into a voyage charter, which retains the character of the vessel as a common
carrier.

It is imperative that a public carrier shall remain as such, notwithstanding the charter of the
whole or portion of a vessel by one or more persons, provided the charter is limited to the ship
only, as in the case of a time-charter or voyage charter.

It is only when the charter includes both the vessel and its crew, as in a bareboat or demise
that a common carrier becomes private, at least insofar as the particular voyage covering the
charter-party is concerned.

Indubitably, a ship-owner in a time or voyage charter retains possession and control of the ship,
although her holds may, for the moment, be the property of the charterer.

A common carrier is a person or corporation whose regular business is to carry passengers or

property for all persons who may choose to employ and to remunerate him.

MT Vector fits the definition of a common carrier under Article 1732 of the Civil Code.

The public must of necessity rely on the care and skill of common carriers in the vigilance over
the goods and safety of the passengers, especially because with the modern development of
science and invention, transportation has become more rapid, more complicated and somehow
more hazardous. For these reasons, a passenger or a shipper of goods is under no obligation to
conduct an inspection of the ship and its crew, the carrier being obliged by law to impliedly
warrant its seaworthiness.

VIRGINES CALVO VS UCPB GENERAL INSURANCE CO.

FACTS:

Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI), a
sole proprietorship customs broker.

Petitioner entered into a contract with San Miguel Corporation (SMC) for the transfer of 114 reels
of semi- chemical fluting paper and 124 reels of kraft liner board from the Port Area in Manila to
SMC's warehouse at the Tabacalera Compound, Romualdez St., Ermita, Manila. The cargo was
insured by respondent UCPB General Insurance Co., Inc.

The shipment 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 withdrew the cargo from the arrastre operator and
delivered it to SMC's warehouse in Ermita, Manila.

On July 25, 1990, the goods were inspected by Marine Cargo Surveyors, who found that 15 reels
of the semi- chemical fluting paper were "wet/stained/torn" and 3 reels of kraft liner board were
likewise torn.

The damage was placed at P93,112.00.- SMC collected payment from respondent UCPB under its
insurance contract.- In turn, respondent, as subrogee of SMC, brought suit against petitioner.-
Petitioner contends that 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 for profit.

ISSUE:

W/N Calvo is a common carrier

YES

Mere proof of delivery of goods in good order to a carrier, and of their arrival at the place of
destination in bad order, makes out a prima facie case against the carrier, so that if no explanation
is given as to how the injury occurred, the carrier must be held responsible

The petitioner, a customs broker and warehouseman, was declared to be a common carrier in one
case although she does not indiscriminately hold her services out to the public but offers the
same to select parties with whom she may contract in the conduct of her business. In the said
case, petitioner entered into a contract with SMC to transfer paper and kraft board from the Port
Area in Manila to SMC’s warehouse in Ermita, Manila. As a common carrier, she is bound to
exercise extraordinary diligence in transporting the goods and is presumed to be negligent when
she failed to deliver the same.

ASIA - LIGHTERAGE VS CA

FACTS:

Asia Lighterage and Shipping, Inc was contracted as carrier to deliver 3,150 metric tons of Better
Western White Wheat in bulk, (US$423,192.35) to the consignee‘s (General Milling Corporation)
warehouse at Bo. Ugong, Pasig City insured by Prudential Guarantee and Assurance, Inc. against
loss/damage for P14,621,771.75.

Improper packing or, in this case, the defect/s in the container, is/are known to the carrier or his
employees or apparent upon ordinary observation, but he nevertheless accepts the same without
protest or exception notwithstanding such condition, he is not relieved of liability for damage
resulting therefrom. In this case, petitioner accepted the cargo without exception despite the
apparent defects in some of the container vans. Hence, for failure of petitioner to prove that she
exercised extraordinary diligence in the carriage of goods in this case or that she is exempt from
liability, the presumption of negligence as provided under Art. 1735 holds.

ISSUE:

Whether or not it is a common carrier

HELD:

YES
Article 1732 of the Civil Code defines common carriers - as persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering their services to the public.

