Transportation Law Case Digests Part i

TRANSPORTATION LAW CASE DIGESTS I.

CONTRACT OF TRANSPORTATION A. CONCEPT, PARTIES AND PERFECTION DANGWA TRANSPORTATION vs. COURT OF APPEALS

FACTS: Private respondents filed a complaint for damages against petitioners for the death of Pedrito Cudiamat as a result of a vehicular accident which occurred on March 25, 1985 at Marivic, Sapid, Mankayan, Benguet. Petitioner Theodore M. Lardizabal was driving a passenger bus belonging to petitioner corporation in a reckless and imprudent manner and without due regard to traffic rules and regulations and safety to persons and property, it ran over its passenger, Pedrito Cudiamat. Petitioners alleged that they had observed and continued to observe the extraordinary diligence and that it was the victim's own carelessness and negligence which gave rise to the subject incident. RTC pronounced that Pedrito Cudiamat was negligent, which negligence was the proximate cause of his death. However, Court of Appeals set aside the decision of the lower court, and ordered petitioners to pay private respondents damages due to negligence. ISSUE: WON the CA erred in reversing the decision of the trial court and in finding petitioners negligent and liable for the damages claimed. HELD: CA Decision AFFIRMED The testimonies of the witnesses show that that the bus was at full stop when the victim boarded the same. They further confirm the conclusion that the victim fell from the platform of the bus when it suddenly accelerated forward and was run over by the rear right tires of the vehicle. Under such circumstances, it cannot be said that the deceased was guilty of negligence. It is not negligence per se, or as a matter of law, for one attempt to board a train or streetcar which is moving slowly. An ordinarily prudent person would have made the attempt board the moving conveyance under the same or similar circumstances. The fact that passengers board and alight from slowly moving vehicle is a matter of common experience both the driver and conductor in this case could not have been unaware of such an ordinary practice. Common carriers, from the nature of their business and reasons of public policy, are bound to observe extraordinary diligence for the safety of the passengers transported by the according to all the circumstances of each case. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence very cautious persons, with a due regard for all the circumstances. It has also been repeatedly held that in an action based on a contract of carriage, the court need not make an express finding of fault or negligence on the

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part of the carrier in order to hold it responsible to pay the damages sought by the passenger. By contract of carriage, the carrier assumes the express obligation to transport the passenger to his destination safely and observe extraordinary diligence with a due regard for all the circumstances, and any injury that might be suffered by the passenger is right away attributable to the fault or negligence of the carrier. This is an exception to the general rule that negligence must be proved, and it is therefore incumbent upon the carrier to prove that it has exercised extraordinary diligence as prescribed in Articles 1733 and 1755 of the Civil Code. KOREAN AIRLINES CO. v. CA LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, versus MARJORIE NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT SECURITY AGENCY FACTS: Nicanor Navidad, then drunk, entered the EDSA LRT station after purchasing a "token" (representing payment of the fare). While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the security guard assigned to the area approached him. A misunderstanding or an altercation between the two apparently ensued that led to a fist fight. No evidence, however, was adduced to indicate how the fight started or who, between the two, delivered the first blow or how Navidad later fell on the LRT tracks. At the exact moment that Navidad fell, an LRT train, operated by petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving train, and he was killed instantaneously. The widow of Nicanor, Marjorie Navidad, along with her children, filed a complaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit Organization, Inc. (Metro Transit), and Prudent for the death of her husband. Trial court ruled in favor Navidad’s wife and against the defendants Prudent Security and Junelito Escartin . LRTA and Rodolfo Roman were dismissed for lack of merit. CA held LRTA and Roman liable, hence the petition. ISSUE: Whether or not there was a perfected contract of carriage between Navidad and LRTA HELD: AFFIRMED with MODIFICATION but only in that (a) the award of nominal damages is DELETED and (b) petitioner Rodolfo Roman is absolved from liability Contract of carriage was deemed created from the moment Navidad paid the fare at the LRT station and entered the premises of the latter, entitling Navidad to all the rights and protection under a contractual relation. The appellate court had correctly held LRTA and Roman liable for the death of Navidad in failing to exercise extraordinary diligence imposed upon a common carrier. While the deceased might not have

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TRANSPORTATION LAW CASE DIGESTS then as yet boarded the train, a contract of carriage theretofore had already existed when the victim entered the place where passengers were supposed to be after paying the fare and getting the corresponding token therefor.

denied that he was a common carrier and argued that he could not be held responsible for the value of the lost goods, such loss having been due to force majeure. ISSUE:

The law requires common carriers to carry passengers safely using the utmost diligence of very cautious persons with due regard for all circumstances. Such duty of a common carrier to provide safety to its passengers so obligates it not only during the course of the trip but for so long as the passengers are within its premises and where they ought to be in pursuance to the contract of carriage. The statutory provisions render a common carrier liable for death of or injury to passengers (a) through the negligence or willful acts of its employees or b) on account of willful acts or negligence of other passengers or of strangers if the common carrier’s employees through the exercise of due diligence could have prevented or stopped the act or omission. In case of such death or injury, a carrier is presumed to have been at fault or been negligent, and by simple proof of injury, the passenger is relieved of the duty to still establish the fault or negligence of the carrier or of its employees and the burden shifts upon the carrier to prove that the injury is due to an unforeseen event or to force majeure. The liability of the common carrier and that of the independent contractor is solidary. B. COMMON CARRIERS (Arts. 1731 to 1766 NCC) 1. Definitions of “domestic shipping” under R.A. No. 9295 and of “public service” under Commonwealth Act No. 146 2. Common Carriage PEDRO DE GUZMAN vs.COURT OF APPEALS and ERNESTO CENDANA FACTS: Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal in Pangasinan, and bring such material to Manila for resale. He utilized two (2) six-wheeler trucks which he owned for hauling the material to Manila. He charged freight rates which were commonly lower than regular commercial rates for the cargo loaded in his vehicle. Pedro de Guzman a merchant and authorized dealer of General Milk Company contracted with Cendana for the hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk in Makati, Rizal. 150 cartons were loaded on a truck driven by Cendana himself, while 600 cartons were placed on board the other truck which was driven by Manuel Estrada, Cendana’s driver and employee. The other 600 boxes never reached de Guzman, since the truck which carried these boxes was hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and the cargo. Having failed to exercise the extraordinary diligence required of him by the law, he is held liable for the value of the undelivered goods. Cendana

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Whether or not Ernesto Cendana may, under the facts earlier set forth, be properly characterized as a common carrier? Whether or not high jacking with robbery can be properly regarded as a fortuitous event that can exempt the carrier? HELD: The trial court rendered a Decision finding private respondent to be a common carrier and holding him liable for the value of the undelivered goods as damages and as attorney's fees. The Court of Appeals reversed the judgment of the trial court and held that respondent had been engaged in transporting return loads of freight "as a casual occupation — a sideline to his scrap iron business" and not as a common carrier. 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. To exempt private respondent from the liabilities of a common carrier because he has not secured the necessary certificate of public convenience, would be offensive to sound public policy; that would be to reward private respondent precisely for failing to comply with applicable statutory requirements. Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to a very high degree of care and diligence ("extraordinary diligence") in the carriage of goods as well as of passengers. Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or deterioration of the goods which they carry, "unless the same is due to any of the following causes only: (1) Flood, storm, earthquake, lightning or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character-of the goods or defects in the packing or-in the containers; and (5) Order or act of competent public authority. The above list of causes of loss, destruction or deterioration which exempt the common carrier for responsibility therefor, is a closed list. Causes falling outside the foregoing list, even if they appear to constitute a species of force majeure fall within the scope of Article 1735, which provides as follows: In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted

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TRANSPORTATION LAW CASE DIGESTS negligently, unless they prove that they observed extraordinary diligence as required in Article 1733. (Emphasis supplied) The limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force." In the instant case, armed men held up the second truck owned by private respondent which carried petitioner's cargo. The occurrence of the loss must reasonably be regarded as quite beyond the control of the common carrier and properly regarded as a fortuitous event. It is necessary to recall that even common carriers are not made absolute insurers against all risks of travel and of transport of goods, and are not held liable for acts or events which cannot be foreseen or are inevitable, provided that they shall have complied with the rigorous standard of extraordinary diligence. Cendana is not liable for the value of the undelivered merchandise which was lost because of an event entirely beyond private respondent's control. Petition for Review on certiorari is hereby DENIED and the Decision of the Court of Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs. PLANTERS PRODUCTS, INC. VS. COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI KAISHA G.R. No. 101503 September 15, 1993 FACTS: Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk on 16 June 1974 aboard the cargo vessel M/V "Sun Plum" owned by private respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union, Philippines, as evidenced by Bill of Lading No. KP-1 signed by the master of the vessel and issued on the date of departure. Prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant to the Uniform General Charter was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan. Before loading the fertilizer aboard the vessel, four (4) of her holds were all presumably inspected by the charterer's representative and found fit to take a load of urea in bulk pursuant to par. 16 of the charterparty . After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper, the steel hatches were closed with heavy iron lids, covered with three (3) layers of tarpaulin, then tied with steel bonds. The hatches remained closed and tightly sealed throughout the entire voyage. Petitioner unloaded the cargo from the holds into its steelbodied dump trucks which were parked alongside

