97TRANSPORTATION LAW | ATTY. AMPILTRICIA CRUZJDCTR DLSU LAW

Mendoza v. PALFACTS: Mendoza was the owner of the Cita Theater located in the City of Naga, Camarines Sur, where he used to exhibit movie pictures booked from movie producers or film owners in Manila. To take advantage of the yearly town fiesta at Naga, he decided to exhibit a film which would fit the occasion. On Aug 1948, he contracted with LVN pictures, Inc. (movie producer in MNL) for him to show during the town fiesta the Tagalog film entitled Himala ng Birhen or Miracle of the Virgin. He made extensive preparations; he had 2K posters printed and later distributed not only in the City of Naga but also in the neighboring towns. He also advertised in a weekly of general circulation in the province. The posters and advertisement stated that the film would be shown in the Cita theater on the 17th and 18th of September, corresponding to the eve and day of the fiesta itself. LVN Pictures Inc. delivered to the defendant Philippine Airlines (PAL) a can containing the film "Himala ng Birhen" consigned to the Cita Theater. This can of films was loaded on flight 113 of PAL. For reasons not explained by PAL, but which would appear to be the fault of its employees or agents, this can of film was not unloaded at Pili Air Port and it was brought back to Manila. Mendoza who had completed all arrangements for the exhibition of the film, went to the Air Port and inquired from the defendant's station master there about the can of film. Said station master could not explain why the film was not unloaded and sent several radiograms to his principal in Manila making inquiries and asking that the film be sent to Naga immediately. After investigation and search in the Manila office, the film was finally located the following day (Sept 18) and then shipped to the Pili Air Port on Sept 20. Mendoza received it and exhibited the film but he had missed his opportunity to realize a large profit as he expected for the people after the fiesta had already left for their towns. Mendoza brought this action against the PAL. After trial, the lower court found that because of his failure to exhibit the film "Himala ng Birhen" during the town fiesta, Mendoza suffered damages or rather failed to earn profits in the amount of P3K but finding the PAL not liable for said damages, dismissed the complaint. PAL claimed that under paragraph 6 of the Way Bill printed on the back thereof, there was no obligation on its part to carry the film in question on any specified time, it could not be held accountable for the delay of about three days. RTC found that although the defendant was not obligated to load the film on any specified plane or on any particular day, once said can film was loaded and shipped on one of its planes making trip to Camarines, then it assumed the obligation to unload it at its point of destination and deliver it to the consignee, and its unexplained failure to comply with this duty constituted negligence. It however found that fraud was not involved and that defendant was debtor in GF. RTC held that not because plaintiff failed to realize profits in the sum of P3K due to the negligence of the defendant, should the latter be made to reimburse him said sum. Applying provisions of Art. 1107 of the Civil Code which provides that losses and those foreseen, or which might have been foreseen, at the time of constituting the obligation, and which are a necessary consequence of the failure to perform it, the trial court held that inasmuch as these damages suffered by Mendoza were not foreseen or could not have been foreseen at the time that the defendant accepted the can of film for shipment, for the reason that neither the shipper LVN Pictures Inc. nor the consignee Mendoza had called its attention to the special circumstances attending the shipment and the showing of the film during the town fiesta of Naga, plaintiff may not recover the damages sought. Counsel for appellant insists that the articles of the Code of Commerce rather than those of the Civil Code should have been applied in deciding this case for the reason that the shipment of the can of film is an act of commerce. It argued that although the contract of transportation was not by land or waterways as defined in said Art. 349, nevertheless, air transportation being analogous to land and water transportation, should be considered as included, especially in view of the second paragraph of Art. 2 of the same Code which says that transactions covered by the Code of Commerce and all others of analogous character shall be deemed acts of commerce. The trial court, however, disagreed to this contention and opined that air transportation not being expressly covered by the Code of Commerce, cannot be governed by its provisions.ISSUE: W/N PAL is a common carrier? W/N PAL is liable for the late delivery of goods to consignee Mendoza?

RULING:1) YES. The obvious reason for its non-inclusion in the Code of Commerce was that at the time of its promulgation, transportation by air on a commercial basis was not yet known. In the United Sates where air transportation has reached its highest development, an airline company engaged in the transportation business is regarded as a common carrier. There can be no doubt, under the general law of common carriers, that those air lines and aircraft owners engaged in the passenger service on regular schedules on definite routes, who solicit the patronage of the traveling public, advertise schedules for routes, time of leaving, and rates of fare, and make the usual stipulation as to baggage, are common carriers by air.

2) NO. Under Art. 1107 of the Civil Code, a debtor in good faith like the defendant herein, may be held liable only for damages that were foreseen or might have been foreseen at the time the contract of the transportation was entered into. The trial court correctly found that the defendant company could not have foreseen the damages that would be suffered by Mendoza upon failure to deliver the can of film on the 17th of September, 1948 for the reason that the plans of Mendoza to exhibit that film during the town fiesta and his preparations, specially the announcement of said exhibition by posters and advertisement in the newspaper, were not called to the defendant's attention.Common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right of prompt delivery, unless such common carriers previously assume the obligation. Said rights and obligations are created by a specific contract entered into by the parties.

Maritime Co. v. CAFACTS: Rizal Surety was the insurer of 800 packages of PVC compound loaded on the SSDoa Nati(owned by National Development Company whereas the petitioner Martime Co was its agent) at Yokohama and consigned to the Acme Electrical Manufacturing Company. NDC had appointed petitioner Maritime as its agent to manage and operate 3 vessels owned by it, including the SSDoa Natifor and in its behalf and account, and for a determinate period or payment of all guarantees made by Maritime Co for account of the vessels (ship agent under COC) The subject goods were never delivered to the consignee so that Rizal as insurer paid consignee the sum of P38K. The cause of the non-delivery of the goods, from the evidence presented by NDC and Martime Co. is that the SSDoa Natiwas rammed by M/V Yasushima Maru, causing damage to the hull of the SSDoa Natiand the resultant flooding of the holds damaged beyond repair the goods of the consignee in question. Rizal Surety & Insurance Co. sued both defendants for the recovery of the sum of money paid by it as insurer for the value of the goods lost in transit on board SSDoa Nati. RTC dismissed the complaint and held that under the Code of Commerce, it would be the vessel at fault in this collision that would be responsible for the damage to the cargo. And the evidence of both Defendants, which has not been rebutted, is that the M/VYasushima Maruwas at fault in the collision, so that the cause of action of plaintiff should be directed to the owners of the negligent vessel. However, as Plaintiff has brought this action in good faith, attorney's fees are not recoverable. Rizal Surety elevated the case to the CA.CA set aside RTCs judgment and ordered NDC and Maritime Co. to pay jointly and severally to Rizal Surety the sum of P38,758.50 with legal rate of interest from the filing of the complaint.

ISSUE: W/N NDC and Maritime Co are liable to petitioner?

RULING:YES. Under the established facts, and in accordance with Article 1734 above mentioned, petitioner Maritime Co. and NDC, as "common carriers," are liable to Acme for "the loss, destruction or deterioration of the goods," and may be relieved of responsibility if the loss, etc., is due to any of the following causes only:1. Flood, storm, earthquakes, lightning or other natural disaster or calamity;2. Act of the public enemy in war, whether international or civil;3. Act or omission of the shipper or owner of the goods;4. The character of the goods or defects in the packing or in the containers;5. Order or act of competent public authority.'

