Pedro de Guzman v. Court of Appeals.............................................................1

G.R. No. L-47822................................................................................................1

First Philippine Industrial Corp. v. Court of Appeals..................................1

G.R. No. 125948.............................................................................................1

CALVO VS. UCPB GENERAL INSURANCE TERMINAL SERVICE, INC....................................................................................................................2

NATIONAL STEEL CORPORATION vs. COURT OF APPEALS (1997)................................................................................................................2

Loadstar Shipping Co. Inc. v. Court of Appelas.........................................2

G.R. No. 131621.............................................................................................2

Asia Lighterage and Shipping Inc. v. CA...............................................3

Gr, No. 147246, August 19, 2003...............................................................3

Planters Products, Inc. v. Court of Appeals................................................3

G.R. No. 101503.............................................................................................3

Schmitz Transport and Brokerage Corp v Transort Venture Inc., GR 150255 April 22,2005............................................................................4

AF Sanchez Brokerage vs CA...................................................................4

(Dec 21, 2004).................................................................................................4

Loadstar Shipping Co. Inc. v. Court of Appelas.........................................5

G.R. No. 131621.............................................................................................5

Eastern Shipping Lines vs. IAC...................................................................5

150 SCRA 463.................................................................................................5

Lita Enterprises, Inc. v. IAC...........................................................................5

G.R. No. L-64693............................................................................................5

MER INDUSTRIES INC VS MALAYAN INSURANCE CO, INC.............6

GR No. 161745, SEPTEMBER 30, 2005....................................................6

Mr. & Mrs. Engracio Fabre, Jr. vs. CA, et al...............................................6

259 SCRA 426.................................................................................................6

Pedro de Guzman v. Court of AppealsG.R. No. L-47822

Facts:

Herein respondent Ernesto Cendana was engaged in buying up used bottles and scrap metal in Pangasinan. Normally, after collection respondent would bring such material to Manila for resale. He utilized (2) two six-wheelers trucks which he owned for the purpose. Upon returning to Pangasinan, he would load his vehicle with cargo belonging to different merchants to different establishments in Pangasisnan which respondents charged a freight fee for.

Sometime in November 1970, herein petitioner Pedro de Guzman, a merchant and dealer of General Milk Company Inc. in Pangasinan contracted with respondent for hauling 750 cartons of milk. Unfortunately, only 150 cartons made it, as the other 600 cartons were intercepted by hijackers along Marcos Highway. Hence, petitioners commenced an action against private respondent.

In his defense, respondent argued that he cannot be held liable due to force majuere, and that he is not a common carrier and hence is not required to exercise extraordinary diligence.

Issues:

1. Whether or not respondent can be held liable for loss of the cartons of milk due to force majeure.

2. Whether or not respondent is a common carrier.

Held:

1. The court ruled the affirmative. The circumstances do not fall under the exemption from liability as enumerated in Article 1734 of the Civil Code. The general rule is established by the article that common carriers are responsible for the loss, destruction or deterioration of the goods which they carry, unless the same is due to any of the following causes only:

a. Flood, storm, earthquake, lightning or other natural disasters;

b. Act of the public enemy, whether international or civil;

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

d. Character of the goods or defects in the packing;e. Order or act of competent public authority.

2. The court ruled the affirmative. Article 1732 of the New Civil Code avoids any 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. It also avoids a distinction between a person or enterprise offering transportation services on a regular or scheduled basis and one offering such services on an occasional, episodic, and unscheduled basis.

First Philippine Industrial Corp. v. Court of Appeals

G.R. No. 125948

Facts:Herein petitioner applied for a mayor’s permit to operate its

pipeline concession. Before such permit was issued, the City treasurer required petitioner to pay local tax. In order not to hamper its operations, petitioner paid the tax under protest.

Then the petitioner filed a letter protest addressed to the treasurer claiming exemption from payment of the tax because according to the Local Government Code of 1991, transportation contractors are not included in the enumeration of contractors which are liable to pay taxes. The city treasurer denied the protest. The petitioner filed a case before the trial court for tax refund, however it was subsequently dismissed. Hence, this petition.

Issue:Whether or not the petitioner is a common carrier as contemplated to be exempted under the law.

