G.R. No.

L-25599 April 4, 1968

HOME INSURANCE COMPANY, plaintiff-appellee,

vs.
AMERICAN STEAMSHIP AGENCIES, INC. and LUZON STEVEDORING CORPORATION, defendants,
AMERICAN STEAMSHIP AGENCIES, INC., defendant-appellant.

William H. Quasha and Associates for plaintiff-appellee.

Ross, Selph, Salcedo and Associates for defendant-appellant.

BENGZON, J.P., J.:

"Consorcio Pesquero del Peru of South America" shipped freight pre-paid at Chimbate, Peru, 21,740 jute bags of Peruvian fish meal
through SS Crowborough, covered by clean bills of lading Numbers 1 and 2, both dated January 17, 1963. The cargo, consigned to
San Miguel Brewery, Inc., now San Miguel Corporation, and insured by Home Insurance Company for $202,505, arrived in Manila on
March 7, 1963 and was discharged into the lighters of Luzon Stevedoring Company. When the cargo was delivered to consignee San
Miguel Brewery Inc., there were shortages amounting to P12,033.85, causing the latter to lay claims against Luzon Stevedoring
Corporation, Home Insurance Company and the American Steamship Agencies, owner and operator of SS Crowborough.

Because the others denied liability, Home Insurance Company paid the consignee P14,870.71 — the insurance value of the loss, as
full settlement of the claim. Having been refused reimbursement by both the Luzon Stevedoring Corporation and American Steamship
Agencies, Home Insurance Company, as subrogee to the consignee, filed against them on March 6, 1964 before the Court of First
Instance of Manila a complaint for recovery of P14,870.71 with legal interest, plus attorney's fees.

In answer, Luzon Stevedoring Corporation alleged that it delivered with due diligence the goods in the same quantity and quality that
it had received the same from the carrier. It also claimed that plaintiff's claim had prescribed under Article 366 of the Code of Commerce
stating that the claim must be made within 24 hours from receipt of the cargo.

American Steamship Agencies denied liability by alleging that under the provisions of the Charter party referred to in the bills of lading,
the charterer, not the shipowner, was responsible for any loss or damage of the cargo. Furthermore, it claimed to have exercised due
diligence in stowing the goods and that as a mere forwarding agent, it was not responsible for losses or damages to the cargo.

On November 17, 1965, the Court of First Instance, after trial, absolved Luzon Stevedoring Corporation, having found the latter to
have merely delivered what it received from the carrier in the same condition and quality, and ordered American Steamship Agencies
to pay plaintiff P14,870.71 with legal interest plus P1,000 attorney's fees. Said court cited the following grounds:

(a) The non-liability claim of American Steamship Agencies under the charter party contract is not tenable because Article
587 of the Code of Commerce makes the ship agent also civilly liable for damages in favor of third persons due to the
conduct of the captain of the carrier;

(b) The stipulation in the charter party contract exempting the owner from liability is against public policy under Article 1744
of the Civil Code;

(c) In case of loss, destruction or deterioration of goods, common carriers are presumed at fault or negligent under Article
1735 of the Civil Code unless they prove extraordinary diligence, and they cannot by contract exempt themselves from
liability resulting from their negligence or that of their servants; and

(d) When goods are delivered to the carrier in good order and the same are in bad order at the place of destination, the
carrier is prima facie liable.

Disagreeing with such judgment, American Steamship Agencies appealed directly to Us. The appeal brings forth for determination
this legal issue: Is the stipulation in the charter party of the owner's non-liability valid so as to absolve the American Steamship
Agencies from liability for loss?

The bills of lading,1 covering the shipment of Peruvian fish meal provide at the back thereof that the bills of lading shall be governed
by and subject to the terms and conditions of the charter party, if any, otherwise, the bills of lading prevail over all the agreements. 2 On
the of the bills are stamped "Freight prepaid as per charter party. Subject to all terms, conditions and exceptions of charter party dated
London, Dec. 13, 1962."