In De Guzman vs. CA it was held that the definition of - common carriers in Article 1732 of the
Civil Code 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.

X EXERCISE EO - DILIGENCE

It appears that on August 17, 1990, the transport of said cargo was suspended due to a warning of
an incoming typhoon.

- The cargo did not reach its destination.

The same conclusion was reached in another case involving a company that also transports goods
through barges.

The petitioner argued that it is a private carrier allegedly because it has no fixed and publicly
known route, maintains no terminals and issues no tickets. It points out that it is not obligated to
carry indiscriminately for any person. The SC rejected the argument f the petitioner pointing out
that the principal business of the petitioner is that of lighterage and drayage and it offers its
barges to the public for carrying or transporting by water for compensation.

Petitioner was considered a common carrier whether its carrying of goods is done on an irregular
basis rather than a scheduled manner and with a limited clientele.

A common carrier need not have a fixed and publicly known route nor does it have to maintain
terminals or issue tickets

 PSTSI III was tied down to other barges which arrived ahead of it while weathering out the
storm that night.

A few days after, the barge developed a list because of a hole it sustained after hitting an unseen
protuberance underneath the water. It filed a Marine Protest on August 28, 1990 and also secured
the services of Gaspar Salvaging Corporation to refloat the barge.

The barge was then towed to ISLOFF terminal before it finally headed towards the consignee’s
wharf on September 5, 1990.

Upon reaching the Sta. Mesa spillways, the barge again ran aground due to strong current.

7 days later, a bidding was conducted to dispose of the damaged wheat retrieved & loaded on
the 3 other barges.

The total proceeds from the sale of the salvaged cargo was P201,379.75.

Private respondent, as insurer, indemnified the consignee for the lost cargo and thus, as
subrogee, sought recovery from petitioner

The petitioner argued that it is a private carrier allegedly because it has no fixed and publicly
known route, maintains no terminals and issues no tickets. It points out that it is not obligated to
carry indiscriminately for any person.
TC AND CA – ruled in favor of private respondent

There is also no distinction between a person or enterprise offering transportation service on a

regular/scheduled basis and one offering such service - on an occasional, episodic or
unscheduled basis.

The test to determine a common carrier is “whether the given undertaking is a part of the
business engaged in by the carrier which he has held out to the general public as his
occupation rather than the quantity or extent of the business transacted.”

In the case at bar, the petitioner admitted that it is - engaged in the business of shipping,
lighterage and drayage, offering its barges to the public, despite its limited clientele for
carrying/transporting goods by water for compensation.

1. W/N petitioner is a common carrier. - 2. W/N it exercised extraordinary care and diligence in
its care and custody of the consignee’s cargo. -

Character of the goods or defects in the packing or in the containers.- For this provision to apply,
the rule is that if the its care and custody of the consignee’s goods.- Common carriers are bound
to observe extraordinary diligence in the vigilance over the goods transported by them. They are
presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or
deteriorated. To overcome the presumption of negligence in the case of loss, destruction or

Fortuitous event to be a valid defense, must be established to be the proximate cause of the loss.

deterioration of the goods, the common carrier must prove that it exercised extraordinary
diligence. There are, however, exceptions

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;

In the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss
of its cargo. Petitioner claims that this was caused by a typhoon, hence, it should not be held
liable for the loss of the cargo. However, petitioner failed to prove that the typhoon is the
proximate and only cause of the loss of the goods, and that it has exercised due diligence
before, during and after the occurrence of the typhoon to prevent/minimize the loss.

The evidence show that, even before the towing bits of the barge broke, it had already previously
sustained damage when it hit a sunken object while docked at the Engineering Island. It even
suffered a hole. Clearly, this could not be solely attributed to the typhoon. Thus, when petitioner
persisted to proceed with the voyage, it recklessly exposed the cargo to further damage.

Moreover, petitioner still headed to the consignee’s wharf despite knowledge of an incoming
typhoon. During the time that the barge was heading towards the consignee’s wharf on
September 5, 1990, typhoon “Loleng” has already entered the Philippine area of responsibility.