Held:The court rules the affirmative. The court enunciated the (4)

tests in determining whether the carrier is that of a common carrier:a. must be engaged int eh business of carrying goods for

other as a public employment and must hold itself out as ready to engage in the transportation of goods generally as a business and not a casual occupation

b. it must undertake to carry goods of the kind which its business is confined;

c. it must undertake the method by which his business is conducted and over its established roads;

d. the transportation must be for hire.In the case at bar, the court categorically ruled that the

transporting of oil through pipelines is still considered to be an activity of a common carrier. The petitioner is a common carrier because it is engaged in the business of transporting passengers or goods; like petroleum. It undertakes to carry for all persons indifferently. The fact that the petitioner has limited clientele does not exclude it from the

definition of common carrier. Under the petroleum act of the Philippines, the petitioner is considered a common carrier even if it is a pipeline concessionaire.And even as regards the petroleum operation, it is of public utility. Specifically, the Bureau of Internal Revenue considers petitioners as common carrier not subject to withholding tax

CALVO VS. UCPB GENERAL INSURANCE TERMINAL SERVICE, INC.

Facts:

A contract was entered into between Calvo and San Miguel Corporation (SMC) for the transfer of certain cargoes from the port area in Manila to the warehouse of SMC. The cargo was insured by UCPB General Insurance Co., Inc. When the shipment arrived and unloaded from the vessel, Calvo withdrew the cargo from the arrastre operator and delivered the same to SMC’s warehouse. When it was inspected, it was found out that some of the goods were torn. UCPB, being the insurer, paid for the amount of the damages and as subrogee thereafter, filed a suit against Calvo.Petitioner, on the other hand, contends that it is a private carrier not required to observe such extraordinary diligence in the vigilance over the goods.As customs broker, she does not indiscriminately hold her services out to the public but only to selected parties.

Issue:

Whether or not Calvo is a common carrier liable for the damages for failure to observe extraordinary diligence in the vigilance over the goods.

Held:

The contention has no merit. In De Guzman v. Court of Appeals, the Court dismissed a similar contention and held the party to be a common carrier, thus -The Civil Code defines "common carriers" in the following terms:"Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public."

The law makes no distinction between a carrier offering its services to the general community or solicits business only from a narrow segment of the general population. Note that the transportation of goods holds an integral part of Calvo’s business, it cannot indeed be doubted that it is a common carrier.

NATIONAL STEEL CORPORATION vs. COURT OF APPEALS (1997)

Facts:

NSC hired MV Vlasons I, a private vessel owned by VSI. They entered into a contract of voyage charter hire wherein the contract states that NSC hired VSI's vessel to make one voyage to load steel products at Iligan City and discharge them at North Harbor, Manila. On arrival and upon opening the three hatches containing the shipment, nearly all the skids of tinplates and hot rolled sheets were allegedly found to be wet and rusty. NSC filed a complaint for damages but RTC dismissed the complaint

Issues:1. whether VSI contracted with NSC as a common carrier or as

a private carrier2. Whether or not the provisions of the Civil Code of the

Philippines on common carriers pursuant to which there exist[s] a presumption of negligence against the common carrier in case of loss or damage to the cargo are applicable to a private carrier.

Held:

1. VSI was not a common carrier but a private carrier. It is undisputed that VSI did not offer its services to the general public. The extent of VSI's responsibility and liability over NSC's cargo are determined primarily by the stipulations in the contract of carriage or charter party and the Code of Commerce. The burden of proof lies on the part of NSC and not the VSI.

Article 1732 of the Civil Code defines a common carrier as "persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water or air, for compensation, offering their services to the public." It has been held that the true test of a common carrier is the carriage of passengers or goods, provided it has space, for all who opt to avail themselves of its transportation service for a fee. A carrier which does not qualify under the above test is deemed a private carrier. "Generally, private carriage is undertaken by special agreement and the carrier does not hold himself out to carry goods for the general public. . . ."

2. Because the MV Vlason I was a private carrier, the shipowner's obligations are governed by the provisions of the Code of Commerce and not by the Civil Code which, as a general rule places the prima facie presumption of negligence on a common carrier.

IN A CONTRACT OF PRIVATE CARRIAGE, THE BURDEN OF PROOF IN CASE OF ACCIDENT IS ON THE CARRIER but the court exempts VSI due to force majeure.

NSC must prove that the damage to its shipment was caused by VSI's willful negligence or failure to exercise due diligence in making MV Vlason I seaworthy and fit for holding, carrying and safekeeping the cargo. The burden of proof was placed on NSC by the parties' agreement.

Loadstar Shipping Co. Inc. v. Court of Appelas

G.R. No. 131621

Facts:On November 19, 1984 herein petitioner shipping company

carried, a shipment of (3) three bulk items on board its M/V Cherokee, which amounted to P6,067,178.00, the same being insured by the Manila Insurance Co. (MIC). The vessel in turn was insured by Prudential Guarantee and Assurance, Inc. of P4 million. Unfortunately the ship sank in the are of Limasawa.

