HOME INSURANCE COMPANY vs. AMERICAN STEAMSHIP and LUZON STEVEDORING G.R.

No. L-25599 April 4, 1968

FACTS: Consorcio Pesquero del Peru of South America shipped freight pre-paid at Peru, jute bags
of Peruvian fish meal through SS Crowborough, covered by clean bills of lading. The cargo,
consigned to San Miguel Brewery, Inc., now San Miguel Corporation, and insured by Home
Insurance Company 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 causing the latter to lay claims against Luzon Stevedoring Corporation, Home Insurance
Company and the American Steamship Agencies (shipowner), owner and operator of SS
Crowborough.
Because the others denied liability, Home Insurance Company paid SMBI the insurance value of the
loss, as full settlement of the claim. 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 CFI of Manila a complaint for recovery of
the payment paid with legal interest, plus attorneys fees.
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.
The CFI, after trial, absolved Luzon Stevedoring Corporation, having found the latter to have merely
delivered what it received from the carrier in the same condition and quality, and ordered American
Steamship Agencies to pay Home Insurance Company the amount demanded with legal interest
plus attorneys fees.
Disagreeing with such judgment, American Steamship Agencies appealed directly to Us.
ISSUE: Is the stipulation in the charter party of the owners non-liability valid so as to absolve the
American Steamship Agencies from liability for loss?
HELD: The judgment appealed from is hereby reversed and appellant is absolved from liability to
plaintiff.
YES The bills of lading, covering the shipment of Peruvian fish meal provide 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. On the bills are stamped Freight
prepaid as per charter party. Subject to all terms, conditions and exceptions of charter party dated
London, Dec. 13, 1962.
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 provisions of our Civil Code on common carriers were taken from Anglo-American law. Under
American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a
special person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner
from liability for the negligence of its agent is not against public policy, and is deemed valid.
Such doctrine We find reasonable. The Civil Code provisions on common carriers should not be
applied where the carrier is not acting as such but as a private carrier. The stipulation in the charter

party absolving the owner from liability for loss due to the negligence of its agent would be void only
if the strict public policy governing common carriers is applied. Such policy has no force where the
public at large is not involved, as in 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.

Valenzuela Hardwood vs. CA

(GR 102316, 30 June 1997)
FACTS: Valenzuela Hardwood and Industrial Supply, Inc. (VHIS) entered into an agreement with the
Seven Brothers whereby the latter undertook to load on board its vessel M/V Seven Ambassador the
formers lauan round logs numbering 940 at the port of Maconacon, Isabela for shipment to Manila.
VHIS insured the logs against loss and/or damage with South Sea Surety and Insurance Co.
The said vessel sank resulting in the loss of VHIS insured logs. VHIS demanded from South Sea
Surety the payment of the proceeds of the policy but the latter denied liability under the policy for
non-payment of premium. VHIS likewise filed a formal claim with Seven Brothers for the value of the
lost logs but the latter denied the claim.
The RTC ruled in favor of the petitioner.Both Seven Brothers and South Sea Surety appealed. The
Court of Appeals affirmed the judgment except as to the liability of Seven Brothers.South Sea Surety
and VHIS filed separate petitions for review before the Supreme Court. In a Resolution dated 2 June
1995, the Supreme Court denied the petition of South Sea Surety. The present decision concerns
itself to the petition for review filed by VHIS.
ISSUE: Is a stipulation in a charter party that the (o)wners shall not be responsible for loss, split,
short-landing, breakages and any kind of damages to the cargo valid?
HELD: Yes. Xxx [I]t is undisputed that private respondent had acted as a private carrier in
transporting petitioners 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 a
contract involving a common carrier, private carriage does not involve the general public. Hence, the
stringent provisions of the Civil Code on common carriers protecting the general public cannot
justifiably be applied to a ship transporting commercial goods as a private carrier. Consequently, the
public policy embodied therein is not contravened by stipulations in a charter party that lessen or
remove the protection given by law in contracts involving common carriers.