SPOUSES CRUZ VS SUN HOLIDAYS

FACTS:

Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 2001 against
Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City for damages
arising from the death of their son Ruelito C. Cruz (Ruelito) who perished with his wife on
September 11, 2000 on board the boat M/B Coco Beach III that capsized en route to Batangas
from Puerto Galera, Oriental Mindoro where the couple had stayed at Coco Beach Island Resort
(Resort) owned and operated by respondent.

On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including
petitioners’ son 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.

ISSUE:

W/N Respondent is a Common Carrier

HELD:

YES.

Civil Code defines "common carriers" in the following terms: Article 1732. Common carriers are
persons, corporations, firms or associations engaged in the business of carrying or transporting
passengers 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

DELSAN – TRANSPORT VS CA

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 Caltex’s
industrial fuel oil from the Batangas-Bataan Refinery to different parts of the country.

ISSUE:

W/N the payment 1. 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.

W/N the non- presentation ofthe marine - insurance policy bars the complaintfor recovery of
sum of money for lack of cause of - action.

HELD:

NO.

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 vessel’s
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.

Extra-rdinary diligence requires that the ship which will transport the goods is seaworthy.
Ensuring the seaworthiness of the vessel is the first step in exercising the required vigilance.
However, presentation of certificates of seaworthiness is not sufficient to over the presumption of
negligence.

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 and his wife, died during the incident.

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 respondent’s 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 respondent’s ferry services
pay the same amount is likewise inconsequential. These guests may only be deemed to have
overpaid.

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 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

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:

Delsan theorized that when the American Home paid Caltex the value of its lost cargo, the act of
American Home is equivalent to a tacit recognition that the ill-fated vessel was seaworthy;
otherwise, American Home was not legally liable to Caltex due to the latter’s breach of implied
warranty under the marine insurance policy that the vessel was seaworthy.

o Delsan avers that although chief officer had merely a 2nd officer’s license, he was qualified to
act as the vessel’s chief officer. In fact, all the crew and officers of MTT Maysun were exonerated
in the administrative investigation.

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, Delsan’s 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 Maysun’s 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.

Neither may petitioner escape liability by presenting in evidence certificates that tend to show
that at the time of dry-docking and inspection by the Philippine Coast Guard, the vessel MT
Maysun, was fit for voyage. These pieces of evidence do not necessarily take into account the
actual condition of the vessel at the time of the commencement of the voyage. Additionally, the
exoneration of MT Maysun's officers and crew by the Board of Marine Inquiry merely concerns
their respective administrative liabilities. It does not in any way operate to absolve the petitioner
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,
petitioner 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.

2. NO.

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

BELGIAN - CHARTERING VS FIRST PHIL INSURANCE CO

FACTS:

On June 13, 1990, CMC Trading A.G. shipped on boardthe M/V 'Anangel Sky' at Hamburg,
Germany 242 coils ofvarious Prime Cold Rolled Steel sheets for transportation EO diligenceto
Manila consigned to the Philippine Steel Trading 2. W/N a notation in - Corporation. the bill of
lading atOn July 28, 1990, M/V Anangel Sky arrived at the port of the time of loading Manila
and, within the subsequent days, discharged the is sufficient to subject cargo. show pre- Four (4)
coils were found to be in bad order. Finding the shipment damage four (4) coils in their damaged
state to be unfit for the and to exempt intended purpose, the consignee Philippine Steel Trading
herein defendants - Corporation declared the same as total loss. from liability.

ISSUE:

1. NO.

The Supreme Court held that the petitioners failed to rebut the prima facie presumption of
negligence. They failed to prove that they observed the extraordinary diligence and precaution,
which the law requires a common carrier to know and to follow to avoid damage to or
destruction of the goods entrusted to it for safe carriage and delivery.