A perusal of the charter party3 referred to shows that while the possession and control of the ship were not entirely transferred to the
charterer,4 the vessel was chartered to its full and complete capacity (Exh. 3). Furthermore, the, charter had the option to go north or
south or vice-versa,5 loading, stowing and discharging at its risk and expense. 6Accordingly, the charter party contract is one of
affreightment over the whole vessel rather than a demise. As such, the liability of the shipowner for acts or negligence of its captain
and crew, would remain in the absence of stipulation.

Section 2, paragraph 2 of the charter party, provides that the owner is liable for loss or damage to the goods caused by personal want
of due diligence on its part or its manager to make the vessel in all respects seaworthy and to secure that she be properly manned,
equipped and supplied or by the personal act or default of the owner or its manager. Said paragraph, however, exempts the owner of
the vessel from any loss or damage or delay arising from any other source, even from the neglect or fault of the captain or crew or
some other person employed by the owner on board, for whose acts the owner would ordinarily be liable except for said paragraph..

Regarding the stipulation, the Court of First Instance declared the contract as contrary to Article 587 of the Code of Commerce making
the ship agent civilly liable for indemnities suffered by third persons arising from acts or omissions of the captain in the care of the
goods and Article 1744 of the Civil Code under which a stipulation between the common carrier and the shipper or owner limiting the
liability of the former for loss or destruction of the goods to a degree less than extraordinary diligence is valid provided it be reasonable,
just and not contrary to public policy. The release from liability in this case was held unreasonable and contrary to the public policy on
common carriers.
The provisions of our Civil Code on common carriers were taken from Anglo-American law.7 Under American jurisprudence, a common
carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier. 8 As a private carrier, a
stipulation exempting the owner from liability for the negligence of its agent is not against public policy,9 and is deemed valid.

Such doctrine We find reasonable. The Civil Code provisions on common carriers should not be applied where the carrier is not acting
as such but as a private carrier. The stipulation in the charter party absolving the owner from liability for loss due to the negligence of
its agent would be void only if the strict public policy governing common carriers is applied. Such policy has no force where the public
at large is not involved, as in the case of a ship totally chartered for the use of a single party.

And furthermore, in a charter of the entire vessel, the bill of lading issued by the master to the charterer, as shipper, is in fact and legal
contemplation merely a receipt and a document of title not a contract, for the contract is the charter party. 10 The consignee may not
claim ignorance of said charter party because the bills of lading expressly referred to the same. Accordingly, the consignees under
the bills of lading must likewise abide by the terms of the charter party. And as stated, recovery cannot be had thereunder, for loss or
damage to the cargo, against the shipowners, unless the same is due to personal acts or negligence of said owner or its manager, as
distinguished from its other agents or employees. In this case, no such personal act or negligence has been proved.

WHEREFORE, the judgment appealed from is hereby reversed and appellant is absolved from liability to plaintiff. No costs. So
ordered.

G.R. No. 98243 July 1, 1992

ALEJANDRO ARADA, doing business under the name and style "SOUTH NEGROS ENTERPRISES", petitioner,
vs.
HONORABLE COURT OF APPEALS, respondents.

PARAS, J.:

This is a petition for review on certiorari which seeks to annul and set aside the decision * of the Court of Appeals dated April 8, 1991
in CA-G.R. CV No. 20597 entitled "San Miguel Corporation v. Alejandro Arada, doing business under the name and style "South
Negros Enterprises", reversing the decision of the RTC, Seventh Judicial Region, Branch XII, Cebu City, ordering petitioner to pay the
private respondent tho amount of P172,284.80 representing the value of the cargo lost on board the ill-fated, M/L Maya with interest
thereon at the legal rate from the date of the filing of the complaint on March 25, 1983 until fully paid, and the costs.

The undisputed facts of the case are as follows: Alejandro Arada, herein petitioner, is the proprietor and operator of the firm South
Negros Enterprises which has been organized and established for more than ten (10) years. It is engaged in the business of small
scale shipping as a common carrier, servicing the hauling of cargoes of different corporations and companies with the five (5) vessels
it was operating (Rollo, p. 121).