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the berth, using metal scoops attached to the ship, pursuant to the terms and conditions of the charterpartly (which provided for an F.I.O.S. clause). However, the hatches remained open throughout the duration of the discharge. Each time a dump truck was filled up, its load of Urea was covered with tarpaulin. The port area was windy, certain portions of the route to the warehouse were sandy and the weather was variable, raining occasionally while the discharge was in progress. It took eleven (11) days for PPI to unload the cargo. A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was hired by PPI to determine the "outturn" of the cargo shipped, by taking draft readings of the vessel prior to and after discharge. The survey report submitted by CSCI to the consignee (PPI) revealed a shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt, sand and rust and rendered unfit for commerce. Consequently, PPI sent a claim letter to Soriamont Steamship Agencies (SSA), the resident agent of the carrier, KKKK, representing the cost of the alleged shortage in the goods shipped and the diminution in value of that portion said to have been contaminated with dirt. Respondent SSA was not able to respond to this consignee’s claim for payment because according to them, they only received a request for shortlanded certificate and not a formal claim. Hence, PPI filed an action for damages with the Court of First Instance of Manila. The defendant carrier argued that the strict public policy governing common carriers does not apply to them because they have become private carriers by reason of the provisions of the charter-party. The court a quo however sustained the claim of the plaintiff against the defendant carrier for the value of the goods lost or damaged. On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from liability for the value of the cargo that was lost or damaged. Relying on the 1968 case of Home Insurance Co.v. American Steamship Agencies, Inc., the appellate court ruled that the cargo vessel M/V "Sun Plum" owned by private respondent KKKK was a private carrier and not a common carrier by reason of the time charterer-party. Accordingly, the Civil Code provisions on common carriers which set forth a presumption of negligence do not find application in the case at bar. ISSUE: Whether a common carrier becomes a private carrier by reason of a charter-party. HELD: The assailed decision of the Court of Appeals, which reversed the trial court, is affirmed. A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; a contract of affreightment by which the owner of a ship or other vessel lets the whole or a part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight; Charter parties are of two types: (a) contract

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TRANSPORTATION LAW CASE DIGESTS of affreightment which involves the use of shipping space on vessels leased by the owner in part or as a whole, to carry goods for others; and, (b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer to him of its entire command and possession and consequent control over its navigation, including the master and the crew, who are his servants. Contract of affreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides for the hire of vessel only, either for a determinate period of time or for a single or consecutive voyage, the shipowner to supply the ship's stores, pay for the wages of the master and the crew, and defray the expenses for the maintenance of the ship. Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil Code. The definition extends to carriers either by land, air or water which hold themselves out as ready to engage in carrying goods or transporting passengers or both for compensation as a public employment and not as a casual occupation. The distinction between a "common or public carrier" and a "private or special carrier" lies in the character of the business, such that if the undertaking is a single transaction, not a part of the general business or occupation, although involving the carriage of goods for a fee, the person or corporation offering such service is a private carrier. It is not disputed that respondent carrier, in the ordinary course of business, operates as a common carrier, transporting goods indiscriminately for all persons. When petitioner chartered the vessel M/V "Sun Plum", the ship captain, its officers and compliment were under the employ of the shipowner and therefore continued to be under its direct supervision and control. Hardly then can we charge the charterer, a stranger to the crew and to the ship, with the duty of caring for his cargo when the charterer did not have any control of the means in doing so. This is evident in the present case considering that the steering of the ship, the manning of the decks, the determination of the course of the voyage and other technical incidents of maritime navigation were all consigned to the officers and crew who were screened, chosen and hired by the shipowner. It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or 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 shipowner 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. Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship Agencies, supra, is misplaced for the reason that the meat of the controversy therein was the validity of a

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stipulation in the charter-party exempting the shipowners from liability for loss due to the negligence of its agent, and not the effects of a special charter on common carriers. At any rate, the rule in the United States that a ship chartered by a single shipper to carry special cargo is not a common carrier, does not find application in our jurisdiction, for we have observed that the growing concern for safety in the transportation of passengers and /or carriage of goods by sea requires a more exacting interpretation of admiralty laws, more particularly, the rules governing common carriers. In an action for recovery of damages against a common carrier on the goods shipped, the shipper or consignee should first prove the fact of shipment and its consequent loss or damage while the same was in the possession, actual or constructive, of the carrier. Thereafter, the burden of proof shifts to respondent to prove that he has exercised extraordinary diligence required by law or that the loss, damage or deterioration of the cargo was due to fortuitous event, or some other circumstances inconsistent with its liability. To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the prima facie presumption of negligence. Verily, the presumption of negligence on the part of the respondent carrier has been efficaciously overcome by the showing of extraordinary zeal and assiduity exercised by the carrier in the care of the cargo. The period during which private respondent was to observe the degree of diligence required of it as a public carrier began from the time the cargo was unconditionally placed in its charge after the vessel's holds were duly inspected and passed scrutiny by the shipper, up to and until the vessel reached its destination and its hull was reexamined by the consignee, but prior to unloading. Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss, destruction or deterioration of the goods if caused by the charterer of the goods or defects in the packaging or in the containers. The Code of Commerce also provides that all losses and deterioration which the goods may suffer during the transportation by reason of fortuitous event, force majeure, or the inherent defect of the goods, shall be for the account and risk of the shipper, and that proof of these accidents is incumbent upon the carrier. The carrier, nonetheless, shall be liable for the loss and damage resulting from the preceding causes if it is proved, as against him, that they arose through his negligence or by reason of his having failed to take the precautions which usage has established among careful persons. Thus, the petition is dismissed. ESTRELLITA M. BASCOS vs. COURT OF APPEALS and RODOLFO A. CIPRIANO G.R. No. 101089. April 7, 1993. FACTS: Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE) entered into a hauling contract with Jibfair Shipping Agency Corp. whereby the former

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TRANSPORTATION LAW CASE DIGESTS bound itself to haul the latter’s 2,000 m/tons of soya bean meal from Magallanes Drive, Del Pan, Manila to the warehouse of Purefoods Corporation in Calamba, Laguna. To carry out its obligation, CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita Bascos to transport and to deliver 400 sacks of soya bean meal from the Manila Port Area to Calamba, Laguna at the rate. But, Bascos failed to deliver the said cargo. As a consequence, Cipriano paid Jibfair Shipping Agency the amount of the lost goods in accordance with the contract. Cipriano demanded reimbursement from Bascos but the latter refused to pay. Eventually, Cipriano filed a complaint for a sum of money and damages with writ of preliminary attachment for breach of a contract of carriage. The trial court granted the writ of preliminary attachment and rendered a decision, ordering Bascos to pay for actual damages with legal interest, attorney’s fees and the costs of the suit. The court further denied the “Urgent Motion To Dissolve/Lift preliminary Attachment” filed by Bascos for being moot and academic. Bascos appealed to the CA but the appellate court affirmed the trial court’s judgment. Hence, the petition for review on certiorari. Petitioner, Bascos interposed the following defenses: that there was no contract of carriage since CIPTRADE leased her cargo truck to load the cargo from Manila Port Area to Laguna; that CIPTRADE was liable to petitioner for loading the cargo; that the truck carrying the cargo was hijacked along Paco, Manila; that the hijacking was immediately reported to CIPTRADE and that petitioner and the police exerted all efforts to locate the hijacked properties; and that hijacking, being a force majeure, exculpated petitioner from any liability to CIPTRADE ISSUE: WON petitioner was a common carrier. WON the hijacking referred to a force majeure. HELD: The Supreme Court dismissed the petition and affirmed the decision of the Court of Appeals. Petitioner is a common carrier. Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or 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 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 this case, petitioner herself has made the admission that she was in the trucking business, offering her trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is required to prove the same. Moreover, in referring to Article 1732 of the Civil Code, it held in De Guzman vs. Court of Appeals that “The above article makes no distinction between one whose

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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. Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them. Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. There are very few instances when the presumption of negligence does not attach and these instances are enumerated in Article 1734. In those cases where the presumption is applied, the common carrier must prove that it exercised extraordinary diligence in order to overcome the presumption. As to the second issue, the Court held that hijacking, not being included in the provisions of Article 1734, must be dealt with under the provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or negligent. UArticle 1745 of the Civil Code provides that a common carrier is held responsible; and will not be allowed to divest or to diminish such responsibility even for acts of strangers like thieves or robbers except where such thieves or robbers in fact acted with grave or irresistible threat, violence or force. Affidavits were not enough to overcome the presumption. (1) Bascos’s affidavit about the hijacking was based on what had been told her by Juanito Morden. It was not a first-hand account. While it had been admitted in court for lack of objection on the part of Cipriano, the lower court had discretion in assigning weight to such evidence. (2) The affidavit of Jesus Bascos did not dwell on how the hijacking took place. (3) While the affidavit of Juanito Morden, the truck helper in the hijacked truck, was presented as evidence in court, he himself was a witness as could be gleaned from the contents of the petition. Mr. & Mrs. Engracio Fabre, Jr. vs. CA, et al. 259 SCRA 426 Facts: Petitioners Fabre and his wife were owners of a minibus which they used principally in connection with a bus service for school children which they operated. The couple had a driver, Porfirio Cabil, whom they hired after trying him out for two weeks. His job was to take school children to and from the St. Scholastica’s College. On November 2, 1984, private respondent Word for the World Christian Fellowship Inc. arranged with petitioners for the transportation of 33 members from

