Transpo Case Digest

TRANSPORTATION LAW CASE DIGESTS
I. CONTRACT OF TRANSPORTATION
A. CONCEPT, PARTIES AND PERFECTION
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
First Philippine Industrial Corporation vs. Court of Appeals
G.R. No. 125948 December 29, 1998
Facts:
Petitioner, First Phil. Industrial Corporation (FirstPhil for brevity) is a grantee of a pipeline
concession under Republic Act No. 387, as amended, to contract, install and operate oil
pipelines. FirstPhil applied for a mayor's permit, but before the mayor's permit could be
issued, the respondent City Treasurer required petitioner to pay a local tax pursuant to
the Local Government Code. Petitioner filed a letter-protest addressed to the respondent
City Treasurer, but the latter denied the same contending that petitioner cannot be
considered engaged in transportation business, thus it cannot claim exemption under
Section 133 (j) of the Local Government Code.
FirstPhil filed with the RTC Batangas a complaint for tax refund with prayer for writ of
preliminary injunction against respondents, contending that the imposition of tax upon
them violates Sec 133 of the Local Government Code. On the other hand, respondents
assert that pipelines are not included in the term "common carrier" which refers solely to
ordinary carriers such as trucks, trains, ships and the like. Respondents further posit that
the term "common carrier" under the said code pertains to the mode or manner by which
a product is delivered to its destination.
RTC dismissed the complaint, ruling that exemption granted under Sec. 133 (j)
encompasses only "common carriers" so as not to overburden the riding public or
commuters with taxes. And that petitioner is not a common carrier, but a special carrier
extending its services and facilities to a single specific or "special customer" under a
"special contract."
The case was elevated by the petitioner to the CA, but CA affirmed the decision of the
RTC. Hence this petition.
Issue:
WON the petitioner is a "common carrier" and, therefore, exempt from the business taxc
Held: Petition was granted. CA decision was REVERSED and SET ASIDE.
SC ruled in this case that petitioner is a common carrier and thus, exempt from business
tax.
A "common carrier" may be defined, broadly, as one who holds himself out to the public
as engaged in the business of transporting persons or property from place to place, for
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compensation, offering his services to the public generally. Art. 1732 of the Civil Code
defines a "common carrier" as "any person, corporation, firm or association engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or
air, for compensation, offering their services to the public." The test for determining
whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a public
employment, and must hold himself out as ready to engage in the transportation of
goods for person generally as a business and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry by the method by which his business is conducted and
over his established roads; and
4. The transportation must be for hire.
Based on the above definitions and requirements, there is no doubt that petitioner is a
common carrier. It is engaged in the business of transporting or carrying goods, i.e.
petroleum products, for hire as a public employment. It undertakes to carry for all
persons indifferently, that is, to all persons who choose to employ its services, and
transports the goods by land and for compensation. The fact that petitioner has a limited
clientele does not exclude it from the definition of a common carrier.
The definition of "common carriers" in the Civil Code makes no distinction as to the
means of transporting, as long as it is by land, water or air. It does not provide that the
transportation of the passengers or goods should be by motor vehicle. In fact, in the
United States, oil pipe line operators are considered common carriers.
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a
"common carrier.", and at the same time, said act also regards petroleum operation as a
public utility. BIR likewise considers the petitioner a "common carrier." In so ruling, it
held that, since petitioner is a pipeline concessionaire that is engaged only in
transporting petroleum products, it is considered a common carrier under Republic Act
No. 387. Such being the case, it is not subject to withholding tax prescribed by Revenue
Regulations No. 13-78, as amended.
Section 133 (j), of the Local Government Code, provides:
Sec. 133. Common Limitations on the Taxing Powers of Local Government Units.
Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of the following:
(j) Taxes on the gross receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers by air, land or water,
except as provided in this Code.
SC held that the legislative intent in excluding from the taxing power of the local
government unit the imposition of business tax against common carriers is to prevent a
duplication of the so-called "common carrier's tax."
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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. Scholasticas College.
On November 2, 1984, private respondent Word for the World Christian Fellowship Inc.
arranged with petitioners for the transportation of 33 members from 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 attorneys 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
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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 Cabils first one outside of
Manila, Cabil should 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 drivers
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. Scholasticas 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 formers employees, although such employees may
have acted beyond the scope of their authority or in violation of the orders of the
common carriers.
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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) sixwheeler 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, Cendanas 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 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:
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:
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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)
(2)
(3)
(4)
(5)
Flood, storm, earthquake, lightning or other natural disaster or calamity;