On March 24, 1982. petitioner entered into a contract with private respondent to safely transport as a common carrier, cargoes of the
latter from San Carlos City, Negros Occidental to Mandaue City using one of petitioner's vessels, M/L Maya. The cargoes of private
respondent consisted of 9,824 cases of beer empties valued at P176,824.80, were itemized as follows:

NO. CARGO VALUE

OF
CASE
S
7,515 PPW P136.773.0
CS STENIE 0
MTS
1,542 PLW 23,438.40
CS GRANDE
MTS
58 CS G.E. 1,276.00
PLASTIC
MTS
24 CS PLP MTS 456.00
37 CS CS 673.40
WOODEN
MTS
8 CS LAGERLIT 128.00
E PLASTIC
MTS
640 STENEI 14,080.00
CS PLASTIC
MTS
9,824 P176,824.8
CS 0

On March 24, 1982, petitioner thru its crew master, Mr. Vivencio Babao, applied for a clearance with the Philippine Coast Guard for
M/L Maya to leave the port of San Carlos City, but due to a typhoon, it was denied clearance by SNI Antonio Prestado PN who was
then assigned at San Carlos City Coast Guard Detachment (Rollo, p. 122).

On March 25, 1982 M/L Maya was given clearance as there was no storm and the sea was calm. Hence, said vessel left for Mandaue
City. While it was navigating towards Cebu, a typhoon developed and said vessel was buffeted on all its sides by big waves. Its rudder
was destroyed and it drifted for sixteen (16) hours although its engine was running.
On March 27, 1982 at about 4:00 a.m., the vessel sank with whatever was left of its cargoes. The crew was rescued by a passing
pump boat and was brought to Calanggaman Island. Later in the afternoon, they were brought to Palompon, Leyte, where Vivencio
Babao filed a marine protest (Rollo, p. 10).

On the basis of such marine protest, the Board of Marine Inquiry conducted a hearing of the sinking of M/L Maya wherein private
respondent was duly represented. Said Board made its findings and recommendation dated November 7, 1983, the dispositive portion
of which reads as:

WHEREFORE, premises considered, this Board recommends as it is hereby recommended that the
owner/operator, officers and crew of M/L Maya be exonerated or absolved from any administrative liability on
account of this incident (Exh. 1).

The Board's report containing its findings and recommendation was then forwarded to the headquarters of the Philippine Coast Guard
for appropriate action. On the basis of such report, the Commandant of the Philippine Coast Guard rendered a decision dated
December 21, 1984 in SBMI Adm. Case No. 88-82 exonerating the owner/operator officers and crew of the ill-fated M/L Maya from
any administrative liability on account of said incident (Exh. 2).

On March 25, 1983, Private respondent filed a complaint in the Regional Trial Court its first cause of action being for the recovery of
the value of the cargoes anchored on breach of contract of carriage. After due hearing, said court rendered a decision dated July 18,
1988, the dispositive portion of which reads

WHEREFORE, judgment is hereby rendered as follows:

(1) With respect to the first cause of action, claim of plaintiff is hereby dismissed;

(2) Under the second cause of action, defendant must pay plaintiff the sum of P2,000.00;

(3) In the third cause of action, the defendant must pay plaintiff the sum of P2,849.20;

(4) Since the plaintiff has withheld the payment of P12,997.47 due the defendynt, the plaintiff should deduct the
amount of P4,849.20 from the P12,997.47 and the balance of P8,148.27 must be paid to the defendant; and

(5) Defendant's counterclaim not having been substantiated by evidence is likewise dismissed. NO COSTS. (Orig.
Record, pp. 193-195).

Thereafter, private respondent appealed said decision to the Court of Appeals claiming that the trial court erred in —

(1) holding that nothing was shown that the defendant, or any of his employees who manned the M/L Maya was
negligent in any way nor did they fail to observe extraordinary diligence over the cargoes of the plaintiff; and

(2) holding that the sinking of said vessel was caused by the storm, consequently, dismissing the claim of plaintiff
in its first cause of action for breach of contract of carriage of goods (Rollo, pp. 33-34; Decision, pp. 3-4).