MIC settled the insurance with the consignee and asked for the subrogation receipt, then MIC filed a claim against Loadstar. PGAI alleging the sinking was due to the fault and negligence of Loadstar. In their defense, Loadstar set up the argument of force majuere. PGAI was dropped from the case afer proving MIC had no locus standi against them. Inter alia all other defenses, Loadstar argues that it cannot be considered a common carrier because it was issued a certificate of public convenience and that it carried a particular type of cargo for a particular shipper.

Issues:1. Whether or not Loadstar’s Cherokee is a common carrier;2. Wheter or not, considering the type of carriage the M/V is,

the required amount of diligence was observed;

Held:1. The court rules the affirmative that the M/V Cherokee is a

common carrier. It is not necessary that the carrier be issued a certificate of public convenience and their public character is not altered by the fact that the carriage of the goods in question was periodic, occasional, episodic, or unscheduled.

Additionally, the second argument of Loadstar must fail; that the M/V Cherokee was carrying a particular type of cargo for one shipper which appears to be purely coincidental is not reason enough to convert a vessel that is a common carrier to a private one, especially where, as in the case, it was shown that the vessel was also carrying passengers.

2. The court rules the negative. Loadstar should have exercised extraordinary diligence since it is a common carrier; and the fact that it still allowed the voyage despite the knowledge of a typhoon present counters their exercise of extra ordinary diligence required.

Asia Lighterage and Shipping Inc. v. CAGr, No. 147246, August 19, 2003

FACTS:

Petitioner was contracted as carrier by a corporation from Portland, Oregon to deliver a cargo to the consignee's warehouse at Pasig City. The cargo, however, never reached the consignee as the barge that carried the cargo sank completely, resulting in damage to the cargo. Private respondent, as insurer, indemnified the consignee for the lost cargo and thus, as subrogee, sought recovery from petitioner. Both the trial court and the appellate court ruled in favor of private respondent. The Court ruled in favor of private respondent. Whether or not petitioner is a common carrier, the Court ruled in the affirmative. The principal business of petitioner is that of lighterage and drayage, offering its barges to the public, although for limited clientele, for carrying or transporting goods by water for compensation. Whether or not petitioner failed to exercise extraordinary diligence in its care and custody of the consignee's goods, the Court also ruled in the affirmative. The barge completely sank after its towing bits broke, resulting in the loss of the cargo. Petitioner failed to prove that the typhoon was the proximate and only cause of the loss and that it has exercised due diligence before, during and after the occurrence. HCISED

ISSUE:

Whether or Not the petitioner is a common carrier.

RULING: YES.

Petitioner is a common carrier whether its carrying of goods is done on an irregular rather than scheduled manner, and with an only limited clientele. A common carrier need not have fixed and publicly known routes. Neither does it have to maintain terminals or issue tickets. To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs. Court of Appeals. The test to determine a common carrier is "whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of the business transacted." In the case at bar, the petitioner admitted that it is engaged in the business of shipping and lighterage, offering its barges to the public, despite its limited clientele for carrying or transporting goods by water for compensation.

Article 1732 of the Civil Code defines common carriers as persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation..offering their services to the public. Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it has no fixed and publicly known route, maintains no terminals, and issues no tickets. It points out that it is not obliged to carry indiscriminately for any person. It is not bound to carry goods unless it consents. In short, it does not hold out its services to the general public. In De Guzman vs. Court of Appeals, we held that the definition of common carriers in Article 1732 of the Civil Code makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity. We also did not distinguish between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Further, we ruled that Article 1732 does not distinguish between a carrier offering its services to the general public, and one who offers services or solicits business only from a narrow segment of the general population. Common carriers are bound to observe extraordinary diligence in the

vigilance over the goods transported by them. They are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. To overcome the presumption of negligence in the case of loss, destruction or deterioration of the goods, deterioration of the goods, the common carrier must prove that it exercised extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of the Civil Code enumerates the instances when the presumption of negligence does not attach: Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only: (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; (5) Order or act of competent public authority.

In the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss of its cargo. Petitioner claims that this was caused by a typhoon, hence, it should not be held liable for the loss of the cargo. However, petitioner failed to prove that the typhoon is the proximate and only cause of the loss of the goods, and that it has exercised due diligence before, during and after the occurrence of the typhoon to prevent or minimize the loss. The evidence show that, even before the towing bits of the barge broke, it had already previously sustained damage when it hit a sunken object while docked at the Engineering Island. It even suffered a hole. Clearly, this could not be solely attributed to the typhoon. The partly-submerged vessel was refloated but its hole was patched with only clay and cement. The patch work was merely a provisional remedy, not enough for the barge to sail safely. Thus, when petitioner persisted to proceed with the voyage, it recklessly exposed the cargo to further damage.

