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De Guzman v.

CA
Facts:
Respondent Ernesto Cendana was a junk dealer. He buys scrap materials and
brings those that he gathered to Manila for resale using 2 six-wheeler trucks.
On the return trip to Pangasinan, respondent would load his vehicle with
cargo which various merchants wanted delivered, charging fee lower than
the commercial rates. Sometime in November 1970, petitioner Pedro de
Guzman contracted with respondent for the delivery of 750 cartons of Liberty
Milk. On December 1, 1970, respondent loaded the cargo. Only 150 boxes
were delivered to petitioner because the truck carrying the boxes was
hijacked along the way. Petitioner commenced an action claiming the value
of the lost merchandise. Petitioner argues that respondent, being a common
carrier, is bound to exercise extraordinary diligence, which it failed to do.
Private respondent denied that he was a common carrier, and so he could
not be held liable for force majeure. The trial court ruled against the
respondent, but such was reversed by the Court of Appeals.
Issues:
(1) Whether or not private respondent is a common carrier
(2) Whether private respondent is liable for the loss of the goods
Held:
(1) Article 1732 makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity. Article 1732 also carefully avoids
making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article
1732 distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the general
population. It appears to the Court that private respondent is properly
characterized as a common carrier even though he merely "back-hauled"
goods for other merchants from Manila to Pangasinan, although such
backhauling was done on a periodic or occasional rather than regular or
scheduled manner, and even though private respondent's principal
occupation was not the carriage of goods for others. There is no dispute that
private respondent charged his customers a fee for hauling their goods; that
fee frequently fell below commercial freight rates is not relevant here. A
certificate of public convenience is not a requisite for the incurring of liability
under the Civil Code provisions governing common carriers.
(2) 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:

a. Flood, storm, earthquake, lightning, or other natural disaster or calamity;


b. Act of the public enemy in war, whether international or civil;
c. Act or omission of the shipper or owner of the goods;

d. The character of the goods or defects in the packing or in the containers;


and
e. Order or act of competent public authority."
The hijacking of the carrier's truck - does not fall within any of the five (5)
categories of exempting causes listed in Article 1734. Private respondent as
common carrier is presumed to have been at fault or to have acted
negligently. This presumption, however, may be overthrown by proof of
extraordinary diligence on the part of private respondent. We believe and so
hold that 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."
we hold that 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.

First Philippine Industrial Corp. vs. CA


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

Calvo V. UCPB Gen Insurance Co. (2002)


G.R. No.148496

March 19, 2002

Lessons Applicable: Legal Effect (Transportation)


FACTS:
At the time material to this case, Transorient Container Terminal Services,
Inc. (TCTSI) owned by Virgines Calvo entered into a contract with San Miguel
Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting paper
and 124 reels of kraft liner board from the Port Area in Manila to SMC's
warehouse at the Tabacalera Compound, Romualdez St., Ermita, Manila.
The cargo was insured by respondent UCPB General Insurance Co., Inc.
July 14, 1990: arrived in Manila on board "M/V Hayakawa Maru" and later on
unloaded from the vessel to the custody of the arrastre operator, Manila Port
Services, Inc
July 23 to July 25, 1990: Calvo withdrew the cargo from the arrastre operator
and delivered it to SMC's warehouse in Ermita, Manila
July 25, 1990: goods were inspected by Marine Cargo Surveyors, who found
that 15 reels of the semi-chemical fluting paper were "wet/stained/torn" and
3 reels of kraft liner board were likewise torn
SMC collected payment from UCPB the total damage of P93,112 under its
insurance contract
UCPB brought suit against Calvo as subrogee of SMC
Calvo: Art. 1734(4) The character of the goods or defects in the packing or in
the containers
spoilage or wettage" took place while the goods were in the custody of either
the carrying vessel "M/V Hayakawa Maru," which transported the cargo to
Manila, or the arrastre operator, to whom the goods were unloaded and who
allegedly kept them in open air for 9 days notwithstanding the fact that some
of the containers were deformed, cracked, or otherwise damaged
Trial Court: Calvo liable
CA: affirmed
ISSUE: W/N Calvo can be exempted from liability under Art. 1734(4)
HELD: NO. CA AFFIRMED.