Since none of the specified absolutory causes is present, the carrier's liability is clear. The petitioner's other claim that the loss of the goods was due entirely to the fault of the Japanese vessel, Yasushima Maru, which rammed into theDoa Naticannot be sustained. CA found, as a fact, after a review and study of the evidence, that theDoa Nati "did not exercise even due diligence to avoid the collision.' Having failed to exercise extraordinary diligence to avoid any loss of life and property, as commanded by law, not having in fact exercised "even due diligence to avoid the collision,' it must be held responsible for the loss of the goods in question. Besides, as remarked by the Court of Appeals, "the principal cause of action is not derived from a maritime collision, but rather, from a contract of carriage, as evidenced by the bill of lading."

De Guzman v. CA and CendanaFACTS: Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal in Pangasinan which he would bring to Manila for resale. He utilized two (2) six-wheeler trucks which he owned for hauling the material to Manila. On the return trip to Pangasinan, respondent would load his vehicles with cargo which various merchants wanted delivered to differing establishments in Pangasinan. For that service, respondent charged freight rates which were commonly lower than regular commercial rates. Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent for the hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk in Makati, Rizal, to petitioner's establishment in Urdaneta on or before 4 December 1970. Accordingly, respondent loaded in Makati the merchandise on to his trucks: 150 cartons were loaded on a truck driven by respondent himself, while 600 cartons were placed on board the other truck which was driven by Manuel Estrada, respondent's driver and employee. Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reached petitioner, since the truck which carried these boxes was hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and the cargo. De Guzman commenced action against Cendena in the CFI of Pangasinan, demanding payment of P 22,150 representing the claimed value of the lost merchandise, plus damages and attorney's fees. Petitioner argued that private respondent, being a common carrier, and having failed to exercise the extraordinary diligence required of him by the law, should be held liable for the value of the undelivered goods. Cendena denied that he was a common carrier and argued that he could not be held responsible for the value of the lost goods, such loss having been due toforce majeure. RTCfound private respondent to be a common carrier and held him liable for the value of the undelivered goods as well as P4K as damages and P 2K as attorney's fees. CA reversed the judgment of the trial court and held that respondent had been engaged in transporting return loads of freight "as a casual occupation a sideline to his scrap iron business" and not as a common carrier.ISSUE/S: W/N Cendena may, under the facts presented, be properly characterized as a common carrier? W/N Cendena, assuming it is a common carrier, may be held liable for the loss of goods?

RULING:1. YES. 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 back-hauling was done on a periodic or occasional rather than regular or scheduled manner, and even though private respondent'sprincipal 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. That liability arises the moment a person or firm acts as a common carrier, without regard to whether or not such carrier has also complied with the requirements of the applicable regulatory statute and implementing regulations and has been granted a certificate of public convenience or other franchise. To exempt private respondent from the liabilities of a common carrier because he has not secured the necessary certificate of public convenience, would be offensive to sound public policy; that would be to reward private respondent precisely for failing to comply with applicable statutory requirements. 2. NO. The specific cause alleged in the instant case the hijacking of the carrier's truck does not fall within any of the five (5) categories of exempting causes listed in Article 1734. It would follow, therefore, that the hijacking of the carrier's vehicle must be dealt with under the provisions of Article 1735, in other words, that the 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.The duty of extraordinary diligence in the vigilance over goods is, under Article 1733, given additional specification not only by Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6.

Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed to divest or to diminish such responsibility even for acts of strangers like thieves or robbers,exceptwhere such thieves or robbers in fact acted "with grave or irresistible threat, violence or force." The limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force."In the instant case, armed men held up the second truck owned by private respondent which carried petitioner's cargo. The record shows that the accused were charged with willfully and unlawfully taking and carrying away with them the second truck, driven by Manuel Estrada and loaded with the 600 cartons of Liberty filled milk destined for delivery at petitioner's store in Urdaneta, Pangasinan. The decision of the trial court shows that the accused acted with grave, if not irresistible, threat, violence or force. Three (3) of the five (5) hold-uppers were armed with firearms. The robbers not only took away the truck and its cargo but also kidnapped the driver and his helper, detaining them for several days and later releasing them in another province (in Zambales). The hijacked truck was subsequently found by the police in Quezon City. CFI convicted all the accused of robbery, though not of robbery in band.Thus, 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.

Bascos v. CAFACTS: Rodolfo Cipriano representing CIPTRADE entered into a hauling contract with Jibfair Shipping Agency Corporation whereby CIPTRADE bound itself to haul the latter's 2,000 m/tons of soya bean meal from Magallanes Drive, Del Pan, Manila to the warehouse of Purefoods Corporation in Calamba, Laguna. To carry out its obligation, CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita Bascos (petitioner) to transport and to deliver 400 sacks of soya bean meal worth P156,404 from the Manila Port Area to Calamba, Laguna at the rate of P50/metric ton. Petitioner Bascos failed to deliver the said cargo. As a consequence of that failure, Cipriano paid Jibfair Shipping Agency the amount of the lost goods in accordance with the contract which stated that: CIPTRADE shall be held liable and answerable for any loss in bags due to theft, hijacking and non-delivery or damages to the cargo during transport at market value Cipriano demanded reimbursement from Bascos but the latter refused to pay. Eventually, Cipriano filed a complaint for a sum of money and damages with writ of preliminary attachment for breach of a contract of carriage. RTC rendered a decision in favor of CIPTRADE. CA affirmed.

ISSUE/S: Was petitioner a common carrier? YES Was the hijacking referred to a force majeure? NO

RULING:1) Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or association engaged in the business of carrying or transporting passengers or goods or both, by land, water or air, for compensation, offering their services to the public." The test to determine a common carrier is "whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of the business transacted." In this case, petitioner herself has made the admission that she was in the trucking business, offering her trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is required to prove the same.

2) Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them. Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. There are very few instances when the presumption of negligence does not attach and these instances are enumerated in Article 1734. In those cases where the presumption is applied, the common carrier must prove that it exercised extraordinary diligence in order to overcome the presumption.To exculpate the carrier from liability arising from hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or force by virtue of Art. 1745 (6).Both the trial court and the Court of Appeals have concluded that the affidavits presented by petitioner were not enough to overcome the presumption. Petitioner's affidavit about the hijacking was based on what had been told her by Juanito Morden. It was not a first-hand account. The affidavit of Jesus Bascos did not dwell on how the hijacking took place. Moreover, while the affidavit of Juanito Morden, the truck helper in the hijacked truck, was presented as evidence in court, he himself was a witness as could be gleaned from the contents of the petition. Affidavits are not considered the best evidence if the affiants are available as witnesses. The subsequent filing of the information for carnapping and robbery against the accused named in said affidavits did not necessarily mean that the contents of the affidavits were true because they were yet to be determined in the trial of the criminal cases.The presumption of negligence was raised against petitioner. It was petitioner's burden to overcome it. Thus, contrary to her assertion, private respondent need not introduce any evidence to prove her negligence. Her own failure to adduce sufficient proof of extraordinary diligence made the presumption conclusive against her.