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TRANSPORTATION LAW CASE DIGESTS Manila to La Union and back in consideration of which they paid P3,000 to petitioners. The group left at 8:00 in the evening, petitioner Cabil drove the minibus. The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at Carmen was under repair, so that petitioner Cabil, who was unfamiliar with the area (it being his first trip to La Union), was forced to take a detour through the town of Ba-ay in Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil came upon a sharp curve on the highway, running on a south to east direction. The road was slippery because it was raining, causing the bus, which was running at the speed of 50 kilometers per hour, to skid to the left road shoulder. The bus hit the left traffic steel brace and sign along the road and rammed the fence of one Jesus Escano, then turned over and landed on its left side, coming to a full stop only after a series of impacts. The bus came to rest off the road. A coconut tree which it had hit fell on it and smashed its front portion. Several passengers were injured. Private respondent Amyline Antonio was thrown on the floor of the bus and pinned down by a wooden seat which came off after being unscrewed. It took three persons to safely remove her from this position. She was in great pain and could not move. A case was filed by the respondents against Fabre and Cabil. Amyline Antonio was found to be suffering from paraplegia and is permanently paralyzed from the waist down. The RTC ruled in favor of respondents. Mr. & Mrs. Fabre and Cabil were ordered to pay jointly and severally actual, moral and exemplary damages, and as well as amount of loss of earning capacity of Antonio and attorney’s fees. The Court of Appeals affirmed the decision of the trial court with modification on the award of damages. Issues: 1. Whether or not petitioners were negligent. 2. Whether or not petitioners were liable for the injuries suffered by private respondents. 3. Whether or not damages can be awarded and in the positive, up to what extent. Held: SC affirmed the decision of the CA but reverted the amount of the award of damages to that ordered by the RTC. 1. The finding that Cabil drove his bus negligently, while his employer, the Fabres, who owned the bus, failed to exercise the diligence of a good father of the family in the selection and supervision of their employee is fully supported by the evidence on record. Indeed, it was admitted by Cabil that on the night in question, it was raining, and, as a consequence, the road was slippery, and it was dark. However, it is undisputed that Cabil drove his bus at the speed of 50 kilometers per hour and only slowed down when he noticed the curve some 15 to 30 meters ahead. Given the conditions of the road and considering that the trip was Cabil’s first one outside of Manila, Cabil should

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have driven his vehicle at a moderate speed. There is testimony that the vehicles passing on that portion of the road should only be running 20 kilometers per hour, so that at 50 kilometers per hour, Cabil was running at a very high speed. Cabil was grossly negligent and should be held liable for the injuries suffered by private respondent Amyline Antonio. Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption that his employers, the Fabres, were themselves negligent in the selection and supervision of their employee. Due diligence in selection of employees is not satisfied by finding that the applicant possessed a professional driver’s license. The employer should also examine the applicant for his qualifications, experience and record of service. In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not consider the fact that Cabil had been driving for school children only, from their homes to the St. Scholastica’s College in Metro Manila. They had hired him only after a two-week apprenticeship. 2. This case involves a contract of carriage. Petitioners, the Fabres, did not have to be engaged in the business of public transportation for the provisions of the Civil Code on common carriers to apply to them. 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. 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. 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. As common carriers, the Fabres were bound to exercise “extraordinary diligence” for the safe transportation of the passengers to their destination. This duty of care is not excused by proof that they exercised the diligence of a good father of the family in the selection and supervision of their employee. As Art. 1759 of the Code provides: Common carriers are liable for the death of or injuries to passengers through the negligence or wilful acts of the former’s employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers. First Philippine Industrial Corporation vs. Court of Appeals G.R. No. 125948 December 29, 1998 Facts:

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TRANSPORTATION LAW CASE DIGESTS 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 taxc Held: Petition was granted. REVERSED and SET ASIDE.

CA

decision

was

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;

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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."

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

Page 7

TRANSPORTATION LAW CASE DIGESTS 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.

unloaded from the vessel, Calvo withdrew the cargo from the arrastre operator and delivered the same to SMC’s warehouse. When it was inspected, it was found out that some of the goods were torn. UCPB, being the insurer, paid for the amount of the damages and as subrogee thereafter, filed a suit against Calvo. Petitioner, on the other hand, contends that it is a private carrier not required to observe such extraordinary diligence in the vigilance over the goods. As customs broker, she does not indiscriminately hold her services out to the public but only to selected parties.

Issues:

Whether or not Calvo is a common carrier liable for the damages for failure to observe extraordinary diligence in the vigilance over the goods.

(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. CALVO VS. UCPB GENERAL INSURANCE TERMINAL SERVICE, INC. Facts: A contract was entered into between Calvo and San Miguel Corporation (SMC) for the transfer of certain cargoes from the port area in Manila to the warehouse of SMC. The cargo was insured by UCPB General Insurance Co., Inc. When the shipment arrived and

EH 405

Issue:

Held: The contention has no merit. In De Guzman v. Court of Appeals, the Court dismissed a similar contention and held the party to be a common carrier, thus The 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 law makes no distinction between a carrier offering its services to the general community or solicits business only from a narrow segment of the general population. Note that the transportation of goods holds an integral part of Calvo’s business, it cannot indeed be doubted that it is a common carrier. Asia Lighterage and Shipping Inc. v. CA Gr, No. 147246, August 19, 2003 FACTS: Petitioner was contracted as carrier by a corporation from Portland, Oregon to deliver a cargo to the consignee's warehouse at Pasig City. The cargo, however, never reached the consignee as the barge that carried the cargo sank completely, resulting in damage to the cargo. Private respondent, as insurer, indemnified the consignee for the lost cargo and thus, as subrogee, sought recovery from petitioner. Both the trial court and the appellate court ruled in favor of private respondent. The Court ruled in favor of private respondent. Whether or not petitioner is a common carrier, the Court ruled in the affirmative. The principal business of petitioner is that of lighterage and drayage, offering its barges to the public, although for limited clientele, for carrying or transporting goods by water for compensation. Whether or not petitioner failed to exercise extraordinary diligence in its care and custody of the consignee's goods, the Court also ruled in the affirmative. The barge completely sank after its towing bits broke, resulting in the loss of the cargo. Petitioner failed to prove that the typhoon was the proximate and

Page 8

TRANSPORTATION LAW CASE DIGESTS only cause of the loss and that it has exercised due diligence before, during and after the occurrence. HCISED ISSUE:

earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; (5) Order or act of competent public authority.

Whether or Not the petitioner is a common carrier. RULING: YES. Petitioner is a common carrier whether its carrying of goods is done on an irregular rather than scheduled manner, and with an only limited clientele. A common carrier need not have fixed and publicly known routes. Neither does it have to maintain terminals or issue tickets. To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs. Court of Appeals. 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 and lighterage, offering its barges to the public, despite its limited clientele for carrying or transporting goods by water for compensation. 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. Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it has no fixed and publicly known route, maintains no terminals, and issues no tickets. It points out that it is not obliged to carry indiscriminately for any person. It is not bound to carry goods unless it consents. In short, it does not hold out its services to the general public. In De Guzman vs. Court of Appeals, we 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. We also did not distinguish 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. Further, we ruled that Article 1732 does not distinguish between a carrier offering its services to the general public, and one who offers services or solicits business only from a narrow segment of the general population. 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 deterioration of the goods, deterioration of the goods, the common carrier must prove that it exercised extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of the Civil Code enumerates the instances when the presumption of negligence does not attach: 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,

EH 405

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 or 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. The partly-submerged vessel was refloated but its hole was patched with only clay and cement. The patch work was merely a provisional remedy, not enough for the barge to sail safely. Thus, when petitioner persisted to proceed with the voyage, it recklessly exposed the cargo to further damage. AF Sanchez Brokerage vs CA (Dec 21, 2004) Facts: AF Sanchez is engaged in a broker business wherein its main job is to calculate customs duty, fees and charges as well as storage fees for the cargoes. Part also of the services being given by AF Sanchez is the delivery of the shipment to the consignee upon the instruction of the shipper. Wyett engaged the services of AF Sanchez where the latter delivered the shipment to Hizon Laboratories upon instruction of Wyett. Upon inspection, it was found out that at least 44 cartons containing contraceptives were in bad condition. Wyett claimed insurance from FGU. FGU exercising its right of subrogation claims damages against AF Sanchez who delivered the damaged goods. AF Sanchez contended that it is not a common carrier but a brokerage firm. Issue: Held:

Is

AF

Sanchez

a

common

carrier?

SC held that Art 1732 of the Civil Code in defining common carrier does not distinguish whether the activity is undertaken as a principal activity or merely as an ancillary activity. In this case, while it is true that AF Sanchez is principally engaged as a broker, it cannot be denied from the evidence presented that part of the services it offers to its customers is the delivery of the goods to their respective consignees. Note: AF Sanchez claimed that the proximate cause of the damage is improper packing. Under the CC, improper packing of the goods is an exonerating circumstance. But in this case, the SC held that though the goods

Page 9

TRANSPORTATION LAW CASE DIGESTS were improperly packed, since AF Sanchez knew of the condition and yet it accepted the shipment without protest or reservation, the defense is deemed waived.