Planters Products, Inc. v. Court of Appeals

G.R. No. 101503

Facts:Planters Products (Planters) purchased from Mitsubishi

International Corporation of USA of 9,000 metric tons of urea fertilizer which the latter shipped abroad the cargo vessel owned by private respondent Kyosei Kisin Kabushiki Kaisha (KKKK) from America to La Union. Prior to its voyage, a time charter party was entered into between Mitusbishi as shipper/charterer and KKKK as ship-owner. After the Urea fertilizer was loaded in bulk by stevedored hired by the shipper, the steel hatches were closed with heavy iron lids which remained closed during the entire journey.

Upon arrival of the vessel, the hatches were opened with the use of the vessel boom. Planters unloaded the cargo from the holders into the steel bodied dump trucks. Each time the dump trucks were filled up, its load of urea was covered with tarpaulin before it was transported to the consignee’s warehouse located some (50) fifty meteres from the wharf. It took (11) eleven days from planters to unload the cargo. The report submitted by private marine and cargo surveyors revealed a shortage in the cargo, and some portion in the cargo was contaminated with dirt, rendering the same unfit for commerce. Planters filed an action for damages bu the appellate court absolved the carrier from liability.

Issues:1. Whether or not the respondent is a common carrier.2. Whether or not the respondent is liable for damages.

Held:1. The court rules the affirmative as to the respondent being a

common carrier. The term common carrier is defined in Article 1732 of the Civil Code. The definition refers to carriers either by land, water, or air which holds themselves out as ready to engage in carrying goods on transporting passengers or both for compensation as a public employment and not as a casual occupation; if the

undertaking is a single transaction, not a part of the general business or corporation, although involving the carriage of goods for a fee, then the person or corporation offering such services is a private carrier. In the case at bar respondent carrier transports goods indiscriminately for all persons. Being such, he is a common carrier.

2. The court rules the negative. True, being a common carrier, respondent must have observed extraordinary diligence over the goods it carries. In the case at bar it has been proven that the respondent has sufficiently overcome this, by clear and convincing proof, the prima facie presumption of negligence, due to the manner of storage of the goals during the vogyage. In fact, it was pointed out that there was a risk in shipping the urea due to its character.

Schmitz Transport and Brokerage Corp v Transort Venture Inc., GR 150255 April 22,2005

Facts:

On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from the port of Ilyichevsk, Russia on board M/V “Alexander Saveliev” 545 hot rolled steel sheets in coil weighing 6,992,450 metric tons. The cargoes, which were to be discharged at the port of Manila in favor of the consignee, Little Giant Steel Pipe Corporation (Little Giant), were insured against all risks with Industrial Insurance Company Ltd. (Industrial Insurance) under Marine Policy No. M-91-3747-TIS. The vessel arrived at the port of Manila and the Philippine Ports Authority (PPA) assigned it a place of berth at the outside breakwater at the Manila South Harbor.

Schmitz Transport, whose services the consignee engaged to secure the requisite clearances, to receive the cargoes from the shipside, and to deliver them to its (the consignee’s) warehouse at Cainta, Rizal, in turn engaged the services of TVI to send a barge and tugboat at shipside. TVI’s tugboat “Lailani” towed the barge “Erika V” to shipside. The tugboat, after positioning the barge alongside the vessel, left and returned to the port terminal. Arrastre operator Ocean Terminal Services Inc. commenced to unload 37 of the 545 coils from the vessel unto the barge. By 12:30 a.m. of October 27, 1991 during which the weather condition had become inclement due to an approaching storm, the unloading unto the barge of the 37 coils was accomplished. No tugboat pulled the barge back to the pier, however. At around 5:30 a.m. of October 27, 1991, due to strong waves, the crew of the barge abandoned it and transferred to the vessel. The barge pitched and rolled with the waves and eventually capsized, washing the 37 coils into the sea. Little Giant thus filed a formal claim against Industrial Insurance which paid it the amount of P5,246,113.11.  Little Giant thereupon executed a subrogation receipt in favor of Industrial Insurance. Industrial Insurance later filed a complaint against Schmitz Transport, TVI, and Black Sea through its representative Inchcape (the defendants) before the RTC of Manila, they faulted the defendants for undertaking the unloading of the cargoes while typhoon signal No. 1 was raised. The RTC held all the defendants negligent. Defendants Schmitz Transport and TVI filed a joint motion for reconsideration assailing the finding that they are common carriers. RTC denied the motion for reconsideration. CA affirmed the RTC decision in toto, finding that all the defendants were common carriers — Black Sea and TVI for engaging in the transport of goods and cargoes over the seas as a regular business and not as an isolated transaction, and Schmitz Transport for entering into a contract with Little Giant to transport the cargoes from ship to port for a fee.