mere proof of delivery of goods in good order to a carrier, and of their arrival
at the place of destination in bad order, makes out a prima facie case against
the carrier, so that if no explanation is given as to how the injury occurred,
the carrier must be held responsible
extraordinary responsibility 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 the right to receive the same
Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers
or goods or both, by land, water, or air for compensation, offering their
services to the public."
The above article makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity . . . 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.
concept of "common carrier" under Article 1732 may be seen to coincide
neatly with the notion of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially
supplements the law on common carriers set forth in the Civil Code
Under Section 13, paragraph (b) of the Public Service Act, "public service"
includes:
" x x x every person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with general or limited
clientele, whether permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street railway, traction
railway, subway motor vehicle, either for freight or passenger, or both, with
or without fixed route and whatever may be its classification, freight or
carrier service of any class, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair shop, wharf or dock,
ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light,
heat and power, water supply and power petroleum, sewerage system, wire
or wireless communications systems, wire or wireless broadcasting stations
and other similar public services. x x x"
when Calvo's employees withdrew the cargo from the arrastre operator, they
did so without exception or protest either with regard to the condition of
container vans or their contents
Calvo must do more than merely show the possibility that some other party
could be responsible for the damage. It must prove that it used "all
reasonable means to ascertain the nature and characteristic of goods
tendered for transport and that it exercised due care in the handling

A.F. SANCHEZ BROKERAGE vs CA Case Digest


A.F. SANCHEZ BROKERAGE INC., v. THE HON. COURT OF APPEALS and FGU
INSURANCE CORPORATION
447 SCRA 427 (2004), THIRD DIVISION (Carpio Morales, J.)
A common carrier is liable to the resulting damage to the goods if the
improper packaging is known to the carrier or his employees or is apparent
upon ordinary observation, but he nevertheless accepts the same without
protest or exception.
FACTS: Respondent FGU Insurance Corporation (FGU) brought an action for
reimbursement against petitioner A.F. Sanchez Brokerage Inc. (Sanchez
Brokerage) to collect the amount paid by the former to Wyeth-Suaco
Laboratories Inc. (Wyeth-Suaco) as insurance payment for the goods
delivered in bad condition.
A.F. Brokerage refused to admit liability for the damaged goods which it
delivered from Philippines Skylanders, Inc. (PSI) to Wyeth-Suaco as it
maintained that the damage was due to improper and insufficient export
packaging, discovered when the sealed containers were opened outside the
PSI warehouse.
The Regional Trial Court of Makati dismissed the said complaint; however, the
decision was subsequently reversed and set aside by the Court of Appeals,
finding that Sanchez Brokerage is liable for the carriage of cargo as a
common carrier by definition of the New Civil Code.
ISSUE: Whether or not the FGU Insurance is liable for the delivery of the
damaged goods
HELD: As defined under Article 1732 of the Civil Code, 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. It 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 Sanchez Brokerage that it is not a common carrier but a customs
broker whose principal function is to prepare the correct customs declaration
and proper shipping documents as required by law is bereft of merit. It
suffices that petitioner undertakes to deliver the goods for pecuniary
consideration.
In this light, Sanchez Brokerage as a common carrier is mandated to
observe, under Article 1733 of the Civil Code, extraordinary diligence in the
vigilance over the goods it transports according to all the circumstances of
each case. In the event that the goods are lost, destroyed or deteriorated, it
is presumed to have been at fault or to have acted negligently, unless it
proves that it observed extraordinary diligence.
The concept of extra-ordinary diligence was explained in Compania
Maritima v. Court of Appeals. The extraordinary diligence in the vigilance
over the goods tendered for shipment requires the common carrier to know
and to follow the required precaution for avoiding damage to or destruction
of the goods entrusted to it for sale, carriage and delivery. It requires
common carriers to render service with the greatest skill and foresight and
to use all reasonable means to ascertain the nature and characteristics of
goods tendered for shipment and to exercise due care in the handling and
storage including such methods as their nature requires.
It was established that Sanchez Brokerage received the cargoes from the PSI
warehouse in good order and condition and that upon delivery by petitioner
some of the cargoes were found to be in bad order as noted in the Delivery
Receipt and as indicated in the Survey and Destruction Report.
While paragraph no. 4 of Article 1734 of the Civil Code exempts a common
carrier from liability if the loss or damage is due to the character of the
goods or defects in the packaging or in the containers, the rule is that if the
improper packaging is known to the carrier or his employees or is apparent
upon ordinary observation, but he nevertheless accepts the same without
protest or exception notwithstanding such condition, he is not relieved of
liability for the resulting damage. If the claim of Sanchez Brokerage that
some of the cartons were already damaged upon delivery to it were true,
then it should naturally have received the cargo under protest or with
reservation duly noted on the receipt issued by PSI but it made no such
protest or reservation.

