Baliwag Transit, Inc., vs.CA G.R. No. 80447 January 31, 1989

FACTS:On April 10, 1985, a Complaint for damages arising from breach of contract of carriage was filed by private respondents, the Spouses Sotero Cailipan, Jr. and Zenaida Lopez, and their son George, of legal age, against Baliwag Transit. The Complaint alleged that George, who was a paying passenger on a Baliwag bus on December 17, 1984, suffered multiple serious physical injuries when he was thrown off said bus driven in a careless & negligent manner by Leonardo Cruz, the authorized bus driver. As a result, he was confined in the hospital for treatment, incurring medical expenses, which were borne by his parents in the sum of about P200,000.00 plus other incidental expenses of about P10,000.00.

On February 5, 1986, Baliwag filed a Motion to Admit Amended Answer, which was granted by the RTC. The Amended Answer incorporated the affirmative defense that on May 16 1985, George bad been paid all his claims for damages arising from the incident subject matter of the complaint when he signed the following Release of Claims, witnessed by his brother Benjamin L. Cailipan, a licensed engineer:

For and in consideration of the payment to me/us of the sum of EIGHT THOUSAND TWENTY and 50/100 PESOS ONLY (P8,020.50), the receipt of which is hereby acknowledged, I/we, being of lawful age, do hereby release, acquit and forever discharge Fortune Insurance and/or Baliwag transit, Inc. his/her heirs, executors and assigns, from any and all liability now accrued or hereafter to accrue on account of any and all claims or causes of action which I/we now or may here after have for personal injuries, damage to property, loss of services, medical expenses, losses or damages of any and every kind or nature whatsoever, now known or what may hereafter develop by me/us sustained or received on or about 17th day of December, 1984 through Reckless Imprudence Resulting to Physical Injuries, and I/we hereby declare that I/we fully understand the terms of this settlement and voluntarily accept said sum for the purpose of making a full and final compromise adjustment and settlement of the injuries and damages, expenses and inconvenience above mentioned. (Rollo, p. 11)

Opposing to petitioners affirmative defense, Sotero Cailipan, Jr. testified that be is the father of George, who at the time of the incident was a student, living with his parents & totally dependent on them for their support; that they (the parents) shouldered the expenses for his hospitalization; and that they had not signed the Release of Claims.

In an Order dated 29 August 1986, the RTC of Bulacan, Branch 20, ruled that since the contract of carriage is between Baliwag and George L. Cailipan, the latter, who is of legal age, had the exclusive right to execute the Release of Claims despite the fact that he is still a student & dependent on his parents for support. Consequently, the execution by George of the Release of Claims discharges Baliwag and Fortune Insurance.

The Spouses appealed to the CA. The CA rendered a Decision on October 22, 1987 setting aside the appealed Order and holding that the Release of Claims cannot operate as a valid ground for the dismissal of the case because it does not have the conformity of all the parties, particularly Georges parents, who have a substantial interest in the case as they stand to be prejudiced by the judgment because they spent a sizeable amount for the medical bills of their son; that the Release of Claims was secured by Fortune Insurance for the consideration of P8,020.50 as the full and final settlement of its liability under the insurance policy and not for the purpose of releasing Baliwag from its liability as a carrier in this suit for breach of contract. The Appellate Court also ordered the remand of the case to the lower Court for trial on the merits and for George to return the amount of P8,020.50 to Fortune Insurance.

ISSUES:What is the legal effect of the Release of Claims executed by George during the pendency of this case?

HELD:Since the suit is one for breach of contract of carriage,the Release of Claims executed by him, as the injured party, discharging Fortune Insurance and Baliwag from any and all liability is valid. He was then of legal age, a graduating student of Agricultural Engineering, and had the capacity to do acts with legal effect (Article 37in relation toArticle 402,Civil Code). Thus,he could sue and be sued even without the assistance of his parents.

Thecontract of carriage was actually betweenGeorge, asthe paying passenger, andBaliwag, asthe common carrier.As such carrier,Baliwag was bound to carry its passengers safely as far as human care and foresight could provide, and is liable for injuries to them through the negligence or wilful acts of its employees (Articles 1755 and 1759, Civil Code). Thus,George had the right to be safely brought to his destination and Baliwag had the correlative obligation to do so.Sincea contract may be violated only by the parties thereto, as against each other,in an action upon that contract, the real parties in interest, either as plaintiff or as defendant,must be parties to said contract(Marimperio Compania Naviera, S.A. vs. CA, No. L-40234, December 14, 1987, 156 SCRA 368).

Areal party-in-interest-plaintiffis one whohas a legal rightwhile areal party-in-interest-defendantis one whohas a correlative legal obligation whose act/omission violates the legal right of the former(Lee vs. Romillo, Jr., G.R. No. 60973, May 28, 1988).In the absence of any contract of carriage between Baliwag and Georges parents, the latter are not real parties-in-interest in an action for breach of that contract.

The general rule of the common law is thatevery action must be brought in the name of the party whose legal right has been invaded or infringed. 15 Enc. P1. & Pr. p. 484. For the immediate wrong and damagethe person injured is the only one who can maintain the action. Id. p. 578. The person who sustains an injury is the person to bring an action for the injury against the wrongdoer. Dicey parties to Actions, 347. (Cited in Green v. Shoemaker, 73 A 688, 23 L.R.A., N.S. 667).

There isno question regarding the genuineness & due execution of the Release of Claims. It is aduly notarized public document.If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control (Article 1370, Civil Code). The phraseologyany and all claims or causes of actionisbroad enough to include all damages that may accrue to the injured party arising from the unfortunate accident.

The Release of Claims had the effect of a compromise agreementsince it wasentered into for the purpose of making a full and final compromise adjustment & settlement of the cause of action involved. Acompromiseis acontract whereby the parties, by making reciprocal concessions,avoid a litigation or put an end to one already commenced(Article 2028, Civil Code).

First Philippine Industrial Corp. vs. CA

Facts:Petitioner is a grantee of a pipeline concession under Republic Act No. 387. Sometime in January 1995, petitioner applied for mayors permit in Batangas. However, the Treasurer required petitioner to pay a local tax based on gross receipts amounting to P956,076.04. In order not to hamper its operations, petitioner paid the taxes for the first quarter of 1993 amounting to P239,019.01 under protest. On January 20, 1994, petitioner filed a letter-protest to the City Treasurer, claiming that it is exempt from local tax since it is engaged in transportation business. The respondent City Treasurer denied the protest, thus, petitioner filed a complaint before the Regional Trial Court of Batangas for tax refund. Respondents assert that pipelines are not included in the term common carrier which refers solely to ordinary carriers or motor vehicles. The trial court dismissed the complaint, and such was affirmed by the Court of Appeals.

Issue:Whether a pipeline business is included in the term common carrier so as to entitle the petitioner to the exemption

Held:Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public."

The test for determining whether a party is a common carrier of goods is:(1) He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to engage in the transportation of goods for person generally as a business and not as a casual occupation;(2) He must undertake to carry goods of the kind to which his business is confined;(3) He must undertake to carry by the method by which his business is conducted and over his established roads; and(4) The transportation must be for hire.

Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its services, and transports the goods by land and for compensation. The fact that petitioner has a limited clientele does not exclude it from the definition of a common carrier

De Guzman v. CA

Facts:Respondent Ernesto Cendana was a junk dealer. He buys scrap materials and brings those that he gathered to Manila for resale using 2 six-wheeler trucks. On the return trip to Pangasinan, respondent would load his vehicle with cargo which various merchants wanted delivered, charging fee lower than the commercial rates. Sometime in November 1970, petitioner Pedro de Guzman contracted with respondent for the delivery of 750 cartons of Liberty Milk. On December 1, 1970, respondent loaded the cargo. Only 150 boxes were delivered to petitioner because the truck carrying the boxes was hijacked along the way. Petitioner commenced an action claiming the value of the lost merchandise. Petitioner argues that respondent, being a common carrier, is bound to exercise extraordinary diligence, which it failed to do. Private respondent denied that he was a common carrier, and so he could not be held liable for force majeure. The trial court ruled against the respondent, but such was reversed by the Court of Appeals.