Issue:

Whether or not Black Sea and TVI are common carriers

Held :

Contrary to petitioner’s insistence, this Court, as did the appellate court, finds that petitioner is a common carrier.  For it undertook to transport the cargoes from the shipside of “M/V Alexander Saveliev” to the consignee’s warehouse at Cainta, Rizal.  As the appellate court put it,  “as long as a person or corporation holds [itself] to the public for the purpose of transporting goods as [a] business, [it] is already considered a common carrier regardless if [it] owns the

vehicle to be used or has to hire one.” That petitioner is a common carrier, the testimony of its own Vice-President and General Manager Noel Aro that part of the services it offers to its clients as a brokerage firm includes the transportation of cargoes reflects so.

It is settled that under a given set of facts, a customs broker may be regarded as a common carrier.  Thus, this Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable Court of Appeals,[44] held:

The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier, as defined under Article 1732 of the Civil Code, to wit,Art. 1732.  Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public.x x x

Article 1732 does not distinguish between one whose principal business activity is the carrying of goods and one who does such carrying only as an ancillary activity.  The contention, therefore, of petitioner that it is not a common carrier but a customs broker whose principal function is to prepare the correct customs declaration and proper shipping documents as required by law is bereft of merit.  It suffices that petitioner undertakes to deliver the goods for pecuniary consideration.

And in Calvo v. UCPB General Insurance Co. Inc.,[46] this Court held that as the transportation of goods is an integral part of a customs broker, the customs broker is also a common carrier.  For to declare otherwise “would be to deprive those with whom [it] contracts the protection which the law affords them notwithstanding the fact that the obligation to carry goods for [its] customers, is part and parcel of petitioner’s business.”

AF Sanchez Brokerage vs CA(Dec 21, 2004)

Facts:

AF Sanchez is engaged in a broker business wherein its main job is to calculate customs duty, fees and charges as well as storage fees for the cargoes. Part also of the services being given by AF Sanchez is the delivery of the shipment to the consignee upon the instruction of the shipper.

Wyett engaged the services of AF Sanchez where the latter delivered the shipment to Hizon Laboratories upon instruction of Wyett. Upon inspection, it was found out that at least 44 cartons containing contraceptives were in bad condition. Wyett claimed insurance from FGU. FGU exercising its right of subrogation claims damages against AF Sanchez who delivered the damaged goods. AF Sanchez contended that it is not a common carrier but a brokerage firm.

Issue: Is AF Sanchez a common carrier?Held:

SC held that Art 1732 of the Civil Code in defining common carrier does not distinguish whether the activity is undertaken as a principal activity or merely as an ancillary activity. In this case, while it is true that AF Sanchez is principally engaged as a broker, it cannot be denied from the evidence presented that part of the services it offers to its customers is the delivery of the goods to their respective consignees.

Note:AF Sanchez claimed that the proximate cause of the damage is improper packing. Under the CC, improper packing of the goods is an exonerating circumstance. But in this case, the SC held that though the goods were improperly packed, since AF Sanchez knew of the condition and yet it accepted the shipment without protest or reservation, the defense is deemed waived.

Loadstar Shipping Co. Inc. v. Court of Appelas

G.R. No. 131621

Facts:On November 19, 1984 herein petitioner shipping company

carried, a shipment of (3) three bulk items on board its M/V Cherokee, which amounted to P6,067,178.00, the same being insured by the Manila Insurance Co. (MIC). The vessel in turn was insured by Prudential Guarantee and Assurance, Inc. of P4 million. Unfortunately the ship sank in the are of Limasawa.

MIC settled the insurance with the consignee and asked for the subrogation receipt, then MIC filed a claim against Loadstar. PGAI alleging the sinking was due to the fault and negligence of Loadstar. In their defense, Loadstar set up the argument of force majuere. PGAI was dropped from the case afer proving MIC had no locus standi against them. Inter alia all other defenses, Loadstar argues that it cannot be considered a common carrier because it was issued a certificate of public convenience and that it carried a particular type of cargo for a particular shipper.