Act of the public enemy in war, whether international or civil;
Act or omission of the shipper or owner of the goods;
The character-of the goods or defects in the packing or-in the containers; and
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 negligently, unless they prove that they observed
extraordinary diligence as required in Article 1733. (Emphasis supplied)
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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.
KOREAN AIRLINES CO. v. CA
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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 Navidads 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
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Roman liable for the death of Navidad in failing to exercise extraordinary diligence
imposed upon a common carrier. While the deceased might not have 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.
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 carriers 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.
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
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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 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
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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.
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 charter-party . 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
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parked alongside the berth, using metal scoops attached to the ship, pursuant to the
terms and conditions of the charter-partly (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 consignees
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.
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ISSUE: Whether a common carrier becomes a private carrier by reason of a charterparty.
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 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
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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 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
EH 405
Page 14

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 bound itself to
haul the latters 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, attorneys 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 courts 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,
EH 405
Page 15

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 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) Bascoss
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.
LOADSTAR SHIPPING CO., INC., vs.

EH 405
Page 16

COURT OF APPEALS
Facts:
On 19 November 1984, LOADSTAR received on board a) 705 bales of lawanit hardwood;

b) 27 boxes and crates of tilewood assemblies and the others ;and c) 49 bundles of
mouldings R & W (3) Apitong Bolidenized. On its way to Manila from the port of Nasipit,
Agusan del Norte, the vessel, along with its cargo, sank off Limasawa Island. As a result
of the total loss of its shipment, the consignee made a claim with LOADSTAR which,
however, ignored the same. MIC filed a complaint against LOADSTAR and PGAI, alleging
that the sinking of the vessel was due to the fault and negligence of LOADSTAR and its
employees. LOADSTAR denied any liability for the loss of the shipper's goods and claimed
that sinking of its vessel was due to force majeure. LOADSTAR submits that the vessel
was a private carrier because it was not issued certificate of public convenience, it did
not have a regular trip or schedule nor a fixed route, and there was only "one shipper,
one consignee for a special cargo.
Issues:
(1) Is the M/V "Cherokee" a private or a common carrier?

(2) Did LOADSTAR observe due and/or ordinary diligence in these premises.
Held: Petition is dismissed:
SC hold that LOADSTAR is a common carrier. It is not necessary that the carrier be issued
a certificate of public convenience, and this public character is not altered by the fact
that the carriage of the goods in question was periodic, occasional, episodic or
unscheduled. The bills of lading failed to show any special arrangement, but only a
general provision to the effect that the M/V"Cherokee" was a "general cargo carrier." 14
Further, the bare fact that the vessel was carrying a particular type of cargo for one
shipper, which appears to be purely coincidental, is not reason enough to convert the
vessel from a common to a private carrier, especially where, as in this case, it was shown
that the vessel was also carrying passengers. Under Article 1732 of the Civil Code the
EH 405
Page 17

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
unloaded from the vessel, Calvo withdrew the cargo from the arrastre operator and
delivered the same to SMCs 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.
Issue:
Whether or not Calvo is a common carrier liable for the damages for failure to observe
extraordinary diligence in the vigilance over the goods.
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 Calvos business, it cannot
EH 405
Page 18

indeed
be
doubted
that
it
is
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 only cause of the loss and that it has exercised due diligence
before, during and after the occurrence. HCISED
ISSUE:
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
EH 405
Page 19

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, 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.
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
EH 405
Page 20

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
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 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.
Schmitz Transport and Brokerage Corp v Transort Venture Inc., GR 150255

April 22,2005
Facts:
EH 405
Page 21

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
consignees) warehouse at Cainta, Rizal, in turn engaged the services of TVI to send a
barge and tugboat at shipside. TVIs 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.
Issue:
Whether or not Black Sea and TVI are common carriers
EH 405
Page 22

Held :
Contrary to petitioners 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 consignees 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 VicePresident 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
petitioners business.
EH 405
Page 23

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," 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
EH 405
Page 24

shipment by therein respondent ICTSI, the arrastre operator, and not by its negligence.
The petition has no merit.
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.
3.
4.
The character of the goods or defects in the packing or in the containers;
5.
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
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
EH 405
Page 25

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 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
EH 405
Page 26