First Philippine Industrial Corp v. CAFACTS: Petitioner is a grantee of a pipeline concession under RA No. 387, as amended, to contract, install and operate oil pipelines. The original pipeline concession was granted in 1967 and renewed by the Energy Regulatory Board in 1992. Petitioner applied for a mayor's permit with the Office of the Mayor of Batangas City. However, before the mayor's permit could be issued, the respondent City Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the Local Government Code.The respondent City Treasurer assessed a business tax on the petitioner based on the gross receipts for products pumped at GPS-1 for the fiscal year 1993. In order not to hamper its operations, petitioner paid the tax under protest for the first quarter of 1993. Petitioner filed a letter-protest addressed to the respondent City Treasurer which asserts the fact that FPIC is a pipeline operator granted with a government concession under the Petroleum Act and as such, is exempt from paying tax on gross receipts under Sec. 133(h) of the LGC. It also asserted that transportation contractors are not included in the enumeration of contractors under Sec. 131(e) of the LGC, thus, the authority to impose tax "on contractors and other independent contractors" under this provision does not include Respondent City Treasurer denied the protest contending that petitioner cannot be considered engaged in transportation business, thus it cannot claim exemption under Section 133 (j) of the Local Government Code. Petitioner filed with the RTC of Batangas City a complaint for tax refund with prayer for writ of preliminary injunction against respondents City of Batangas and Adoracion Arellano in her capacity as City Treasurer. Respondents argued that petitioner cannot be exempt from taxes under Section 133 (j) of the Local Government Code as said exemption applies only to "transportation contractors and persons engaged in the transportation by hire and common carriers by air, land and water." They assert that pipelines are not included in the term "common carrier" which refers solely to ordinary carriers such as trucks, trains, ships and the like and that the term "common carrier" under the said code pertains to the mode or manner by which a product is delivered to its destination. RTC dismissed the complaint and ruled that FIPC is not a common carrier but a special carrier extending its services and facilities to a single specific customer under a special contract. CA affirmed RTCs Decision.ISSUE: W/N petitioner an oil pipeline owner is a common carrier?

RULING:YES. A "common carrier" may be defined, broadly, as one who holds himself out to the public as engaged in the business of transporting persons or property from place to place, for compensation, offering his services to the public generally.

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

The test for determining whether a party is a common carrier of goods is:1. He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to engage in the transportation of goods for person generally as a business and not as a casual occupation;2. He must undertake to carry goods of the kind to which his business is confined;3. He must undertake to carry by the method by which his business is conducted and over his established roads; and4. 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.

As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes no distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that the transportation of the passengers or goods should be by motor vehicle. In fact, in the United States, oil pipe line operators are considered common carriers.

Under the Petroleum Act of the Philippines (RA 387), petitioner is considered a "common carrier." Thus, Article 86 thereof provides that:Art. 86. Pipe line concessionaire as common carrier. A pipe line shall have the preferential right to utilize installations for the transportation of petroleum owned by him, but is obligated to utilize the remaining transportation capacity pro rata for the transportation of such other petroleum as may be offered by others for transport, and to charge without discrimination such rates as may have been approved by the Secretary of Agriculture and Natural Resources.

Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7 thereof provides:that everything relating to the exploration for and exploitation of petroleum . . . and everything relating to the manufacture, refining, storage, ortransportation by special methods of petroleum, is hereby declared to be apublic utility. The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling No. 069-83, it declared:

. . . since [petitioner] is a pipeline concessionaire that is engaged only in transporting petroleum products, it is considered a common carrier under Republic Act No. 387 . . . . Such being the case, it is not subject to withholding tax prescribed by Revenue Regulations No. 13-78, as amended.

From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and, therefore, exempt from the business tax as provided for in Section 133 (j), of the Local Government Code, to wit:

Sec. 133.Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:xxx(j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire and common carriers by air, land or water, except as provided in this Code.

Calvo v. UCPB Gen Insurance FACTS: Virgines Calvo is the owner of Transorient Container Terminal Services, Inc (TCTSI), a sole proprietorship customs broker. Calvo entered into a contract with San Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting paper and 124 reels of kraft liner board from the Port Area in Manila to SMC's warehouse at the Tabacalera Compound, Romualdez St., Ermita, Manila. The cargo was insured by respondent UCPB General Insurance Co., Inc. On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in Manila on board "M/V Hayakawa Maru" and, after 24 hours, were unloaded from the vessel to the custody of the arrastre operator, Manila Port Services, Inc. From July 23 to July 25, 1990, petitioner, pursuant to her contract with SMC, withdrew the cargo from the arrastre operator and delivered it to SMC's warehouse in Ermita, Manila. On July 25, 1990, the 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. The damage was placed atP93,112. SMC collected payment from respondent UCPB under its insurance contract for the aforementioned amount. As subrogee of SMC, UCPB brought suit against petitioner in the RTC which rendered judgment finding petitioner Calvo liable to respondent for the damage to the shipment. It held that defendant by reason of the nature of [her] business should have devised ways and means in order to prevent the damage to the cargoes which it is under obligation to take custody of and to forthwith deliver to the consignee. It held that Calvo did not present any evidence on what precaution she performed to prevent the said incident, hence the presumption is that the moment the defendant accepts the cargo she shall perform such extraordinary diligence because of the nature of the cargo. CA affirmed RTCs decision. Petitioner contends that contrary to the findings of the trial court and the CA, she is not a common carrier but a private carrier because, as a customs broker and warehouseman, she does not indiscriminately hold her services out to the public, but only offers the same to select parties with whom she may contract in the conduct of her business.

ISSUE: W/N petitioner is a common carrier and is thus liable to respondent? YES

RULING:There is greater reason for holding petitioner to be a common carrier because the transportation of goods is an integral part of her business. To uphold petitioner's contention would be to deprive those with whom she contracts the protection which the law affords them notwithstanding the fact that the obligation to carry goods for her customers, as already noted, is part and parcel of petitioner's business.

Now, as to petitioner's liability, Art. 1733 of the Civil Code provides:Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. . . .

In the case at bar, petitioner denies liability for the damage to the cargo. She claims that the "spoilage or wettage" took place while the goods were in the custody of either the carrying vessel "M/V Hayakawa Maru," which transported the cargo to Manila, or the arrastre operator, to whom the goods were unloaded and who allegedly kept them in open air for nine days from July notwithstanding the fact that some of the containers were deformed, cracked or otherwise damaged.

Contrary to petitioner's assertion, the Survey Report of the Marine Cargo Surveyors indicates that when the shipper transferred the cargo in question to the arrastre operator, these were covered by clean Equipment Interchange Report (EIR) and, when petitioner's employees withdrew the cargo from the arrastre operator, they did so without exception or protest either with regard to the condition of container vans or their contents. To put it simply, Calvo received the shipment in good order and condition and delivered the same to the consignee damaged. CA can only conclude that the damages to the cargo occurred while it was in the possession of the defendant-appellant. Whenever the thing is lost (or damaged) in the possession of the debtor (or obligor), it shall be presumed that the loss (or damage) was due to his fault, unless there is proof to the contrary. No proof was proffered to rebut this legal presumption and the presumption of negligence attached to a common carrier in case of loss or damage to the goods.

Anent petitioner's insistence that the cargo could not have been damaged while in her custody as she immediately delivered the containers to SMC's compound, suffice it to say that to prove the exercise of extraordinary diligence, petitioner must do more than merely show the possibility that some other party could be responsible for the damage. It must prove that it used "all reasonable means to ascertain the nature and characteristic of goods tendered for transport and that it exercised due care in the handling thereof. Petitioner failed to do this.

Nor is there basis to exempt provision to apply petitioner from liability under Art. 1734(4) because the rule is that if the improper packing or, in this case, the defect/s in the container, is/are known to the carrier or his employees or apparent upon ordinary observation, but he nevertheless accepts the same without protest or exception notwithstanding such condition, he is not relieved of liability for damage resulting therefrom.14In this case, petitioner accepted the cargo without exception despite the apparent defects in some of the container vans. Hence, for failure of petitioner to prove that she exercised extraordinary diligence in the carriage of goods in this case or that she is exempt from liability, the presumption of negligence as provided under Art. 1735.