Issues:3. Whether or not Loadstar’s Cherokee is a common carrier;4. Wheter or not, considering the type of carriage the M/V is,

the required amount of diligence was observed;

Held:3. The court rules the affirmative that the M/V Cherokee is a

common carrier. It is not necessary that the carrier be issued a certificate of public convenience and their public character is not altered by the fact that the carriage of the goods in question was periodic, occasional, episodic, or unscheduled. Additionally, the second argument of Loadstar must fail; that the M/V Cherokee was carrying a particular type of cargo for one shipper which appears to be purely coincidental is not reason enough to convert a vessel that is a common carrier to a private one, especially where, as in the case, it was shown that the vessel was also carrying passengers.

4. The court rules the negative. Loadstar should have exercised extraordinary diligence since it is a common carrier; and the fact that it still allowed the voyage despite the knowledge of a typhoon present counters their exercise of extra ordinary diligence required.

Eastern Shipping Lines vs. IAC

150 SCRA 463

Facts:In GR 69044, the M/S ASIATICA, a vessel operated by

Eastern Shipping Lines loaded at Kobe, Japan for Manila:(1) 5,000 pieces of calorized lance pipes in 28 packages valued at P256,039.00 consigned to Philippine Blooming Mills Co., Inc., (2) 7 cases of spare parts valued at P92,361.75, consigned to Central Textile Mills, Inc.

Both sets of goods were insured for their value with Development Insurance and Surety Corporation.

In GR 71478, the same vessel took on board :1. 128 cartons of garment fabrics and accessories, in 2

containers, consigned to Mariveles Apparel Corporation2. two cases of surveying instruments consigned to Aman

Enterprises and General Merchandise.

The 128 cartons were insured for their value by Nisshin Fire & Marine Insurance Co., for US$46,583.00. The 2 cases by Dowa Fire & Marine Insurance Co., Ltd., for US$11,385.00. Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the total loss of ship and cargo. The respective Insurers paid the corresponding marine insurance values to the consignees concerned and were thus subrogated unto the rights of the latter as the insured.

Eastern Shipping denied liability mainly on the ground that the loss was due to an extraordinary fortuitous event; hence, it is not liable under the law. The Trial Court rendered judgment in favor of Development Insurance in the amounts of P256,039.00 and P92,361.75, respectively, with legal interest, plus P35,000.00 as attorney’s fees and costs. Eastern Shipping took an appeal to the then Court of Appeals which, on 14 August 1984, affirmed the decision of the trial court. Eastern Shipping filed a petition for review on certiorari.

Nisshin, and Dowa, as subrogees of the insured, filed suit against Eastern Shipping for the recovery of the insured value of the cargo lost imputing unseaworthiness of the ship and non-observance of extraordinary diligence by Eastern Shipping. Eastern Shipping denied liability on the principal grounds that the fire which caused the sinking of the ship is an exempting circumstance under Section 4(2) (b) of the Carriage of Goods by Sea Act (COGSA); and that when the loss of fire is established, the burden of proving negligence of the vessel is shifted to the cargo shipper. Trial Court rendered judgment in favor of Nisshin and Dowa. CA affirmed decision. Hence this petition on certiorari.

Issue:Whether or not the carrier exercised extraordinary diligence.

Held:Eastern Shipping shall pay the Development Insurance the

amount of P256,039 for the 28 packages of calorized lance pipes, and P71,540 for the 7 cases of spare parts, with interest at the legal rate from the date of the filing of the Complaint on 13 June 1978, plus P5,000 as attorney’s fees, and the costs. The Court, on the other hand, in GR 71478, affirmed the judgment.

The evidence of the defendant did not show that extraordinary diligence was observed by the vessel to prevent the occurrence of fire at hatches nos. 2 and 3. Defendant’s evidence did not likewise show the amount of diligence made by the crew, on orders, in the care of the cargoes. What appears is that after the cargoes were stored in the hatches, no regular inspection was made as to their condition during the voyage. The complete defense afforded by the COGSA when loss results from fire is unavailing to Eastern Shipping. The Carriage of Goods by Sea Act (COGSA), a special law, is merely suppletory to the provisions of the Civil Code The fire may not be considered a natural disaster or calamity, as it arises almost invariably from some act of man or by human means. It does not fall within the category of an act of God unless caused by lightning or by other natural disaster or calamity. It may even be caused by the actual fault or privity of the carrier.