Issues:(1) Whether or not private respondent is a common carrier(2) Whether private respondent is liable for the loss of the goods

Held:(1)Article 1732 makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity. Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. It appears to the Court that private respondent is properly characterized as a common carrier even though he merely "back-hauled" goods for other merchants from Manila to Pangasinan, although such backhauling was done on a periodic or occasional rather than regular or scheduled manner, and even though private respondent's principal occupation was not the carriage of goods for others. There is no dispute that private respondent charged his customers a fee for hauling their goods; that fee frequently fell below commercial freight rates is not relevant here. A certificate of public convenience is not a requisite for the incurring of liability under the Civil Code provisions governing common carriers.

(2) Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or deterioration of the goods which they carry, "unless the same is due to any of the following causes only:a.Flood, storm, earthquake, lightning, or other natural disaster or calamity;b.Act of the public enemy in war, whether international or civil;c.Act or omission of the shipper or owner of the goods;d.The character of the goods or defects in the packing or in the containers; ande.Order or act of competent public authority."

The hijacking of the carrier's truck - does not fall within any of the five (5) categories of exempting causes listed in Article 1734. Private respondent as common carrier is presumed to have been at fault or to have acted negligently. This presumption, however, may be overthrown by proof of extraordinary diligence on the part of private respondent. We believe and so hold that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force." we hold that the occurrence of the loss must reasonably be regarded as quite beyond the control of the common carrier and properly regarded as a fortuitous event. It is necessary to recall that even common carriers are not made absolute insurers against all risks of travel and of transport of goods, and are not held liable for acts or events which cannot be foreseen or are inevitable, provided that they shall have complied with the rigorous standard of extraordinary diligence.

NATIONAL STEEL vs. CA

FACTSThe MV Vlasons I is a vessel which renders tramping service and, as such, does not transport cargo or shipment for the general public. Its services are available only to specific persons who enter into a special contract of charter party with its owner. The ship is a private carrier, and it is in this capacity that its owner, Vlasons Shipping, Inc. (VSA), entered into a contract of affreightment or contract of voyage charter hire with National Steel Corporation (NSC) on 17 July 1974, whereby NSC hired VSIs vessel, the MV VLASONS I to make 1 voyage to load steel products at Iligan City and discharge them at North Harbor, Manila, under certain terms and conditions[footnoteRef:1]. [1: ]

In accordance with the Contract of Voyage Charter Hire, the MV VLASONS I loaded at NSCs pier at Iligan City, the NSCs shipment of 1,677 skids of tinplates and 92 packages of hot rolled sheets or a total of 1,769 packages with a total weight of about 2,481.19 metric tons for carriage to Manila. The shipment was placed in the 3 hatches of the ship. Chief Mate Gonzalo Sabando, acting as agent of the vessel, acknowledged receipt of the cargo on board and signed the corresponding bill of lading, BLPP 0233 on 8 August 1974.

The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on 12 August 1974. The following day, when the vessels 3 hatches containing the shipment were opened by NSCs agents, nearly all the skids of tinplates and hot rolled sheets were allegedly found to be wet and rusty. The cargo was discharged and unloaded by stevedores hired by the Charterer. Unloading was completed only on 24 August 1974 after incurring a delay of 11 days due to the heavy rain which interrupted the unloading operations.

To determine the nature and extent of the wetting and rusting, NSC called for a survey of the shipment by the Manila Adjusters and Surveyors Company (MASCO). In a letter to the NSC dated 17 March 1975, MASCO made a report of its ocular inspection conducted on the cargo, both while it was still on board the vessel and later at the NDC warehouse in Pureza St., Sta. Mesa, Manila where the cargo was taken and stored. MASCO reported that it found wetting and rusting of the packages of hot rolled sheets and metal covers of the tinplates; that tarpaulin hatch covers were noted torn at various extents; that container/metal casings of the skids were rusting all over. The MIT Testing Laboratories issued Report 1770 which in part, states, The analysis of bad order samples of packing materials shows that wetting was caused by contact with sea water.

Thus, NSC filed with VSI its claim for damages suffered due to the downgrading of the damaged tinplates in the amount of P941,145.18. Then on 3 October 1974, NSC formally demanded payment of said claim but VSI refused and failed to pay. Thus prompting NSC to file its complaint against VSI on 21 April 1976

CFI RIZAL: judgment in favor of VSI and against NSC dismissing its complaint. It also ordered NSC to pay VSI on the counterclaim for the sum of P75,000.00 as unpaid freight and P88,000.00 as demurrage with interest at the legal rate on both until the same shall have been fully paid; attorneys fees and expenses of litigation in the sum of P100,000.00; and cost of suit.CA: modified the decision of the trial court by reducing the demurrage from P88,000.00 to P44,000.00 and deleting the award of attorneys fees and expenses of litigation.

NSC and VSI filed separate MRS- denied; thus, this petition consolidated by the court.

ISSUEW/N VSI is liable?

RULINGNO. IT is the Stevedores who are liable. CA decision affirmed

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 test of a common carrier 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. The most typical, although not the only form of private carriage, is the charter party, a maritime contract by which the charterer, a party other than the shipowner, obtains the use and service of all or some part of a ship for a period of time or a voyage or voyages.

ITCAB, VSI did not offer its services to the general public. It carried passengers or goods only for those it chose under a special contract of charter party. The MV Vlasons I was not a common but a private carrier. Consequently, the rights and obligations of VSI and NSC, including their respective liability for damage to the cargo, are determined primarily by stipulations in their contract of private carriage or charter party. As the MV Vlasons I was a private carrier, the shipowners obligations are governed by the foregoing 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.

From the parties Contract of Voyage Charter Hire, VSI shall not be responsible for losses except on proven willful negligence of the officers of the vessel. The NANYOZAI Charter Party, which was incorporated in the parties contract of transportation further provided that the shipowner shall not be liable for loss of or damage to the cargo arising or resulting from unseaworthiness, unless the same was caused by its lack of due diligence to make the vessel seaworthy or to ensure that the same was properly manned, equipped and supplied, and to make the holds and all other parts of the vessel in which cargo was carried, fit and safe for its reception, carriage and preservation. The NANYOZAI Charter Party also provided that owners shall not be responsible for split, chafing and/or any damage unless caused by the negligence or default of the master or crew. Thus, burden of proof was on NSC to prove that the damage to its shipment was caused by VSIs willful negligence or failure to exercise due diligence in making MV Vlasons I seaworthy and fit for holding, carrying and safekeeping the cargo. HOWEVER, NSC failed to do this.

On the issue of seaworthiness, VSI exercised due diligence to make the ship seaworthy and fit for the carriage of NSCs cargo of steel and tinplates. This is shown by the fact that it was drydocked and harbored by the Philippine Coast Guard before it proceeded to Iligan City for its voyage to Manila under the contract of voyage charter hire. The vessels voyage from Iligan to Manila was the vessels first voyage after drydocking. The Philippine Coast Guard Station in Cebu cleared it as seaworthy, fitted and equipped; it met all requirements for trading as cargo vessel.

Due diligence was exercised by the officers and the crew of the MV Vlasons I. This was further demonstrated by the fact that, despite encountering rough weather twice, the new tarpaulin did not give way and the ships hatches and cargo holds remained waterproof. Herein, the ship used the old tarpaulin, only in addition to the new one used primarily to make the ships hatches watertight. The foregoing are clear from the marine protest of the master of the MV Vlasons I, Antonio C. Dumlao, and the deposition of the ships boatswain, Jose Pascua, where it was stated that every time the strong winds and big waves caused the first layer of the canvass covering to give way, the new canvass covering still hold on. NSC failed to discharge its burden to show negligence on the part of the officers and the crew of MV Vlasons

WHO IS LIABLE: It was the stevedores of NSC who were negligent in unloading the cargo from the ship. The stevedores employed only a tent-like material to cover the hatches when strong rains occasioned by a passing typhoon disrupted the loading of the cargo. This tent-like covering, however, was clearly inadequate for keeping rain and seawater away from the hatches of the ship. NSC attempts to discredit the testimony of Vicente Angliongto, an officer of VSI, by questioning his failure to complain immediately about the stevedores negligence on the first day of unloading, pointing out that he wrote his letter to NSC only 7 days later. 7 days lapsed because he first called the attention of the stevedores, then the NSCs representative, about the negligent and defective procedure adopted in unloading the cargo. This series of actions constitutes a reasonable response in accord with common sense and ordinary human experience. Angliongto could not be blamed for calling the stevedores attention first and then the NSCs representative on location before formally informing NSC of the negligence he had observed, because he was not responsible for the stevedores or the unloading operations. In fact, he was merely expressing concern for NSC which was ultimately responsible for the stevedores it had hired and the performance of their task to unload the cargo. A stevedore company engaged in discharging cargo has the duty to load the cargo in a prudent manner, and it is liable for injury to, or loss of, cargo caused by its negligence and where the officers and members and crew of the vessel do nothing and have no responsibility in the discharge of cargo by stevedores, the vessel is not liable for loss of, or damage to, the cargo caused by the negligence of the stevedores.