(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)
"(3)
"(4)
"(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
EH 405
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free from any fault a fact it miserably failed to prove.
LOADSTAR SHIPPING CO., INC., v. CA
Facts:
On 19 November 1984, LOADSTAR received on board a) 705 bales of lawanit hardwood;

b) 27 boxes and crates of tilewood assemblies and the others ;and c) 49 bundles of
mouldings R & W (3) Apitong Bolidenized. On its way to Manila from the port of Nasipit,
Agusan del Norte, the vessel, along with its cargo, sank off Limasawa Island. As a result
of the total loss of its shipment, the consignee made a claim with LOADSTAR which,
however, ignored the same. MIC filed a complaint against LOADSTAR and PGAI, alleging
that the sinking of the vessel was due to the fault and negligence of LOADSTAR and its
employees. LOADSTAR denied any liability for the loss of the shipper's goods and claimed
that sinking of its vessel was due to force majeure. LOADSTAR submits that the vessel
was a private carrier because it was not issued certificate of public convenience, it did
not have a regular trip or schedule nor a fixed route, and there was only "one shipper,
one consignee for a special cargo.
Issues:
(1) Is the M/V "Cherokee" a private or a common carrier?

(2) Did LOADSTAR observe due and/or ordinary diligence in these premises.
Held: Petition is dismissed:
SC hold that LOADSTAR is a common carrier. It is not necessary that the carrier be issued
a certificate of public convenience, and this public character is not altered by the fact
that the carriage of the goods in question was periodic, occasional, episodic or
unscheduled. The bills of lading failed to show any special arrangement, but only a
EH 405
Page 28

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.
CEBU SALVAGE CORP. v. PHIL HOME ASSURANCE
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.
EH 405
Page 29

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 any,
otherwise, the bills of lading prevail over all the agreements.
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..
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 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
EH 405
Page 30

o 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
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:
EH 405
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1 VSI was not a common carrier but a private carrier. It is undisputed that VSI did not
offer its services to the general public. The extent of VSI's responsibility and
liability over NSC's cargo are determined primarily by the stipulations in the
contract of carriage or charter party and the Code of Commerce. The burden of
proof lies on the part of NSC and not the VSI.
Article 1732 of the Civil Code defines a common carrier as "persons, corporations,
firms or associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water or air, for compensation, offering their
services to the public." It has been held that the true test of a common carrier is
the carriage of passengers or goods, provided it has space, for all who opt to avail
themselves of its transportation service for a fee. A carrier which does not qualify
under the above test is deemed a private carrier. "Generally, private carriage is
undertaken by special agreement and the carrier does not hold himself out to carry
goods for the general public. . . ."
2 Because the MV Vlason I was a private carrier, the shipowner's obligations are
governed by the provisions of the Code of Commerce and not by the Civil Code
which, as a general rule places the prima facie presumption of negligence on a
common carrier.
IN A CONTRACT OF PRIVATE CARRIAGE, THE BURDEN OF PROOF IN CASE OF

ACCIDENT IS ON THE CARRIER but the court exempts VSI due to force majeure.
NSC must prove that the damage to its shipment was caused by VSI's willful
negligence or failure to exercise due diligence in making MV Vlason I seaworthy
and fit for holding, carrying and safekeeping the cargo. The burden of proof was
placed on NSC by the parties' agreement.
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
plaintiffs insured logs.
EH 405
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Plaintiff demanded from defendant South Sea Surety and Insurance Co., Inc. the
payment of the proceeds of the policy but the latter denied liability under the policy.
Plaintiff likewise filed a formal claim with defendant Seven Brothers Shipping Corporation
for the value of the lost logs but the latter denied the claim.
Court of Appeals affirmed in part the RTC judgment by sustaining the liability of South
Sea Surety and Insurance Company ("South Sea"), but modified it by holding that Seven
Brothers Shipping Corporation ("Seven Brothers") was not liable for the lost cargo.
ISSUE:
Whether defendants shipping corporation and the surety company are liable to the
plaintiff for the latter's lost logs.
HELD:
The charter party between the petitioner and private respondent stipulated that the
"(o)wners shall not be responsible for loss, split, short-landing, breakages and any kind of
damages to the cargo" VALID
There is no dispute between the parties that the proximate cause of the sinking of M/V
Seven Ambassadors resulting in the loss of its cargo was the "snapping of the iron chains
and the subsequent rolling of the logs to the portside due to the negligence of the
captain in stowing and securing the logs on board the vessel and not due to fortuitous
event." Likewise undisputed is the status of Private Respondent Seven Brothers as a
private carrier when it contracted to transport the cargo of Petitioner Valenzuela. Even
the latter admits this in its petition.
Private respondent had acted as a private carrier in transporting petitioner's lauan logs.
Thus, Article 1745 and other Civil Code provisions on common carriers which were cited
by petitioner may not be applied unless expressly stipulated by the parties in their
charter party.
In a contract of private carriage, the parties may validly stipulate that responsibility for
the cargo rests solely on the charterer, exempting the shipowner from liability for loss of
or damage to the cargo caused even by the negligence of the ship captain. Pursuant to
Article 1306 of the Civil Code, such stipulation is valid because it is freely entered into by
the parties and the same is not contrary to law, morals, good customs, public order, or
public policy. Indeed, their contract of private carriage is not even a contract of adhesion.
We stress that in a contract of private carriage, the parties may freely stipulate their
duties and obligations which perforce would be binding on them. Unlike in contract
involving a common carrier, private carriage does not involve the general public. Hence,
the stringent provisions of the Civil Code on common carriers protecting the general
public cannot justifiably be applied to a ship transporting commercial goods as a private
carrier. Consequently, the public policy embodied therein is not contravened by
stipulations in a charter party that lessen or remove the protection given by law in
contracts involving common carriers.
The provisions of our Civil Code on common carriers were taken from Anglo-American
law. Under American jurisprudence, a common carrier undertaking to carry a special
EH 405
Page 33

