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COMMON CARRIERS Transportation Law Case Digests

2-Manresa SY 2015-2016

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What is a Common Carrier?

First Philippine Industrial Corp. vs. CA

FACTS:

First Philippine Industrial Corporation 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 a pipeline operator with a government concession engaged in the business of transporting petroleum products from the Batangas refineries, via pipeline, to Sucat and JTF Pandacana Terminals.

The respondent City Treasurer denied the protest, thus, petitioner filed a complaint before the Regional Trial Court of Batangas for tax refund. In its complaint, petitioner alleged that the authority of cities to impose and collect a tax on the gross receipts of contractors and independent contractors under Sec. 141 (e) and 151 does not include the authority to collect such taxes on transportation contractors for, as defined under Sec. 131 (h), the term "contractors" excludes transportation contractors

Respondents assert that pipelines 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." Respondents assert that pipelines are not included in the term "common carrier" which refers solely to ordinary carriers such as trucks, trains, ships and the like.

ISSUE:

Whether or not a pipeline business is included in the term common carrier so as to entitle the petitioner to the tax exemption. Yes.

RULING:

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.

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.

In De Guzman vs. Court of Appeals the Supreme Court ruled that:

The above article (Art. 1732, Civil Code) makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a "sideline"). Article 1732 . . . 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. We think that Article 1877 deliberately refrained from making such distinctions.

Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local Government Code refers only to common carriers transporting goods and passengers through moving



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vehicles or vessels either by land, sea or water, is erroneous.

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.



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PEDRO DE GUZMAN vs. CA and ERNESTO CENDANA

FACTS: Cendana is a junk dealer from Pangasinan who brings such material to Manila for resale. On the return trip to Pangasinan, respondent would load his vehicles with cargo which various merchants deliver to Pangasinan. For that service Cendana charged freight rates commonly lower than the regular rates. In 1970, de Guzman a dealer of General Milk contracted Cendana to deliver 750 cartons of Liberty milk to Pangasinan. The controversy arose when 600 cartons never reached Pangasinan as the truck which carried these boxes was hijacked. De Guzman sued Cendana seeking to recover the value of the goods. It is the contention of de Guzman that as a common carrier Cendana failed to exercise extra-ordinary diligence in dealing with the goods. As a defense, Cendana alleged that he is not a common carrier for the reason that this is not his principal line of business, he only do this occasionally, and that he has no certificate of convenience. ISSUES: 1. Whether or not Cendana is a common carrier. 2. Whether or not a Certificate of Convenience is a prerequisite before one can become a common carrier. 3. Whether or not Cendana should be held liable. RULING: 1. Yes. Cendana is a common carrier. Article 1732 defines common carriers as persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public. The article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and who does such carrying only as an ancillary activity or as sideline. Article 1732 carefully avoids making distinctions between a person and/or enterprise offering transportation 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, one who offers services or solicit business only from a narrow segment of the general population. Common carrier may coincide neatly with the notion of public service under the Public Service Act which at least supplements the law on common carriers set forth in the Civil Code. Public service includes, xxx

any 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 xxx 2. No. 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 a firm acts as common carrier, without regard whether or not such carrier has also complied with the requirements of applicable regulatory statute and implementing regulations and has been granted a certificate of public convenience or other franchise. The law imposes duties and liabilities upon common carriers for the safety and protection of those who utilize their services and the law cannot allow a common carrier to render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and authorizations. 3. No. The Supreme Court held that Cendana should not be held liable under the circumstances. The hijacking of the carriers truck does not fall within any of the five (5) categories enumerated in Article 1734 and that list is exclusive. Therefore, there is a presumption as provided under Article 1735, in other words, the private respondent as common carrier is presumed to have been at fault or have acted negligently. This presumption, however, may be overthrown by proof of extraordinary diligence on the part of Cendana. Article 1745 (6) provides that a common carrier is held responsible and will not be allowed to divest or to diminish such responsibility even for acts of strangers like thieves or robbers, except where such thieves or robbers in fact acted with grave or irresistible threat, violence or force. The Court believes and so hold that should there be grave and irresistible threat, violence or force the limits of extraordinary diligence would be reached. In this case ARMED robbers held up the truck of Cendana and in fact these men were apprehended and were tried before the CFI and were convicted for robbery. In these circumstances, the SC 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. Therefore, Cendana is not liable for the value of the undelivered merchandise which was lost because of an event entirely beyond his control.



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ESTRELLITA M. BASCOS, petitioners, vs. COURT OF APPEALS and RODOLFO A.

CIPRIANO, respondents.

FACTS: Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered into a hauling contract with Jibfair Shipping Agency Corporation whereby the former 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 to transport and to deliver 400 sacks of soya bean meal worth P156,404.00 from the Manila Port Area to Calamba, Laguna at the rate of P50.00 per metric ton. Petitioner 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 held the former ...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 petitioner 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.

Petitioner contends that there was no contract of carriage but a contract of lease since CIPTRADE leased her cargo truck to load the cargo from Manila Port Area to Laguna and that they offer their services only to a select group of people and do not cater to the general public; that CIPTRADE was liable to petitioner in the amount of P11,000.00 for loading the cargo; that the truck carrying the cargo was hijacked along Canonigo St., Paco, Manila on the night of October 21, 1988; that the hijacking was immediately reported to CIPTRADE and that petitioner and the police exerted all efforts to locate the hijacked properties; that after preliminary investigation, an information for robbery and carnapping were filed against Jose Opriano, et al.; and that hijacking, being a force majeure, exculpated petitioner from any liability to CIPTRADE.

RTC rendered a decision in favor of Cipriano and ordered Bascos to pay damages to the former. CA affirmed the said decision.

ISSUES: (1) was petitioner a common carrier?; and (2) was the hijacking referred to a force majeure?

(1) YES. 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 under the name A.M. Bascos Trucking offering her trucks to those with cargo to move. Both courts appreciated the following pieces of evidence as indicators that petitioner was a common carrier: the fact that the truck driver of petitioner, Maximo Sanglay, received the cargo consisting of 400 bags of soya bean meal as evidenced by a cargo receipt signed by Maximo Sanglay; the fact that the truck helper, Juanito Morden, was also an employee of petitioner; and the fact that control of the cargo was placed in petitioner's care.

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 (in local idiom, as a "sideline"). 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.

(2) NO. 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. Such presumption does not attach in instances enumerated in Article 1734. In those cases where the presumption is applied, the



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common carrier must prove that it exercised extraordinary diligence in order to overcome the presumption.

In De Guzman vs. CA, SC held that hijacking, not being included in Article 1734, must be dealt with under Article 1735 and thus, the common carrier is presumed to have been at fault or negligent. 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 which is in accordance with Article 1745 of the Civil Code. Affidavits of petitioner, Jesus Bascos, and Juanito Morden's "Salaysay" were presented before the court. However, petitioner's affidavit about the hijacking was based on what had been told her by Juanito Morden and thus, was not a first-hand account. Secondly, the affidavit of Jesus Bascos did not dwell on how the hijacking took place. Thirdly, 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. These affidavits were not enough to overcome the presumption. 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.