Issue: Whether or not Black Sea and TVI are common carriers Held :

Schmitz Transport and Brokerage Corp v Transort Venture Inc., GR 150255 April 22,2005 Facts: On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from the port of Ilyichevsk, Russia on board M/V “Alexander Saveliev” 545 hot rolled steel sheets in coil weighing 6,992,450 metric tons. The cargoes, which were to be discharged at the port of Manila in favor of the consignee, Little Giant Steel Pipe Corporation (Little Giant), were insured against all risks with Industrial Insurance Company Ltd. (Industrial Insurance) under Marine Policy No. M-91-3747-TIS. The vessel arrived at the port of Manila and the Philippine Ports Authority (PPA) assigned it a place of berth at the outside breakwater at the Manila South Harbor. Schmitz Transport, whose services the consignee engaged to secure the requisite clearances, to receive the cargoes from the shipside, and to deliver them to its (the consignee’s) warehouse at Cainta, Rizal, in turn engaged the services of TVI to send a barge and tugboat at shipside. TVI’s tugboat “Lailani” towed the barge “Erika V” to shipside. The tugboat, after positioning the barge alongside the vessel, left and returned to the port terminal. Arrastre operator Ocean Terminal Services Inc. commenced to unload 37 of the 545 coils from the vessel unto the barge. By 12:30 a.m. of October 27, 1991 during which the weather condition had become inclement due to an approaching storm, the unloading unto the barge of the 37 coils was accomplished. No tugboat pulled the barge back to the pier, however. At around 5:30 a.m. of October 27, 1991, due to strong waves, the crew of the barge abandoned it and transferred to the vessel. The barge pitched and rolled with the waves and eventually capsized, washing the 37 coils into the sea. Little Giant thus filed a formal claim against Industrial Insurance which paid it the amount of P5,246,113.11. Little Giant thereupon executed a subrogation receipt in favor of Industrial Insurance. Industrial Insurance later filed a complaint against Schmitz Transport, TVI, and Black Sea through its representative Inchcape (the defendants) before the RTC of Manila, they faulted the defendants for undertaking the unloading of the cargoes while typhoon signal No. 1 was raised. The RTC held all the defendants negligent. Defendants Schmitz Transport and TVI filed a joint motion for reconsideration assailing the finding that they are common carriers. RTC denied the motion for reconsideration. CA affirmed the RTC decision in toto, finding that all the defendants were common carriers — Black Sea and TVI for engaging in the transport of goods and cargoes over the seas as a regular business and not as an isolated transaction, and Schmitz Transport for entering into a contract with Little Giant to transport the cargoes from ship to port for a fee.

EH 405

Contrary to petitioner’s insistence, this Court, as did the appellate court, finds that petitioner is a common carrier. For it undertook to transport the cargoes from the shipside of “M/V Alexander Saveliev” to the consignee’s warehouse at Cainta, Rizal. As the appellate court put it, “as long as a person or corporation holds [itself] to the public for the purpose of transporting goods as [a] business, [it] is already considered a common carrier regardless if [it] owns the vehicle to be used or has to hire one.” That petitioner is a common carrier, the testimony of its own Vice-President and General Manager Noel Aro that part of the services it offers to its clients as a brokerage firm includes the transportation of cargoes reflects so. It is settled that under a given set of facts, a customs broker may be regarded as a common carrier. Thus, this Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable Court of Appeals,[44] held: The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier, as defined under Article 1732 of the Civil Code, to wit, 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. xxx Article 1732 does not distinguish between one whose principal business activity is the carrying of goods and one who does such carrying only as an ancillary activity. The contention, therefore, of petitioner that it is not a common carrier but a customs broker whose principal function is to prepare the correct customs declaration and proper shipping documents as required by law is bereft of merit. It suffices that petitioner undertakes to deliver the goods for pecuniary consideration. And in Calvo v. UCPB General Insurance Co. Inc.,[46] this Court held that as the transportation of goods is an integral part of a customs broker, the customs broker is also a common carrier. For to declare otherwise “would be to deprive those with whom [it] contracts the protection which the law affords them notwithstanding the fact that the obligation to carry goods for [its] customers, is part and parcel of petitioner’s business.” PHIL CHARTER vs. M/V "NATIONAL HONOR," [G.R. No. 161833. July 8, 2005.] FACTS: On November 5, 1995, J. Trading Co. Ltd. of Seoul, Korea, loaded a shipment of four units of parts and accessories on board the vessel M/V "National Honor,"

Page 10

TRANSPORTATION LAW CASE DIGESTS represented in the Philippines by its agent, National Shipping Corporation of the Philippines (NSCP). The shipment was contained in two wooden crates, namely, Crate No. 1 and Crate No. 2, complete and in good order condition. Crate No. 1 contained the following articles: one (1) unit Lathe Machine complete with parts and accessories; one (1) unit Surface Grinder complete with parts and accessories; and one (1) unit Milling Machine complete with parts and accessories. On the flooring of the wooden crates were three wooden battens placed side by side to support the weight of the cargo. It was insured for P2,547,270.00 with the Philippine Charter Insurance Corporation (PCIC). The M/V "National Honor" arrived at the Manila International Container Terminal (MICT). The International Container Terminal Services, Incorporated (ICTSI) was the exclusive arrastre operator of MICT and was charged with discharging the cargoes from the vessel. Claudio Cansino, the stevedore of the ICTSI, placed two sling cables on each end of Crate No. 1. No sling cable was fastened on the mid-portion of the crate. As the crate was being hoisted from the vessel's hatch, the mid-portion of the wooden flooring suddenly snapped in the air, about five feet high from the vessel's twin deck, sending all its contents crashing down hard, resulting in extensive damage to the shipment. Blue Mono International Company, Incorporated (BMICI) subsequently filed separate claims against the NSCP, the ICTSI, and its insurer, the PCIC, for US$61,500.00. When the other companies denied liability, PCIC paid the claim and was issued a Subrogation Receipt for P1,740,634.50. On March 22, 1995, PCIC, as subrogee, filed with the RTC of Manila a Complaint for Damages against the "Unknown owner of the vessel M/V National Honor," NSCP and ICTSI, as defendants. ICTSI, for its part, filed its Answer with Counterclaim and Cross-claim against its co-defendant NSCP, claiming that the loss/damage of the shipment was caused exclusively by the defective material of the wooden battens of the shipment, insufficient packing or acts of the shipper. The trial court rendered judgment for PCIC and ordered the complaint dismissed. According to the trial court, the loss of the shipment contained in Crate No. 1 was due to the internal defect and weakness of the materials used in the fabrication of the crates. The CA affirmed in TOTO the decision of the RTC. ISSUE: WHETHER OR NOT THE COMMON CARRIER IS LIABLE FOR THE DAMAGE SUSTAINED BY THE SHIPMENT IN THE HANDS OF THE ARRASTRE OPERATOR. HELD: THE RULING OF THE RTC AND CA WAS UPHELD. The petitioner posits that the loss/damage was caused by the mishandling of the shipment by therein respondent ICTSI, the arrastre operator, and not by its negligence. The petition has no merit.

EH 405

We agree with the contention of the petitioner that common carriers, from the nature of their business and for reasons of public policy, are mandated to observe extraordinary diligence in the vigilance over the goods according to all the circumstances of each case. The extraordinary diligence in the vigilance over the goods requires common carriers to render service with the greatest skill and foresight and "to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires." When the goods shipped are either lost or arrive in damaged condition, a presumption arises against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold it liable. However, under Article 1734 of the New Civil Code, the presumption of negligence does not apply to any of the following causes: 1. Flood, storm, earthquake, lightning or other natural disaster or calamity; 2. Act of the public enemy in war, whether international or civil; 3. Act or omission of the shipper or owner of the goods; 4. The character of the goods or defects in the packing or in the containers; 5. Order or act of competent public authority. It bears stressing that the enumeration in Article 1734 of the New Civil Code which exempts the common carrier for the loss or damage to the cargo is a closed list. Crate No. 1 was provided by the shipper of the machineries in Seoul, Korea. There is nothing in the record which would indicate that defendant ICTSI had any role in the choice of the materials used in fabricating this crate. Said defendant, therefore, cannot be held as blame worthy for the loss of the machineries contained in Crate No. 1. The CA affirmed the ruling of the RTC, thus: “The case at bar falls under one of the exceptions mentioned in Article 1734 of the Civil Code, particularly number (4) thereof, i.e., the character of the goods or defects in the packing or in the containers. The trial court found that the breakage of the crate was not due to the fault or negligence of ICTSI, but to the inherent defect and weakness of the materials used in the fabrication of the said crate.” Upon examination of the records, We find no compelling reason to depart from the factual findings of the trial court. It appears that the wooden batten used as support for the flooring was not made of good materials, which caused the middle portion thereof to give way when it was lifted. The shipper also failed to indicate signs to notify the stevedores that extra care should be employed in handling the shipment. Appellant's allegation that since the cargo arrived safely from the port of [P]usan, Korea without defect, the fault should be attributed to the arrastre operator who mishandled the cargo; is without merit. The cargo fell while it was being carried only at about five (5) feet high above the ground. It would not have so easily collapsed had the cargo been properly packed. The shipper should have used materials of stronger quality to support the heavy machines. Not only did the shipper fail to properly pack the cargo, it also failed to