The obligation of NSC to insure the cargo stipulated in the Contract of Voyage Charter Hire is totally separate and distinct from the contractual or statutory responsibility that may be incurred by VSI for damage to the cargo caused by the willful negligence of the officers and the crew of MV Vlasons I . Thus, NSCs failure to insure the cargo will not affect its right, as owner and real party in interest, to file an action against VSI for damages caused by the latters willful negligence. Nothing in the charter party would make the liability of VSI for damage to the cargo contingent on or affected in any manner by NSCs obtaining an insurance over the cargo.

Loadstar Shipping Co. v. CA

Facts:

On November 19, 1984, Loadstar received on board its vessel M/V Cherokee the following goods for shipment:

1.705 bales of lawanit hardwood2.27 boxes and crates of tilewood assemblies and others3.49 bundles of mouldings R & W (3) Apitong Bolidenized

The goods, amounting to P6,067,178, were insured by Manila Insurance Co. The vessel is insured by Prudential Guarantee and Assurance, Inc. On November 20, 1984, on its way to Manila from Agusan, the vessel sank off Limasawa Island. MIC paid the consignee P6,075,000 for the value of the goods lost, and filed a complaint against Loadstar and PGAI, claiming subrogation into the rights of the consignee. When PGAI paid Loadstar, it was dropped from the complaint. The trial court ruled against Loadstar, and this was affirmed by the Court of Appeals.

Loadstar submits that the vessel was a private carrier because it was not issued a 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." In refutation, MIC argues that the issue as to the classification of the M/V "Cherokee" was not timely raised below; hence, it is barred by estoppel. While it is true that the vessel had on board only the cargo of wood products for delivery to one consignee, it was also carrying passengers as part of its regular business. Moreover, the bills of lading in this case made no mention of any charter party but only a statement that the vessel was a "general cargo carrier." Neither was there any "special arrangement" between LOADSTAR and the shipper regarding the shipment of the cargo. The singular fact that the vessel was carrying a particular type of cargo for one shipper is not sufficient to convert the vessel into a private carrier.

LOADSTAR argues that as a private carrier, it cannot be presumed to have been negligent, and the burden of proving otherwise devolved upon MIC. It also maintains that the vessel was seaworthy, and that the loss was due to force majeure. LOADSTAR goes on to argue that, being a private carrier, any agreement limiting its liability, such as what transpired in this case, is valid. Since the cargo was being shipped at "owners risk," LOADSTAR was not liable for any loss or damage to the same. Finally, LOADSTAR avers that MICs claim had already prescribed, the case having been instituted beyond the period stated in the bills of lading for instituting the same suits based upon claims arising from shortage, damage, or non-delivery of shipment shall be instituted within sixty days from the accrual of the right of action. MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding that the loss of the cargo was due to force majeure, because the same concurred with LOADSTARs fault or negligence. Secondly, LOADSTAR did not raise the issue of prescription in the court below; hence, the same must be deemed waived. Thirdly, the "limited liability" theory is not applicable in the case at bar because LOADSTAR was at fault or negligent, and because it failed to maintain a seaworthy vessel. Authorizing the voyage notwithstanding its knowledge of a typhoon is tantamount to negligence.

Issues:(1) Whether Loadstar was a common carrier or a private carrier(2) Whether Loadstar exercised the degree of diligence required under the circumstances(3) Whether the stipulation that the goods are at the owners risk is valid(4) Whether the action has prescribed

Held:(1) We 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. There was no charter party. 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." 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.

(2) The doctrine of limited liability does not apply where there was negligence on the part of the vessel owner or agent. LOADSTAR was at fault or negligent in not maintaining a seaworthy vessel and in having allowed its vessel to sail despite knowledge of an approaching typhoon. In any event, it did not sink because of any storm that may be deemed as force majeure, inasmuch as the wind condition in the area where it sank was determined to be moderate. Since it was remiss in the performance of its duties, LOADSTAR cannot hide behind the "limited liability" doctrine to escape responsibility for the loss of the vessel and its cargo.

(3) Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the carrier from any and all liability for loss or damage occasioned by its own negligence. The second is one providing for an unqualified limitation of such liability to an agreed valuation. And the third is one limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and pays a higher rate of freight. According to an almost uniform weight of authority, the first and second kinds of stipulations are invalid as being contrary to public policy, but the third is valid and enforceable. Since the stipulation in question is null and void, it follows that when MIC paid the shipper, it was subrogated to all the rights which the latter has against the common carrier, LOADSTAR.

(4) MICs cause of action had not yet prescribed at the time it was concerned. Inasmuch as neither the Civil Code nor the Code of Commerce states a specific prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA) which provides for a one-year period of limitation on claims for loss of, or damage to, cargoes sustained during transit may be applied suppletorily to the case at bar. This one-year prescriptive period also applies to the insurer of the goods. In this case, the period for filing the action for recovery has not yet elapsed. Moreover, a stipulation reducing the one-year period is null and void; it must, accordingly, be struck down.Eastern Shipping Lines vs Intermediate Appellate Court

Facts:On June, 1977 M/SASIATICA, a Vessel operated by Eastern Shipping Lines was bound for Manila from Kobe, Japan. It loaded , 5,000 pieces ofcolorizedlance pipes in 28packagesvalued at P256,039.00 consigned to PhilippineBloomingMills Co., Inc., and 7 cases of spare parts valued at P92,361.75, consigned to Central Textile Mills, Inc. Both were insured from marine risks with Development Insurance and Surety Corp. It also took 128 cartoons of garment fabrics andaccessoriesin 2 containers consigned to Mariveles Apparel Corp and2 Casesof surveying instruments consigned to Aman Enterprises and General Merchandise. The shipments were insured with DOWA Fire and Marine Insurance Co. and Nisshin Fire and marine Insurance Co. respectably. En Route from Kobe to Manila the vessel caught fire and sank losing all its shipment. The insurance companies paid for the insurance of the above mentioned shipments. They Then instituted a case to redeem the insurance that they paid to the various companies against Eastern Shipping Lines. They contend that Eastern should not be exempted from liability because it was not able to exercise due diligence in preventing the occurrence of the fire as well as its unseaworthiness.

Eastern Shipping invoked the Carriage of Goods by Sea Act as a defense wherein it is said to be exempt from the said liability. The Fire was said to be one of the exempting circumstance under the act. It also contended that it the fire occurred as a fortuitous event such as a natural disaster or calamity which leads them to conclude that they should not be made liable.

Issues:Which law should govern the case is it the Civil Code provisions or the specific law which is the Carriage of Goods by Sea Act? Who has the burden of proof to show the negligence of the carrier?

Held:It is the law of the country to which the goods are to be transported which shall apply in this case. The Carriage of Goods by Sea Act will be supplementary to the Civil Code provision.

Common carriers are bound to observe extraordinary diligence when transporting goods. Common carriers are responsible for the loss, destruction, or deterioration of the goods unless it is due to the ff events: flood, storm, earthquake, lightning, or other natural disaster or calamity. In this case fire may not be considered a natural disaster or calamity. This is because the occurrence may be due to an act by man or the actual fault of the carrier. The common carrier is presumed to have been at fault or have acted negligently unless it proves that it has observed the extraordinary diligence required by law. Evidence presented by the witness failed to establish the extraordinary diligence which was required of the carrier. The fire started 24 hours before discovery and upon discovery it was already too big to suppress. It appears that after the cargoes were stored no regular inspections were done to see to it that the cargoes are well kept. The crew could not even explain how the fire started. Because of this the carrier was not able to prove that it has exercised extraordinary diligence making it liable of the costs and damages. Even if fire were to be considered a "natural disaster" within the meaning of Article 1734 of the Civil Code, 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. " This Petitioner Carrier has also failed to establish satisfactorily. They are bound to pay the insurance companies as well as 5K for attorneys fees.