Home Insurance Co. v. American Steamship AgenciesFACTS: "Consorcio Pesquero del Peru of South America" shipped freight pre-paid at Chimbate, Peru, 21,740 jute bags of Peruvian fish meal through SS Crowborough on January 17, 1963. The cargo, consigned to SMC and insured by Home Insurance Company for $202,505, arrived in Manila on March 7, 1963 and was discharged into the lighters of Luzon Stevedoring Company. When the cargo was delivered to consignee San Miguel Brewery Inc/SMC there were shortages amounting to P12,033.85, causing SMC to lay claims against Luzon Stevedoring Corporation, Home Insurance Company and the American Steamship Agencies, owner and operator of SS Crowborough. Because the others denied liability, Home Insurance Company paid the consignee P14,870.71 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 a complaint for recovery of P14,870.71 with legal interest, plus attorney's 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. American Steamship Agencies OTOH, denied liability by alleging that under the provisions of the Charter party referred to in the bills of lading, the charterer, not the shipowner, was responsible for any loss or damage of the cargo. Furthermore, it claimed to have exercised due diligence in stowing the goods and that as a mere forwarding agent, it was not responsible for losses or damages to the cargo. CFI 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 plaintiff. It held that the non-liability claim of American Steamship Agencies under the charter party contract is not tenable because Article 587 of the Code of Commerce makes the ship agent also civilly liable for damages in favor of third persons due to the conduct of the captain of the carrier; the stipulation in the charter party contract exempting the owner from liability is against public policy under Article 1744 of the Civil Code; In case of loss, destruction or deterioration of goods, common carriers are presumed at fault or negligent under Article 1735 of the Civil Code unless they prove extraordinary diligence, and they cannot by contract exempt themselves from liability resulting from their negligence or that of their servants; and when goods are delivered to the carrier in good order and the same are in bad order at the place of destination, the carrier isprima facieliable.

ISSUE: Is the stipulation in the charter party of the owner's non-liability valid so as to absolve the American Steamship Agencies from liability for loss? NO

RULING:A perusal of the charter party referred to shows that while the possession and control of the ship were not entirely transferred to the charterer,the vessel was chartered to its full and complete capacity. Furthermore, the, charter had the option to go north or south orvice-versa,loading, stowing and discharging at its risk and expense. Accordingly, the charter party contract is one of affreightment over the whole vessel rather than a demise. As such, the liability of the shipowner for acts or negligence of its captain and crew, would remain in the absence of stipulation.

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.

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 and Industrial Supply v. CAFACTS: Valenzuela Hardwood and Industrial Supply, Inc. (VHIS) entered into an agreement with the defendant Seven Brothers (Shipping Corporation) whereby the latter undertook to load on board its vessel M/V Seven Ambassador the VHIS lauan round logs numbering 940 at the port of Maconacon, Isabela for shipment to Manila. VIHS insured the logs against loss and/or damage with defendant South Sea Surety and Insurance Co., Inc. for P2M and the latter issued its Marine Cargo Insurance Policy No. In the meantime, the said vessel M/V Seven Ambassador sank on Jan 25 resulting in the loss of the plaintiff's insured logs. A check for P5625 to cover payment of the premium and documentary stamps due on the policy was tendered due to the insurer but was not accepted. Instead, the South Sea Surety and Insurance Co., Inc. cancelled the insurance policy it issued as of the date of the inception for non-payment of the premium due in accordance with Section 77 of the Insurance Code. Plaintiff demanded from defendant South Sea Surety and Insurance Co., Inc. the payment of the proceeds of the policy but the latter denied liability under the policy. Plaintiff likewise filed a formal claim with defendant Seven Brothers Shipping Corporation for the value of the lost logs but the latter denied the claim. RTCrendered judgment in favor of plaintiff and against defendants. The trial court deemed the charter party stipulation exempting owners from liability for loss or any type of breakage void for being contrary to public policy,citing Article 1745 of the Civil Code. Both defendants shipping corporation and the surety company appealed. CA affirmed in part the RTC judgment by sustaining the liability of South Sea Surety and Insurance Company but modified it by holding that Seven Brothers Shipping Corporation ("Seven Brothers") was not liable for the lost cargo.It upheld the stipulation in the charter party that the ship owner would be exempted from liability in case of loss. It also held that the RTC erred in applying the provisions of the Civil Code on common carriers to establish the liability of the shipping corporation. The provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier. The shipping corporation should not therefore be held liable for the loss of the logs. It should be noted at the outset that there is no dispute between the parties that the proximate cause of the sinking ofM/V Seven Ambassadorsresulting in the loss of its cargo was the "snapping of the iron chains and the subsequent rolling of the logs to the portside due to the negligence of the captain in stowing and securing the logs on board the vessel and not due to fortuitous event."

ISSUE: Whether the stipulation in the subject charter party exempting owners for loss, split, short-landing, breakages and any kind of damages to the cargo valid? Whether defendants shipping corporation and the surety company are liable to the plaintiff for the latter's lost logs?

RULING:1. YES. It is undisputed that private respondent had acted as aprivate carrierin transporting petitioner's lauan logs. Thus, Article 1745 and other Civil Code provisions on common carriers which were cited by petitioner may not be applied unless expressly stipulated by the parties in their charter party.

In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on the charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence of the ship captain. Pursuant to Article 1306of 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. 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 carrier's obligations and liabilities over the shipment which, in turn, determine the price or consideration of the charter.

2. YES. In view of the above disquisition upholding the validity of the questioned charter party stipulation and holding that petitioner may not recover from private respondent, the present issue is moot and academic. It suffices to state that the Resolution of this Court dated June 2, 1995affirming the liability of South Sea does not, by itself, necessarily preclude the petitioner from proceeding against private respondent. An aggrieved party may still recover the deficiency for the person causing the loss in the event the amount paid by the insurance company does not fully cover the loss by virtue of Article 2207 of the Civil Code.