Page 11

TRANSPORTATION LAW CASE DIGESTS indicate an arrow in the middle portion of the cargo where additional slings should be attached. While it is true that the crate contained machineries and spare parts, it cannot thereby be concluded that the respondents knew or should have known that the middle wooden batten had a hole, or that it was not strong enough to bear the weight of the shipment. The statement in the Bill of Lading, that the shipment was in apparent good condition, is sufficient to sustain a finding of absence of defects in the merchandise. Case law has it that such statement will create a prima facie presumption only as to the external condition and not to that not open to inspection. LEA MER INDUSTRIES INC VS MALAYAN INSURANCE CO, INC. GR No. 161745, SEPTEMBER 30, 2005 FACTS: Ilian Silica Mining entered into a contract of carriage with the petitioner, Lea Mer Industries Inc. for the shipment of 900 metric tons of silica sand worth P565,000. The cargo was consigned to Vulcan Industrial and Mining Corporation and was to be shipped from Palawan to Manila. The silica sand was boarded to Judy VII, the vessel leased by Lea Mer. However, during the course of its voyage, the vessel sank which led to the loss of the cargo. Consequently, the respondent, as the insurer, paid Vulcan the value of the lost cargo. Malayan Insurance Co., Inc. then collected from the petitioner the amount it paid to Vulcan as reimbursement and as its exercise on the right of subrogation. Lea Mer refused to pay which led Malayan to institute a complaint with the RTC. The RTC dismissed the complaint stating that the loss was due to a fortuitous event, Typhoon Trining. Petitioner did not know that a typhoon was coming and that it has been cleared by the Philippine Coast Guard to travel from Palawan to Manila. The CA reversed the ruling of the trial court for the reason that said vessel was not seaworthy when it sailed to Manila. ISSUE: Whether or not the petitioner is liable for the loss of the cargo. HELD: CA reversed. 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 — when this service is offered to the public for compensation. Petitioner is clearly a common carrier, because it offers to the public its business of transporting goods through its vessels. Thus, the Court corrects the trial court's finding that petitioner became a private carrier when Vulcan chartered it. Charter parties are classified as contracts of demise (or bareboat) and affreightment, which are distinguished as follows: "Under the demise or bareboat charter of the vessel, the charterer will generally be considered as owner for the voyage or service stipulated. The charterer mans

EH 405

the vessel with his own people and becomes, in effect, the owner pro hac vice, subject to liability to others for damages caused by negligence. To create a demise, the owner of a vessel must completely and exclusively relinquish possession, command and navigation thereof to the charterer; anything short of such a complete transfer is a contract of affreightment (time or voyage charter party) or not a charter party at all." The distinction is significant, because a demise or bareboat charter indicates a business undertaking that is private in character. Consequently, the rights and obligations of the parties to a contract of private carriage are governed principally by their stipulations, not by the law on common carriers. The Contract in the present case was one of affreightment, as shown by the fact that it was petitioner's crew that manned the tugboat M/V Ayalit and controlled the barge Judy VII. Common carriers are bound to observe extraordinary diligence in their vigilance over the goods and the safety of the passengers they transport, as required by the nature of their business and for reasons of public policy. Extraordinary diligence requires rendering service with the greatest skill and foresight to avoid damage and destruction to the goods entrusted for carriage and delivery. Common carriers are presumed to have been at fault or to have acted negligently for loss or damage to the goods that they have transported. This presumption can be rebutted only by proof that they observed extraordinary diligence, or that the loss or damage was occasioned by any of the following causes: "(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; "(2) Act of the public enemy in war, whether international or civil; "(3) Act or omission of the shipper or owner of the goods; "(4) The character of the goods or defects in the packing or in the containers; "(5) Order or act of competent public authority." Jurisprudence defines the elements of a "fortuitous event" as follows: (a) the cause of the unforeseen and unexpected occurrence, or the failure of the debtors to comply with their obligations, must have been independent of human will; (b) the event that constituted the caso fortuito must have been impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have been such as to render it impossible for the debtors to fulfill their obligation in a normal manner; and (d) the obligor must have been free from any participation in the aggravation of the resulting injury to the creditor. To excuse the common carrier fully of any liability, the fortuitous event must have been the proximate and only cause of the loss. Moreover, it should have exercised due diligence to prevent or minimize the loss before, during and after the occurrence of the fortuitous event. As required by the pertinent law, it was not enough for the common carrier to show that there was an unforeseen or unexpected occurrence. It had to show that it was free from any fault — a fact it miserably failed to prove.

Page 12

TRANSPORTATION LAW CASE DIGESTS LOADSTAR SHIPPING CO., INC., v. CA

CEBU SALVAGE CORP. v. PHIL HOME ASSURANCE

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.

3. Private Carriage Home Insurance Co. v. American Steamship Agencies 23 SCRA 24 FACTS: "Consorcio Pesquero del Peru of South America" shipped freight pre-paid at Chimbate, Peru, 21,740 jute bags of Peruvian fish meal through SS Crowborough. The cargo, consigned to San Miguel Brewery, Inc., now San Miguel Corporation, and insured by Home Insurance Company for $202,505, arrived in Manila and was discharged into the lighters of Luzon Stevedoring Company. When the cargo was delivered to consignee San Miguel Brewery Inc., there were shortages amounting to P12,033.85, causing the latter to lay claims against Luzon Stevedoring Corporation, Home Insurance Company and the American Steamship Agencies, owner and operator of SS Crowborough. Because the others denied liability, Home Insurance Company paid the consignee P14,870.71. Having been refused reimbursement by both the Luzon Stevedoring Corporation and American Steamship Agencies, Home Insurance Company, as subrogee to the consignee, filed against them before the Court of First Instance a complaint for recovery of P14,870.71 with legal interest, plus attorney's fees.

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.

EH 405

In answer, Luzon Stevedoring Corporation alleged that it delivered with due diligence the goods in the same quantity and quality that it had received the same from the carrier. It also claimed that plaintiff's claim had prescribed under Article 366 of the Code of Commerce stating that the claim must be made within 24 hours from receipt of the cargo. American Steamship Agencies denied liability by alleging that under the provisions of the Charter party referred to in the bills of lading, the charterer, not the shipowner, was responsible for any loss or damage of the cargo. Furthermore, it claimed to have exercised due diligence in stowing the goods and that as a mere forwarding agent, it was not responsible for losses or damages to the cargo. The Court of First Instance absolved the Luzon Stevedoring Corporation from any liability and ordered the American Steamship Agencies to pay the sum. Hence, this petition. ISSUE: Is the stipulation in the charter party of the owner's non-liability valid so as to absolve the American Steamship Agencies from liability for loss? RULING: Judgment was reversed and American Steamship Agencies was absolved liability. • The bills of lading provided at the back thereof that the bills of lading shall be governed by and subject to the terms and conditions of the charter party, if

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TRANSPORTATION LAW CASE DIGESTS any, otherwise, the bills of lading prevail over all the agreements. o

•

The Court of First Instance declared the contract as contrary to Article 587 of the Code of Commerce making the ship agent civilly liable for indemnities suffered by third persons arising from acts or omissions of the captain in the care of the goods and Article 1744 of the Civil Code under which a stipulation between the common carrier and the shipper or owner limiting the liability of the former for loss or destruction of the goods to a degree less than extraordinary diligence is valid provided it be reasonable, just and not contrary to public policy. The release from liability in this case was held unreasonable and contrary to the public policy on common carriers. o

o

•

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

distinguished from its other agents or employees. In this case, no such personal act or negligence has been proved. 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.

Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier.8 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 he Civil Code provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier. The stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent would be void only if the strict public policy governing common carriers is applied. Such policy has no force where the public at large is not involved, as in the case of a ship totally chartered for the use of a single party.

And furthermore, in a charter of the entire vessel, the bill of lading issued by the master to the charterer, as shipper, is in fact and legal contemplation merely a receipt and a document of title not a contract, for the contract is the charter party. The consignee may not claim ignorance of said charter party because the bills of lading expressly referred to the same. Accordingly, the consignees under the bills of lading must likewise abide by the terms of the charter party. And as stated, recovery cannot be had thereunder, for loss or damage to the cargo, against the shipowners, unless the same is due to personal acts or negligence of said owner or its manager, as

EH 405

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.

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TRANSPORTATION LAW CASE DIGESTS 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.

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.

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.

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.

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 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)

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

EH 405

FGU INSURANCE v. G.P. SARMIENTO 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.

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TRANSPORTATION LAW CASE DIGESTS 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.

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.

ISSUE: Is the Caravan Travel and reimbursement and damages?

Tours

liable

for

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

EH 405

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

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TRANSPORTATION LAW CASE DIGESTS everything else that was essential to book petitioner for the tour. Hence, petitioner cannot recover and must bear her own damage.