Vasquez vs. Court of Appeals(138 SCRA 553)

Facts:MV Pioneer Cebu left the port of Manila and bounded for Cebu. Its officers were aware of the upcoming typhoon Klaring that is already building up somewhere in Mindanao. There being no typhoon signals on their route, they proceeded with their voyage. When they reached the island of Romblon, the captain decided not to seek shelter since the weather was still good. They continued their journey until the vessel reached the island of Tanguingui, while passing through the island the weather suddenly changed and heavy rains fell. Fearing that they might hit Chocolate island due to zero visibility, the captain ordered to reverse course the vessel so that they could weather out the typhoon by facing the strong winds and waves. Unfortunately, the vessel struck a reef near Malapascua Island, it sustained a leak and eventually sunk.

The parents of the passengers who were lost due to that incident filed an action against Filipinas Pioneer Lines for damages. The defendant pleaded force majeure but the Trial Court ruled in favor of the plaintiff. On appeal to the Court of Appeals, it reversed the decision of the lower stating that the incident was a force majeure and absolved the defendants from liability.

Issue:Whether of not Filipinas Pioneer Lines is liable for damages and presumed to be at fault for the death of its passenger?

Held:The Supreme Court held the Filipinas Pioneer Lines failed to observe that extraordinary diligence required of them by law for the safety of the passengers transported by them with due regard for all necessary circumstance and unnecessarily exposed the vessel to tragic mishap. Despite knowledge of the fact that there was a typhoon, they still proceeded with their voyage relying only on the forecast that the typhoon would weaken upon crossing the island of Samar. The defense of caso fortuito is untenable. To constitute caso fortuito to exempt a person from liability it necessary that the event must be independent from human will, the occurrence must render it impossible for the debtor to fulfill his obligation in a normal manner, the obligor must be free from any participation or aggravation to the injury of the creditor. Filipina Pioneer Lines failed to overcome that presumption o fault or negligence that arises in cases of death or injuries to passengers

TABACALERA INSURANCE CO ET AL VS NORTH FRONT SHIPPING SERVICES AND CA

TABACALERA INSURANCE CO., Prudential Guarantee & Assurance, Inc., and New Zealand Insurance Co., Ltd., in this petition for review oncertiorari, assail the 22 December 1994 decision of the Court of Appeals and its Resolution of 16 February 1995 which affirmed the 1 June 1993 decision of the Regional Trial Court dismissing their complaint for damages against North Front Shipping Services, Inc.

On 2 August 1990, 20,234 sacks of corn grains valued at P3,500,640.00 were shipped on boardNorth Front777, a vessel owned by North Front Shipping Services, Inc. The cargo was consigned to Republic Flour Mills Corporation in Manila under Bill of Lading No. 0011and insured with the herein mentioned insurance companies. The vessel was inspected prior to actual loading by representatives of the shipper and was found fit to carry the merchandise. The cargo was covered with tarpaulins and wooden boards. The hatches were sealed and could only be opened by representatives of Republic Flour Mills Corporation.

The vessel left Cagayan de Oro City on 2 August 1990 and arrived Manila on 16 August 1990. Republic Flour Mills Corporation was advised of its arrival but it did not immediately commence the unloading operations. There were days when unloading had to be stopped due to variable weather conditions and sometimes for no apparent reason at all. When the cargo was eventually unloaded there was a shortage of 26.333 metric tons. The remaining merchandise was already moldy, rancid and deteriorating. The unloading operations were completed on 5 September 1990 or twenty (20) days after the arrival of the barge at the wharf of Republic Flour Mills Corporation in Pasig City.

Precision Analytical Services, Inc., was hired to examine the corn grains and determine the cause of deterioration. ACertificate of Analysiswas issued indicating that the corn grains had 18.56% moisture content and the wetting was due to contact with salt water. The mold growth was only incipient and not sufficient to make the corn grains toxic and unfit for consumption. In fact the mold growth could still be arrested by drying.

Republic Flour Mills Corporation rejected the entire cargo and formally demanded from North Front Shipping Services, Inc., payment for the damages suffered by it. The demands however were unheeded. The insurance companies were perforce obliged to pay Republic Flour Mills Corporation P2,189,433.40.

By virtue of the payment made by the insurance companies they were subrogated to the rights of Republic Flour Mills Corporation. Thusly, they lodged a complaint for damages against North Front Shipping Services, Inc., claiming that the loss was exclusively attributable to the fault and negligence of the carrier. The Marine Cargo Adjusters hired by the insurance companies conducted a survey and found cracks in the bodega of the barge and heavy concentration of molds on the tarpaulins and wooden boards. They did not notice any seals in the hatches. The tarpaulins were not brand new as there were patches on them, contrary to the claim of North Front Shipping Services, Inc., thus making it possible for water to seep in. They also discovered that the bulkhead of the barge was rusty.

North Front Shipping Services, Inc., averred in refutation that it could not be made culpable for the loss and deterioration of the cargo as it was never negligent. Captain Solomon Villanueva, master of the vessel, reiterated that the barge was inspected prior to the actual loading and was found adequate and seaworthy. In addition, they were issued a permit to sail by the Coast Guard. The tarpaulins were doubled and brand new and the hatches were properly sealed. They did not encounter big waves hence it was not possible for water to seep in. He further averred that the corn grains were farm wet and not properly dried when loaded.The court below dismissed the complaint and ruled that the contract entered into between North Front Shipping Services, Inc., and Republic Flour Mills Corporation was a charter-party agreement. As such, onlyordinary diligencein the care of goods was required of North Front Shipping Services, Inc. The inspection of the barge by the shipper and the representatives of the shipping company before actual loading, coupled with thePermit to Sailissued by the Coast Guard, sufficed to meet the degree of diligence required of the carrier.

On the other hand, the Court of Appeals ruled that as a common carrier required to observe a higher degree of diligenceNorth Front777 satisfactorily complied with all the requirements hence was issued aPermit to Sailafter proper inspection. Consequently, the complaint was dismissed and the motion for reconsideration rejected.The charter-party agreement between North Front Shipping Services, Inc., and Republic Flour Mills Corporation did not in any way convert the common carrier into a private carrier. We have already resolved this issue with finality inPlanters Products, Inc.v.Court of Appeals2thus -

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 . . . 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 the vessel only, either for a determinate period of time or for a single or consecutive voyage, the ship owner to supply the ship's store, pay for the wages of the master of the crew, and defray the expenses for the maintenance of the ship.

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 . . .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 shin only, as in the case of a time-charter or voyage-charter(emphasis supplied).

North Front Shipping Services, Inc., is a corporation engaged in the business of transporting cargo and offers its services indiscriminately to the public. It is without doubt a common carrier. As such it is required to observeextraordinary diligencein its vigilance over the goods it transports.3When goods placed in its care are lost or damaged, the carrier is presumed to have been at fault or to have acted negligently.4North Front Shipping Services, Inc., therefore has the burden of proving that it observedextraordinary diligencein order to avoid responsibility for the lost cargo.

North Front Shipping Services, Inc., proved that the vessel was inspected prior to actual loading by representatives of the shipper and was found fit to take a load of corn grains. They were also issuedPermit to Sailby the Coast Guard. The master of the vessel testified that the corn grains were farm wet when loaded. However, this testimony was disproved by the clean bill of lading issued by North Front Shipping Services, Inc., which did not contain a notation that the corn grains were wet and improperly dried. Having been in the service since 1968, the master of the vessel would have known at the outset that corn grains that were farm wet and not properly dried would eventually deteriorate when stored in sealed and hot compartments as in hatches of a ship. Equipped with this knowledge, the master of the vessel and his crew should have undertaken precautionary measures to avoid or lessen the cargo's possible deterioration as they were presumed knowledgeable about the nature of such cargo. But none of such measures was taken.