The general public enters into a contract of transportation with common carriers without a hand or a
voice in the preparation thereof. The riding public merely adheres to the contract; even if the public
wants to, it cannot submit its own stipulations for the approval of the common carrier. Thus, the law
on common carriers extends its protective mantle against one-sided stipulations inserted in tickets,
invoices or other documents over which the riding public has no understanding or, worse, no choice.
Compared to the general public, a charterer in a contract of private carriage is not similarly situated.
It can -- and in fact it usually does -- enter into a free and voluntary agreement. In practice, the
parties in a contract of private carriage can stipulate the carriers obligations and liabilities over the
shipment which, in turn, determine the price or consideration of the charter. Thus, a charterer, in
exchange for convenience and economy, may opt to set aside the protection of the law on common
carriers. When the charterer decides to exercise this option, he takes a normal business risk

FIREMANS FUND INSURANCE CO vs METRO PORT SERVICES

FACTS: Vulcan Industrial and Mining Corporation imported from the United States several
machineries and equipment which were loaded on board the SIS Albert Maersk at the port of
Philadelphia, U.S.A., and transhipped for Manila through the vessel S/S Maersk Tempo.
The shipment arrived at the port of Manila on June 3, 1979 and was turned over complete and in
good order condition to the arrastre operator E. Razon Inc. (now Metro Port Service Inc. and referred
to as the ARRASTRE).
A tractor operator, named Danilo Librando and employed by the ARRASTRE, was ordered to
transfer the shipment to the Equipment Yard at Pier 3. While Librando was maneuvering the tractor
(owned and provided by Maersk Line) to the left, the cargo fell from the chassis and hit one of the
container vans of American President Lines. It was discovered that there were no twist lock at the
rear end of the chassis where the cargo was loaded.
An Insurance was claimed by Vulcan Industrial, in turn, the petitioner insurance company demanded
recovery from Maerks Line. The trial court ruled that Maerks and Metro Port be held solidarily liable.
On appeal by Metro Port, the Court of Appeals reversed, ruling that it is only Maerks that is liable.
ISSUE: WON Maerks and Metro Port exercised the proper degree of diligence.
WON Maerks and Metro Port be held liable solidarity.
RULING: Maerks and Metro port did not exercise the proper diligence.
In general, the nature of the work of an arrastre operator covers the handling of cargoes at piers and
wharves. The ARRASTRE is required to provide cargo handling equipment which includes among
others trailers, chassis for containers. In some cases, however, the shipping line has its own cargo
handling equipment.
In this case, Maerks provide for the chassis and tractors and merely requested the arrastre (Metro)
to dispatch a tractor operator. ARRASTRE which had the sole discretion and prerogative to hire and
assign Librando to operate the tractor. It was also the ARRASTRE's sole decision to detail and
deploy Librando for the particular task from among its pool of tractor operators or drivers. Since the
ARRASTRE offered its drivers for the operation of tractors in the handling of cargo and equipment,
then the ARRASTRE should see to it that the drivers under its employ must exercise due diligence in
the performance of their work.
The testimonies are appreciated and the court held that Maerks is at fault in not providing twist locks
on the chassis and Metro is also at fault for Librandos negligence in not checking that the cargo is
securely loaded on the chassis.