National Steel Corp. v. CA and Vlasons Shipping Inc.FACTS: TheMV Vlasons Iis 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. It is undisputed that the ship is a private carrier. And it is in the capacity that its owner, Vlasons Shipping, Inc., entered into a contract of affreightment or contract of voyage charter hire with National Steel Corporation. Plaintiff National Steel Corporation (NSC) as Charterer and defendant Vlasons Shipping, Inc. (VSI) as Owner, entered into a Contract of Voyage Charter Hire whereby NSC hired VSI's vessel, the MV "VLASONS I" to make one (1) voyage to load steel products at Iligan City and discharge them at North Harbor, Manila. The parties stipulated in their contract that the terms and conditions of the NONYOZAI Charter Party shall form part of their terms. The terms "F.I.O.S.T." (Freight In and Out including Stevedoring and Trading) which is used in the shipping business is a standard provision in said Charter Party means that the handling, loading and unloading of the cargoes are the responsibility of the Charterer. Under Paragraph 5 of the NANYOZAI Charter Party, it states, "Charterers to load, stow and discharge the cargofree of risk and expenses to owners. It also stipulated that the owners shall not be liable for loss of or damage of the cargo arising or resulting from: unseaworthiness unless caused by want of due diligence on the part of the owners to make the vessel seaworthy, and to secure that the vessel is properly manned, equipped and supplied and to make the holds and all other parts of the vessel in which cargo is carried, fit and safe for its reception, carriage and preservation xxx In accordance with the Contract of Voyage Charter Hire, the MV "VLASONS I" loaded at plaintiffs pier at Iligan City, the NSC's shipment of 1,677 skids of tinplates and 92 packages of hot rolled sheets for carriage to Manila. The shipment was placed in the 3 hatches of the ship. The vessel arrived with the cargo at North Harbor, Manila. The following day, when the vessel's 3 hatches containing the shipment were opened by plaintiff's 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 after incurring a delay of 11 days due to the heavy rain which interrupted the unloading operations. MASCO (surveyor hired by the NSC) 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 where the cargo was taken and stored. 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. MASCO ventured the opinion that "rusting of the tinplates was caused by contact with SEA WATER sustained while still on board the vessel as a consequence of the heavy weather and rough seas encountered while en route to destination. It was also reported that MASCO's surveyors drew at random samples of bad order packing materials of the tinplates and delivered the same to the M.I.T. Testing Laboratories for analysis which affirmed MASCOs finding. On the basis of the aforesaid report, NSC filed with the defendant its claim for damages suffered due to the downgrading of the damaged tinplates in the amount of P941K. Plaintiff formally demanded payment of said claim but defendant VSI refused and failed to pay. In its complaint, it claimed that it sustained losses as a result of the act, neglect and default of the master and crew in the management of the vessel as well as the want of due diligence on the part of the defendant to make the vessel seaworthy and to make the holds and all other parts of the vessel in which the cargo was carried, fit and safe for its reception, carriage and preservation all in violation of defendant's undertaking under their Contract of Voyage Charter Hire. Defendant denied liability for the alleged damage claiming that the MV "VLASONS I" was seaworthy in all respects for the carriage of plaintiff's cargo and that said vessel was not a "common carrier" inasmuch as she was under voyage charter contract with the plaintiff as charterer under the charter party. RTC ruled in favor of defendant. It held that The MV "VLASONS I" is a vessel of Philippine registry engaged in the tramping service and is available for hire only under special contracts of charter party as in this particular case. It further held that defendant cannot be held liable for it pursuant to Article 1734 of the Civil Case which exempts the carrier from responsibility for loss or damage arising from the "character of the goods . . ." All the 1,769 skids of the tinplates could not have been damaged by water as claimed by plaintiff but because of its own sweating; and that due to the fact the vessel encountered rough seas and bad weather on which account the master filed a Marine Protest can be invoked as a defense of force majeure. CA modified the decision of the RTC by reducing the demurrage and deleting attorneys fees and expenses.ISSUE: W/N VSI is a private/common carrier? PRIVATE W/N defendant may be held liable on account of the damage of the cargo owned by plaintiff? NO

RULING:In the instant case, it is undisputed that VSI did not offer its services to the general public. As found by the RTC, it carried passengers or goods only for those it chose under a "special contract of charter party." TheMV 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.

It is clear from the parties' Contract of Voyage Charter Hire that 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 a 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."

Because theMV Vlasons Iwas a private carrier, the shipowner's obligations are governed by the foregoing provisions of the Code of Commerce and not by the Civil Code which, as a general rule, places theprima facie presumption of negligence on a common carrier. It is a hornbook doctrine that: In an action against a private carrier for loss of, or injury to, cargo, the burden is on the plaintiff to prove that the carrier was negligent or unseaworthy, and the fact that the goods were lost or damaged while in the carrier's custody does not put the burden of proof on the carrier.

Indicators of VSIs due diligence:a) It was drylocked and inspected by the Philippine Coast Guard before it proceeded to Iligan City for its voyage to Manila under the contract of voyage charter hire. The vessel's voyage from Iligan to Manila was the vessel'sfirst voyage after drydocking. The Philippine Coast Guard Station in Cebu cleared it asseaworthy, fitted and equipped;it met all requirements for trading as cargo vessel.b) The records sufficiently support VSI's contention that the ship used the old tarpaulin, only in addition to the new one used primarily to make the ship's hatches watertight. c) Despite encountering rough weather twice, the new tarpaulin did not give way and the ship's hatches and cargo holds remained waterproof. Indeed, NSC failed to discharge its burden to show negligence on the part of the officers and the crew ofMV Vlasons I. On the contrary, the records reveal that 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 unloading of the cargo. This tent-like covering, however, was clearly inadequate for keeping rain and seawater away from the hatches of the ship.

The charter party is a normal commercial contract and its stipulations are agreed upon in consideration of many factors, not the least of which is the transport price which is determined not only by the actual costs but also by the risks and burdens assumed by the shipper in regard to possible loss or damage to the cargo. In recognition of such factors, the parties even stipulated that the shipper should insure the cargo to protect itself from the risks it undertook under the charter party. That NSC failed or neglected to protect itself with such insurance should not adversely affect VSI, which had nothing to do with such failure or neglect.

FGU Insurance v. GP Sarmiento Trucking and Lambert ErolesFACTS: G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver 30 units of Condura S.D. white refrigerators aboard one of its Isuzu trucks, driven by Lambert Eroles, from the plant site of Concepcion Industries, Inc., along South Superhighway in Alabang, Metro Manila, to the Central Luzon Appliances in Dagupan City. While the truck was traversing the north diversion road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it collided with an unidentified truck, causing it to fall into a deep canal, resulting in damage to the cargoes. FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries, Inc., the value of the covered cargoes in the sum of P204,450. FGU, in turn, being the subrogee of the rights and interests of Concepcion Industries, Inc., sought reimbursement of the amount it had paid to the latter from GPS. Since the trucking company failed to heed the claim, FGU filed a complaint for damages and breach of contract of carriage against GPS and its driver Lambert Eroles with the RTC. Respondents asserted that GPS was the exclusive hauler only of Concepcion Industries, Inc., since 1988, and it was not so engaged in business as a common carrier. Respondents further claimed that the cause of damage was purely accidental. GPS instead of submitting evidence, filed with leave of court a motion to dismiss the complaint by way of demurrer to evidence on the ground that petitioner had failed to prove that it was a common carrier. RTC granted the motion to dismiss. FGU appealed. CA rejected such appeal and ruled in favor of petitioner.

ISSUE: W/N GPS may be considered as a common carrier as defined under the law and existing jurisprudence? NO W/N GPS may be presumed to have been negligent when the goods it undertook to transport safely were subsequently damaged while in its custody? YES

RULING:GPS, being an exclusive contractor and hauler of Concepcion Industries, Inc., rendering or offering its services to no other individual or entity, cannot be considered a common carrier. 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 hire or compensation, offering their services to thepublic,whether to the public in general or to a limited clientele in particular, but never on an exclusive basis. The true test of a common carrier is the carriage of passengers or goods, providing space for those who opt to avail themselves of its transportation service for a fee. Given accepted standards, GPS scarcely falls within the term "common carrier."The above conclusion nothwithstanding, GPS cannot escape from liability. Inculpa contractual, upon which the action of petitioner rests as being the subrogee of Concepcion Industries, Inc., the mere proof of the existence of the contract and the failure of its compliance justify,prima facie, a corresponding right of relief.The law, recognizing the obligatory force of contracts, will not permit a party to be set free from liability for any kind of misperformance of the contractual undertaking or a contravention of the tenor thereof. A breach upon the contract confers upon the injured party a valid cause for recovering that which may have been lost or suffered.

Respondent trucking corporation recognizes the existence of a contract of carriage between it and petitioners assured, and admits that the cargoes it has assumed to deliver have been lost or damaged while in its custody. In such a situation, a default on, or failure of compliance with, the obligation in this case, the delivery of the goods in its custody to the place of destination - gives rise to a presumption of lack of care and corresponding liability on the part of the contractual obligor the burden being on him to establish otherwise. GPS has failed to do so.

Respondent driver, on the other hand, without concrete proof of his negligence or fault, may not himself be ordered to pay petitioner. The driver, not being a party to the contract of carriage between petitioners principal and defendant, may not be held liable under the agreement. A contract can only bind the parties who have entered into it or their successors who have assumed their personality or their juridical position.Consonantly with the axiomres inter alios acta aliis neque nocet prodest, such contract can neither favor nor prejudice a third person. Petitioners civil action against the driver can only be based onculpa aquiliana,which, unlikeculpa contractual,would require the claimant for damages to prove negligence or fault on the part of the defendant.