InCompania Maritima v.Court of Appeals5we ruled -. . . Mere proof of delivery of the goods in good order to a common carrier, and of their arrival at the place of destination in bad order, makes outprima faciecase against the common carrier, so that if no explanation is given as to how the loss, deterioration or destruction of the goods occurred, the common carrier must be held responsible. Otherwise stated, it is incumbent upon the common carrier to prove that the loss, deterioration or destruction was due to accident or some other circumstances inconsistent with its liability . . .

The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for safe carriage and delivery.It requires common carriers to render service with the greatest skill and foresight and "to use all reasonable means to ascertain the nature and characteristics of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires" (emphasis supplied).

In fine, we find that the carrier failed to observe the requiredextraordinary diligencein the vigilance over the goods placed in its care. The proofs presented by North Front Shipping Services, Inc., were insufficient to rebut theprima faciepresumption of private respondent's negligence, more so if we consider the evidence adduced by petitioners.

It is not denied by the insurance companies that the vessel was indeed inspected before actual loading and thatNorth Front777 was issued aPermit to Sail. They proved the fact of shipment and its consequent loss or damage while in the actual possession of the carrier. Notably, the carrier failed to volunteer any explanation why there was spoilage and how it occurred. On the other hand, it was shown during the trial that the vessel had rusty bulkheads and the wooden boards and tarpaulins bore heavy concentration of molds. The tarpaulins used were not new, contrary to the claim of North Front Shipping Services, Inc., as there were already several patches on them, hence, making it highly probable for water to enter.

Laboratory analysis revealed that the corn grains were contaminated with salt water. North Front Shipping Services, Inc., failed to rebut all these arguments. It did not even endeavor to establish that the loss, destruction or deterioration of the goods was due to the following: (a) flood, storm, earthquake, lightning, or other natural disaster or calamity; (b) act of the public enemy in war, whether international or civil; (c) act or omission of the shipper or owner of the goods; (d) the character of the goods or defects in the packing or in the containers; (e) order or act of competent public authority.6This is a closed list. If the cause of destruction, loss or deterioration is other than the enumerated circumstances, then the carrier is rightly liable therefor.

However, we cannot attribute the destruction, loss or deterioration of the cargo solely to the carrier. We find the consignee Republic Flour Mills Corporation guilty of contributory negligence. It was seasonably notified of the arrival of the barge but did not immediately start the unloading operations. No explanation was proffered by the consignee as to why there was a delay of six (6) days. Had the unloading been commenced immediately the loss could have been completely avoided or at least minimized. As testified to by the chemist who analyzed the corn samples, the mold growth was only at its incipient stage and could still be arrested by drying. The corn grains were not yet toxic or unfit for consumption. For its contributory negligence, Republic Flour Mills Corporation should share at least 40% of the loss.7

WHEREFORE, the Decision of the Court of Appeals of 22 December 1994 and its Resolution of 16 February 1995 are REVERSED and SET ASIDE. Respondent North Front Shipping Services, Inc., is ordered to pay petitioners Tabacalera Insurance Co., Prudential Guarantee & Assurance, Inc., and New Zealand Insurance Co. Ltd., P1,313,660.00 which is 60% of the amount paid by the insurance companies to Republic Flour Mills Corporation, plus interest at the rate of 12%per annumfrom the time this judgment becomes final until full payment.SO ORDERED.