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)
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
petitioners niece, Meriam Menor, was respondent companys ticketing manager.
Pursuant to said contract, Menor went to her aunts residence on June 12, 1991 a
Wednesday to deliver petitioners 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
petitioners 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.
EH 405
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Upon petitioners return from Europe, she demanded from respondent the
reimbursement of P61,421.70, representing the difference between the sum she paid for
Jewels of Europe and the amount she owed respondent for the British Pageant tour.
Despite several demands, respondent company refused to reimburse the amount,
contending that the same was non-refundable.Petitioner was thus constrained to file a
complaint against respondent for breach of contract of carriage and damages, which was
docketed as Civil Case No. 92-133 and raffled to Branch 59 of the Regional Trial Court of
Makati City.
After due proceedings, the trial court rendered a decision in favor of Estela Crisostomo.
But it was reversed by the Court of Appeals. Hence, this petition.
ISSUE:
Is the Caravan Travel and Tours liable for reimbursement and damages?
HELD: Petition DENIED.
By definition, a contract of carriage or transportation is one whereby a certain person or

association of persons obligate themselves to transport persons, things, or news from
one place to another for a fixed price.Such person or association of persons are regarded
as carriers and are classified as private or special carriers and common or public
carriers.A common carrier is defined under Article 1732 of the Civil Code as persons,
corporations, firms or associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water or air, for compensation, offering their
services to the public.
It is obvious from the above definition that respondent is not an entity engaged in the
business of transporting either passengers or goods and is therefore, neither a private
nor a common carrier. Respondent did not undertake to transport petitioner from one
place to another since its covenant with its customers is simply to make travel
arrangements in their behalf. Respondents 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,
EH 405
Page 35

respondent acted merely as an agent of the airline, with whom petitioner ultimately
contracted for her carriage to Europe. Respondents 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 petitioners contractual relation with respondent is the latters service
of arranging and facilitating petitioners 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. Petitioners submission is
premised on a wrong assumption.It is thus not bound under the law to observe
extraordinary diligence in the performance of its obligation, as petitioner claims.
Since the contract between the parties is an ordinary one for services, the standard of
care required of respondent is that of a good father of a family under Article 1173 of the
Civil Code.This connotes reasonable care consistent with that which an ordinarily prudent
person would have observed when confronted with a similar situation. The test to
determine whether negligence attended the performance of an obligation is: did the
defendant in doing the alleged negligent act use that reasonable care and caution which
an ordinarily prudent person would have used in the same situation?If not, then he is
guilty of negligence.
we do not agree with the finding of the lower court that Menors negligence concurred
with the negligence of petitioner and resultantly caused damage to the latter. Contrary
to petitioners 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 petitioners 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 petitioners hotel accommodation
as well as food, land transfers and sightseeing excursions, in accordance with its avowed
undertaking. Therefore, it is clear that respondent performed its prestation under the
contract as well as everything else that was essential to book petitioner for the tour.
Hence, petitioner cannot recover and must bear her own damage.
4. Distinction from towage, arrester and stevedoring