Both the arrastre and the carrier are charged with and obligated to deliver the goods in good
condition to the consignee.
The legal relationship between the consignee and the arrastre operator is akin to that of a depositor
and warehouseman (Lua Kian v. Manila Railroad Co., 19 SCRA 5 [1967]). The relationship between
the consignee and the common carrier is similar to that of the consignee and the arrastre operator
(Northern Motors, Inc. v. Prince Line, et al., 107 Phil. 253 [1960]). Since it is the duty of the
ARRASTRE to take good care of the goods that are in its custody and to deliver them in good
condition to the consignee, such responsibility also devolves upon the CARRIER. Both the
ARRASTRE and the CARRIER are therefore charged with and obligated to deliver the goods in
good condition to the consignee.
Delgado Brothers, Inc. V. Home Insurance, Inc
G.R. No. L-16567 March 27, 1961
FACTS: February 17, 1955: Victor Bijou & Co. shipped at New York for Manila aboard the vessel
S.S. Leoville and consigned to the Judy Philippines, Inc. of Manila, a shipment of 1 case Linen
Handkerchiefs and 2 cases cotton piece goods, for which, the New York agent of said vessel, the
Barber Steamship Lines, Inc., issued Bill of Lading No. 119 shipment as insured with Home
Insurance, Inc. by the shipper and/or consignee
March 30, 1955: vessel arrived at the Port of Manila and delivered 1 case of Linen Handkerchiefs in
bad order, with a shortage of 503 yards of Linen Print Handkerchiefs, to the prejudice, loss and
damage of shipper and or consignee in the sum of P1,287.20 so they filed a claim against Home
Insurance Inc.
March 7, 1956: Home Insurance Inc. filed against contractor Delgado Brothers Inc.
Trial Court: dismissed the case in favor of Home based on its special defenses invoked in its answer
since no claim was filed within the 15-day period from the date of the arrival of the goods before they
could file a suit in the court of proper jurisdiction within 1 year from the date of said arrival at the Port
of Manila, it is completely relieved and released of any and all liability for loss or damage under the
law and in accordance with the pertinent provisions of the management Contract with the Bureau of
Customs, covering the operation of the Arrastre Service for the Port of Manila; and that petitioner in
no way acts as an agent of the carrying vessel or of the importer or consignee
CA: reversed because of lack of jurisdiction it being a maritime contract should be handled by the
Municipal Court
ISSUE: W/N the case has prescribed according to maritime law (arrastre being a maritime case)
HELD: NO.
In case of controversy involving both maritime and nonmaritime subject matter,
where the principal matter involved belongs to the jurisdiction of a court of common law or of
equity, admiralty will not take cognizance of incidental maritime matters connected therewith
but will relegate the whole controversy to the appropriate tribunal
Both as to the nature of the functions and the place of their performance (upon
wharves and piers shipside), Brother's services are clearly not maritime but arrastre services
they are no different from those of a depositary or warehouseman
To give admiralty jurisdiction over a contract as maritime, such contract must relate to
the trade and business of the sea; it must be essentially and fully maritime in its character; it
must provide for maritime services, maritime transactions, or maritime casualties.

 Delgado Brothers, Inc. has nothing to do with the loading or unloading of cargoes to
and from the ships. Its operation on and its responsibility for the merchandise and goods
begins from the time they are placed upon the wharves or piers or delivered along sides of
ships
Court of First Instance of Manila has jurisdiction in cases where suit is brought
directly against the carrier or shipowner.
Respondent cannot invoke the rule against multiplicity of suits, for the simple reason
that said rule has to be subservient to the superior requirement that the court must have
jurisdiction
Philippine Airlines v. Court of Appeals
106 SCRA 391
Facts: Samson is a licensed aviator employed by the Philippine Airlines. He was partnered with
another pilot Bustamante. Samson had complained on previous occasions to PAL that Bustamante
was slow in reacting and was having lapses of poor judgment during flights. PAL however still
allowed Bustamante to continue flying.
On a certain flight, Bustamante overshot the airfield while landing the plane at the Daet airport.
Samson tried to control the plane, but did not succeed. The plane crash-landed beyond the runway
into a mangrove. Samson hit his head on the windshield due to the impact of the crash. He suffered
head injuries such as brain concussions and wounds on his forehead. To make matters worse,
plaintiff was discharged from employment. Samson then filed an action for damages against PAL.
Issue: Whether or not PAL is liable for damages.
Held: The Court held that PAL is liable for damages. There was gross negligence on the part of PAL
because despite the knowledge of Bustamantes condition the still allowed him to continue flying.
Bustamante had a tumor in his nasopharynx which affected his vision. As provided in Articles 1732,
1733, and 1756 of the NCC, PAL being a common carrier should have exercised extraordinary
diligence in the supervision of their employees and utmost diligence in bringing passengers to their
destination.
The court affirmed the decision of the trial court in awaring damages. Private respondent is entitled
to P198,000.00 as unearned income or compulsory damages, P80,000.00 for moral damages,
P20,000 as attorneys fees and P5,000 as expenses for litigation. This claim of the plaintiff for loss
and impairment of earning capacity is based on the provision of Art. 2205, NCC. Even from the
standpoint of the petitioner that there is employer-employee relationship between it and private
respondent arising from the contract of employment, private respondent is still entitled to moral
damages in view of the finding of bad faith or malice, applying the provisions of Art. 2220 of the
NCC.
Citadel Lines, Inc. v. Court of Appeals
184 SCRA 544
Facts: Citadel Lines, Inc., petitioner herein is the general agent of the vessel "Cardigan Bay/Strait
Enterprise" . Manila Wine Merchants, Inc. (Consignee) is the importer of the subject shipment of
Dunhill cigarettes from England. The said vessel loaded on board Filbrite cartons of manufactured