THE PHILIPPINE AMERICAN GENERAL INSURANCE CO INC VS CA AND FELMAN SHIPPING LINESThis case deals with the liability, if any, of a shipowner for loss of cargo due to its failure to observe the extraordinary diligence required by Art. 1733 of the Civil Code as well as the right of the insurer to be subrogated to the rights of the insured upon payment of the insurance claim.On 6 July 1983 Coca-Cola Bottlers Philippines, Inc., loaded on boardMV Asilda,a vessel owned and operated by respondent Felman Shipping Lines (FELMAN for brevity), 7,500 cases of 1-liter Coca-Cola softdrink bottles to be transportedfromZamboangaCityto CebuCityforconsigneeCoca-ColaBottlersPhilippines,Inc.,Cebu.[1]The shipment was insured with petitioner Philippine American General Insurance Co., Inc. (PHILAMGEN for brevity), under Marine Open Policy No. 100367-PAG.MV Asildaleft the port of Zamboanga in fine weather at eight oclock in the evening of the same day.At around eight forty-five the following morning, 7 July 1983, the vessel sank in the waters of Zamboanga del Norte bringing down her entire cargo with her including the subject 7,500 cases of 1-liter Coca-Cola softdrink bottles.On 15 July 1983 the consignee Coca-Cola Bottlers Philippines, Inc., Cebu plant, filed a claim with respondent FELMAN for recovery of damages it sustained as a result of the loss of its softdrink bottles that sank withMV Asilda.Respondent denied the claim thus prompting the consignee to file an insurance claim with PHILAMGEN which paid its claim ofP755,250.00.Claiming its right of subrogation PHILAMGEN sought recourse against respondent FELMAN which disclaimed any liability for the loss.Consequently, on 29 November 1983 PHILAMGEN sued the shipowner for sum of money and damages.In its complaint PHILAMGEN alleged that the sinking and total loss ofMV Asildaand its cargo were due to the vessels unseaworthiness as she was put to sea in an unstable condition.It further alleged thatthevesselwasimproperlymannedandthatits officers were grossly negligent in failing to take appropriate measures to proceed to a nearby port or beach after the vessel started to list.On 15 February 1985 FELMAN filed a motion to dismiss based on the affirmative defense that no right of subrogation in favor of PHILAMGEN was transmitted by the shipper, and that, in any event, FELMAN had abandoned all its rights, interests and ownership overMV Asildatogether with her freight and appurtenances for the purpose of limiting and extinguishing its liability under Art. 587 of the Code of Commerce.[2]On 17 February 1986 the trial court dismissed the complaint of PHILAMGEN.On appeal the Court of Appeals set aside the dismissal and remanded the case to the lower court for trial on the merits.FELMAN filed a petition forcertiorariwith this Court but it was subsequently denied on 13 February 1989.On 28 February 1992 the trial court rendered judgment in favor of FELMAN.[3]It ruled thatMV Asildawas seaworthy when it left the port of Zamboanga as confirmed by certificates issued by the Philippine Coast Guard and the shipowners surveyor attesting to its seaworthiness.Thus the loss of the vessel and its entire shipment could only be attributed to either a fortuitous event, in which case, no liability should attach unless there was a stipulation to the contrary, or to the negligence of the captain and his crew, in which case, Art. 587 of the Code of Commerce should apply.The lower court further ruled that assumingMV Asildawas unseaworthy, still PHILAMGEN could not recover from FELMAN since the assured (Coca-Cola Bottlers Philippines, Inc.) had breached its implied warranty on the vessels seaworthiness.Resultantly, the payment made by PHILAMGEN to the assured was an undue, wrong and mistaken payment.Since it was not legally owing, it did not give PHILAMGEN the right of subrogation so as to permit it to bring an action in court as a subrogee.On 18 March 1992 PHILAMGEN appealed the decision to the Court of Appeals.On 29 August 1994 respondent appellate court rendered judgment findingMV Asildaunseaworthy for being top- heavy as 2,500 cases of Coca-Cola softdrink bottles were improperly stowed on deck.In other words, while the vessel possessed the necessary Coast Guard certification indicating its seaworthiness with respect to the structure of the ship itself, it was not seaworthy with respect to the cargo.Nonetheless, the appellate court denied the claim of PHILAMGEN on the ground that the assureds implied warranty of seaworthiness was not complied with.Perfunctorily, PHILAMGEN was not properly subrogated to the rights and interests of the shipper.Furthermore, respondent court held that the filing of notice of abandonmenthad absolved the shipowner/agent from liability under the limited liability rule.The issues for resolution in this petition are:(a) whetherMV Asildawas seaworthy when it left the port of Zamboanga; (b) whether the limited liability under Art. 587oftheCodeofCommerceshould apply; and, (c) whether PHILAMGEN was properly subrogated to the rights and legal actions which the shipper had against FELMAN, the shipowner.MV Asildawas unseaworthy when it left the port of Zamboanga.In a joint statement, the captain as well as the chief mate of the vessel confirmed that the weather was fine when they left the port of Zamboanga.According to them, the vessel was carrying 7,500 cases of 1-liter Coca-Cola softdrink bottles, 300 sacks of seaweeds, 200 empty CO2 cylinders and an undetermined quantity of empty boxes for fresh eggs.They loaded the empty boxes for eggs and about 500 cases of Coca-Cola bottles on deck.[4]The ship captain stated that around four oclock in the morning of 7 July 1983 he was awakened by the officer on duty to inform him that the vessel had hit a floating log.At that time he noticed that the weather had deteriorated with strong southeast winds inducing big waves.After thirty minutes he observed that the vessel was listing slightly to starboard and would not correct itself despite the heavy rolling and pitching.He then ordered his crew to shift the cargo from starboard to portside until the vessel was balanced.At about seven oclock in the morning, the master of the vessel stopped the engine because the vessel was listing dangerously to portside.He ordered his crew to shift the cargo back to starboard.The shifting of cargo took about an hour afterwhich he rang the engine room to resume full speed.At around eight forty-five, the vessel suddenly listed to portside and before the captain could decide on his next move, some of the cargoondeckwerethrownoverboardandseawaterenteredthe engine room and cargo holds of the vessel.At that instance, the master of the vessel ordered his crew to abandon ship.Shortly thereafter,MV Asildacapsized and sank.He ascribed the sinkingtotheentry of seawater through a hole in the hull caused by the vessels collision with a partially submerged log.[5]The Elite Adjusters, Inc., submitted a report regarding the sinking ofMV Asilda.The report, which was adopted by the Court of Appeals, reads -We found in the course of our investigation that a reasonable explanation for the series of lists experienced by the vessel that eventually led to her capsizing and sinking, was that the vessel wastop-heavywhich is to say that while the vessel may not have been overloaded, yet the distribution or stowage of the cargo on board was done in such a manner that the vessel was in top-heavy condition at the time of her departure and which condition rendered her unstable and unseaworthy for that particular voyage.In this connection, we wish to call attention to the fact that this vessel was designed as a fishing vessel x x x x and it was not designed to carry a substantial amount or quantity of cargo on deck.Therefore, we believe strongly that had her cargo been confined to those that could have been accommodated under deck, her stability would not have been affected and the vessel would not have been in any danger of capsizing, even given the prevailing weather conditions at that time of sinking.But from the moment that the vessel was utilized to load heavy cargo on its deck, the vessel was rendered unseaworthy for the purpose of carrying the type of cargo because the weight of the deck cargo so decreased the vessels metacentric height as to cause it to become unstable.Finally, with regard to the allegation that the vessel encountered big waves, it must be pointed out that ships are precisely designed to be able to navigate safely even during heavy weather and frequently we hear of ships safely and successfully weathering encounters with typhoons and although they may sustain some amount of damage, the sinking of ship during heavy weather is not a frequent occurrence and is not likely to occur unless they are inherently unstable and unseaworthyxxxxWe believe, therefore, and so hold that theproximate causeof the sinking of theM/VAsildawas her condition of unseaworthiness arising from her having beentop-heavywhenshedepartedfromthe Port of Zamboanga.Her having capsized and eventually sunk was bound to happen and was therefore in the category of an inevitable occurrence (underscoring supplied).[6]We subscribe to the findings of the Elite Adjusters, Inc., and the Court of Appeals that the proximate cause of the sinking ofMV Asildawas its being top-heavy.Contrary to the ship captains allegations, evidence shows that approximately 2,500 cases of softdrink bottles were stowed on deck.Several days afterMV Asildasank, an estimated 2,500 empty Coca-Cola plastic cases were recovered near the vicinity of the sinking.Considering that the ships hatches were properly secured, the empty Coca-Cola cases recovered could have come only from the vessels deck cargo.It is settled that carrying a deck cargo raises the presumption of unseaworthiness unless it can be shown that the deck cargo will not interfere with the proper management of the ship.However, in this case it was established thatMV Asildawas not designed to carry substantial amount of cargo on deck.The inordinate loading of cargo deck resulted in the decrease of the vessels metacentric height[7]thus making it unstable.The strong winds and waves encountered by the vessel are but the ordinary vicissitudes of a sea voyage and as such merely contributed to its already unstable and unseaworthy condition.On the second issue, Art. 587 of the Code of Commerce is not applicable to the case at bar.[8]Simply put, the ship agent is liable for the negligent acts of the captain in the care of goodsloadedonthevessel.This liability however can be limited through abandonment of the vessel, its equipment and freightage as provided in Art. 587.Nonetheless, there are exceptional circumstances whereintheship agent could still be held answerable despite the abandonment, as where the loss or injury was due to the fault of the shipowner and the captain.[9]The international rule is to the effect that the right of abandonment of vessels, as a legal limitation of a shipowners liability, does not apply to cases where the injury or average was occasioned by the shipowners own fault.[10]It must be stressed at this point that Art. 587 speaks only of situations where the fault or negligence is committed solely by the captain.Where the shipowner is likewise to be blamed, Art. 587 will not apply, and such situation will be covered by the provisions of the Civil Code on common carrier.[11]It was already established at the outset that the sinking ofMV Asildawas due to its unseaworthiness even at the time of its departure from the port of Zamboanga.It was top-heavy as an excessive amount of cargo was loaded on deck.Closer supervision on the part of the shipowner could have prevented this fatal miscalculation.As such,FELMAN was equally negligent.It cannot therefore escape liability through the expedient of filing a notice of abandonment of the vessel by virtue of Art. 587 of the Code of Commerce.Under Art 1733 of the Civil Code, (c)ommon carriers, from the nature of their business and for reasons of publicpolicy,areboundtoobserve extraordinary diligence in the vigilance over the goods andfor the safety of the passengerstransportedbythem,accordingtoallthe circumstances of each case x x x x" In the event of loss of goods, common carriers are presumed to have acted negligently.FELMAN, the shipowner, was not able to rebut this presumption.In relation to the question of subrogation, respondent appellate court foundMV Asildaunseaworthy with reference to the cargo and therefore ruled that there was breach of warranty of seaworthiness that rendered the assured not entitled to the payment of is claim under the policy.Hence, when PHILAMGEN paid the claim of the bottling firm there was in effect a voluntary payment and no right of subrogation accrued in its favor.In other words, when PHILAMGEN paid it did so at its own risk.It is generally held that in every marine insurance policy the assured impliedly warrants to the assurer that the vessel is seaworthy and such warranty is as much a term of the contract as if expressly written on the face of the policy.[12]Thus Sec. 113 of the Insurance Code provides that (i)n every marine insurance upon a ship or freight, or freightage, or upon anything which is the subject of marine insurance, a warranty is implied that the ship is seaworthy.Under Sec. 114, a ship is seaworthy when reasonably fit to perform the service, and to encountertheordinaryperilsofthevoyage,contemplatedbythe parties to the policy.Thus it becomes the obligation of the cargo owner to look for a reliable common carrier which keeps itsvesselsin seaworthy condition.He may have no control overthevesselbuthe has full control in the selection of the common carrier that will transport his goods.He also has full discretion in the choice of assurer that will underwrite a particular venture.We need not belabor the alleged breach of warranty of seaworthiness by the assured as painstakingly pointed out by FELMAN to stress that subrogation will not work in this case.In policies where the law will generally imply a warranty of seaworthiness, it can only be excluded by terms in writing in the policy in the clearest language.[13]And where the policy stipulates that the seaworthiness of the vessel as between the assured and the assurer is admitted, the question of seaworthiness cannot be raised by the assurer without showing concealment or misrepresentation by the assured.[14]The marine policy issued by PHILAMGEN to the Coca-Cola bottling firm in at least two (2) instances has dispensed with the usual warranty of worthiness.Paragraph 15 of the Marine Open Policy No. 100367-PAG reads (t)he liberties as per Contract of Affreightment the presence of the Negligence Clause and/or Latent Defect Clause in the Bill of Lading and/or Charter Party and/or Contract of Affreightment as between the Assured and theCompanyshallnotprejudicethe insurance.The seaworthiness of the vessel as between the Assured and the Assurers is hereby admitted.[15]The same clause is present in par. 8 of the Institute Cargo Clauses(F.P.A.) of the policywhich states (t)he seaworthiness of the vessel as between the Assured and Underwriters in hereby admitted x x x x"[16]The result of the admission of seaworthiness by the assurer PHILAMGEN may mean one or two things:(a) that the warranty of the seaworthiness is to be taken as fulfilled; or, (b) that the risk of unseaworthiness is assumed by the insurance company.[17]The insertion of such waiver clausesin cargo policies is in recognition of the realistic fact that cargo owners cannot control the state of the vessel.Thus it can be said that with such categorical waiver,PHILAMGEN has accepted the risk of unseaworthiness so that if the ship should sink by unseaworthiness, as what occurred in this case, PHILAMGEN is liable.Having disposed of this matter, we move on to the legal basis for subrogation.PHILAMGENs action against FELMAN is squarely sanctioned by Art. 2207 of the Civil Code which provides:Art. 2207.If the plaintiffs property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract.If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury.InPan Malayan Insurance Corporation v. Court of Appeals,[18]we said that payment by the assurer to the assured operates as an equitable assignment to the assurerof all the remedies whichtheassuredmay have against the third party whose negligenceorwrongfulactcaused the loss.The right of subrogation is not dependent upon, nor does itgrow out of any privity of contract or uponpaymentbytheinsurance company of the insurance claim.It accrues simply upon payment by the insurance company of the insurance claim.The doctrine of subrogation has its roots in equity.It is designed to promote and to accomplish justice and is the mode which equity adopts to compel the ultimate payment of a debt by one who in justice, equity and good conscience ought to pay.[19]Therefore, the payment made by PHILAMGEN to Coca-Cola Bottlers Philippines, Inc., gave the former the right to bring an action as subrogee against FELMAN.Having failed to rebut the presumption of fault, the liability of FELMAN for the loss of the 7,500 cases of 1-liter Coca-Cola softdrink bottles is inevitable.WHEREFORE, the petition is GRANTED.Respondent FELMAN SHIPPING LINES is ordered to pay petitioner PHILIPPINE AMERICANGENERAL INSURANCE CO., INC., Seven Hundred Fifty-five Thousand TwoHundredandFiftyPesos(P755,250.00)plus legal interest thereon counted from 29 November 1983, the date ofjudicial demand, pursuant to Arts. 2212 and 2213 of the Civil Code.[20]SO ORDERED.