In its decision Promulgated on April 8, 1991, the Court of Appeals reversed the decision of the court a quo, the dispositive portion and
the dispositive part of its decision reads as:

WHEREFORE, that part of the Judgment appeal6d from is REVERSED and the appellee Aleiandro Arada, doing
business by the name and style, "South Negros Enterprises", ordered (sic) to pay unto the appellant San Miguel
Corporation the amount of P176,824.80 representing the value of the cargo lost on board the ill-fated vessel, M/L
Maya, with interest thereon at the legal rate from date of the filing of the complaint on March 25, 1983, until fully
paid, and the costs. (Rollo, p. 37)

The Court of Appeals ruled that "in view of his failure to observe extraordinary diligence over the cargo in question and his negligence
previous to the sinking of the carrying vessel, as above shown, the appellee is liable to the appellant for the value of the lost cargo.

Hence the present recourse.

On November 20, 1991, this Court gave due course to the petition. The pivotal issue to be resolved is whether or not petitioner is
liable for the value of the lost cargoes.

Petitioner contends that it was not in the exercise of its function as a common carrier when it entered into a contract with private
respondent,but was then acting as a private carrier not bound by the requirement of extraordinary diligence (Rollo, p. 15) and that the
factual findings of the Board of Marine Inquiry and the Special Board of Marine Inquiry are binding and conclusive on the Court (Rollo,
pp. 16-17).

Private respondent counters that M/L Maya was in the exercise of its function as a common carrier and its failure to observe the
extraordinary diligence required of it in the vigilance over their cargoes makes Petitioner liable for the value of said cargoes.

The petition is devoid of merit.

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 (Art. 1732 of the New Civil Code).
In the case at bar, there is no doubt that petitioner was exercising its function as a common carrier when it entered into a contract with
private respondent to carry and transport the latter's cargoes. This fact is best supported by the admission of petitioner's son, Mr. Eric
Arada, who testified as the officer-in-charge for operations of South Negros Enterprises in Cebu City. In substance his testimony on
January 14, 1985 is as follows:

Q. How many vessels are you operating?

A. There were all in all around five (5).

Q. And you were entering to service hauling of cargoes to different companies, is that correct?

A. Yes, sir.

Q. In one word, the South Negros Enterprises is engaged in the business of common carriers, is that correct?

A. Yes, sir,

Q. And in fact, at the time of the hauling of the San Miguel Beer, it was also in the same category as a common carrier?

A. Yes, sir,

(TSN. pp. 3-4, Jan. 29, 1985)

A common carrier, both from the nature of its business and for insistent reasons of public policy is burdened by law with the duty of
exercising extraordinary diligence not only in ensuring the safety of passengers, but in caring for the goods transported by it. The loss
or destruction or deterioration of goods turned over to the common carrier for the conveyance to a designated destination raises
instantly a presumption of fault or negligence on the part of the carrier, save only where such loss, destruction or damage arises from
extreme circumstances such as a natural disaster or calamity ... (Benedicto v. IAC, G.R. No. 70876, July 19, 1990, 187 SCRA 547)
(Emphasis supplied).

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

In the instant case, the appellate court was correct in finding that petitioner failed to observe the extraordinary diligence over the cargo
in question and he or the master in his employ was negligent previous to the sinking of the carrying vessel. In substance, the decision
reads:

... VIVENCIO BABAO, the master of the carrying vessel, knew that there was a typboon coming before his
departure but did not check where it was.

xxx xxx xxx

If only for the fact that he was first denied clearance to depart on March 24, 1982, obviously because of a typhoon
coming, Babao, as master of the vessel, should have verified first where the typhoon was before departing on
March 25, 1982. True, the sea was calm at departure time. But that might be the calm before the storm. Prudence
dictates that he should have ascertained first where the storm was before departing as it might be on his path.
(Rollo, pp. 35-36)