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VIRGINES CALVO doing business under the name and style TRANSORIENT CONTAINER TERMINAL SERVICES, INC. v. UCPB GENERAL INSURANCE

CO., INC.

March 19, 2002

FACTS:

Petitioner 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 SMCs warehouse at the Tabacalera Compound, Ermita, Manila.

The cargo was insured by respondent UCPB General Insurance Co., Inc.

The shipment in question, contained in 30 metal vans, arrived in Manila on board M/V Hayakawa Maru and were unloaded from the vessel to the custody of the arrastre operator, Manila Port Services, Inc.

Calvo, pursuant to her contract with SMC, withdrew the cargo from the arrastre operator and delivered it to SMCs warehouse in Ermita, Manila.

Upon delivery, 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 at P93,112.00.

SMC collected payment from respondent UCPB under its insurance contract for the aforementioned amount. In turn, UCPB as subrogee of SMC, brought suit against Calvo before RTC. It rendered judgment finding Calvo liable to UCPB for the damage to the shipment.

RTC [as affirmed by CA] opined that damages sustained by shipment are attributable to improper handling whilst in the custody of the broker. It ruled that Calvo is a customs broker, warehouseman and at the same time a common carrier who is supposed to exercise the extraordinary diligence required by law. Having failed to exercise such diligence, she must be held liable.

Petitioner contends that contrary to the findings of RTC and 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:

WON Calvo is a common carrier

RULING:

Yes. Calvo is a common carrier.

The Civil Code defines common carriers in the following terms:

Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public.

The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity. . . Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis.

Neither does Article 1732 distinguish between a carrier offering its services to the general public, i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1732 deliberately refrained from making such distinctions.

The concept of common carrier under Article 1732 also coincides with the notion of public service, under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth in the Civil Code.

Under Section 13, paragraph (b) of the Public Service Act, public service includes:

x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of any class, express serviceand other similar public services. x x x

There is greater reason for holding petitioner Calvo to be a common carrier because the transportation of goods is an integral part of her business. To uphold Calvos contention would be to deprive those with whom she contracts the protection which the law affords them notwithstanding the fact that the obligation to



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carry goods for her customers, as already noted, is part and parcel of petitioners business.

ON CALVOS LIABILITY AS COMMON CARRIER

Now, being classified as common carrier, Calvos liability in 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. . . .

Meaning of Extraordinary Diligence:

As defined in Compania Maritima v. Court of Appeals,

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

Calvo in this case did not exercise extraordinary diligence. Despite her insistence that the cargo could not have been damaged while in her custody, 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.

Contrary to Calvos assertion, when petitioners 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. Surely, if the container vans were deformed, cracked, distorted or dented, Calvo would have reported it immediately to the consignee but she did not.

We 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.

On Calvos contention that she is still exempted from liability even assuming arguendo that she is a common carrier:

Petitioner contends that she must be exempted from liability under Art. 1734(4), which provides:

Common carriers are responsible for the loss, destruction, or deterioration of the goods, UNLESS the same is due to any of the following causes only:

. . . .

(4) The character of the goods or defects in the packing or in the containers. xxx

But Calvo is STILL NOT EXEMPTED FROM LIABILITY. For this provision to apply, 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.

In 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 holds.



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PLANTERS v. CA

Planters Products Inc (PPI) versus Court of Appeals (CA), Soriamont Steamship Agencies (SSA) and Kyosei Kisen Kabushiki Kaisha (KKKK)

FACTS:

Planters Products Inc (PPI) purchased from Mitsubishi 9, 329.7069 metric tons (MT) of urea 46% fertilizer to be shipped in bulk by cargo vessel M/V Sun Plum owned by KKKK from Alaska, USA to La Union, Philippines. Prior to its voyage, a time charter party on MV Sun Plum was executed between Mitsubishi as shipper/charterer and KKKK as shipowner. The ship was inspected and found fit to take a load of urea in bulk. The urea was loaded in bulk under the supervision of Mitsubishi and the cargo vessel went on voyage. Upon its arrival in La Union, PPI unloaded the cargo to dump trucks and transported them to a warehouse 50 meters away from the wharf. 11 days after, the unloading finished. PPI found out that there was shortage of about 94-106 MT of urea and about 18-23 MT were contaminated with dirt thus unfit for commerce.

PPI then sent a claim letter to SSA, KKKKs resident agent amounting to P245,969.31 representing the cost of the shortage and contaminated urea. SSA denied the claim because they had nothing to do with the discharge of shipment. PPI thus filed an action for damages with CFI Manila. KKKK defended that the strict public policy governing common carriers does not apply to them because they become private carriers by reason of the charter-party. CFI ruled in favor of PPI. Upon appeal in CA, the appellate court absolved KKKK from liability and ruled that it was a private carrier thus there was no presumption of negligence. Hence, this appeal via petition for review.

ISSUES:

(1) WON a common carrier becomes a private carrier by reason of a charter party. NO

(2) WON KKKK is liable for damages. NO

RULING:

(1) Article 1732 of NCC defines common carriers as persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation offering their services to the public.

The distinction between a "common or public carrier" and a "private or special carrier" lies in the character of the business, such that if the undertaking is a single transaction, not a part of the general business or occupation, although involving the carriage of goods for

a fee, the person or corporation offering such service is a private carrier.

It is undisputed that KKKK is a common carrier, transporting goods indiscriminately to all persons in its ordinary course of business. What happens in a charter party is that an entire ship or some principal part thereof is let by the owner to another person for a specified time or use. There are 2 types, (a) contract of affreightment which involves the use of shipping space on vessels leased by the owner in part or as a whole, to carry goods for others; and, (b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer to him of its entire command and possession and consequent control over its navigation, including the master and the crew, who are his servants. Contract of affreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage.

In this case, the charter party executed on MV Sun Plum is a time charter party wherein KKKK lets the use of the ship to PPI but the ship captain and the crew remained to be under the direct supervision and control of KKKK. Thus, a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter party is concerned. Indubitably, a shipowner in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer.

(2) Article 1733 of NCC mandates that common carriers, by reason of the nature of their business, should observe extraordinary diligence in the vigilance over the goods they carry. In the case of private carriers, however, the exercise of ordinary diligence in the carriage of goods will suffice. Moreover, in the case of loss, destruction or deterioration of the goods, common carriers are presumed to have been at fault or to have acted negligently, and the burden of proving otherwise rests on them. On the contrary, no such presumption applies to private carriers, for whosoever alleges damage to or deterioration of the goods carried has the onus of proving that the cause was the negligence of the carrier.

While it may be true that KKKK remains to be a common carrier despite the time charter party, it is still not liable for damages because it has successfully overcome the presumption of negligence. The carrier proved that it has exercised extraordinary zeal and diligence in the care of the cargo. The vessel was in good condition and



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all the seals intact making it impossible for any contamination during the voyage. Also, shipment of highly soluble fertilizer such as urea in bulk carries with it the risk of loss or damage. The weather was variable during the unloading and the packaging of urea was insufficient which all contributed to the loss. PPI has not adduced evidence of negligence on the part of KKKK thus it cannot claim for damages for the loss it suffered.