Loadstar Shipping Co. v. CA and Manila Insurance Co.FACTS: LOADSTAR received on board its M/V "Cherokee" the following goods for shipment: a) 705 bales of lawanit hardwood; b) 27 boxes and crates of tilewood assemblies and the others; and c) 49 bundles of mouldings R & W (d) Apitong Bolidenized. The goods, amounting to P6M were insured for the same amount with respondent MIC against various risks including "TOTAL LOSS BY TOTAL OF THE LOSS THE VESSEL." The vessel, in turn, was insured by Prudential Guarantee & Assurance, Inc. (hereafter PGAI) for P4 million. On its way to Manila from the port of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank off Limasawa Island. As a result of the total loss of its shipment, the consignee made a claim with LOADSTAR which, however, ignored the same. As the insurer, MIC paid P6M to the insured in full settlement of its claim, and the latter executed a subrogation receipt therefor. MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking of the vessel was due to the fault and negligence of LOADSTAR and its employees. It also prayed that PGAI be ordered to pay the insurance proceeds from the loss the vessel directly to MIC, said amount to be deducted from MIC's claim from LOADSTAR. LOADSTAR denied any liability for the loss of the shipper's goods and claimed that sinking of its vessel was due toforce majeure. PGAI, on the other hand, averred that MIC had no cause of action against it, LOADSTAR being the party insured. In any event, PGAI was later dropped as a party defendant after it paid the insurance proceeds to LOADSTAR. RTCrendered judgment in favor of MIC, prompting LOADSTAR to elevate the matter to the court of Appeals, which, however, agreed with the trial court and affirmed its decisionin toto. 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.

ISSUE: W/N LOADSTAR is a private/common carrier?

RULING: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.

In support of its position, LOADSTAR relied on the 1968 case ofHome Insurance Co. v. American Steamship Agencies, Inc., where this Court held that a common carrier transporting special cargo or chartering the vessel to a special person becomes a private carrier that is not subject to the provisions of the Civil Code. Any stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent is void only if the strict policy governing common carriers is upheld. Such policy has no force where the public at is not involved, as in the case of a ship totally chartered for the use of a single party. LOADSTAR also citedValenzuela HardwoodandIndustrial Supply, Inc. v. Court of Appeals andNational Steel Corp. v. Court of Appeals, both of which upheld the Home Insurance doctrine.

These cases invoked by LOADSTAR are not applicable in the case at bar for the simple reason that the factual settings are different. The records do not disclose that the M/V "Cherokee," on the date in question, undertook to carry a special cargo or was chartered to a special person only. 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.

Under the facts and circumstances obtaining in this case, LOADSTAR fits the definition of a common carrier under Article 1732 of the Civil Code. The SC upheld the doctrine enshrined inDe Guzman v. Court of Appeals, where the Court juxtaposed the statutory definition of "common carriers" with the peculiar circumstances of that case. Art. 1732 makes no distinction between one whoseprincipalbusiness activity is the carrying of persons or goods or both, and one who does such carrying only asancillaryactivity. 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 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 narrowsegmentof the general population.

A certificate of public convenience is not a requisite for the incurring of liability under the Civil Code provisions governing common carriers. That liability arises the moment a person or firm acts as a common carrier, without regard to whether or not such carrier has also complied with the requirements of the applicable regulatory statute and implementing regulations and has been granted a certificate of public convenience or other franchise.

As regards the issue of seaworthiness of M/V Cherokee, the Court found that the subject vessel was not seaworthy when it embarked on its voyage on 19 November 1984. The vessel was not even sufficiently manned at the time. "For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. The failure of a common carrier to maintain in seaworthy condition its vessel involved in a contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code."Arada v. CAFACTS: Petitioner Alejandro Arada is the proprietor and operator of the firm South Negros Enterprises which has been organized and established for more than 10 years. It is engaged in the business of small scale shipping as a common carrier, servicing the hauling of cargoes of different corporations and companies with the 5 vessels it was operating. On March 24, 1982, petitioner entered into a contract with private respondent to safely transport as a common carrier, cargoes of the latter from San Carlos City, Negros Occidental to Mandaue City using one of petitioner's vessels, M/L Maya. The cargoes of private respondent San Miguel Corporation consisted of 9,824 cases of beer empties valued at P176,824.80. Petitioner thru its crew master, Mr. Vivencio Babao, applied for a clearance with the Philippine Coast Guard for M/L Maya to leave the port of San Carlos City, but due to a typhoon, it was denied clearance. The next day, M/L Maya was given clearance as there was no storm and the sea was calm. Hence, said vessel left for Mandaue City. While it was navigating towards Cebu, a typhoon developed and said vessel was buffeted on all its sides by big waves. Its rudder was destroyed and it drifted for sixteen (16) hours although its engine was running. At about 4:00 a.m., the vessel sank with whatever was left of its cargoes. The crew was rescued by a passing pump boat and was brought to Calanggaman Island. Later in the afternoon, they were brought to Palompon, Leyte, where Vivencio Babao filed a marine protest. On the basis of such marine protest, the Board of Marine Inquiry recommended that the owner/operator, officers and crew of M/L Maya be exonerated or absolved from any administrative liability on account of this incident. The Board's report containing its findings and recommendation was then forwarded to the headquarters of the Philippine Coast Guard for appropriate action. On the basis of such report, the Commandant of the Philippine Coast Guard rendered a decision exonerating the owner/operator officers and crew of the ill-fated M/L Maya from any administrative liability on account of said incident. SMC filed a complaint in the RTC its first cause of action being for the recovery of the value of the cargoes anchored on breach of contract of carriage. RTC dismissed the plaintiffs claim on the basis of its first cause of action. SMC appealed to the CA. CA reversed the decision and Arada was ordered to pay unto the appellant SMC. It ruled that "in view of his failure to observe extraordinary diligence over the cargo in question and his negligence previous to the sinking of the carrying vessel, as above shown, the appellee is liable to the appellant for the value of the lost cargoISSUE: Whether or not petitioner is liable for the value of the lost cargoes? YESRULING:There is no doubt that petitioner was exercising its function as a common carrier when it entered into a contract with private respondent to carry and transport the latter's cargoes.

A common carrier, both from the nature of its business and for insistent reasons of public policy is burdened by law with the duty of exercisingextraordinary diligencenot only in ensuring the safety of passengers, but in caring for the goods transported by it. The loss or destruction or deterioration of goods turned over to the common carrier for the conveyance to a designated destination raises instantly a presumption of fault or negligence on the part of the carrier, save only where such loss, destruction or damage arises from extreme circumstances such as a natural disaster or calamity.

In order that the common carrier may be exempted from responsibility, the natural disaster must have been theproximateandonly cause of the loss.However, the common carrier must exercise due diligence to prevent or minimize the loss before, during and after the occurrence of flood, storm or other natural disaster in order that the common carrier may be exempted from liability for the destruction or deterioration of the goods (Article 1739, New Civil Code).

In the instant case, the appellate court was correct in finding that petitioner failed to observe the extraordinary diligence over the cargo in question and he or the master in his employ was negligent previous to the sinking of the carrying vessel. Respondent court's conclusion as to the negligence of petitioner is supported by evidence. It will be noted that Vivencio Babao knew of the impending typhoon when the Philippine Coast Guard denied M/L Maya the issuance of a clearance to sail. Less than 24 hours elapsed since the time of the denial of said clearance and the time a clearance to sail was finally issued.