4. Distinction from towage, arrester and stevedoring 5. Governing Laws 6. Registered Owner Rule and Kabit System C. OBLIGATIONS OF PARTIES AND DEFENSES 1. Duties of Common Carrier COMPAÑIA MARITIMA v. INSURANCE COMPANY OF NORTH AMERICA G.R. No. L-18965 October 30, 1964 FACTS: Macleod and Company of the Philippines contracted the services of the Compañia Maritima, a shipping corporation, for the shipment of 2,645 bales of hemp from the former's Sasa private pier at Davao City to Manila and for their subsequent transhipment to Boston, Massachusetts, U.S.A. on board the S.S. Steel Navigator. This oral contract was later on confirmed by a formal and written booking issued by Macleod's branch office in Sasa and handcarried to Compañia Maritima's branch office in Davao in compliance with which the latter sent to Macleod's private wharf on which the loading of the hemp was completed on October 29, 1952. These two lighters were manned each by a patron and an assistant patron. The patrons of both barges issued the corresponding carrier's receipts. During the night of October 29, 1952, or at the early hours of October 30, LCT No. 1025 sank, resulting in the damage or loss of 1,162 bales of hemp loaded therein. The total damages totaled to P60,421.02. Since Macleod’s products were insured by Insurance Company of North America, it executed a subrogation contract where Macleod assigned all rights to the Insurance Company of North America to the damaged and insured cargo. Unable to collect from Compania Maritima, Company of North America filed this case in court. The trial court ordered Compania Maritima to pay Macleod the damages it incurred due to its sinking. The CA affirmed the decision of the lower court prompting the petitioner to elevate the case to the Supreme Court. ISSUE: (1) Was there a contract of carriage between the carrier and the shipper even if the loss occurred when the hemp was loaded on a barge owned by the carrier which was loaded free of charge and was not actually loaded on the S.S. Bowline Knot which would carry the hemp to Manila and no bill of lading was issued therefore? HELD:

EH 405

1. This issue should be answered in the affirmative. The oral contract was later confirmed by a formal and written booking issued by the shipper's branch office, Davao City, in virtue of which the carrier sent two of its lighters to undertake the service. It also appears that the patrons of said lighters were employees of the carrier with due authority to undertake the transportation and to sign the documents that may be necessary therefor. The fact that the carrier sent its lighters free of charge to take the hemp from Macleod's wharf at Sasa preparatory to its loading onto the ship Bowline Knot does not in any way impair the contract of carriage already entered into between the carrier and the shipper, for that preparatory step is but part and parcel of said contract of carriage. In other words, here we have a complete contract of carriage the consummation of which has already begun: the shipper delivering the cargo to the carrier, and the latter taking possession thereof by placing it on a lighter manned by its authorized employees, under which Macleod became entitled to the privilege secured to him by law for its safe transportation and delivery, and the carrier to the full payment of its freight upon completion of the voyage. The receipt of goods by the carrier has been said to lie at the foundation of the contract to carry and deliver, and if actually no goods are received there can be no such contract. The liability and responsibility of the carrier under a contract for the carriage of goods commence on their actual delivery to, or receipt by, the carrier or an authorized agent. ... and delivery to a lighter in charge of a vessel for shipment on the vessel, where it is the custom to deliver in that way, is a good delivery and binds the vessel receiving the freight, the liability commencing at the time of delivery to the lighter. ... and, similarly, where there is a contract to carry goods from one port to another, and they cannot be loaded directly on the vessel and lighters are sent by the vessel to bring the goods to it, the lighters are for the time its substitutes, so that the bill of landing is applicable to the goods as soon as they are placed on the lighters. (80 C.J.S., p. 901, emphasis supplied) The liability of the carrier as common carrier begins with the actual delivery of the goods for transportation, and not merely with the formal execution of a receipt or bill of lading; the issuance of a bill of lading is not necessary to complete delivery and acceptance. Even where it is provided by statute that liability commences with the issuance of the bill of lading, actual delivery and acceptance are sufficient to bind the carrier. SERVANDO vs. PHILIPPINE STEAM NAVIGATION CO. FACTS: On November 6, 1963, appellees Clara Uy Bico and Amparo Servando loaded on board the appellant's vessel, FS-176, for carriage from Manila to Pulupandan, Negros Occidental. In the bills of lading issued for the cargoes in question, the parties agreed to limit the responsibility of the carrier for the loss or damage that

Page 17

TRANSPORTATION LAW CASE DIGESTS may be caused to the shipment by inserting therein the following stipulation: Clause 14. Carrier shall not be responsible for loss or damage to shipments billed 'owner's risk' unless such loss or damage is due to negligence of carrier. Nor shall carrier be responsible for loss or damage caused by force majeure, dangers or accidents of the sea or other waters; war; public enemies; . . . fire . ... Upon arrival of the vessel at Pulupandan, in the morning of November 18, 1963, the cargoes were discharged, complete and in good order, unto the warehouse of the Bureau of Customs. At about 2:00 in the afternoon of the same day, said warehouse was razed by a fire of unknown origin, destroying appellees' cargoes. Before the fire, however, appellee Uy Bico was able to take delivery of 907 cavans of rice 2 Appellees' claims for the value of said goods were rejected by the appellant SC RULING We sustain the validity of the above stipulation; there is nothing therein that is contrary to law, morals or public policy. Besides, the agreement contained in the above quoted Clause 14 is a mere iteration of the basic principle of law written in Article 1 1 7 4 of the Civil Code: Article 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable. Thus, where fortuitous event or force majeure is the immediate and proximate cause of the loss, the obligor is exempt from liability for non-performance. The Partidas, 4 the antecedent of Article 1174 of the Civil Code, defines 'caso fortuito' as 'an event that takes place by accident and could not have been foreseen. Examples of this are destruction of houses, unexpected fire, shipwreck, violence of robbers.' In its dissertation of the phrase 'caso fortuito' the Enciclopedia Juridicada Espanola 5 says: "In a legal sense and, consequently, also in relation to contracts, a 'caso fortuito' presents the following essential characteristics: (1) the cause of the unforeseen and unexpected occurrence, or of the failure of the debtor to comply with his obligation, must be independent of the human will; (2) it must be impossible to foresee the event which constitutes the 'caso fortuito', or if it can be foreseen, it must be impossible to avoid; (3) the occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and (4) the obligor must be free from any participation in the aggravation of the injury resulting to the creditor." In the case at bar, the burning of the customs warehouse was an extraordinary event which happened independently of the will of the appellant. The latter could not have foreseen the event. There is nothing in the record to show that appellant carrier ,incurred in delay in the performance of its obligation. It appears that appellant had not only notified appellees of the arrival of their shipment, but

EH 405

had demanded that the same be withdrawn. In fact, pursuant to such demand, appellee Uy Bico had taken delivery of 907 cavans of rice before the burning of the warehouse. Nor can the appellant or its employees be charged with negligence. The storage of the goods in the Customs warehouse pending withdrawal thereof by the appellees was undoubtedly made with their knowledge and consent. Since the warehouse belonged to and was maintained by the government, it would be unfair to impute negligence to the appellant, the latter having no control whatsoever over the same. The lower court in its decision relied on the ruling laid down in Yu Biao Sontua vs. Ossorio 6, where this Court held the defendant liable for damages arising from a fire caused by the negligence of the defendant's employees while loading cases of gasoline and petroleon products. But unlike in the said case, there is not a shred of proof in the present case that the cause of the fire that broke out in the Custom's warehouse was in any way attributable to the negligence of the appellant or its employees. Under the circumstances, the appellant is plainly not responsible MAERSK LINE vs. CA FACTS: Petitioner Maersk Line is engaged in the transportation of goods by sea, doing business in the Philippines through its general agent Compania General de Tabacos de Filipinas while private respondent Efren Castillo, on the other hand, is the proprietor of Ethegal Laboratories, a firm engaged in the manutacture of pharmaceutical products. Private respondent ordered from Eli Lilly. Inc. (ELI) of Puerto Rico through its agent in the Philippines, Elanco Products, 600,000 empty gelatin capsules for the manufacture of his pharmaceutical products. The shipper ELI advised Castillo as consignee that the gelatin capsules contained in 6 drums were already shipped on board MV "Anders Maerskline for shipment to the Philippines via Oakland, California, which according to the memo sent, was to arrive on April 3, 1977. For reasons unknown, the cargo of capsules were mishipped and diverted to Richmond, Virginia, USA and then transported back Oakland, Califorilia causing it to arrive 2 months after it was specified in the memo. Castillo refused to receive the delivery of the goods due to the delay. Castillo filed before the rescission of the contract and damages against ELI. ELI’s argument was that it the subject shipment was transported in accordance with the provisions of the covering bill of lading and that its liability under the law on transportation of good attaches only in case of loss, destruction or deterioration of the goods as provided for in Article 1734 of Civil Code and ELI filed a croos-claim against Maerskline. issues having been joined, private respondent moved for the dismissal of the complaint against Eli Lilly, Inc.on the ground that the evidence on record shows that the delay in the

Page 18

TRANSPORTATION LAW CASE DIGESTS delivery of the shipment was attributable solely to petitioner. RTC: ruled in favor of Castillo on the ground that breach in the performance of their obligation consisting of their negligence to deliver the goods on time. CA: Affirmed the Decision of the RTC. ISSUE: W/N maerskline may be held liable for the delay Ruling: The SC, in their ruling made reference to the stipulations in the bill of lading. A provision in said bill of lading states that “The Carrier does not undertake that the goods shall arive at the port of discharge or the place of delivery at any particular time or to meet any particular market or use and save as is provided in clause 4 the Carrier shall in no circumstances be liable for any direct, indirect or consequential loss or damage caused by delay”. According to the SC, the aforequoted provision at the back of the bill of lading, in fine print, is a contract of adhesion. Generally, contracts of adhesion are considered void since almost all the provisions of these types of contracts are prepared and drafted only by one party, usually the carrier. Nonetheless, settled is the rule that bills of lading are contracts not entirely prohibited. The questioned provision in the subject bill of lading has the effect of practically leaving the date of arrival of the subject shipment on the sole determination and will of the carrier. While it is true that common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right to prompt delivery, unless such common carriers previously assume the obligation to deliver at a given date or time (Mendoza v. Philippine Air Lines, Inc., 90 Phil. 836 [1952]), delivery of shipment or cargo should at least be made within a reasonable time. In the case before us, we find that a delay in the delivery of the goods spanning a period of two (2) months and seven (7) days falls was beyond the realm of reasonableness. It was due to petitioner’s negligence that the goods were mishipped to Richmond, Virginia.

MACAM vs. CA [G.R. No. 125524. August 25, 1999] FACTS: On 4 April 1989 petitioner Macam shipped on board the vessel Nen Jiang, owned and operated by respondent China Ocean Shipping Co., through local agent respondent WALLEM, 3,500 boxes of watermelons and 1,611 boxes of fresh mangoes; the two sets of fruits were covered by two bills of lading and were exported through their respective Letters of Credit both issued by Pakistan Bank. The shipment was bound for Hongkong with PAKISTAN BANK as consignee and Great Prospect Company of Kowloon, Hongkong (GPC) as notify party. On 6 April 1989, per letter of credit

EH 405

requirement, copies of the bills of lading and commercial invoices were submitted to petitioner's depository bank, Consolidated Banking Corporation (SOLIDBANK), which paid petitioner in advance the total value of the shipment of US$20,223.46. Upon arrival in Hongkong, the shipment was (1) delivered by respondent WALLEM directly to GPC (the buyer-importer), not to PAKISTAN BANK, (2) and without the required bill of lading having been surrendered. Subsequently, GPC failed to pay PAKISTAN BANK such that the latter, still in possession of the original bills of lading, refused to pay petitioner through SOLIDBANK. Since SOLIDBANK already prepaid petitioner the value of the shipment, it demanded payment from respondent WALLEM through five (5) letters but was refused. Petitioner was thus allegedly constrained to return the amount involved to SOLIDBANK; petitioner then demanded payment from respondent WALLEM in writing but to no avail. On 25 September 1991 petitioner sought collection of the value of the shipment of US$20,223.46 or its equivalent of P546,033.42 from respondents before the Regional Trial Court of Manila, based on delivery of the shipment to GPC without presentation of the bills of lading and bank guarantee. On 14 May 1993, the trial court favored Pet, ordering China Ocean Shipping and Wallem to pay, jointly and severally. The Court of Appeals appreciated the evidence in a different manner; it set aside the decision of the trial court and dismissed the complaint together with the counterclaims. Hence, the petition for review. ISSUES: (1) Duration and extent of a common carrier’s extraordinary responsibility. WON delivery to GPC was proper. (2) WON respondents are liable to petitioner for releasing the goods to GPC without the bills of lading or bank guarantee. RULING: 1.) YES. Art. 1736 of the NCC. The extraordinary responsibility of the common carriers 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 consignee, or to the person who has a right to receive them, without prejudice to the provisions of article 1738. We emphasize that the extraordinary responsibility of the common carriers lasts until actual or constructive delivery of the cargoes to the consignee or to the person who has a right to receive them. PAKISTAN BANK was indicated in the bills of lading as consignee whereas GPC was the notify party. However, in the export invoices GPC was clearly named as buyer/importer. Petitioner also referred to GPC as such in his demand letter to respondent WALLEM and in his complaint before the trial court.

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TRANSPORTATION LAW CASE DIGESTS This premise draws us to conclude that the delivery of the cargoes to GPC as buyer/importer which, conformably with Art. 1736 had, other than the consignee, the right to receive them was proper. 2.) NO. Contrary to petitioner’s claims, the Court agrees with respondents that it was his (Macam’s) practice to ask the shipping lines to immediately release shipment of perishable goods through telephone calls by himself or his “people.” He no longer required presentation of a bill of lading nor of a bank guarantee as a condition to releasing the goods in case he was already fully paid. Thus, taking into account that subject shipment consisted of perishable goods and SOLIDBANK pre-paid the full amount of the value thereof, it is not hard to believe the claim of respondent WALLEM that petitioner indeed requested the release of the goods to GPC without presentation of the bills of lading and bank guarantee. Respondents submitted in evidence a telex dated 5 April 1989 as basis for delivering the cargoes to GPC without the bills of lading and bank guarantee. The telex instructed delivery of various shipments to the respective consignees without need of presenting the bill of lading and bank guarantee per the respective shipper’s request since “for prepaid shipt ofrt charges already fully paid” (sic). It has been the practice of petitioner to request the shipping lines to immediately release perishable cargoes such as watermelons and fresh mangoes through telephone calls by himself or his “people.” In transactions covered by a letter of credit, bank guarantee is normally required by the shipping lines prior to releasing the goods. But for buyers using telegraphic transfers, petitioner dispenses with the bank guarantee because the goods are already fully paid. In his several years of business relationship with GPC and respondents, there was not a single instance when the bill of lading was first presented before the release of the cargoes. In view of petitioner’s utter failure to establish the liability of respondents over the cargoes, no reversible error was committed by respondent court in ruling against him. WHEREFORE, the petition is DENIED.

DELSAN TRANSPORT LINES, INC vs. AMERICAN HOME ASSURANCE CORPORATION G.R. No. 149019, August 15, 2006 FACTS: Delsan is a domestic corporation which owns and operates the vessel MT Larusan. On the other hand, respondent American Home Assurance Corporation (AHAC for brevity) is a foreign insurance company duly. It is engaged, among others, in insuring cargoes for transportation within the Philippines.

EH 405

Unloading operations commenced, discharging of the diesel oil. The discharging had to be stopped on account of the discovery that the port bow mooring of the vessel was intentionally cut or stolen by unknown persons. Because there was nothing holding it, the vessel drifted westward, ultimately caused the diesel oil to spill into the sea. As a result of spillage and backflow of diesel oil, Caltex sought recovery of the loss from Delsan, but the latter refused to pay. As insurer, AHAC paid Caltex. AHAC, as Caltex’s subrogee, instituted Civil Case against Delsan. caused by the spillage. It likewise prayed that it be indemnified for damages suffered Delsan insists that the rule on contributory negligence against Caltex, the shipper-owner of the cargo, and the diesel oil was already completely delivered to Caltex. ISSUE: W.O.N. Delsan is liable based on Article 1734 of the NCC and W.O.N. the rule on contributory negligence should be applied against Caltex. HELD: Petition is DENIED. CA is affirmed. 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; 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. Delsan failed to prove its claim that there was a contributory negligence on the part of the owner of the goods – Caltex. Dlesan, as the owner of the vessel, was obliged to prove that the loss was caused by one of the excepted causes if it were to seek exemption from responsibility. 7 Unfortunately, it miserably failed to discharge this burden by the required quantum of proof. Delsan’s argument that it should not be held liable for the loss of diesel oil due to backflow because the same had already been actually and legally delivered to Caltex at the time it entered the shore tank holds no water. It had been settled that the subject cargo was still in the custody of Delsan because the discharging thereof has not yet been finished. 2. Defenses of Common Carrier  Fire as Cause DSR-SENATOR LINES AND C.F. SHARP AND COMPANY, INC. vs. FEDERAL PHOENIX ASSURANCE CO., INC. G.R. No. 135377. October 7, 2003

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TRANSPORTATION LAW CASE DIGESTS Facts: Berde Plants, Inc. (Berde Plants) delivered 632 units of artificial trees to C.F. Sharp and Company, Inc. (C.F. Sharp, for transportation and delivery to the consignee. The cargo was loaded in M/S "Arabian Senator." Federal Phoenix Assurance Company, Inc. (Federal Phoenix Assurance) insured the cargo against all risks in the amount of P941,429.61. M/S "Arabian Senator" left the Manila South Harbor for Saudi Arabia with the cargo on board. When the vessel arrived in Khor Fakkan Port, the cargo was reloaded on board DSR-Senator Lines' feeder vessel, bound for Port Dammam, Saudi Arabia. However, while in transit, the vessel and all its cargo caught fire. Consequently, Federal Phoenix Assurance paid Berde Plants P941,429.61 corresponding to the amount of insurance for the cargo. In turn Berde Plants executed in its favor a "Subrogation Receipt" Thus, Federal Phoenix Assurance filed a complaint for damages against DSR-Senator Lines and C.F. Sharp RTC rendered a Decision in favor of Federal Phoenix Assurance On appeal, the Court of Appeals rendered a Decision affirming the RTC Decision Issue: WON the liability was extinguished when the vessel carrying the cargo was gutted by fire Ruling: Article 1734 of the Civil Code provides: "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; (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." Fire is not one of those enumerated under the above provision which exempts a carrier from liability for loss or destruction of the cargo. Even if fire were to be considered a natural disaster within the purview of Article 1734, it is required under Article 1739 of the same Code that the natural disaster must have been the proximate and only cause of the loss, and that the carrier has exercised due diligence to prevent or minimize the loss before, during or after the occurrence of the disaster.