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PHILAMGEN v. PKS SHIPPING COMPANY

FACTS:

Davao Union Marketing Corporation (DUMC) contracted the services of PKS Shipping Company (PKS Shipping) for the shipment of 75,000 bags of cement worth Php3, 375, 000.00 to Tacloban City. DUMC insured the goods for its full value with Philippine American General Insurance Company (Philamgen).

The goods were loaded aboard dumb barge Limar I which belonged to PKS Shipping. On the evening of December 22, 1988, while Limar I was being towed by MT Iron Eagle (PKS tugboat), the barge sank a couple of miles off the coast of Dumagas Point, in Zamboanga del Sur, bringing down with it the entire cargo of cement.

DUMC filed a formal claim with Philamgen for the full amount of the insurance. Philamgen promptly made payment. However, PKS Shipping refused to reimburse Philamgen which prompted the latter to file suit against the former before the Makati RTC.

PKS Shipping contends it is not a common carrier and therefore not liable for the loss of the cement due to a fortuitous event (Typhoon APIANG).

ISSUES:

1. Whether PKS Shipping is a common carrier or private carrier.

2. In either case, WON it has observed the proper diligence (ordinary-private, extraordinary-common) required in the circumstances to be exempt from liability.

RULING:

1. PKS Shipping is a Common Carrier (CC). Article 1732 of the Civil Code: CCs 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. Complementary to the codal definition is Section 13, paragraph (b), of the Public Service Act: public service is 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 CC, x x x

In applying Article 1732, in conjunction with Sec.13 (b) of the Public Service Act, the Court ruled in the leading case of De Guzman vs. CA that there is 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 (sideline);

- 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; and

- a carrier offering its services to the general public and one who offers services or solicits business only from the narrow segment of the general population.

Much of the distinction between a CC and a private carrier lies in the character of the business. If it undertakes an isolated transaction (not part of the business), and the carrier does not hold itself out to carry goods for the general public or to a limited clientele, although involving the carriage of goods for a fee, the carrier could very well be a private one.

PKS Shipping has engaged itself in the business of carrying goods for others, although for a limited clientele, undertaking to carry such goods for a fee. The regularity of its activities in this area indicates more than just casual activity on its part. Even if individual contracts are entered into, the concept of a CC would not change, otherwise, it will be easy for one to evade liability by simply entering into those distinct agreements with clients.

2. YES, PKS observed extraordinary diligence, hence, not liable for the loss. Article 1733 of the Civil Code requires CC to observe extraordinary diligence in the vigilance over the goods they carry. In case of loss, destruction or deterioration of goods, CC are presumed to have been at fault or to have acted negligently, and the burden of proving otherwise rests on them. However, CC are exempt from liability for the loss, destruction, etc. due to Flood, storm, earthquake, lightning, or natural disaster or calamity; act of the public enemy in war, whether intl or civil; act or omission of the shipper or owner of the goods; the character of the goods or defects in the packing or in the containers; and order or act of competent public authority.

The Court upheld the finding of the CA that based on the testimonies and sworn marine protests of the respective vessel masters of Limar I and MT Iron Eagle that there was no way by which the crew of both the barge and tugboat could have prevented the sinking of Limar I. The vessel was suddenly tossed by 6-8 foot tall waves (extraordinary height) buffeted by strong winds which resulted to the entry of water into the barges hatches. The official certificate of inspection done by the Philippine Coastguard and the Coastwise Load Line certificate would attest to the seaworthiness of Limar I.



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ASIA LIGHTERAGE vs. CA (August 19, 2003)

FACTS: In 1990, Marubeni American Corporation of Portland Oregon shipped 3,150 metric tons of Better Western White Wheat valued at over USD400, 000 on board a marine vessel. The shipment was bound for General Milling Corporation in Manila and was insured by Prudential Guarantee and Assurance, Inc. against loss or damage for Php14, 621,771.75. Upon arrival of the vessel in Manila, the cargo was transferred to the custody of Asia Lighterage and Shipping, Inc., whose services were engaged by General Milling Corporation to deliver said cargo to the latters warehouse in Pasig City. En route to Pasig, the barge on which the cargo was loaded received several warnings of an incoming typhoon and thus it sought shelter in an ship engineering facility where it sustained damaged caused by an unseen protuberance and partially sank. Subsequently, the hole on the barge was patched with clay and cement. It was refloated and continued on its voyage to Pasig City. During transit, the barge ran aground due to strong currents. To avoid complete sinking of the barge, portions of the cargo were loaded to three other barges. The next day, the barge sank completely together with its cargo. Prudential Guarantee and Assurance, paid General Milling Corp., the amount insured and thereafter, as subrogee, it pursued Asia Lighterage for the same amount. Asia Lighterage contends that it is not a common carrier for the following reasons:

a) It has no fixed and publicly known route; b) It maintains no terminals; c) It issues no tickets; d) It is obliged to carry indiscriminately for any

person; and e) It does not hold out its services to the general

public ISSUES: Whether or not Asia Lighterage and Shipping, Inc., is a common carrier. YES. Whether or not Asia Lighterage and Shipping, Inc., exercised extra-ordinary diligence. NO RULING: Yes, Asia Lighterage and Shipping, Inc., was adjudged by the Supreme Court as a common carrier. Article 1732 provides for the definition of common carrier. It may be noted that the above-provision does not make distinction between one whose principal business is

carrying of persons or goods or both, and one carrying only as an ancillary activity (in support of an industry). Furthermore, it does not distinguish between a carrier offering its services to the general public and one who offers services only to a narrow segment of the general public; as in the instant case. In the case of Bascos vs. Court of Appeals, the SC laid down the test to determine a common carrier and that iswhether 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 the instant case, Asia Lighterage admitted that it is in the business of shipping and lighterage and it offers such services to a limited group of clients. As regards to the second issue, Asia Lighterage failed to exercise extra-ordinary diligence as expected from common carriers. Common carriers are presumed to have been at fault or to have acted negligently if the goods are lost or destroyed. Article 1734 of the Civil Code, however, provides for exceptions wherein the presumption of negligence does not attach. To hurdle this presumption, the carrier must prove that it exercised extraordinary diligence which Asia Lighterage miserably failed to do. The facts of the case and testimonial evidence of the crew reveal that the proximate cause of the sinking was not the storm itself but several occurrences. The first was that the barge already partially submerged and the damaged portion thereof was sealed merely by clay and cement- this is only a temporary fix; insufficient to assure the safety of the barge in voyage. Thus, the crews persistence to carry-on with the voyage despite the damage sustained by the vessel and several warnings of incoming typhoons is contrary to the exercise of extraordinary diligence. Asia Lighterage, therefore, cannot escape liability by invoking force majeure.



12

LOADMASTERS CUSTOMS SERVICES, INC., vs. GLODEL BROKERAGE CORPORATION and R&B

INSURANCE CORPORATION,

G.R. No. 179446, January 10, 2011

FACTS:

The case is a petition for review on certiorari under Rule 45 of the Revised Rules of Court assailing the August 24, 2007 Decision of the Court of Appeals (CA) in CA-G.R. CV No. 82822.