A common carrier is obliged to observe extraordinary diligence and the failure of Babao to ascertain the direction of the storm and the weather condition of the path they would be traversing, constitute lack of foresight and minimum vigilance over its cargoes taking into account the surrounding circumstances of the case.

Furthermore, the records show that the crew of M/L Maya did not have the required qualifications provided for in P.D. No. 97 or the Philippine Merchant Marine Officers Law, all of whom were unlicensed. While it is true that they were given special permit to man the vessel, such permit was issued at the risk and responsibility of the owner.

Finally, petitioner claims that the factual findings of the Special Board of Marine Inquiry exonerating the owner/operator, crew officers of the ill-fated vessel M/L Maya from any administrative liability is binding on the court.

In rejecting petitioner's claim, respondent court was correct in ruling that "such exoneration was but with respect to the administrative liability of the owner/operator, officers and crew of the ill-fated" vessel. It could not have meant exoneration of appellee from liability as a common carrier for his failure to observe extraordinary diligence in the vigilance over the goods it was transporting and for the negligent acts or omissions of his employees. Such is the function of the Court, not the Special Board of Marine Inquiry."

Eastern Shipping Lines v. CA and First Nationwide Assurance Co.FACTS: On September 4, 1978, 13 coils of uncoated 7-wire stress relieved wire strand for prestressed concrete were shipped on board the vessel "Japri Venture," owned and operated by the defendant Eastern Shipping Lines, Inc., at Kobe, Japan, for delivery to Stresstek Post-Tensioning Phils., Inc. in Manila, and 6-Razon which were insured by the plaintiff First Nationwide Assurance Corporation for P171,923. The carrying vessel arrived in Manila and discharged the cargo to the custody of the defendant E. Razon, Inc. from whom the consignee's customs broker received it for delivery to the consignee's warehouse. Plaintiff indemnified the consignee in the amount of P171,923.00 for damage and loss to the insured cargo, whereupon the former was subrogated for the latter. The plaintiff now seeks to recover from the defendants what it has indemnified the consignee, less P48,293.70, the salvage value of the cargo, or the total amount of P123,629.30. It appears that while enroute from Kobe to Manila, the carrying vessel "encountered very rough seas and stormy weather" for three days, more or less, which caused it to roll and pound heavily, moving its master to execute a marine note of protest upon arrival at the port of Manila; that the coils wrapped in burlap cloth and cardboard paper were stored in the lower hold of the hatch of the vessel which was flooded with water about one foot deep; that the water entered the hatch when the vessel encountered heavy weather enroute to Manila; that upon request, a survey of bad order cargo was conducted at the pier in the presence of the representatives of the consignee and the defendant E. Razon, Inc. and it was found that seven coils were rusty on one side each; that upon survey conducted at the consignee's warehouse it was found that the "wetting (of the cargo) was caused by fresh water" that entered the hatch when the vessel encountered heavy weather enroute to Manila; and that all thirteen coils were extremely rusty and totally unsuitable for the intended purpose. The complaint that was filed by the First Nationwide Assurance Corporation (insurer) against Eastern Shipping Lines, Inc. and E. Razon, Inc., in the RTC was dismissed in a decision. An appeal therefrom was interposed by the insurer to the CA which ordered Eastern Shipping and E. Razon to pay the insurer as subrogee of the Stresstek.ISSUE: W/N defendants are liable to plaintiff insurer-subrogee? YES

RULING: The heavy seas and rains referred to in the master's report were notcaso fortuito, but normal occurrences that an ocean-going vessel, particularly in the month of September which, in our area, is a month of rains and heavy seas would encounter as a matter of routine. They are neither unforeseen nor unforeseeable. These are conditions that ocean-going vessels would encounter and provide for, in the ordinary course of a voyage. That rain water (not sea water) found its way into the holds of theJupri Ventureis a clear indication that care and foresight did not attend the closing of the ship's hatches so that rain water would not find its way into the cargo holds of the ship.

Moreover, under Article 1733 of the Civil Code, common carriers are bound to observe "extra-ordinary vigilance over goods according to all circumstances of each case.

Since the carrier has failed to establish anycaso fortuito, the presumption by law of fault or negligence on the part of the carrier applies; and the carrier must present evidence that it has observed the extraordinary diligence required by Article 1733 of the Civil Code in order to escape liability for damage or destruction to the goods that it had admittedly carried in this case. No such evidence exists of record. Thus, the carrier cannot escape liability.The Court agrees with and is bound by the foregoing findings of fact made by the appellate court. The presumption, therefore, that the cargo was in apparent good condition when it was delivered by the vessel to the arrastre operator by the clean tally sheets has been overturned and traversed. The evidence is clear to the effect that the damage to the cargo was suffered while aboard petitioner's vessel.

Delsan Transport Lines v. CA and American Home Assurance Corp.FACTS: Caltex Philippines entered into a contract of affreightment with the petitioner, Delsan Transport Lines, Inc., for a period of one year whereby the said common carrier agreed to transport Caltexs industrial fuel oil from the Batangas-Bataan Refinery to different parts of the country. Under the contract, petitioner took on board its vessel, MT Maysun 2,277.314 kiloliters of industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City. The shipment was insured with the private respondent, American Home Assurance Corporation. MT Maysum set sail from Batangas for Zamboanga City. Unfortunately, the vessel sank near Panay Gulf in the Visayas taking with it the entire cargo of fuel oil. AHAC paid Caltex the sum of P5,096,635.67 representing the insured value of the lost cargo. Exercising its right of subrogation under Article 2207 of the New Civil Code, the private respondent demanded of the petitioner the same amount it paid to Caltex. AHAC then filed a complaint with the RTC for collection of a sum of money. RTC rendered a decision dismissing the complaint against herein petitioner. RTC found that the vessel, MT Maysum, was seaworthy to undertake the voyage as determined by the Philippine Coast Guard per Survey Certificate Report upon inspection during its annual dry-docking and that the incident was caused by unexpected inclement weather condition orforce majeure, thus exempting the common carrier (herein petitioner) from liability for the loss of its cargo. CA reversed. It gave credence to the weather report issued by the PAGASA which showed that from 2:00 oclock to 8:oo oclock in the morning on August 16, 1986, the wind speed remained at 10 to 20 knots per hour while the waves measured from .7 to two (2) meters in height only in the vicinity of the Panay Gulf where the subject vessel sank, in contrast to herein petitioners allegation that the waves were twenty (20) feet high. In the absence of any explanation as to what may have caused the sinking of the vessel coupled with the finding that the same was improperly manned, the appellate court ruled that the petitioner is liable on its obligation as common carrierto herein private respondent insurance company as subrogee of Caltex. Petitioner Delsan Transport Lines, Inc. invokes the provision of Section 113 of the Insurance Code which states that in every marine insurance upon a ship or freight, or freightage, or upon any thing which is the subject of marine insurance there is an implied warranty by the shipper that the ship is seaworthy. Consequently, the insurer will not be liable to the assured for any loss under the policy in case the vessel would later on be found as not seaworthy at the inception of the insurance. It theorized that when private respondent paid Caltex the value of its lost cargo, the act of the private respondent is equivalent to a tacit recognition that the ill-fated vessel was seaworthy. It further avers that private respondent failed, for unknown reason, to present in evidence during the trial of the instant case the subject marine cargo insurance policy it entered into with Caltex. By virtue of the doctrine laid down in the case ofHome Insurance Corporation vs. CA,the failure of the private respondent to present the insurance policy in evidence is allegedly fatal to its claim inasmuch as there is no way to determine the rights of the parties thereto.