Schmitz Transport & Brokerage Corporation vs. Transport Venture,


Inc. (458 SCRA 557)
FACTS:
Petitioner, who was in charge of securing requisite clearances, receive the
cargoes from the shipside and deliver it to the consignee Little Giant Steel
Pipe Corporation warehouse at Cainta, Rizal, hired the services of respondent
Transport Venture Incorporation (TVI)s tugboat for the hot rolled steel sheets
in coil. Coils were unloaded to the barge but there was no tugboat to pull the
barge to the pier. Due to strong waves caused by approaching storm, the
barge was abandoned. Later, the barge capsized washing 37 coils into the
sea. Consignee was executed a subrogation receipt by Industrial Insurance
after the formers filing of formal claim. Industrial Insurance filed a complaint
against both petitioner and respondent herein. The trial court held that
petitioner and respondent TVI were jointly and severally liable for the
subrogation.
ISSUE:
Whether or not the loss of cargoes was due to fortuitous event.
RULING:
NO. In order, to be considered a fortuitous event: (1) the cause of the
unforeseen and unexpected occurrence, or the failure of the debtor to
comply with his obligation, must be independent of human will; (2) it must
be impossible to foresee the event which constitute 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 any

manner; and (4) the obligor must be free from any participation in the
aggravation of the injury resulting to the creditor.
Petitioner and respondent TVI were jointly and severally liable for the amount
of paid by the consignee plus interest computed from the date of decision of
the trial court.

CASE DIGEST (Transportation Law): Philippine Charter Insurance Corp.


vs. Unknown Owner
PHILIPPINE CHARTER INSURANCE CORPORATION vs. UNKNOWN OWNER OF
THE VESSEL M/V NATIONAL HONOR, NATIONAL SHIPPING CORPORATION OF
THE PHILIPPINES and INTERNATIONAL CONTAINER SERVICES, INC.
[G.R. No. 161833. July 8, 2005]
FACTS:
Petitioner Philippine Charter Insurance Corporation (PCIC) is the insurer of a
shipment on board the vessel M/V National Honor, represented in the
Philippines by its agent, National Shipping Corporation of the Philippines
(NSCP).
The M/V National Honor arrived at the Manila International Container
Terminal (MICT). The International Container Terminal Services, Incorporated
(ICTSI) was furnished with a copy of the crate cargo list and bill of lading, and
it knew the contents of the crate. The following day, the vessel started
discharging its cargoes using its winch crane. The crane was operated by
Olegario Balsa, a winchman from the ICTSI, exclusive arrastre operator of
MICT.

Denasto Dauz, Jr., the checker-inspector of the NSCP, along with the crew and
the surveyor of the ICTSI, conducted an inspection of the cargo. They
inspected the hatches, checked the cargo and found it in apparent good
condition. Claudio Cansino, the stevedore of the ICTSI, placed two sling
cables on each end of Crate No. 1. No sling cable was fastened on the midportion of the crate. In Dauzs experience, this was a normal procedure. As
the crate was being hoisted from the vessels hatch, the mid-portion of the
wooden flooring suddenly snapped in the air, about five feet high from the
vessels twin deck, sending all its contents crashing down hard, resulting in
extensive damage to the shipment.
PCIC paid the damage, and as subrogee, filed a case against M/V National
Honor, NSCP and ICTSI. Both RTC and CA dismissed the complaint.
ISSUE:
Whether or not the presumption of negligence is applicable in the instant
case.
HELD:
No.
We agree with the contention of the petitioner that common carriers, from
the nature of their business and for reasons of public policy, are mandated to
observe extraordinary diligence in the vigilance over the goods and for the
safety of the passengers transported by them, according to all the
circumstances of each case. he Court has defined extraordinary diligence in
the vigilance over the goods as follows:

The extraordinary diligence in the vigilance over the goods tendered for
shipment requires the common carrier to know and to follow the required
precaution for avoiding damage to, or destruction of the goods entrusted to
it for sale, carriage and delivery. It requires common carriers to render
service with the greatest skill and foresight and to use all reasonable means
to ascertain the nature and characteristic of goods tendered for shipment,
and to exercise due care in the handling and stowage, including such
methods as their nature requires.
The common carriers duty to observe the requisite diligence in the shipment
of goods lasts from the time the articles are surrendered to or
unconditionally placed in the possession of, and received by, the carrier for
transportation until delivered to, or until the lapse of a reasonable time for
their acceptance, by the person entitled to receive them.] >When the goods
shipped are either lost or arrive in damaged condition, a presumption arises
against the carrier of its failure to observe that diligence, and there need not
be an express finding of negligence to hold it liable. To overcome the
presumption of negligence in the case of loss, destruction or deterioration of
the goods, the common carrier must prove that it exercised extraordinary
diligence.
However, under Article 1734 of the New Civil Code, the presumption of
negligence does not apply to any of the following causes:
1. Flood, storm, earthquake, lightning or other natural disaster or calamity;

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


3. Act or omission of the shipper or owner of the goods;
4. The character of the goods or defects in the packing or in the containers;
5. Order or act of competent public authority.
It bears stressing that the enumeration in Article 1734 of the New Civil Code
which exempts the common carrier for the loss or damage to the cargo is a
closed list. To exculpate itself from liability for the loss/damage to the cargo
under any of the causes, the common carrier is burdened to prove any of the
aforecited causes claimed by it by a preponderance of evidence. If the carrier
succeeds, the burden of evidence is shifted to the shipper to prove that the
carrier is negligent.
Defect is the want or absence of something necessary for completeness or
perfection; a lack or absence of something essential to completeness; a
deficiency in something essential to the proper use for the purpose for which
a thing is to be used. On the other hand, inferior means of poor quality,
mediocre, or second rate. A thing may be of inferior quality but not
necessarily defective. In other words, defectiveness is not synonymous
with inferiority.

xxx

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

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 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.