On August 28, 2001, R&B Insurance issued Marine Policy No. MN-00105/2001 in favor of Columbia to insure the shipment of 132 bundles of electric copper cathodes against All Risks. On August 28, 2001, the cargoes were shipped on board the vessel "Richard Rey" from Isabela, Leyte, to Pier 10, North Harbor, Manila. They arrived on the same date.

Columbia engaged the services of Glodel for the release and withdrawal of the cargoes from the pier and the subsequent delivery to its warehouses/plants. Glodel, in turn, engaged the services of Loadmasters for the use of its delivery trucks to transport the cargoes to Columbias warehouses/plants in Bulacan and Valenzuela City.

The goods were loaded on board twelve (12) trucks owned by Loadmasters, driven by its employed drivers and accompanied by its employed truck helpers. Of the six (6) trucks route to Balagtas, Bulacan, only five (5) reached the destination. One (1) truck, loaded with 11 bundles or 232 pieces of copper cathodes, failed to deliver its cargo.

Later on, the said truck, was recovered but without the copper cathodes. Because of this incident, Columbia filed with R&B Insurance a claim for insurance indemnity in the amount ofP1,903,335.39. After the investigation, R&B Insurance paid Columbia the amount ofP1,896,789.62 as insurance indemnity.

R&B Insurance, thereafter, filed a complaint for damages against both Loadmasters and Glodel before the Regional Trial Court, Branch 14, Manila (RTC), It sought reimbursement of the amount it had paid to Columbia for the loss of the subject cargo. It claimed that it had been subrogated "to the right of the consignee to recover from the party/parties who may be held legally liable for the loss."

On November 19, 2003, the RTC rendered a decision holding Glodel liable for damages for the loss of the subject cargo and dismissing Loadmasters counterclaim for damages and attorneys fees against R&B Insurance.

Both R&B Insurance and Glodel appealed the RTC decision to the CA.

On August 24, 2007, the CA rendered that the appellee is an agent of appellant Glodel, whatever liability the latter owes to appellant R&B Insurance Corporation as insurance indemnity must likewise be the amount it shall be paid by appellee Loadmasters. Hence, Loadmasters filed the present petition for review on certiorari.

ISSUE:

Whether or not Loadmasters and Glodel are common carriers to determine their liability for the loss of the subject cargo.

RULING:

The petition is PARTIALLY GRANTED. Judgment is rendered declaring petitioner Loadmasters Customs Services, Inc. and respondent Glodel Brokerage Corporation jointly and severally liable to respondent

Under Article 1732 of the Civil Code, common carriers are persons, corporations, firms, or associations engaged in the business of carrying or transporting passenger or goods, or both by land, water or air for compensation, offering their services to the public. Loadmasters is a common carrier because it is engaged in the business of transporting goods by land, through its trucking service. It is a common carrier as distinguished from a private carrier wherein the carriage is generally undertaken by special agreement and it does not hold itself out to carry goods for the general public. Glodel is also considered a common carrier within the context of Article 1732. For as stated and well provided in the case of Schmitz Transport & Brokerage Corporation v. Transport Venture, Inc., a customs broker is also regarded as a common carrier, the transportation of goods being an integral part of its business.

Loadmasters and Glodel, being both common carriers, are mandated from the nature of their business and for reasons of public policy, to observe the extraordinary diligence in the vigilance over the goods transported by them according to all the circumstances of such case, as required by Article 1733 of the Civil Code. When the Court speaks of extraordinary diligence, it is that extreme measure of care and caution which persons of unusual prudence and circumspection observe for securing and preserving their own property or rights. With respect to the time frame of this extraordinary responsibility, the Civil Code provides that the exercise of extraordinary diligence 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



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to the consignee, or to the person who has a right to receive them.

The Court is of the view that both Loadmasters and Glodel are jointly and severally liable to R & B Insurance for the loss of the subject cargo. Loadmasters claim that it was never privy to the contract entered into by Glodel with the consignee Columbia or R&B Insurance as subrogee, is not a valid defense.

For under ART. 2180. The obligation imposed by Article 2176 is demandable not only for ones own acts or omissions, but also for those of persons for whom one is responsible.

x x x x

Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry.

It is not disputed that the subject cargo was lost while in the custody of Loadmasters whose employees (truck driver and helper) were instrumental in the hijacking or robbery of the shipment. As employer, Loadmasters should be made answerable for the damages caused by its employees who acted within the scope of their assigned task of delivering the goods safely to the warehouse.

Glodel is also liable because of its failure to exercise extraordinary diligence. It failed to ensure that Loadmasters would fully comply with the undertaking to safely transport the subject cargo to the designated destination. Glodel should, therefore, be held liable with Loadmasters. Its defense of force majeure is unavailing.

For the consequence, Glodel has no one to blame but itself. The Court cannot come to its aid on equitable grounds. "Equity, which has been aptly described as a justice outside legality, is applied only in the absence of, and never against, statutory law or judicial rules of procedure." The Court cannot be a lawyer and take the cudgels for a party who has been at fault or negligent.



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PERENA v. ZARATE

Private school bus (carpool) is a common carrier in the eyes of the law. They Must observe extraordinary diligence.

FACTS:

The PERENAS were engaged in the business of transporting students from their respective residences in Paraaque City to Don Bosco in Pasong Tamo, Makati City, and back. (private school trasnport .. murag car pool)

They hired ALFARO as driver of the van. The ZARATES contracted the PERENAS to transport the latters son to and from school.

While on their way to school on Aug 12, 1996, ALFARO decided to make a shortcut using the railroad crossing of the Philippine National Railway due to heavy traffic and their were running late.

ALFARO saw that the barandilla (the pole used to block vehicles crossing the railway) was up which means it was okay to cross. He also tried to overtake a bus that is why he did not see the incoming train. He also did not hear the honks of the train kay kusog daw ang music sa van.

The bus was able to cross unscathed but the vans rear end was hit. During the collision, Aaron, was thrown off the van. His body hit the railroad tracks and his head was severed.

ZARATES sued PNR (PH NATL RAILROAD), PERENAS and ALFARO (at large) and filed a complaint for breach of contract of common carriage.

DEFENSE OF PERENAS:

1. Being private carriers, they were not negligent in selecting Alfaro as their driver as they made sure that:

ALFARO has a drivers license

he was not involved in any accident prior to his being hired

2. In short, they observed the diligence of a good father in selecting their employee.

DEFENSE of PNR:

1. Alfaro was reckless for crossing, who did not first stop, look and listen for the incoming train.

2. That the narrow path traversed by the van had not been intended to be a railroad crossing for motorists.

ISSUE:

WON the PERENAS fall under the definition of a COMMON CARRIER which would require the XO DILIGENCE of a GOOD FATHER.

RULING:

YES. Despite catering to a limited clientle, the Pereas operated as a common carrier because they held themselves out as a ready transportation indiscriminately to the students of a particular school living within or near where they operated the service and for a fee.

1. A carrier is a person or corporation who undertakes to transport or convey goods or persons from one place to another, gratuitously or for hire. It can be private/special or public/common.