Well-settled is the rule that common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence and vigilance with respect to the
safety of the goods and the passengers they transport. Thus, common carriers are required to
render service with the greatest skill and foresight and "to use all reason[a]ble means to ascertain
the nature and characteristics of the goods tendered for shipment, and to exercise due care in the
handling and stowage, including such methods as their nature requires." The extraordinary
responsibility lasts from the time the goods are unconditionally placed in the possession of and
received for transportation by the carrier until they are delivered, actually or constructively, to
the consignee or to the person who has a right to receive them. This strict requirement is justified
by the fact that, without a hand or a voice in the preparation of such contract, the riding public
enters into a contract of transportation with common carriers. Even if it wants to, it cannot submit
its own stipulations for their approval. Hence, it merely adheres to the agreement prepared by
them

Mere proof of delivery of the goods in good order to a common carrier and their arrival in bad
order at their destination (or failure to transport the passenger safely) constitutes prima facie case
of fault or negligence against the carrier. If no adequate explanation if given as to how the
deterioration, loss or the destruction of the goods happened, the transporter shall be held
responsible.

Common carriers are responsible for loss, destruction, or deterioration of goods, unless it is due
to any of the following causes only:

1. flood, storm, earthquake, lightning, or other natural disaster or calamity;

2. an act of the public enemy in war, whether international or civil;

3. an act or omission of the shipper or owner of the goods;

4. the character of the goods or defects in the packing or the container; or

5. an order or act of competent public authority.

6. Exercise of EO diligence

The SC applied the COGSA and ruled that the liability should not be based on the price declared
in the letter of credit. The Court considered each coil as a package and awarded $500 per coil or a
total of $2M.

Proof of the delivery of goods in good order to a common carrier and of their arrival in bad order
at their destination

Petitioners refused to submit to the consignee's claim. 3. Whether or not Consequently,

respondent paid the consignee and was thesubrogated to the latter's rights. consignee/plaintiff

Subsequently, respondent instituted this complaint for filed the required recovery of the amount
paid by them, to the consignee as notice of loss insured. within the time

Petitioners imputed that the damage and/or loss was due required by law.to pre-shipment
damage. In addition, thereto, they argued 4. W/N "PACKAGE that their liability, if there be any,
should not exceed the LIMITATION" of limitations of liability provided for in the bill of lading
and liability under other pertinent laws. Finally, they averred that, in any Section 4 (5) of event,
they exercised due diligence and foresight required COGSA is by law to prevent any
damage/loss to said shipment applicable.
RTC - dismissed the Complaint because respondent had failed to prove its claims.

CA – reversed. 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.

1. W/N the common carrier exercised the required diligence

GR: Owing to this high degree of diligence required of them, common carriers, as a general rule,
are presumed to have been at fault or negligent if the goods they transported deteriorated or got
lost or destroyed. That is, unless they prove that they exercised extraordinary diligence in
transporting the goods. In order to avoid responsibility for any loss or damage, therefore, they
have the burden of proving that they observed such diligence.

E: The presumption of fault or negligence will not arise if the loss is due to any of the following
causes:(1) flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) an act of
the public enemy in war, whether international or civil;(3) an act or omission of the shipper or
owner of the goods;(4) the character of the goods or defects in the packing or the container; or(5)
an 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 liable therefor.

True, the words "metal envelopes rust stained and slightly dented" were noted on the Bill of
Lading; however, there was no showing that petitioners exercised due diligence to forestall or
lessen the loss. Having been in the service for several years, the master of the vessel should have
known at the outset that metal envelopes in the said state would eventually deteriorate when not
properly stored while in transit. Equipped with the proper knowledge of the nature of steel
sheets in coils and of the proper way of transporting them, the master of the vessel and his crew
should have undertaken precautionary measures to avoid possible deterioration of the cargo. But
none of these measures was taken. 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.