Sarkies Tours Phils. V. IAC

Facts:

On August 31, 1984, Fatima boarded petitioners bus from Manila to Legazpi. Her belongings consisting of 3 bags were kept at the baggage compartment of the bus, but during the stopover in Daet, it was discovered that only one remained. The others might have dropped along the way. Other passengers suggested having the route traced, but the driver ignored it. Fatima immediately told the incident to her mother, who went to petitioners office in Legazpi and later in Manila. Petitioner offered P1,000 for each bag, but she turned it down. Disapointed, she sought help from Philtranco bus drivers and radio stations. One of the bags was recovered. She was told by petitioner that a team is looking for the lost luggage. After nine months of fruitless waiting, respondents filed a case to recover the lost items, as well as moral and exemplary damages, attorneys fees and expenses of litigation. The trial court ruled in favor of respondents, which decision was affirmed with modification by the Court of Appeals, deleting moral and exemplary damages.

Issues:(1) Whether petitioner is liable for the loss of the luggage(2) Whether the damages sought should be recovered

Held:(1) The cause of the loss in the case at bar was petitioner's negligence in not ensuring that the doors of the baggage compartment of its bus were securely fastened. As a result of this lack of care, almost all of the luggage was lost, to the prejudice of the paying passengers.

(2) There is no dispute that of the three pieces of luggage of Fatima, only one was recovered. Respondents had to shuttle between Bicol and Manila in their efforts to be compensated for the loss. During the trial, Fatima and Marisol had to travel from the United States just to be able to testify. Expenses were also incurred in reconstituting their lost documents. Under these circumstances, the Court agrees with the Court of Appeals in awarding P30,000.00 for the lost items and P30,000.00 for the transportation expenses, but disagrees with the deletion of the award of moral and exemplary damages which, in view of the foregoing proven facts, with negligence and bad faith on the fault of petitioner having been duly established, should be granted to respondents in the amount of P20,000.00 and P5,000.00, respectively.

Yes. Common carriers, from the nature of their business and for reasons of publicpolicy,areboundtoobserveextraordinarydiligenceinthevigilanceoverthegoodstransported by them, and this liability lasts from the time the goods are unconditionally placed in the possession of, andreceived by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the person who has a right to receive them, unless the loss is due toany of the excepted causes under Art. 1734.The cause of the loss was Sarkies Tours negligence in not ensuring that the doors of the baggage compartment of its bus were securely fastened. As a result of this lack of care, almost all of the luggage was lost, tothe prejudice of the paying passengers.

MAERSK LINE VS CA AND EFREN V CASTILLO

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.Private respondent Efren Castillo, on the other hand, is the proprietor of Ethegal Laboratories, a firm engaged in the manutacture of pharmaceutical products.On November 12, 1976, private respondent ordered from Eli Lilly. Inc. of Puerto Rico through its (Eli Lilly, Inc.'s) agent in the Philippines, Elanco Products, 600,000 empty gelatin capsules for the manufacture of his pharmaceutical products. The capsules were placed in six (6) drums of 100,000 capsules each valued at US $1,668.71.

Through a Memorandum of Shipment, the shipper Eli Lilly, Inc. of Puerto Rico advised private respondent as consignee that the 600,000 empty gelatin capsules in six (6) drums of 100,000 capsules each, were already shipped on board MV "Anders Maerskline" under Voyage No. 7703 for shipment to the Philippines via Oakland, California. In said Memorandum, shipper Eli Lilly, Inc. specified the date of arrival to be April 3, 1977.

For reasons unknown, said cargo of capsules were mishipped and diverted to Richmond, Virginia, USA and then transported back Oakland, Califorilia. The goods finally arrived in the Philippines on June 10, 1977 or after two (2) months from the date specified in the memorandum. As a consequence, private respondent as consignee refused to take delivery of the goods on account of its failure to arrive on time.

Private respondent alleging gross negligence and undue delay in the delivery of the goods, filed an action before the court a quo for rescission of contract with damages against petitioner and Eli Lilly, Inc. as defendants. Denying that it committed breach of contract, petitioner alleged in its that answer that 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 (Rollo, p. 16).

Defendant Eli Lilly, Inc., on the other hand, filed its answer with compulsory and cross-claim. In its cross-claim, it alleged that the delay in the arrival of the subject merchandise was due solely to the gross negligence of petitioner Maersk Line.

The trial court rendered a decision in favor of Castillo hold that there was a breach in the performance of their obligation by the defendant Maersk Line consisting of their negligence to ship the 6 drums of empty Gelatin Capsules which under their own memorandum shipment would arrive in the Philippines on April 3, 1977 which under Art. 1170 of the New Civil Code, they stood liable for damages.On appeal, respondent court rendered its decision dated August 1, 1990 affirming with modifications the lower court's decision.

Issue:WON Maersk Line is liable for damages resulting from delay in the delivery of the shipment in the absence in the bill of lading of a stipulation on the period of delivery.Ruling:Petitioner maintains that it cannot be held for damages for the alleged delay in the delivery of the 600,000 empty gelatin capsules since it acted in good faith and there was no special contract under which the carrier undertook to deliver the shipment on or before a specific date.

The bill of lading covering the subject shipment among others, reads:6. GENERAL

(1) 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. If the Carrier should nevertheless be held legally liable for any such direct or indirect or consequential loss or damage caused by delay, such liability shall in no event exceed the freight paid for the transport covered by this Bill of Lading.

It is not disputed that 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 . The only participation left of the other party in such a contract is the affixing of his signature thereto, hence the term "Adhesion".

Nonetheless, settled is the rule that bills of lading are contracts not entirely prohibited. One who adheres to the contract is in reality free to reject it in its entirety; if he adheres, he gives his consent (Magellan Manufacturing Marketing Corporation v. Court of Appeals, et al., 201 SCRA 102 [1991]).

However, the aforequoted ruling applies only if such contracts will not create an absurd situation as in the case at bar. 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, delivery of shipment or cargo should at least be made within a reasonable time.