Lita Enterprises, Inc. v. IAC

G.R. No. L-64693

Facts: Spouse ocampo purchased 5 toyota standard cars from

delta motors in installments to be used as taxi cabs. However, since they do not have any franchise to operate a taxicabs, they entered in an agreement with lita enterprises for the use of the latter’s certificate of public convenience, commonly known as Kabit system. Later on, the

taxi collided into a motorcycle resulting to the death of the driver of the motorcycle Emeterio Martin. Lita enterprises were adjudged liable and two of the taxicabs were levied upon and sold at a public auction. Thereafter the spouses ocampo decided to register the taxicabs in their own name and ask Lita enterprise to return the papers but the latter refused. Hence this petition.

Issue:Whether or not the agreement between the parties is valid.

Held:The Court held that the agreement between the parties is not

valid.Under the arrangement of kabit system, whereby a person who has been granted a certificate of convenience allows another person who owns motor vehicles to operate under such for a fee. The Kabit System has been identifies as one of the root causes of prevalence of graft and corruption in the government transportation offices. It is void being contrary to public policy.  And the parties have no right of action against each other because they are in pari delicto, the court will leave them both where it finds them.

MER INDUSTRIES INC VS MALAYAN INSURANCE CO, INC.

GR No. 161745, SEPTEMBER 30, 2005

FACTS:

Ilian Silica Mining entered into a contract of carriage with the petitioner, Lea Mer Industries Inc. for the shipment of 900 metric tons of silica sand worth P565,000. The cargo was consigned to Vulcan Industrial and Mining Corporation and was to be shipped from Palawan to Manila. The silica sand was boarded to Judy VII, the vessel leased by Lea Mer. However, during the course of its voyage, the vessel sank which led to the loss of the cargo.

Consequently, the respondent, as the insurer, paid Vulcan the value of the lost cargo. Malayan Insurance Co., Inc. then collected from the petitioner the amount it paid to Vulcan as reimbursement and as its exercise on the right of subrogation. Lea Mer refused to pay which led Malayan to institute a complaint with the RTC. The RTC dismissed the complaint stating that the loss was due to a fortuitous event, Typhoon Trining. Petitioner did not know that a typhoon was coming and that it has been cleared by the Philippine Coast Guard to travel from Palawan to Manila. The CA reversed the ruling of the trial court for the reason that said vessel was not seaworthy when it sailed to Manila.

ISSUE: Whether or not the petitioner is liable for the loss of the cargo.

HELD:

CA reversed. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods, or both — by land, water, or air — when this service is offered to the public for compensation. Petitioner is clearly a common carrier, because it offers to the public its business of transporting goods through its vessels. Thus, the Court corrects the trial court's finding that petitioner became a private carrier when Vulcan chartered it. Charter parties are classified as contracts of demise (or bareboat) and affreightment, which are distinguished as follows:

"Under the demise or bareboat charter of the vessel, the charterer will generally be considered as owner for the voyage or service stipulated. The charterer mans the vessel with his own people and becomes, in effect, the owner pro hac vice, subject to liability to others for damages caused by negligence. To create a demise, the owner of a vessel must completely and exclusively relinquish possession, command and navigation thereof to the charterer; anything short of such a complete transfer is a contract of affreightment (time or voyage charter party) or not a charter party at all."

The distinction is significant, because a demise or bareboat charter indicates a business undertaking that is private in character. Consequently, the rights and obligations of the parties to a contract of private carriage are governed principally by their stipulations, not by the law on common carriers. The Contract in the present case was one of affreightment, as shown by the fact that it was petitioner's crew that manned the tugboat M/V Ayalit and controlled the barge Judy VII.

Common carriers are bound to observe extraordinary diligence in their vigilance over the goods and the safety of the passengers they transport, as required by the nature of their business and for reasons of public policy. Extraordinary diligence requires rendering service with the greatest skill and foresight to avoid damage and destruction to the goods entrusted for carriage and delivery.

Common carriers are presumed to have been at fault or to have acted negligently for loss or damage to the goods that they have transported. This presumption can be rebutted only by proof that they observed extraordinary diligence, or that the loss or damage was occasioned by any of the following causes: "(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;"(2) 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."

Jurisprudence defines the elements of a "fortuitous event" as follows: (a) the cause of the unforeseen and unexpected occurrence, or the failure of the debtors to comply with their obligations, must have been independent of human will; (b) the event that constituted the caso fortuito must have been impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have been such as to render it impossible for the debtors to fulfill their obligation in a normal manner; and (d) the obligor must have been free from any participation in the aggravation of the resulting injury to the creditor. To excuse the common carrier fully of any liability, the fortuitous event must have been the proximate and only cause of the loss. Moreover, it should have exercised due diligence to prevent or minimize the loss before, during and after the occurrence of the fortuitous event. As required by the pertinent law, it was not enough for the common carrier to show that there was an unforeseen or unexpected occurrence. It had to show that it was free from any fault — a fact it miserably failed to prove.