EH 405

Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them. Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. There are very few instances when the presumption of negligence does not attach and these instances are enumerated in Article 1739. In those cases where the presumption is applied, the common carrier must prove that it exercised extraordinary diligence in order to overcome the presumption. Respondent Federal Phoenix Assurance raised the presumption of negligence against petitioners. However, they failed to overcome it by sufficient proof of extraordinary diligence. Petition is DENIED



Shore Pass Requirement

JAPAN AIRLINES vs. ASUNCION FACTS: Respondents Michael and Jeanette Asuncion left Manila on board Japan Airlines (JAL) bound for LA. Their itinerary included a stop-over in Narita and an overnight stay at Hotel Nikko Narita. Upon arrival at Narita, JAL endorsed their applications for shore pass and directed them to the Japanese immigration official. A shore pass is required of a foreigner aboard a vessel or aircraft who desires to stay in the neighborhood of the port of call for not more than 72 hours. During their interview, the Japanese immigration official noted that Michael appeared shorter than his height as indicated in his passport. Because of this inconsistency, respondents were denied shore pass entries and were brought instead to the Narita Airport Rest House where they were billeted overnight. Respondents were charged US$400.00 each for their accommodation, security service and meals. Respondents filed a complaint for damages claiming that JAL did not fully apprise them of their travel requirements and that they were rudely and forcibly detained at Narita Airport. JAL denied the allegations of respondents. It maintained that the refusal of the Japanese immigration authorities to issue shore passes to respondents is an act of state which JAL cannot interfere with or prevail upon. Consequently, it cannot impose upon the immigration authorities that respondents be billeted at Hotel Nikko instead of the airport resthouse. ISSUE: WON JAL is guilty of breach of contract. HELD:

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TRANSPORTATION LAW CASE DIGESTS Under Article 1755 of the Civil Code, a common carrier such as JAL is bound to carry its passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. When an airline issues a ticket to a passenger, confirmed for a particular flight on a certain date, a contract of carriage arises. The passenger has every right to expect that he be transported on that flight and on that date and it becomes the carrier’s obligation to carry him and his luggage safely to the agreed destination. If the passenger is not so transported or if in the process of transporting he dies or is injured, the carrier may be held liable for a breach of contract of carriage. We find that JAL did not breach its contract of carriage with respondents. It may be true that JAL has the duty to inspect whether its passengers have the necessary travel documents, however, such duty does not extend to checking the veracity of every entry in these documents. JAL could not vouch for the authenticity of a passport and the correctness of the entries therein. The power to admit or not an alien into the country is a sovereign act which cannot be interfered with even by JAL. This is not within the ambit of the contract of carriage entered into by JAL and herein respondents. As such, JAL should not be faulted for the denial of respondents’ shore pass applications.  Exercise of Extraordinary Diligence, Inherent Character of Goods and Inadequacy of Packaging PLANTERS PRODUCTS, INC. VS. COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI KAISHA G.R. No. 101503 September 15, 1993 FACTS: Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk on 16 June 1974 aboard the cargo vessel M/V "Sun Plum" owned by private respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union, Philippines, as evidenced by Bill of Lading No. KP-1 signed by the master of the vessel and issued on the date of departure. Prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant to the Uniform General Charter was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan. Before loading the fertilizer aboard the vessel, four (4) of her holds were all presumably inspected by the charterer's representative and found fit to take a load of urea in bulk pursuant to par. 16 of the charterparty . After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper, the steel hatches were closed with heavy iron lids, covered with three (3) layers of tarpaulin, then

EH 405

tied with steel bonds. The hatches remained closed and tightly sealed throughout the entire voyage. Petitioner unloaded the cargo from the holds into its steelbodied dump trucks which were parked alongside the berth, using metal scoops attached to the ship, pursuant to the terms and conditions of the charterpartly (which provided for an F.I.O.S. clause). However, the hatches remained open throughout the duration of the discharge. Each time a dump truck was filled up, its load of Urea was covered with tarpaulin. The port area was windy, certain portions of the route to the warehouse were sandy and the weather was variable, raining occasionally while the discharge was in progress. It took eleven (11) days for PPI to unload the cargo. A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was hired by PPI to determine the "outturn" of the cargo shipped, by taking draft readings of the vessel prior to and after discharge. The survey report submitted by CSCI to the consignee (PPI) revealed a shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt, sand and rust and rendered unfit for commerce. Consequently, PPI sent a claim letter to Soriamont Steamship Agencies (SSA), the resident agent of the carrier, KKKK, representing the cost of the alleged shortage in the goods shipped and the diminution in value of that portion said to have been contaminated with dirt. Respondent SSA was not able to respond to this consignee’s claim for payment because according to them, they only received a request for shortlanded certificate and not a formal claim. Hence, PPI filed an action for damages with the Court of First Instance of Manila. The defendant carrier argued that the strict public policy governing common carriers does not apply to them because they have become private carriers by reason of the provisions of the charter-party. The court a quo however sustained the claim of the plaintiff against the defendant carrier for the value of the goods lost or damaged. On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from liability for the value of the cargo that was lost or damaged. Relying on the 1968 case of Home Insurance Co.v. American Steamship Agencies, Inc., the appellate court ruled that the cargo vessel M/V "Sun Plum" owned by private respondent KKKK was a private carrier and not a common carrier by reason of the time charterer-party. Accordingly, the Civil Code provisions on common carriers which set forth a presumption of negligence do not find application in the case at bar. ISSUE: Whether a common carrier becomes a private carrier by reason of a charter-party. HELD: The assailed decision of the Court of Appeals, which reversed the trial court, is affirmed. A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; a

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TRANSPORTATION LAW CASE DIGESTS contract of affreightment by which the owner of a ship or other vessel lets the whole or a part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight; Charter parties are of two types: (a) contract of affreightment which involves the use of shipping space on vessels leased by the owner in part or as a whole, to carry goods for others; and, (b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer to him of its entire command and possession and consequent control over its navigation, including the master and the crew, who are his servants. Contract of affreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides for the hire of vessel only, either for a determinate period of time or for a single or consecutive voyage, the shipowner to supply the ship's stores, pay for the wages of the master and the crew, and defray the expenses for the maintenance of the ship. Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil Code. The definition extends to carriers either by land, air or water which hold themselves out as ready to engage in carrying goods or transporting passengers or both for compensation as a public employment and not as a casual occupation. The distinction between a "common or public carrier" and a "private or special carrier" lies in the character of the business, such that if the undertaking is a single transaction, not a part of the general business or occupation, although involving the carriage of goods for a fee, the person or corporation offering such service is a private carrier. It is not disputed that respondent carrier, in the ordinary course of business, operates as a common carrier, transporting goods indiscriminately for all persons. When petitioner chartered the vessel M/V "Sun Plum", the ship captain, its officers and compliment were under the employ of the shipowner and therefore continued to be under its direct supervision and control. Hardly then can we charge the charterer, a stranger to the crew and to the ship, with the duty of caring for his cargo when the charterer did not have any control of the means in doing so. This is evident in the present case considering that the steering of the ship, the manning of the decks, the determination of the course of the voyage and other technical incidents of maritime navigation were all consigned to the officers and crew who were screened, chosen and hired by the shipowner. It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or 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 shipowner 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.

EH 405

Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship Agencies, supra, is misplaced for the reason that the meat of the controversy therein was the validity of a stipulation in the charter-party exempting the shipowners from liability for loss due to the negligence of its agent, and not the effects of a special charter on common carriers. At any rate, the rule in the United States that a ship chartered by a single shipper to carry special cargo is not a common carrier, does not find application in our jurisdiction, for we have observed that the growing concern for safety in the transportation of passengers and /or carriage of goods by sea requires a more exacting interpretation of admiralty laws, more particularly, the rules governing common carriers. In an action for recovery of damages against a common carrier on the goods shipped, the shipper or consignee should first prove the fact of shipment and its consequent loss or damage while the same was in the possession, actual or constructive, of the carrier. Thereafter, the burden of proof shifts to respondent to prove that he has exercised extraordinary diligence required by law or that the loss, damage or deterioration of the cargo was due to fortuitous event, or some other circumstances inconsistent with its liability. To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the prima facie presumption of negligence. Verily, the presumption of negligence on the part of the respondent carrier has been efficaciously overcome by the showing of extraordinary zeal and assiduity exercised by the carrier in the care of the cargo. The period during which private respondent was to observe the degree of diligence required of it as a public carrier began from the time the cargo was unconditionally placed in its charge after the vessel's holds were duly inspected and passed scrutiny by the shipper, up to and until the vessel reached its destination and its hull was reexamined by the consignee, but prior to unloading. Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss, destruction or deterioration of the goods if caused by the charterer of the goods or defects in the packaging or in the containers. The Code of Commerce also provides that all losses and deterioration which the goods may suffer during the transportation by reason of fortuitous event, force majeure, or the inherent defect of the goods, shall be for the account and risk of the shipper, and that proof of these accidents is incumbent upon the carrier. The carrier, nonetheless, shall be liable for the loss and damage resulting from the preceding causes if it is proved, as against him, that they arose through his negligence or by reason of his having failed to take the precautions which usage has established among careful persons. Thus, the petition is dismissed.  Exercise of Extraordinary Diligence and Doctrine of Last Clear Chance  Fortuitous Event

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TRANSPORTATION LAW CASE DIGESTS

EH 405

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