5. Governing Laws
6. Registered Owner Rule and Kabit System
EH 405
Page 36

C. OBLIGATIONS OF PARTIES AND DEFENSES
1. Duties of Common Carrier
COMPAIA 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 Compaia
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 Compaia 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 Macleods 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?
EH 405
Page 37

HELD:
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.
EH 405
Page 38

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 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.'
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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 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
EH 405
Page 40

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.
ELIs 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 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:
EH 405
Page 41

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 petitioners 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
EH 405
Page 42

with PAKISTAN BANK as consignee and Great Prospect Company of Kowloon, Hongkong
(GPC) as notify party. On 6 April 1989, per letter of credit 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 pre-paid 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 carriers 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
EH 405
Page 43

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.
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 petitioners claims, the Court agrees with respondents that it was his
(Macams) 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 shippers 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 petitioners utter failure to establish the liability of respondents over the
cargoes, no reversible error was committed by respondent court in ruling against him.
EH 405
Page 44

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.
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 Caltexs
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)
2)
3)
4)
5)
Flood storm, earthquake, lightning, or other natural disaster or calamity;

EH 405
Page 45

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.
Delsans 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
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:
EH 405
Page 46

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)
(3)
(4)
(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.
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.
EH 405
Page 47

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:
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 carriers 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:
EH 405
Page 48

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 charter-party . 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 the berth, using metal scoops attached to the ship, pursuant to the
terms and conditions of the charter-partly (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.
EH 405
Page 49

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 consignees
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 charterparty.
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 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
EH 405
Page 50

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 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
EH 405
Page 51

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
EH 405
Page 52

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TRANSPORTATION LAW CASE DIGESTS

TRANSPORTATION LAW CASE DIGESTS

TRANSPORTATION LAW CASE DIGESTS

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

TRANSPORTATION LAW CASE DIGESTS

KOREAN AIRLINES CO. v. CA

TRANSPORTATION LAW CASE DIGESTS

TRANSPORTATION LAW CASE DIGESTS

TRANSPORTATION LAW CASE DIGESTS

HELD: CA Decision AFFIRMED

TRANSPORTATION LAW CASE DIGESTS

PLANTERS PRODUCTS, INC. VS. COURT OF APPEALS,

Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation

TRANSPORTATION LAW CASE DIGESTS

TRANSPORTATION LAW CASE DIGESTS

A "charter-party" is defined as a contract by which an entire ship, or some principal part

TRANSPORTATION LAW CASE DIGESTS

TRANSPORTATION LAW CASE DIGESTS

TRANSPORTATION LAW CASE DIGESTS

LOADSTAR SHIPPING CO., INC., vs.

TRANSPORTATION LAW CASE DIGESTS

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

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

Held: Petition is dismissed:

TRANSPORTATION LAW CASE DIGESTS

CALVO VS. UCPB GENERAL INSURANCE TERMINAL SERVICE, INC.

TRANSPORTATION LAW CASE DIGESTS

Asia Lighterage and Shipping Inc. v. CA

Petitioner was contracted as carrier by a corporation from Portland, Oregon to deliver a

Whether or Not the petitioner is a common carrier.

Petitioner is a common carrier whether its carrying of goods is done on an irregular

TRANSPORTATION LAW CASE DIGESTS

TRANSPORTATION LAW CASE DIGESTS

Schmitz Transport and Brokerage Corp v Transort Venture Inc., GR 150255

TRANSPORTATION LAW CASE DIGESTS

TRANSPORTATION LAW CASE DIGESTS

TRANSPORTATION LAW CASE DIGESTS

TRANSPORTATION LAW CASE DIGESTS

TRANSPORTATION LAW CASE DIGESTS

TRANSPORTATION LAW CASE DIGESTS

The distinction is significant, because a demise or bareboat charter indicates a business

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

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

Act or omission of the shipper or owner of the goods;

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

Order or act of competent public authority."

TRANSPORTATION LAW CASE DIGESTS

LOADSTAR SHIPPING CO., INC., v. CA

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

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

Held: Petition is dismissed:

TRANSPORTATION LAW CASE DIGESTS

CEBU SALVAGE CORP. v. PHIL HOME ASSURANCE

TRANSPORTATION LAW CASE DIGESTS

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TRANSPORTATION LAW CASE DIGESTS

IN A CONTRACT OF PRIVATE CARRIAGE, THE BURDEN OF PROOF IN CASE OF

VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY v. CA

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