Respondent court's conclusion as to the negligence of petitioner is supported by evidence. It will be noted that Vivencio Babao knew
of the impending typhoon on March 24, 1982 when the Philippine Coast Guard denied M/L Maya the issuance of a clearance to sail.
Less than 24 hours elapsed since the time of the denial of said clearance and the time a clearance to sail was finally issued on March
25, 1982. Records will show that Babao did not ascertain where the typhoon was headed by the use of his vessel's barometer and
radio (Rorlo, p. 142). Neither did the captain of the vessel monitor and record the weather conditions everyday as required by Art, 612
of the Code of Commerce (Rollo, pp. 142-143). Had he done so while navigating for 31 hours, he could have anticipated the strong
winds and big waves and taken shelter (Rollo, pp- 36; 145). His testimony on May 4, 1982 is as follows:

Q. Did you not check on your own where the typhoon was?

A. No. sir. (TSN, May 4, 1982, pp. 58-59)

Noteworthy is the fact that as Per official records of the Climatological Division of the Philippine Atmospheric, Geophysical and
Astronomical Services Administration (PAG-ASA for brevity) issued by its Chief of Climatological Division, Primitivo G. Ballan, Jr. as
to the weather and sea conditions that prevailed in the vicinity of Catmon, Cebu during the period March 25-27, 1982, the sea
conditions on March 25, 1982 were slight to rough and the weather conditions then prevailing during those times were cloudy skies
with rainshowers and the small waves grew larger and larger, to wit:

SPE WAVE SEA WEAT

ED HT. HER
KNO (METE CONDITI
TS RS) ONS
Marc
h 25
8 AM 15 1-2 slight cloudy
 skies
w/
rainsho
wers
2 PM 20-25 2.0-3.0 modera overcas
te t skies
to w/ some
rough rains
8 PM 30 3.7 rough sea
heaps
up
white
foam
from
breakin
g waves
begin to
be
blown
in
streaks
along
the
directio
n of
the
wind;
Spindrift
begins
2 AM 30 3.7 rough sea
heaps
up
white
foam
from
breakin
g waves
begin to
be
blown
in
streaks
along
the
directio
n of the
wind;
Spindrift
begins

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

While the goods are in the possession of the carrier, it is but fair that it exercises extraordinary diligence in protecting them from loss
or damage, and if loss occurs, the law presumes that it was due to the carrier's fault or negligence; that is necessary to protect the
interest of the shipper which is at the mercy of the carrier (Art. 1756, Civil Code, Aboitiz Shipping Corporation v. Court of Appeals,
G.R. No. 89757, Aug. 6, 1990, 188 SCRA 387).

Furthermore, the records show that the crew of M/L Maya did not have the required qualifications provided for in P.D. No. 97 or the
Philippine Merchant Marine Officers Law, all of whom were unlicensed. While it is true that they were given special permit to man the
vessel, such permit was issued at the risk and responsibility of the owner (Rollo, p. 36).

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

In rejecting petitioner's claim, respondent court was correct in ruling that "such exoneration was but with respect to the administrative
liability of the owner/operator, officers and crew of the ill-fated" vessel. It could not have meant exoneration of appellee from liability
as a common carrier for his failure to observe extraordinary diligence in the vigilance over the goods it was transporting and for the
negligent acts or omissions of his employees. Such is the function of the Court, not the Special Board of Marine Inquiry." (Rollo, P.
37, Annex A, p. 7)

The Philippine Merchant Marine Rules and Regulations particularly Chapter XVI thereof entitled "Marine Investigation and Suspension
and Revocation Proceedings" prescribes the Rules governing maritime casualties or accidents, the rules and Procedures in
administrative investigation of all maritime cases within the jurisdiction or cognizance of the Philippine Coast Guard and the grounds
for suspension and revocation of licenses/certificates of marine officers and seamen (1601 — SCOPE); clearly, limiting the jurisdiction
of the Board of Marine Inquiry and Special Board of Marine Inquiry to the administrative aspect of marine casualties in so far as it
involves the shipowners and officers.

PREMISES CONSIDERED, the appealed decision is AFFIRMED.

SO ORDERED.