ISSUE/S: Whether or not the payment made by the private respondent to Caltex for the insured value of the lost cargo amounted to an admission that the vessel was seaworthy, thus precluding any action for recovery against the petitioner? NO Whether or not the non-presentation of the marine insurance policy bars the complaint for recovery of sum of money for lack of cause of action. NO

RULING:The payment made by the private respondent for the insured value of the lost cargo operates as waiver of its (private respondent) right to enforce the term of the implied warranty against Caltex under the marine insurance policy. However, the same cannot be validly interpreted as an automatic admission of the vessels seaworthiness by the private respondent as to foreclose recourse against the petitioner for any liability under its contractual obligation as a common carrier. The fact of payment grants the private respondent subrogatory right which enables it to exercise legal remedies that would otherwise be available to Caltex as owner of the lost cargo against the petitioner common carrier under Art. 2207 of the Civil Code.

Consequently, the payment made by the private respondent (insurer) to Caltex (assured) operates as an equitable assignment to the former of all the remedies which the latter may have against the petitioner.

From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of passengers transported by them, according to all the circumstance of each case.In the event of loss, destruction or deterioration of the insured goods, common carriers shall be responsible unless the same is brought about, among others, by flood, storm, earthquake, lightning or other natural disaster or calamity.In all other cases, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence.

Petitioner attributes the sinking of MT Maysun to fortuitous even orforce majeure. This tale of strong winds and big waves by the said officers of the petitioner however, was effectively rebutted and belied by the weather reportfrom the PAGASA which the Court believed to of greater merit. Therefore, petitioners vessel, MT Maysun, sank with its entire cargo for the reason that it was not seaworthy. There was no squall or bad weather or extremely poor sea condition in the vicinity when the said vessel sank.

Anent the second issue, the SC held that the presentation in evidence of the marine insurance policy is not indispensable in this case before the insurer may recover from the common carrier the insured value of the lost cargo in the exercise of its subrogatory right. The subrogation receipt, by itself, is sufficient to establish not only the relationship of herein private respondent as insurer and Caltex, as the assured shipper of the lost cargo of industrial fuel oil, but also the amount paid to settle the insurance claim. The right of subrogation accrues simply upon payment by the insurance company of the insurance claim.

Bankers and Manufacturers Assurance Corp v. CA, F.E. Zuellig & Co. Inc. and E. RazonFACTS: There were 108 cases of copper tubings that were imported by Ali Trading Company. The tubings were insured by petitioner and arrived in Manila on board and vessel S/S "Oriental Ambassador" and turned over the private respondent E. Razon, the Manila arrastre operator upon discharge at the waterfront. The carrying vessel is represented in the Philippines by its agent, the other private respondent, F. E. Zuellig and Co., Inc., Upon inspection by the importer, the shipment was allegedly found to have sustained losses by way of theft and pilferage for which petitioner, as insurer, compensated the importer in the amount of P31,014.00. Petitioner, in subrogation of the importer-consignee and on the basis of what it asserts had been already established that a portion of that shipment was lost through theft and pilferage forthwith concludes that the burden of proof of proving a case of non-liability shifted to private respondents, one of whom, the carrier, being obligated to exercise extraordinary diligence in the transport and care of the shipment. It must be underscored that the shipment involved in the case at bar was "containerized". The goods under this arrangement are stuffed, packed, and loaded by the shipper at a place of his choice, usually his own warehouse,in the absenceof the carrier. The container is sealed by the shipper and thereafter picked up by the carrier. A shipment under this arrangement is not inspected nor inventoried by the carrier whose duty is only to transport and deliver the containers in the same condition as when the carrier received and accepted the containers for transport. Upon arrival in Manila, the shipment was discharged in apparent good order and condition and from the pier's docking apron, the containers were shifted to the container yard of Pier 3 for safekeeping. Three weeks later, one of the container vans, said to contain 19 cases of the cargo, was "stripped" in the presence of petitioner's surveyors, and three cases were found to be in bad order. It should be stressed at this point, that the three cases found in bad order arenotthe cases for which the claim below was presented, for although the three cases appeared to be in bad order, the contents remained good and intact. The two other container vans were not moved from the container yard and they werenotstripped. On December 8, 1978, the cargo was released to the care of the consignee's authorized customs broker, the RGS Customs Brokerage. The broker, accepting the shipment without exception as to bad order, caused the delivery of the vans to the consignee's warehouse in Makati. It was at that place, when the contents of the two containers were removed and inspected, that petitioner's surveyors reported, that checked against the packing list, the shipment was short of seven cases. RTC then dismissed petitioners complaint for recovery of the amount it had paid its insured concerning the loss of a portion of a shipment. CA affirmed the dismissal

ISSUE: W/N the owner of the vessel should be held liable for the lost goods? NO

RULING: The CA correctly found that the subject container was not stripped of its content at the pier zone. The two unstripped containers (together with the 19 cases removed from the stripped third container) were delivered to, and received by, the customs broker for the consignee without any exception or notation of bad order of shortlanding. If there was any suspicion or indication of irregularity or theft or pilferage, plaintiff or consignee's representatives should have noted the same on the gate passes or insisted that some form of protest form part of the documents concerning the shipment. Yet, no such step was taken. The shipment appears to have been delivered to the customs broker in good order and condition and complete save for the three cases noted as being apparently in bad order.

Verily, if any of the vans found in bad condition, or if any inspection of the goods was to be done in order to determine the condition thereof, the same should have been done at the pierside, the pier warehouse, or at any time and place while the vans were under the care and custody of the carrier or of the arrastre operator. Unfortunately for petitioner, even as one of the three vans was inspected and stripped, the two other vans and the contents of the owner previously stripped were accepted without exception as to any supposed bad order or condition by petitioner's own broker. To all appearances, therefore, the shipment was accepted by petitioner in good order.

It logically follows that the case at bar presents no occasion for the necessity of discussing the diligence required of a carrier or of the theory ofprima facieliability of the carrier, for from all indications, the shipment did not suffer loss or damage while it was under the care of the carrier, or of the arrastre operator.

Sarkies Tours Phils v. CAFACTS: On August 31, 1984, Fatima boarded petitioner's De Luxe Bus No. 5 in Manila on her way to Legazpi City. Her brother Raul helped her load three pieces of luggage containing all of her optometry review books, materials and equipment, trial lenses, trial contact lenses, passport and visa, as well as her mother Marisol's U.S. immigration (green) card, among other important documents and personal belongings. Her belongings were kept in the baggage compartment of the bus, but during a stopover at Daet, it was discovered that only one bag remained in the open compartment. The others, including Fatima's things, were missing and might have dropped along the way. Some of the passengers suggested retracing the route of the bus to try to recover the lost items, but the driver ignored them and proceeded to Legazpi City. Fatima immediately reported the loss to her mother who, in turn, went to Sarkies Tours office in Legazpi City and later at its head office in Manila. Petitioner, however, merely offered her P1K (this was yr 1997) for each piece of luggage lost, which she turned down. After returning to Bicol, respondents asked assistance from the radio stations and even from Philtranco bus drivers who plied the same route on August 31st. The effort paid off when one of Fatima's bags was recovered. Marisol further reported the incident to the NBI field office in Legazpi City and to the local police. Eventually respondents, through counsel, formally demanded satisfaction of their complaint from petitioner. In a letter dated October 1, 1984, Sarkies Tours apologized for the delay and said that "a team has been sent out to Bicol for the purpose of recovering or at least getting the full detail"of the incident. After more than nine months of fruitless waiting, respondents decided to file the case below to recover the value of the remaining lost items, as well as moral and exemplary damages, attorney's fees and expenses of litigation. They claimed that the loss was due to petitioner's failure to observe extraordinary diligence in the care of Fatima's luggage and that petitioner dealt with them in bad faith from the start. Petition