That petitioners failed to rebut the prima facie presumption of negligence is revealed in the case
at bar by a review of the records and more so by the evidence adduced by respondent. First, as
stated in the Bill of Lading, petitioners received the subject shipment in good order and condition
in Hamburg, Germany. Second, prior to the unloading of the cargo, an Inspection Report
prepared and signed by representatives of both parties showed the steel bands broken, the metal
envelopes rust-stained and heavily buckled, and the contents thereof exposed and rusty. Third,
Bad Order Tally Sheet No. 154979 issued by Jardine Davies Transport Services, Inc., stated that
the four coils were in bad order and condition. Normally, a request for a bad order survey is
made in case there is an apparent or a presumed loss or damage. Fourth, the Certificate of
Analysis stated that, based on the sample submitted and tested, the steel sheets found in bad
order were wet with fresh water. Fifth, petitioners — in a letter addressed to the Philippine Steel
Coating Corporation and dated October 12, 1990 — admitted that they were aware of the
condition of the four coils found in bad order and condition. These facts were confirmed by
Ruperto Esmerio, head checker of BM Santos Checkers Agency. All these conclusively prove the
fact of shipment in good order and condition and the consequent damage to the four coils
possession of petitioner, who notably failed to explain why. Further, petitioners failed to prove
that they observed the extraordinary diligence and precaution which the law requires a common
carrier to know and to follow to avoid damage to or destruction of the goods entrusted to it for
safe carriage and delivery.

Petitioners claim that pursuant to Section 3, paragraph 6 of the Carriage of Goods by Sea Act
(COGSA), respondent should have filed its Notice of Loss within three days from delivery. They
assert that the cargo was discharged on July 31, 1990, but that respondent filed its Notice of Claim
only on September 18, 1990. We are not persuaded. First, the above-cited provision of COGSA
provides that the notice of claim need not be given if the state of the goods, at the time of their
receipt, has been the subject of a joint inspection or survey. As stated earlier, prior to unloading
the cargo, an Inspection Report as to the condition of the goods was prepared and signed by
representatives of both parties

2. 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.

3. 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.

4. YES.

- In the case before us, there was no stipulation in the Bill of Lading limiting the carrier's liability.
Neither there was no stipulation in the Bill of Lading limiting the carrier's liability. Neither did
the shipper 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.

FORTUNE EXPRESS VS CA

FACTS:
Caorong and the assailants, Cabatuan climbed out of the left window of the bus and crawled to
the canal on the opposite side of the highway. He heard shots from inside the bus. Larry de la
Cruz, one of the passengers, saw that Atty. Caorong was hit. Then the bus was set on fire. Some
of the passengers were able to pull Atty. Caorong out of the burning bus and rush him to the
Mercy Community Hospital in Iligan City, but he died while undergoing operation. Thus the
heirs of Atty. Caorong filed the RTC a complaint for damages for breach of contract of carriage
against

Trial Court - dismissed the complaint. CA - reversed the decision of the trial court

ISSUE:

1. W/N the petitioner is liable for the death of one of its passenger

2. W/N the petitioner can raise the defense of fortuitous event

HELD:

1. YES

Article 1763 of the Civil Code provides that a common carrier is responsible for injuries suffered
by a passenger on account of the wilful acts of other passengers, if the employees of the common
carrier could have prevented the act through the exercise of the diligence of a good father of a
family.

In the present case, it is clear that because of the negligence of petitioner's employees, the seizure
of the bus by Manggolo and his men was made possible.

Despite warning by the Philippine Constabulary at Cagayan de Oro that the Maranaos were
planning to take revenge on the petitioner by burning some of its buses and the assurance of
petitioner's operations manager, Diosdado Bravo, that the necessary precautions would be taken,
petitioner did nothing to protect the safety of its passengers.

Had petitioner and its employees been vigilant, they would not have failed to see that the
malefactors had a large quantity of gasoline with them.

Under the circumstances, simple precautionary measures to protect the safety of passengers, such
as frisking passengers and inspecting their baggages, preferably with non-intrusive gadgets such
as metal detectors, before allowing them on board could have been employed without violating
the passenger's constitutional rights.

2. NO.

Art. 1174 of the Civil Code defines a fortuitous event as an occurrence which could not be
foreseen or which though foreseen, is inevitable. In Yobido v. Court of Appeals, we held that to
be considered as force majeure, it is necessary that:(1) the cause of the breach of the obligation
must be independent of the human will;(2) the event must be either unforeseeable or
unavoidable;(3) the occurrence must be such as to render it impossible for the debtor to fulfill the
obligation in a normal manner; and(4) the obligor must be free of participation in, or aggravation
of, the injury to the creditor.