In Saludo, Jr. v. Court of Appeals (207 SCRA 498 [1992]) this Court held:

The oft-repeated rule regarding a carrier's liability for delay is that in the absence of a special contract, a carrier is not an insurer against delay in transportation of goods. When a common carrier undertakes to convey goods, the law implies a contract that they shall be delivered at destination within a reasonable time, in the absence, of any agreement as to the time of delivery. But where a carrier has made an express contract to transport and deliver properly within a specified time, it is bound to fulfill its contract and is liable for any delay, no matter from what cause it may have arisen. This result logically follows from the well-settled rule that where the law creates a duty or charge, and the default in himself, and has no remedy over, then his own contract creates a duty or charge upon himself, he is bound to make it good notwithstanding any accident or delay by inevitable necessity because he might have provided against it by contract. Whether or not there has been such an undertaking on the part of the carrier is to be determined from the circumstances surrounding the case and by application of the ordinary rules for the interpretation of contracts.

An examination of the subject bill of lading shows that the subject shipment was estimated to arrive in Manila on April 3, 1977. While there was no special contract entered into by the parties indicating the date of arrival of the subject shipment, petitioner nevertheless, was very well aware of the specific date when the goods were expected to arrive as indicated in the bill of lading itself. In this regard, there arises no need to execute another contract for the purpose as it would be a mere superfluity.

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. Described as gelatin capsules for use in pharmaceutical products, subject shipment was delivered to, and left in, the possession and custody of petitioner-carrier for transport to Manila via Oakland, California. But through petitioner's negligence was mishipped to Richmond, Virginia.

Petitioner's insitence that it cannot be held liable for the delay finds no merit.

CALVO VS UCPB GENERAL INSURANCE CO

FACTS: At the time material to this case,Transorient Container Terminal Services, Inc. (TCTSI) owned byVirgines Calvoentered into a contract with San Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting paper and 124 reels of kraft liner board from the Port Area in Manila to SMC's warehouse at the Tabacalera Compound, Romualdez St.,Ermita, Manila. The cargo was insured by respondent UCPB General Insurance Co., Inc. July 14, 1990:arrived in Manila on board "M/V Hayakawa Maru" and later onunloaded from the vessel to the custody of thearrastreoperator, Manila Port Services, Inc July 23 to July 25, 1990: Calvowithdrew the cargo from thearrastreoperator and delivered it to SMC's warehouse inErmita, Manila July 25, 1990:goods were inspected by Marine Cargo Surveyors, who found that 15 reels of the semi-chemical fluting paper were "wet/stained/torn" and 3 reels of kraft liner board were likewise torn SMC collected payment from UCPB thetotal damage ofP93,112under its insurance contract UCPB brought suit against Calvo as subrogee of SMC Calvo:Art. 1734(4)The character of the goods or defects in the packing or in the containers spoilage or wettage" took place while the goods were in the custody of either the carrying vessel "M/V Hayakawa Maru," which transported the cargo to Manila, or thearrastreoperator, to whom the goods were unloaded and who allegedly kept them in open air for 9 days notwithstanding the fact that some of the containers were deformed, cracked, or otherwise damaged Trial Court: Calvo liable CA: affirmedISSUE: W/N Calvo can be exempted from liability underArt. 1734(4)

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

ISSUE:WON she is a common carrier?HELD:YesThe 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. There is greater reason for holding petitioner to bea common carrier because the transportation ofgoods is an integral part of her business. To uphold petitioners contention would be to deprivethose with whom she contracts the protection which the law affords them notwithstanding the fact that the obligation to carry goods for hercustomers, as already noted, is part andparcel of petitioners business.When Calvo's employees withdrew the cargo from the arrastre operator, theydid so without exception or protest either with regard to the condition of container vans or their contents. Calvo must do more than merely show the possibility that some other party could be responsible for the damage. It must prove that it used "all reasonable means to ascertain the nature and characteristic of goods tendered for transport and that it exercised due care inthe handling

For 1734(4) to apply, the rule is that if the improper packaging or, in this case, the defects in the container, is/are known to the carrier or his employees orapparent upon ordinary Observation he nevertheless accepts the same without protest or exception notwithstanding such condition, he is not relieved of liabilityfor damage resulting therefrom.

IRON BULK SHIPPING CO LTD v. REMINGTON INDUSTRIAL SALES CORP.FACTS:> Remington Industrial ordered 194 hot rolled steel sheets from Wangs.Wangs forwarded the order to its supplier Burwill. The sheets wereloaded on MV Indian Reliance in Poland and shipped to thePhilippines under a Bill of Lading. Iron Bulk Shipping represented thecharterer in the Philippines.> Upon discharge of the cargo, the sheets were found to be wet andwith rust extending to 50 to 60% of each sheet.> No one honored the claims of loss and as recourse, Remington filedan action for collection. Both lower and appellate courts ruled infavor of Remington.> The charterers defense (Iron Bulk) was that the sheets were alreadyrusty when they were loaded on the ship. However, the Bill of Ladingit issued was found to be a clean bill of lading (i.e. it does notindicate any defect on the goods covered by it). The sheets werefound to be in a fair, usually accepted condition.> The suppliers defense (Wangs) was that Iron Bulk did not exerciseextraordinary diligence in shipping the sheets.> The appellate court dismissed the case against Wangs and now, onlyIron Bulk raised the case on certiorari.ISSUES:1. Whether or not Iron Bulk exercised extraordinary diligence?No.> Diligence required: Even if the cargo was already in adamaged condition at the time it was accepted fortransportation, the carrier is not relieved from itsresponsibility to exercise due care in handling themerchandise and in employing the necessary precautions toprevent the cargo from further deteriorating. Extraordinarydiligence requires the common carrier to know and tofollow the required precaution for avoiding damage to, ordestruction of the goods entrusted to it for safe carriageand delivery. The common carrier must exercise duediligence to forestall or lessen the loss (by applyingadditional safety measures to make sure that the cargo isprotected from corrosion).> Presumption: Except in the cases mentioned under Art. 1734,if the goods are lost, destroyed or deteriorated, commoncarriers are presumed to have been at fault or to haveacted negligently unless they prove that they observedextraordinary diligence.2. Whether or not the CA erred in relying on the pro forma Bill of Lading? No.> Two-fold character: A bill of lading operates as both areceipt and a contract. It is a receipt for the goods shipped(dates, place, description, quality and value) and a contractto transport and deliver the same as therein stipulated.Estoppel: Since Iron Bulk shipping failed to annotate in the bill of lading thealleged damaged condition of the cargo when it was loaded, they are boundby the description contained therein and they are now estopped fromdenying the contents of the said bill of lading.

EVERETT STEAMSHIP vs. CA

FACTSHernandez trading company imported three crates of bus spare parts marked as Marco 12, Marco 13, Marco 14 from its supplier Maruman trading company. Said crates were shipped from Japan to Manila on noard the vessel owned by Everette Orient Lines. Upon arrival in Manila, it was discovered that Marco 14 was missing.

Hernandez makes a formal claim to Everette in an amount of 1 mill ++ Yen, which is the amount of the cargo lost. However, Everett offers an amount of 100k because it is the amount that was stipulated in its Bill of Lading.

Hernandez files a case at the RTC of Caloocan, RTC rules[footnoteRef:2] in favor of Hernandez holding Everett liable for the amount of !mill ++ Yen. [2: Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon.It is required, however, that the contract must be reasonable and just under the circumstances and has been fairly and freely agreed upon.XXXthe Court is of the view that the requirements of said article have not been met. The fact that those conditions are printed at the back of the bill of lading in letters so small that they are hard to read would not warrant the presumption that the plaintiff or its supplier was aware of these conditions such that he had fairly and freely agreed to these conditions. It can not be said that the plaintiff had actually entered into a contract with the defendant, embodying the conditions as printed at the back of the bill of lading that was issued by the defendant to plaintiff. ]

THE CA affirmed the RTCs ruling and made an additional observation that since Hernandez is not a privy to the contract in the bill of lading ( the contract was entered by Everett and Maruman trading [shipper]), and so the 100k limit stipulated will not bind Hernandez making Everett liable for the full amount of 1mill ++ Yen.

ISSUE

1. Is Everett liable for the full amount or the amount that was stipulated in the contract?- what was stipulated in the contract2. Is Hernandez a privy to the contract which says that Petitioner is liable only for 100k? Yes

RULING

1. Co