2. A private carrier is one who, without making the activity a vocation, or without holding himself or itself out to the public as ready to act for all who may desire his or its services, undertakes, by special agreement in a particular instance only, to transport goods or persons from one place to another either gratuitously or for hire.

governed by ordinary contracts in Civil Code

diligence required = ordinary diligence of a good father

3. In contrast, a common carrier is a 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 such services to the public.

governed by provisions on common carriers in CIVIL CODE

diligence = extraordinary diligence, and is presumed to be at fault or to have acted negligently in case of the loss of the effects of passengers, or the death or injuries to passengers.

4. TRUE TEST to know if COMMON CARRIER = not the quantity or extent of the business actually transacted, or the number and character of the conveyances used in the activity, but whether the undertaking is a part of the activity engaged in by the carrier that he has held out to the general public as his business or occupation.

5. If not advertised, tapos single transaction lang = private



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If advertised/held out to the public = public

6. Applying these considerations to the case before us, there is no question that the Pereas as the operators of a school bus service were:

a. engaged in transporting passengers generally as a business, not just as a casual occupation;

b. undertaking to carry passengers over established roads by the method by which the business was conducted; and

c. transporting students for a fee.

7. Despite catering to a limited clientle, the Peras operated as a common carrier because they held themselves out as a ready transportation indiscriminately to the students of a particular school living within or near where they operated the service and for a fee.

Nota bene:

Proof of negligence:

a. PNR did not permit motorists going into the Makati area to cross the railroad tracks, but ALFARO did. Though it was used by some motorists as a shortcut, it did not excuse ALFARO.

b. He knows that it was risky yet he pursued.

c. Loudness of music in the van reduced his ability to hear the warning horns made by the train.

d. His act of overtaking caused him not to see the incoming train from the opposite side of the bus and lead to his miscalculations of getting clear from the train.

e. Lastly, he did not slow down nor go to a full stop before traversing the railroad tracks despite knowing that his slackening of speed and going to a full stop were in obs.



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Degree of Care Required of A Common Carrier

CANGCO v. MANILA RAILROAD FACTS: On January 20, 1915 at around 7-8pm, Jose Cangco was riding the train of Manila Railroad Company where he was an employed as a clerk. As the train drew near to his destination, he arose from his seat. When Cangco was about to alight from the train, Cangco accidentally stepped on a sack of watermelons which he failed to notice because it was already dim when it happened. As a result, he slipped and fell violently on the platform. His right arm was badly crushed and lacerated which was eventually amputated. The operation was unsatisfactory so he had second operation at another hospital and was again amputated higher up near the shoulder expending a total of P790.25 On August 1915, Cangco sued Manila Railroad Company (recovery of damages) on the ground of negligence of its employees placing the sacks of melons upon the platform. The sacks were placed so as to jeopardize the safety of passengers. The MRRs defense was that granting that its employees were negligent in placing an obstruction upon the platform, the direct and proximate cause of the injury suffered by plaintiff was his own contributing negligence. CFI: favored Manila Railroad Co. Cangco had failed to use due caution in alighting from the coach and was therefore precluded from recovering damages. ISSUE: WON MRR should be held liable. RULING: YES, CFI is reversed, and MRR is ordered to pay Cangco the sum of P3,290.25. SC said that the PRIMARY RESPONSIBILITY of MRR should be examined separately from the CONTRIBUTORY NEGLIGENCE of Cangco. On the one hand, there is the contract of carriage on the part of MRR to bring Cangco safely to his destination. There is the presumption of responsibility on the part of MRR to make sure that in order to bring Cangco and other passengers safely to their destination, MRR should have exercised the proper discretion in selecting and directing its employees and workers. MRR is deemed negligent if is proven that they failed in their discretion in selecting and directing its employees. It cannot be doubted that the employees of the railroad company were guilty of negligence. It necessarily follows that the defendant company is liable for the

damage thereby occasioned unless recovery is barred by the plaintiff's own contributory negligence. As ruled by the Court, Article 1903 of the Civil Code is not applicable to obligations arising ex contractu, but only to extra-contractual obligations or to use the technical form of expression, that article relates only to culpa aquiliana and not to culpa contractual Article 1903 of the Civil Code is not applicable to acts of negligence which constitute the breach of a contract two things are apparent:

(1) That when an injury is caused by the negligence of a servant or employee there instantly arises a presumption of law that there was negligence on the part of the master or employer either in selection of the servant or employee, or in supervision over him after the selection, or both; and (2) that that presumption is juris tantum and not juris et de jure, and consequently, may be rebutted. It follows necessarily that if the employer shows to the satisfaction of the court that in selection and supervision he has exercised the care and diligence of a good father of a family, the presumption is overcome and he is relieved from liability.

On the other hand, In determining the question of contributory negligence in performing such act that is to say, whether the passenger acted prudently or recklessly the age, sex, and physical condition of the passenger are circumstances necessarily affecting the safety of the passenger, and should be considered. The place was perfectly familiar to the plaintiff as it was his daily custom to get on and off the train at the station. There could, therefore, be no uncertainty in his mind with regard either to the length of the step which he was required to take or the character of the platform where he was alighting. The Supreme Courts conclusion was that the conduct of the plaintiff in undertaking to alight while the train was yet slightly under way was not characterized by imprudence and that therefore he was not guilty of contributory negligence.



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PHILIPPINE AIRLINES, INC., v. COURT OF APPEALS and PEDRO ZAPATOS

FACTS:

On August 2, 1976, Pedro Zapatos was among the 21 passengers of PAL Flight 477 that took off from Cebu bound for Ozamiz City. The routing of this flight was Cebu-Ozamiz-Cotabato. While on flight and just about 15 minutes before landing at Ozamiz City, the pilot received a radio message that the airport was closed due to heavy rains and inclement weather and that he should proceed to Cotabato City instead.

Upon arrival at Cotabato City, the PAL Station Agent informed the passengers of the following options:

1) to return to Cebu on flight 560 of the same day and thence to Ozamiz City on 4 August 1975, or 2) take the next flight to Cebu the following day, or 3) remain at Cotabato and take the next available flight to Ozamiz City on 5 August 1975.

Zapatos chose to return to Cebu but was not accommodated because only 6 seats were available and he checked-in as passenger No. 9 on Flight 477. He insisted on being given priority over the confirmed passengers in the accommodation, but the Station Agent refused Zapatos demand.

Private respondent tried to stop the departure of Flight 560 as his personal belongings were still on board. His plea fell on deaf ears. PAL then issued to him a free ticket to Iligan city, which the latter received under protest. Private respondent was left at the airport and could not even hitch a ride in the car loaded with PAL personnel. PAL neither provided private respondent with transportation from the airport to the city proper nor food and accommodation for his stay in Cotabato City. Subsequently, Zapatos went to Iligan City; his personal belongings were no longer recovered.

Zapatos filed a complaint for damages for breach of contract of carriage against Philippine Airlines, Inc. (PAL), before the Regional Trial Court, of Misamis Occidental, at Ozamiz City.

PAL filed its answer denying that it unjustifiably refused to accommodate private respondent. It alleged that there was simply no more seat for private respondent on Flight 560 since there were only six (6) seats available and the priority of accommodation on Flight 560 was based on the check-in sequence in Cebu; that the first six (6) priority passengers on Flight 477 chose to take Flight 560.

Regional Trial Court ruled in favor of Zapatos and awarded damages in his favor.

PAL argues that the award for damages is unfounded, asserting that it should not be charged with the task of looking after the passengers' comfort and convenience because the diversion of the flight was due to a fortuitous event, and that if made liable, an added burden is given to PAL which is over and beyond its duties under the contract of carriage. It submits that granting arguendo that negligence exists, PAL cannot be liable in damages in the absence of fraud or bad faith.

ISSUE:

WON PAL is liable for damages for its breach of contract of carriage

RULING:

YES. The position taken by PAL in this case clearly illustrates its failure to grasp the exacting standard required by law. Undisputably, PAL's diversion of its flight due to inclement weather was a fortuitous event. Nonetheless, such occurrence did not terminate PAL's contract with its passengers. Being in the business of air carriage and the sole one to operate in the country, PAL is deemed equipped to deal with situations as in the case at bar. What we said in one case once again must be stressed, i.e., the relation of carrier and passenger continues until the latter has been landed at the port of destination and has left the carrier's premises. Hence, PAL necessarily would still have to exercise extraordinary diligence in safeguarding the comfort, convenience and safety of its stranded passengers until they have reached their final destination. On this score, PAL grossly failed considering the then ongoing battle between government forces and Muslim rebels in Cotabato City and the fact that the private respondent was a stranger to the place.

The contract of air carriage is a peculiar one. Being imbued with public interest, the law requires common carriers to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. In Air France v. Carrascoso, we held that

A contract to transport passengers is quite different in kind and degree from any other contractual relation. And this, because of the relation which an air carrier sustains with the public. Its business is mainly with the travelling public. It invites people to avail of the comforts and advantages it offers. The contract of air carriage, therefore, generates a relation attended with a public duty.



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REPUBLIC VS LORENZO SHIPPING CORP.

FACTS: The government entered into a contract of carriage of goods with the National Trucking and Forwarding Corporation (NTFC). The NTFC shipped 4,868 bags of non-fat dried milk through the Lorenzo Shipping Corporation (LSC). The consignee named in the bills of lading issued by the LSC was Abdurahman Jama, the NTFCs branch supervisor in Zamboanga City. Upon reaching the port of Zamboanga City, LSCs agent, Efren Ruste Shipping Agency, unloaded the bags and delivered the goods to the NTFCs warehouse. Before each delivery, both delivery checkers of the agency requested Jama to surrender the original bills of lading but Jama merely presented the certified true copies thereof. Hence, they made Jama sign the delivery receipts and at times he wasnt around, he instructed his subordinates to sign the delivery receipts for him. The NTFC alleged that they did not receive the subject goods. Thus, it filed a formal claim for non-delivery of the goods shipped thru respondent. It also conducted an investigation but before it was over, Jama resigned as the branch supervisor of NTFC. The government then filed an action for breach of contract of carriage against LSC. ISSUE: W/N LSC is guilty for breach of contract of carriage RULING: NO. Article 1733 of the CC demands that a common carrier observe extra-ordinary diligence over the goods transported by it. Extraordinary diligence is that extreme measure of care and caution which persons of unusual prudence and circumspection use for securing and preserving their own property or rights. This exacting standard imposed on common carriers in a contract of carriage of goods is intended to tilt the scales in favor of the shipper who is at the mercy of the common carrier once the goods have been lodged for shipment. Hence, in case of loss of goods in transit, the common carrier is presumed under the law to have been at fault or negligent. However, the presumption of fault or negligence, may be overturned by competent evidence showing that the common carrier has observed extraordinary diligence over the goods. In this case, the SC found that the LSC adequately proved that it exercised extraordinary diligence. Although the original bills of lading remained with the NTFC, LSCs agents demanded from Jama the certified true copies of the bills of lading. They even made Jama

and in his absence, his designated subordinates, to sign the cargo delivery receipts. This practice which is their standard operating procedure finds support in Article 353 of the Code of Commerce. Under said article, it is enough that the delivery receipt is signed if the surrender of the original bill of lading is not possible. Since it was what was done by LSC, then it could be said that they have sufficiently and substantially complied with the requirements. Hence, LSC is not guilty for breach of contract of carriage.



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Aboitiz Shipping Corp. v Insurance Company of North America (ICNA), August 6, 2008

FACTS: MSAS procured an all risk marine insurance policy from ICNA for transshipment of certain wooden work tools and workbenches purchased for consignee Science Teaching Improvement Project (STIP). The cargo, packed inside a container van, was shipped freight prepaid from Germany on board M/S Katsuragi. A clean bill of lading was issued by Hapag-Lloyd which stated the consignee to be STIP, Cebu City. The container van was off-loaded at Singapore and transshipped on board M/S Vigour Singapore. When the ship arrived and docked at Manila, the container van was again off-loaded. The cargo was received by Aboitiz, which issued a bill of lading containing the notation grounded outside warehouse. The container van was stripped and transferred to another crate/container van without any notation on the condition of the cargo on the Stuffing/Stripping Report. The container van was loaded on board Aboitizs vessel en route to Cebu. The shipment arrived in Cebu City and discharged. It was brought to the Cebu Bonded Warehousing Corporation pending clearance from the Customs. In the Stripping Report, Aboitizs checker noted that the crates were slightly broken or cracked at the bottom. The cargo was withdrawn by STIP and delivered to Don Bosco High School, and received by Mr. Willig. Two days later, Willig, through a telephone call, informed Perez, the Claims Head of Aboitiz, that the cargo sustained water damage. Perez inspected the contrainer and found that the container van and other cargoes were completely dry. Perez found that except for the bottom of the crate which was slightly broken, the crate itself appeared to be completely dry and had no water marks. But he confirmed that the tools which were stored inside the crate were already corroded. He further explained that the "grounded outside warehouse" notation in the bill of lading referred only to the container van bearing the cargo. STIP filed insurance claims with ICNA. The inspection showed the goods sustained water damage, molds, and corrosion which were discovered upon delivery to consignee. STIP filed a formal claim with Aboitiz. A supplemental report showed that PAGASA reported heavy rains that caused water damage to the shipment, which were placed outside the warehouse of the Pier in Manila as can be gleaned from the bill of lading which contained the notation grounded outside warehouse.

It was only 4 days after that the shipment was stuffed inside another container van for shipment to Cebu. ICNA paid the amount, and formally advised Aboitiz of the claim, which the latter did not settle. The RTC rendered judgment against ICNA ruling that it failed to prove personality to sue because it was ICNA UK who issued the policy not ICNA Phils. ICNA failed to produce evidence that it was a foreign corporation duly licensed to do business in the Philippines. Thus, it lacked the capacity to sue before Philippine Courts. On appeal, the CA reversed the RTC ruling holding that the right of subrogation accrues simply upon payment by the insurance company of the insurance claim. As subrogee, ICNA is entitled to reimbursement from Aboitiz, even assuming that it is an unlicensed foreign corporation. The CA ruled that the presumption that the carrier was at fault or that it acted negligently was not overcome by any countervailing evidence. Hence, Aboitiz brought the present petition. ISSUE: Whether or not Aboitiz Shipping Corporation exercised extraordinary diligence? *To determine if they are liable for damages RULING: No. They did not exercise extraordinary diligence. The rule as stated in Article 1735 of the Civil Code is that in cases where 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 required by law. Extraordinary diligence is that extreme measure of care and caution which persons of unusual prudence and circumspection use for securing and preserving their own property rights.This standard is intended to grant favor to the shipper who is at the mercy of the common carrier once the goods have been entrusted to the latter for shipment. Here, the shipment delivered to the consignee sustained water damage. The shipment arrived in the port of Manila and was received by petitioner for carriage on July 26, 1993. On the same day, it was stripped from the container van. Five days later, on July 31, 1993, it was re-stuffed inside another container van. On August 1, 1993, it was loaded onto another vessel bound for Cebu. During the period between July 26 to 31, 1993, the shipment was outside a container van and kept in storage by petitioner.



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The bill of lading issued by petitioner on July 31, 1993 contains the notation grounded outside warehouse, suggesting that from July 26 to 31, the goods were kept outside the warehouse. And since evidence showed that rain fell over Manila during the same period, We can conclude that this was when the shipment sustained water damage. 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 the goods tendered for transport and that it exercised due care in handling them. Extraordinary diligence must include safeguarding the shipment from damage coming from natural elements such as rainfall. Aside from denying that the grounded outside warehouse notation referred not to the crate for shipment but only to the carrier van, petitioner failed to mention where exactly the goods were stored during the period in question. It failed to show that the crate was properly stored indoors during the time when it exercised custody before shipment to Cebu. Petitioner is thus liable for the water damage sustained by the goods due to its failure to satisfactorily prove that it exercised the extraordinary diligence required of common carriers.



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PHILIPPINES FIRST v. WALLEM FACTS: On October 2, 1995 Anhui Chemicals Import & Export Corporation loaded on board M/S Offshore Master a shipment consisting of 10,000 bags of sodium sulphate complete and in good order for transportation to and delivery at the port of Manila for consignee, L.G. Atkimson Import-Export. The Bill of Lading reflects the gross weight of the total cargo at 500,200 kilograms. The Owner and/or Charterer of M/V Offshore Master is unknown while the shipper of the shipment is Shanghai Fareast Ship Business Company. Both are foreign firms doing business in the Philippines, thru its local ship agent, respondent Wallem Philippines Shipping, Inc. (Wallem). On October 16, 1995 the shipment arrived at the port of Manila on board the vessel M/S Offshore Master from which it was subsequently discharged. It was disclosed during the discharge of the shipment from the carrier that 2,426 poly bags (bags) were in bad order and condition, having sustained various degrees of spillages and losses. This is evidenced by the turn survey and bad order survey of the arrastre operator Asian Terminals Inc. Asia starfreight undertook the delivery of the shipment from the peir to the consignees in quezon city. The final inspection was conducted jointly by the consignees representative and the cargo surveyor. During the unloading, it was found and noted that the bags had been discharged in damaged and bad order condition. Upon inspection, it was discovered that 63,065.00 kilograms of the shipment had sustained unrecovered spillages, while 58,235.00 kilograms had been exposed and contaminated, resulting in losses due to depreciation and downgrading. Consignee later on filed a formal complaint against wallem for the value of the damaged shipments but to no avail since it was insured with Philippines first insurance against all risk in the amount of P2,470,213.50. Consequently, Philippines first paid the consignee the sum of P397,879.69 and the latter signed a subrogation receipt. Philippines first in its exercise of his right of subrogation sent demand letter to wallem but it was unheeded. Thus, Philippines first filed with the RTC an action for damages including the payment of principal amount. RTC held that Wallem shipping and the arrastre operator solidarily liable since both the arrastre operator and the carrier are charged with and obligated to deliver the goods in good order condition to the consignee citing the case of Eastern Shipping Lines, Inc. v. Court of Appeals.

CA reversed RTCs decision; there is no solidary liability between the carrier and the arrastre operator because it was clearly established by the court a quo that the damage and losses of the shipment were attributed to the mishandling by the arrastre operator in the discharge of the shipment. The appellate court ruled that the instant case falls under an exception recognized in Eastern Shipping Lines. ISSUES:

1.) Whether or not the Court of Appeals erred in not holding that as a common carrier, the carriers duties extend to the obligation to safely discharge the cargo from the vessel

2.) Whether or not the carrier should be held liable for the cost of the damaged shipment

RULING:

As to the first issue, 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 transported by them. Subject to certain exceptions enumerated under Article 1734 of the Civil Code, common carriers are responsible for the loss, destruction, or deterioration of the goods. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them.

For marine vessels, Article 619 of the Code of Commerce provides that the ship captain is liable for the cargo from the time it is turned over to him at the dock or afloat alongside the vessel at the port of loading, until he delivers it on the shore or on the discharging wharf at the port of unloading, unless agreed otherwise.

Lastly, Section 2 of the COGSA provides that

under every contract of carriage of goods by sea, the carrier in relation to the loading, handling, stowage, carriage, custody, care, and discharge of such goods, shall be subject to the responsibilities and liabilities and entitled to the rights and immunities set forth in the Act. Section 3 (2) thereof then states that among the carriers responsibilities are to properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.

The above doctrines are in fact expressly

incorporated in the bill of lading between the shipper Shanghai Fareast Business Co., and the consignee, to wit:

4. PERIOD OF RESPONSIBILITY. The responsibility of the carrier shall commence from the time when the goods are loaded on board the vessel and shall cease when they are discharged from the vessel.



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The Carrier shall not be liable of loss of or

damage to the goods before loading and after discharging from the vessel, howsoever such loss or damage arises.

Handling cargo is mainly the arrastre operator's principal work so its drivers/operators or employees should observe the standards and measures necessary to prevent losses and damage to shipments under its custody. Thus, in this case the appellate court is correct insofar as it ruled that an arrastre operator and a carrier may not be held solidarily liable at all times.

As to the second issue, according to the testimony of Mr. Talens, it is the master of the vessel who supervises the unloading of the goods and reports them to the head checker who is a contractor or checker of wallem shipping. The records are replete with evidence which show that the damage to the bags happened before and after their discharge and it was caused by the stevedores of the arrastre operator who were then under the supervision of Wallem. It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under the custody of the carrier. In the instant case, the damage or losses were incurred during the discharge of the shipment while under the supervision of the carrier. Consequently, the carrier is liable for the damage or losses caused to the shipment. As the cost of the actual damage to the subject shipment has long been settled, the trial courts finding of actual damages in the amount of P397,879.69 has to be sustained.