The absence of any of the requisites mentioned above would prevent the obligor from being
excused from liability
Thus, in Vasquez v. Court of Appeals, it was held that the common carrier was liable for its
failure to take necessary precautions against an approaching typhoon, of which it was warned,
resulting in the loss of the lives of several passengers. The event was foreseeable, and, thus, the
second requisite mentioned above was not fulfilled.

This ruling applies by analogy to the present case. Despite the report of PC agent Generalao that
the Maranaos were going to attack its buses, petitioner took no steps to safeguard the lives and
properties of its passengers. The seizure of the bus of the petitioner was foreseeable and,
therefore, was not a fortuitous event which would exempt petitioner from liability The
petitioner contends that Atty. Caorong was guilty of contributory negligence in returning to the
bus to retrieve something. But Atty. Caorong did not act recklessly. It should be pointed out that
the intended targets of the violence were petitioner and its employee, not its passengers. The
assailant's motive was to retaliate for the loss of life of two Maranaos as a result of the collision
between petitioner's bus and the jeepney in which the two Maranaos were riding. Mananggolo,
the leader of the group which had hijacked the bus, ordered the passengers to get off the bus as
they intended to burn it and its driver. The armed men actually allowed Atty. Caorong to retrieve
something from the bus. What apparently angered them was his attempt to help the driver of the
bus by pleading for his life. He was playing the role of the good Samaritan. Certainly, this act
cannot be considered an act of negligence, let alone recklessnes

EDGAR COKALIONG SHIPPING LINES V. UCPB GENERAL INSURANCE

Petitioner obliged to deliver cargo

FACTS:

Nestor Angelia and Zosima Mercado separately delivered cargo (Christmas decor, plastic toys,
and other various/assorted goods) to petitioner for transportation to Surigao del Sur on board
the M/V Tandag for which petitioner issued Bills of Lading Nos. 58 and 59, respectively.

As stated in the Bill of Lading, the value of Angelia's cargo was P6,500.00, while Mercado's cargo
was valued in the amount of P14,000.00. Owner insured her cargo Feliciana Legaspi, as owner of
both cargoes, insured them against all risks with respondent in the total amount of P150,000.00.

ISSUE:

W/N petitioner is liable for the loss of the goods

If yes, what is the extent of its liability of the goods lost?

HELD:

1. YES

The findings of the Philippine Coast Guard show that the M/V Tandag sank due to a fire, which
resulted from a crack in the auxiliary engine fuel oil service tank. Fuel spurted out of the crack
and dripped to the heating exhaust manifold, causing the ship to burst into flames. The crack was
located on the side of the fuel oil tank, which had a mere two-inch gap from the engine room
walling, thus precluding constant inspection and care by the crew. Having originated from an
unchecked crack in the fuel oil service tank, the fire could not have been caused by force majeure

Vessel caught fire

- Unfortunately, the engine room of the vessel caught fire after it passed the Mandaue-Mactan
Bridge resulting in the loss of the vessel and its cargo.

Filing of insurance claim

- Hence, Feliciana Legaspi filed an insurance claim from the respondent for the value of both
cargoes. Respondent approved Feliciana's claim and remitted to her the total amount of P148,000
for both cargoes, after which Feliciana executed a Subrogation Receipts/Deeds in favor of
respondent.

Subrogee filed claim against the common carrier

Respondent as subrogee of Feliciana Legaspi, filed a complaint before the Regional Trial Court of
Makati City against petitioner for the collection of the amount which it paid to Feliciana Legaspi
for the loss of the cargo.

Among others, respondent alleged that the loss of the cargo was due to the negligence of the
petitioner. On its part, petitioner contended, among others, that the cause of loss of the aforesaid
cargo was due to force majeure and that they exercised due diligence prior to, during and
immediately after the fire on its vessel. Petitioner further claimed that its liability should not
exceed the value of the cargo as declared in the Bill of Lading. RTC –dismissed the complaint.CA
– reversed the decision of the trial court and ruled in favor of respondent.Hence, petitioner
brought the case to the Supreme Court.

It adds that its exercise of due diligence was adequately proven by the findings of the Philippine
Coast Guard.

Assuming that it is liable, petitioner claims that its liability should be limited to the value
declared by the shipper/consignee in the Billof Lading.

Respondent contention:- The petitioners liability should be based on the actual insured value of
the goods, subject of this case a vessel to inspect their ship frequently so as to discover the
existence of cracked parts, that loss cannot be attributed to force majeure, but to the negligence of
those officers.

Presumption of negligence arises if the common carrier fails to prove that it exercised
extraordinary vigilance over the goods it transported

Here, the petitioner did not present sufficient evidence showing what measures or acts it had
undertaken to ensure the seaworthiness of the vessel or that it had exercised extraordinary
diligence

2. The records show that the Bills of Lading covering the lost goods contain the stipulation that in
case of claim for loss or for damage to the shipped merchandise or property, [t]he liability of the
common carrier x x x shall not exceed the value of the goods as appearing in the bill of lading

A stipulation in the bill of lading limiting the common carriers liability for loss or destruction of a
cargo to a certain sum, unless the shipper or owner declares a greater value, is sanctioned by law,
particularly Articles 1749 and 1750 of the Civil Code

In the present case, the stipulation limiting petitioners liability is not contrary to public policy.

LIABILITY OF THE SHIPOWNER- However, the Court ruled that petitioner should not be
held liable for more than what was declared by the shippers/consignees as the value of the
goods in the Bills of Lading. It held that the liability of a common carrier for the loss of goods,
by stipulation in the bill of lading, be limited to the value declared by the shipper.

LIABILITY OF THE INSURER

On the other hand, the liability of the insurer is determined by the actual value covered by the
insurance policy and the insurance premiums paid herefore, and not necessarily by the value
declared in the bill of lading.

For assuming a higher risk, the insurance company was paid the correct higher premium by
Feliciana Legaspi; while petitioner was paid a fee lower than what it was entitled to for
transporting the goods that had been deliberately undervalued by the shippers in the bill of
lading

As between the two of them, the insurer should bear the loss in excess of the value declared in the
bill of lading.

generally applies to a natural accident, such as that caused by lightning, an earthquake, a

tempest, or a public enemy

- Hence, fire is not considered a natural disaster or calamity

VALID STIPULATIONS RELATIVE TO LIABILITY OF COMMON CARRIERS- A stipulation

that the common carrier’s liability is limited to the value of the goods appearing in the bill of
lading unless the shipper or owner declares a greater value is valid

PURPOSE OF STIPULATION LIMITING LIABILITY- Purpose: in a bill of lading, such

stipulation is for the protection of the common carrier- The shipper/consignee is obliged to notify
the common carrier of the amount that the latter may be liable for in case of loss of the goods

- The common carrier can then take appropriate measures the getting of insurance, if needed,
to cover or protect itself. This precaution on the part of the carrier is reasonable and prudent.

- Hence, a shipper/consignee that undervalues the real value of the goods it seeks to transport
does not only violate a valid contractual stipulation, but commits a fraudulent act when it seeks
to make the common carrier liable for more than the amount it declared in the bill of lading

Presumption of negligence – if the common carrier fails to prove that it exercised extraordinary
vigilance over the goods it transported

Liability of a common carrier – for the loss of goods may, by stipulation in the bill of lading, be
limited to the value declared by the shipper.

LA MALLORCA CORPORATION V. CA

FACTS:

Beltran family road petitioner’s bus- Sps. Mariano Beltran, together with their minor daughters

Milagros, Raquel, and Fe rode Pambusco Bus No. 352 owned by petitioner corporation. They
carried with them 4 pieces of baggages. The conductor happened to be Mariano Beltran’s half-
brother.
Mariano forgot his bayong; Raquel got crushed to death by bus- Upon reaching their desired
destination in Anao, the petitioners alighted from the bus and went to the pedestrian side of the
rode.- But Mariano returned to get his other bayong which he left under his seat. His youngest
daughter followed him without his knowledge.- When he stepped into the bus again, the motor
of the bus was not shut of while unloading and consequently started moving forward.
Incidentally, when the bus was again placed into a complete stop, it had travelled about ten
meters from the point where the plaintiffs had gotten off.