cigarettes called "Dunhill International Filter" and "Dunhill International Menthol". The shipment
arrived at the Port of Manila in a container. The said container was received by Metro Port Service,
Inc., respondent herein. Subsequently the container van, which contained two shipments was
stripped. One shipment was delivered and the other shipment containing cigarettes was palletized.
Due to lack of space at the Special Cargo Coral, the aforesaid cigarettes were placed in two
containers with two pallets with both containers duly padlocked and sealed by the representative of
the petitioner.
The next day, petitioners headchecker discovered that the container van of the cigarettes had a
different padlock and the seal was tampered with. This was reported to the Pier Superintendent it
was found that 90 cases of imported British manufactured cigarettes were missing. When the
Consignee found out that 90 cases were missing it filed a claim demanding the payment of the
market value of the missing cargo. Petitioner, in its reply letter, admitted the loss but alleged that the
same occurred at Pier 13, an area absolutely under the control of the arrastre (Metro Port Service,
Inc). Manila Wine Merchants filed a formal claim, with the arrastre and demanded payment of the
value of the goods but said claim was denied.
The lower court rendered a decision exonerating the arrastre of any liability on the ground that the
subject container van was not formally turned over to its custody, and held the petitioner liable for the
amount representing the market value of the lost shipment. On appeal the court of Appeals affirmed
the decision of the lower court but deleted the award of attorney's fees and costs of suit. Hence this
petition.
Issue: Whether the stipulation limiting the liability of the carrier contained in the bill of lading is
binding on the consignee.
Held: The Court held that the stipulation limiting the liability of the carrier is valid and binding upon
the consignee. It was expressly stipulated in the bill of lading that the carriers liability is limited to
$2.00 per kilo. It has been held in previous cases that a stipulation appearing in the bill of lading
limiting the liability of the carrier is binding, unless the owner or shipper declares a higher value.
The consignee in this case did not declare a higher value and admits that the value of the goods
does not appear in the bill of lading. Therefore the stipulation in the bill of lading should be applied.
The contract had been freely agreed upon and the stipulation appears to be just and reasonable.
Therefore, the award of damages should be reduced and computed with regard to the bill of lading.
Zulueta vs. Pan Am
Facts: Mr. Zulueta and his wife and child boarded a flight of Pan Am from Wake Island to the Phil.
Mr. Zulueta, however, had to relieve himself and thus looked for a secluded place in the beach. As a
result, he was delayed in boarding for some 20 or 30 minutes. While Mr. Zulueta was reaching the
ramp, the captain of the plane demonstrated an intemperate and arrogant tone thereby impelling Mr.
Zulueta to answer back. Thus, Mr. Zulueta was off-loaded. The airport manager of then sent Mr.
Zulueta a letter stating that his stay in Wake Island would be for a minimum of one week during
which he would be charged $13.30 per day.
Issue: WON Pan Am should be held liable.
Held: Yes. Mr. Zulueta was off-loaded to retaliate and punish him for the embarrassment and loss of
face thus suffered by defendants agent.
The Zuluetas had a contract of carriage with the defendant, as a common carrier, pursuant to which
the latter was bound, for a substantial monetary consideration paid by the former, not merely to
transport them to Manila, but, also, to do so with extraordinary diligence or utmost diligence. The

responsibility of the common carrier, under said contract, as regards the passengers safety, is of
such a nature, affecting as it does public interest, that it cannot be dispensed with or even
lessenedby stipulation, by the posting of notices, by statements on tickets, or otherwise.
In the present case, the defendant did not only fail to comply with its obligation to transport Mr.
Zulueta to Manila, but, also, acted in a manner calculated to humiliate him, to chastise him, to make
him suffer, to cause to him the greatest possible inconvenience.
With regard to DAMAGES
It is obvious, however, that in off-loading plaintiff at Wake Island, under the circumstances,
defendants agents had acted with malice aforethought and evident bad faith. If gross negligence
warrants the award of exemplary damages, with more reason is its imposition justified when the act
performed is deliberate, malicious and tainted with bad faith.
The rationale behind exemplary or corrective damages is, as the name implies, to provide an
example or correction for public good. Defendant having breached its contracts in bad faith, the
court, as stated earlier, may award exemplary damages in addition to moral damages