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APPLICABLE LAWS IN CASES INVOLVING COMMON CARRIERS

PAL v. CA, 207 SCRA 100 FACTS: Isidro Co arrived at Manila International Airport aboard Philippine Air Lines from California, USA. After embarking, he proceeded to the baggage retrieval area to claim his nine pieces of checked-in-luggage with corresponding claim checks in his possession. However, he failed to find one luggage. The said item is a Samsonite suitcase measuring worth about $200.00 and contained personal items. Consequently, Co filed a complaint. The RTC and CA found PAL liable and awarded Co damages. Upon reaching the SC, PAL contended that under the Warsaw Convention, its liability, if any, cannot exceed $20.00 based on weigh as Co did not declare the contents of his baggage nor pay additional charges before flight. ISSUE: Whether or not the Warsaw Convention applies. RULING: No, the Warsaw Convention does not apply. The liability of the common carrier for the loss, destruction or deterioration of goods transported from a foreign country to the Philippines is governed primarily by the New Civil Code. In all matters not regulated by said Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by Special Laws. The following applicable provisions of the New Civil Code applicable are Articles 1733, 1735 and 1753 which provide: Article 1733. 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. Article 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in article 1733. Article 1753. The law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction or deterioration.

Since the passengers destination in this case was the Philippines. Philippine law governs the liability of the carrier for the loss of the passengers luggage. In this case, PAL failed to overcome, not only the presumption, but more importantly, Cos evidence, proving that the carriers negligence was the proximate cause of the loss of his baggage. Furthermore, the award of damages is bolstered by the fact that PAL acted in bad faith in faking a retrieval receipt to bail itself out of having to Pay Cos claim.

COMMON CARRIER OF GOODS Transportation Law

Case Digests 2-Manresa

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DEGREE OF DILIGENCE REQUIRED

AMANDO MIRASOL v. THE ROBERT DOLLAR CO. G.R. NO. L-29721 (March 27, 1929)

FACTS: Amando Mirasol is the owner and consignee of two cases of books, shipped in good order and condition at New York, USA, on board The Robert Dollar Co. steamship President Garfield. The said books were to be transported and delivered to Mirasol in the City of Manila, all freight charges paid. On September 1, 1927, the cases arrived in Manila in bad order and damaged condition resulting in the total loss of one case, and a partial loss of the other. Mirasol filed a claim for damages in the amount of P1,630 with regard to one case and P700 with regard to the second case which suffered a partial loss but The Robert Dollar Co. refused and neglected to pay on the ground that the damages to the books was caused by sea water. Mirasol alleged that he never entered into any contract with the shipping company limiting the latter's liability as a common carrier and never intended to ratify or confirm any agreement to limit the latter's liability, and when he wrote the letter of September 3, 1927, he had not then ascertained the contents of the damaged case, and could not determine their value but when the damaged case was found on September 9, 1927, he filed a claim for the real damage of the books in the amount of $375. On its part, The Robert Dollar Co. cited the following contentions which it suggests will exonerate the company's liability regarding the damaged books: 1) the steamship President Garfield was seaworthy and properly manned, equipped and supplied for the voyage and that the damage to Mirasol's merchandise was not caused through the negligence of the vessel or any of its crew. 2) In the bill of lading, it was agreed in writing that The Robert Dollar Co. should not be held liable for any loss or damage resulting from Acts of God or perils of the sea or other waters. 3) In the said bill of lading, it was agreed that The Robert Dollar Co. in no case shall be held liable for said merchandise or property beyond the sum of $250. 4) The damage by sea water is a shipper's risk and thus, The Robert Dollar Co. is not liable. Thereafter, the lower court rendered judgment in favor of Mirasol and awarded in his favor the amount of P2,080 and from which both parties appealed. ISSUE:

Whether or not The Robert Dollar Co. is liable - YES RULING: Under Article 1733 of the New Civil Code, - "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" The defendant having received the two boxes in good condition, its legal duty was to deliver them to the plaintiff in the same condition in which it received them. From the time of their delivery to the defendant in New York until they are delivered to the plaintiff in Manila, the boxes were under the control and supervision of the defendant and beyond the control of the plaintiff. The defendant having admitted that the boxes were damaged while in transit and in its possession, the burden of proof then shifted, and it devolved upon the defendant to both allege and prove that the damage was caused by reason of some fact which exempted it from liability. As to how the boxes were damaged, when or where, was a matter peculiarly and exclusively within the knowledge of the defendant and in the very nature of things could not be in the knowledge of the plaintiff. To require the plaintiff to prove as to when and how the damage was caused would force him to call and rely upon the employees of the defendant's ship, which in legal effect would be to say that he could not recover any damage for any reason. That is not the law. Shippers who are forced to ship goods on an ocean liner or any other ship have some legal rights, and when goods are delivered on board ship in good order and condition, and the ship owner delivers them to the shipper in bad order and condition, it then devolves upon the ship owner to both allege and prove that the goods were damaged by the reason of some fact which legally exempts him from liability; otherwise, the shipper would be left without any redress, no matter what may have caused the damage. The lower court in its opinion says: The defendant has not even attempted to prove that the two cases were wet with sea water by fictitious event, force majeure or nature and defect of the things themselves. Consequently, it must be presumed that it was by causes entirely distinct and in no manner imputable to the plaintiff, and of which the steamer President Garfield or any of its crew could not have been entirely unaware. And the evidence for the defendant shows that the damage was largely caused by "sea water," from which it contends that it is exempt under the provisions of its bill of lading and the provisions of the Article 361 of the Code of Commerce, which is as follows:



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Merchandise shall be transported at the risk and venture of the shipper, if the contrary was not expressly stipulated. Therefore, all damages and impairment suffered by the goods during the transportation, by reason of accident, force majeure, or by virtue of the nature or defect of the articles, shall be for the account and risk of the shipper. The proof of these accidents is incumbent on the carrier. Thus, the Robert Dollar Co. cannot escape liability by enforcing the alleged agreements in the bill of lading as this is considered by the Court as against public policy. Likewise, the company cannot invoke article 361 of the Code of Commerce because it failed to prove that the damages suffered by the books during transportation was by reason of accident or force majeure. Thus it is presumed that The Robert Dollar Co. is negligent and be held liable for damages because it failed to prove that it observed extraordinary diligence in the transport and delivery of the books owned by Amando Mirasol.



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FIREMANS FUND INSURANCE CO v. METRO PORT SERVICES

FACTS:

Vulcan Industrial and Mining Corporation imported from the United States several machineries and equipment which were loaded on board the SIS Albert Maersk at the port of Philadelphia, U.S.A., and transhipped for Manila through the vessel S/S Maersk Tempo.

The shipment arrived at the port of Manila on June 3, 1979 and was turned over complete and in good order condition to the arrastre operator E. Razon Inc. (now Metro Port Service Inc. and referred to as the ARRASTRE).

A tractor operator, named Danilo Librando and employed by the ARRASTRE, was ordered to transfer the shipment to the Equipment Yard at Pier 3. While Librando was maneuvering the tractor (owned and provided by Maersk Line) to the left, the cargo fell from the chassis and hit one of the container vans of American President Lines. It was discovered that there were no twist lock at the rear end of the chassis where the cargo was loaded.

An Insurance was claimed by Vulcan Industrial, in turn, the petitioner insurance company demanded recovery from Maerks Line. The trial court ruled that Maerks

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