Mariano jumped from bus without getting his bayong. At that precise time, he saw people
beginning to gather around the body of the child lying prostrate on the ground, her skull,
crushed, and without life. The child was none other than his daughter Raquel, who was run over
by the bus in which she rode earlier together with her parents

Mariano filed a complaint against petitioner for moral and actual damages as well as atty’s fees.

RTC - found defendant liable for breach of contract of carriage and sentenced it to pay P3,000.00
for the death of the child and P400.00 as compensatory damages representing burial expenses
and costs

CA - Sustained the theory of petitioner that the Mariano family were no longer passengers.
Nevertheless, it still found the petitioners guilty of quasi- delict and held the latter liable for
damages, for the negligence of its driver, in accordance with Article 2180 of the Civil Code.

ISSUE:

1. W/N the Beltran family were still considered passengers at the time of the incident

2. W/N the petitioner is liable

Petitioner’s contention:La Mallorca claimed that there could not be a breach of contract in the
case, for the reason that when the child met her death, she was no longer a passenger of the bus
involved in the incident and, therefore, the contract of carriage had already terminated

HELD:

1. YES

Liability of the insurer – determined by the actual value covered by the insurance policy and the
insurance premiums paid therefor, and not necessarily by the value declared in the bill of lading.
Insurer should bear the loss in excess of the value declared in the bill of lading LIABILITY OF
PASSENGERS

- Termination: once created, the With respect to the father, there can be no controversy
relationship will not ordinarily when he returned to the bus for his bayong, the relation of
terminate until the passenger passenger and carrier between him and the petitioner has, after
reaching his remained subsisting. destination safely alighted from the carrier’s conveyance or has
The issue to be determined here is whether as to the child had reasonable opportunity to the
liability of the carrier for her safety under the contract of leave the carrier’s premises carriage also
persisted. - All persons who remain on the premises within a reasonable It has been recognized
as a rule that the relation of carrier time after leaving the and passenger does not cease at the
moment the conveyance are to be deemed passenger alights from the carrier’s vehicle at a place
passengerselected by the carrier at the point of destination, but - “Reasonable time” or continues
until the passenger has had a reasonable “reasonable delay”: this is to time or a reasonable
opportunity to leave the carrier’s be determined from all the premises. What is a reasonable time
or a reasonable delay circumstances, and includes within this rule is to be determined from all
the reasonable time to look after his circumstances. Thus, a person who, after alighting from a
baggage and prepare for his train, walks along the station platform is considered still a departure
passenger. - For instance, a person, who, after alighting from a train, walks In the present case,
the father returned to the bus to get one along the station platform is of his baggages which was
not unloaded when they alighted considered a passengerfrom the bus. Raquel, the child that she
was, must havefollowed the father. It was at this instance that the child, who - In the case at bar,
there was a must be near the bus, was run over and killed. breach of duty to exercise
extraordinary diligence with In the circumstances, it cannot be claimed that the respect to the 4-
year old child carrier’s agent had exercised the "utmost diligence" of a and the carrier is liable as
a "very cautious person" required by Article 1755 of the Civil consequenceCode to be observed by
a common carrier in the discharge - The presence of passengers of its obligation to transport
safely its passengers. near the bus was not unreasonable and they were, In the first place, the
driver, although stopping the bus, therefore, to be considered still nevertheless did not put off the
engine. Secondly, he started as passengers of the carrier to run the bus even before the bus
conductor gave him the entitled to thee protection under signal to go and while the latter was still
unloading part of their contract the baggages of the passengers Mariano Beltran and family.The
presence of said passengers near the bus was notunreasonable and they are, therefore, to be
considered still as passengers of the carrier, entitled to the protection under their contract of
carriage