Cebu Salvage Corporation (CSC) vs Philippine Home Assurance


Corp., (PHAC
G.R. No. 150403
January 25, 2007
FACTS:
On November 12, 1984, CSC & Maria Christina Chemicals Industries, Inc.,
(MCCII) entered into a voyage charter wherein CSC was to load 800-1,100
metric tons of silica quartz on board the M/T Espiritu Santo at Ayungon,
Negros Occidental for transport to and discharge at Tagoloan, Misamis
Oriental to consigned Ferrochrome Phils., Inc. Pursuant to the contract, on
December 23, 1984, CSC received & loaded 1,100 metric tons of silica quartz
on board the M/T Espiritu Santo which left Ayungon for Tagoloan the next day.
However, the shipment never reached its destination because the M/T
Espiritu Santo sank in the afternoon of December 24, 1984 off the beach of
Opol, Misamis Oriental, resulting in the total loss of the cargo.
MCCII filed a claim for the loss of the shipment with its insurer, PHAC. PHAC
paid the claim in the amount of P211,500 and was surrogated to MCCIIs
rights. It thereafter filed a case in the RTC against CSC for reimbursement of
the amount it paid MCCII.
However, CSC claims no liability insisting that the agreement was merely a
contract of hire wherein MCCII hired the vessel from its owner, ALS Timber
Enterprises. Not being the owner of the M/T Espiritu Santo, petitioner did not
have control over the vessel, its master & crew. Thus, it could not allegedly
be held liable for the loss of the shipment caused by the sinking of a ship it
didnt own.
ISSUES:
1. Whether there is a contract of carriage between CSC and MCCII.
2. Whether CSC is a common carrier despite not being the owner of the
vessel it used.
3. Whether the bill of lading should prevail over the voyage charter as the
contract of carriage between the parties.
4. Whether MCCII should be held liable for its own loss
5. Whether a carrier that enters into a contract of carriage is not liable to the
charterer/shipper if it does not own the vessel it chooses to use.
HELD:
1. Yes. The cargo was loaded on board the vessel; loss/non-delivery of the
cargo was proven; and petitioner failed to prove that it exercised
extraordinary diligence to prevent such loss or that it was due to some
casualty or force majeure. The voyage charter here being a contract of
affreightment, the carrier was answerable for the loss of the goods received
for transportation.

2. CSC was the one which contracted with MCCII for the transport of the
cargo. It had control over what vessel it would use. All throughout its
dealings with MCCII, it represented itself as a common carrier. The fact that it
did not own the vessel it decided to use to consummate the contract of
carriage did not negate its character & duties as a common carrier. The
MCCII could not be reasonably expected to inquire about the ownership of
the vessels which petitioner carrier offered to utilize. It is very difficult &
often impossible for the general public to enforce its rights of action under a
contract of carriage if it should be required to know who the actual owner of
the vehicle is. In this case, the voyage charter itself denominated the
petitioner as the owner/operator of the vessel.

3. No. The bill of lading was merely a receipt issued by ALS to evidence the
fact that the goods had been received for transportation. It was not signed
by MCCII, as in fact it was simply signed by the supercargo of ALS. This is
consistent with the fact that MCCII did not contract directly with ALS. While it
is true that a bill of lading may serve as the contract of carriage between the
parties, it cannot prevail over the express provision of the voyage charter
that MCCII and petitioner executed.

4. No. It deserves scant consideration that the voyage charter stipulated that
cargo insurance was for the charterers account. This meant that the
charterer would take care of having the goods insured. It could not exculpate
the carrier from liability for the breach of its contract of carriage. The law
prohibits it and condemns it as unjust & contrary to public policy.

5. The idea proposed by CSC is preposterous & dangerous. MCCII never dealt
with ALS and yet petitioner insists that MCCII should sue ALS for
reimbursement for its loss. Certainly, to permit a common carrier to escape
its responsibility for the goods it agreed to transport (by expedient of
alleging non-ownership of the vessel it employed) would radically derogate
from the carriers duty of extraordinary diligence. It would also open the door
to collusion between the carrier & the supposed owner and to the possible
shifting of liability from the carrier to one without any financial capability to
answer for the resulting damages.