Mr. & Mrs. Engracio Fabre, Jr. vs. CA, et al.

259 SCRA 426

Facts:

Petitioners Fabre and his wife were owners of a minibus which they used principally in connection with a bus service for school children which they operated. The couple had a driver, Porfirio Cabil, whom they hired after trying him out for two weeks. His job was to take school children to and from the St. Scholastica’s College.

On November 2, 1984, private respondent Word for the World Christian Fellowship Inc. arranged with petitioners for the transportation of 33 members from Manila to La Union and back in consideration of which they paid P3,000 to petitioners.

The group left at 8:00 in the evening, petitioner Cabil drove the minibus. The usual route to Caba, La Union was through Carmen, Pangasinan.  However, the bridge at Carmen was under repair, so that petitioner Cabil, who was unfamiliar with the area (it being his first trip to La Union), was forced to take a detour through the town of Ba-ay in Lingayen, Pangasinan.  At 11:30 that night, petitioner Cabil came upon a sharp curve on the highway, running on a south to east direction. The road was slippery because it was raining, causing the bus, which was running at the speed of 50 kilometers per hour, to skid to the left road shoulder.  The bus hit the left traffic steel brace and sign along the road and rammed the fence of one Jesus Escano, then turned over

and landed on its left side, coming to a full stop only after a series of impacts.  The bus came to rest off the road.  A coconut tree which it had hit fell on it and smashed its front portion.

Several passengers were injured.  Private respondent Amyline Antonio was thrown on the floor of the bus and pinned down by a wooden seat which came off after being unscrewed.  It took three persons to safely remove her from this position.  She was in great pain and could not move.

A case was filed by the respondents against Fabre and Cabil. Amyline Antonio was found to be suffering from paraplegia and is permanently paralyzed from the waist down. The RTC ruled in favor of respondents. Mr. & Mrs. Fabre and Cabil were ordered to pay jointly and severally actual, moral and exemplary damages, and as well as amount of loss of earning capacity of Antonio and attorney’s fees. The Court of Appeals affirmed the decision of the trial court with modification on the award of damages.

Issues:1. Whether or not petitioners were negligent.2. Whether or not petitioners were liable for the injuries

suffered by private respondents.3. Whether or not damages can be awarded and in the

positive, up to what extent.

Held:SC affirmed the decision of the CA but reverted the amount

of the award of damages to that ordered by the RTC.

1. The finding that Cabil drove his bus negligently, while his employer, the Fabres, who owned the bus, failed to exercise the diligence of a good father of the family in the selection and supervision of their employee is fully supported by the evidence on record. Indeed, it was admitted by Cabil that on the night in question, it was raining, and, as a consequence, the road was slippery, and it was dark. However, it is undisputed that Cabil drove his bus at the speed of 50 kilometers per hour and only slowed down when he noticed the curve some 15 to 30 meters ahead. Given the conditions of the road and considering that the trip was Cabil’s first one outside of Manila, Cabil should have driven his vehicle at a moderate speed. There is testimony that the vehicles passing on that portion of the road should only be running 20 kilometers per hour, so that at 50 kilometers per hour, Cabil was running at a very high speed. Cabil was grossly negligent and should be held liable for the injuries suffered by private respondent Amyline Antonio.

Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption that his employers, the Fabres, were themselves negligent in the selection and supervision of their employee. Due diligence in selection of employees is not satisfied by finding that the applicant possessed a professional driver’s license.  The employer should also examine the applicant for his qualifications, experience and record of service. In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not consider the fact that Cabil had been driving for school children only, from their homes to the St. Scholastica’s College in Metro Manila. They had hired him only after a two-week apprenticeship.

2. This case involves a contract of carriage. Petitioners, the Fabres, did not have to be engaged in the business of public transportation for the provisions of the Civil Code on common carriers to apply to them.Art. 1732.  Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public.

The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity. Neither does Article 1732 distinguish between a carrier offering its services to the “general public,” i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population.

As common carriers, the Fabres were bound to exercise “extraordinary diligence” for the safe transportation of the passengers to their destination.  This duty of care is not excused by proof that they exercised the diligence of a good father of the family in the selection and supervision of their employee.

As Art. 1759 of the Code provides:Common carriers are liable for the death of or injuries to passengers through the negligence or wilful acts of the former’s employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers.