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[G.R. No. 138334. August 25, 2003.]

ESTELA L. CRISOSTOMO vs. THE COURT OF APPEALSand CARAVAN
TRAVEL & TOURS INTERNATIONAL, INC.
FACTS:
Petitioner Estela L. Crisostomo contracted the services of respondent
Caravan Travel and Tours International, Inc. to facilitate her tour known as
"Jewels
of
Europe."
On June 12, 1991, Meriam Menor, respondent's ticketing manager as well as
petitioner's niece, delivered petitioner's travel documents and plane tickets
and informed her to be at the airport on June 15, 1991, two hours before
departure. On the stated date when the petitioner went to the airport, the
ight that she was supposed to take had departed the previous day. She
complained to Menor, but the latter prevailed upon her to take another tour
known as "British Pageant." Upon petitioner's return from Europe, she
demanded from respondent the reimbursement of P61,421.70 representing
the dierence between the sum she paid for "Jewels of Europe" and the
amount she owed respondent for the "British Pageant" tour, but despite
several demands, respondent company refused to reimburse the amount,
contending that the same was non-refundable. Thus, she led a complaint
against respondent for breach of contract of carriage and damages. In its
answer, respondent denied the responsibility and insisted that petitioner was
duly informed of the correct departure as legibly printed on the plane ticket
two days ahead of the scheduled trip. After trial, the lower court awarded
damages to the petitioner on the basis that the respondent was negligent,
but it deducted 10% from the amount for the contributory negligence of
petitioner. On appeal, the Court of Appeals found petitioner to be more
negligent, hence, it directed her to pay the balance of the price for the
"British Pageant." Hence, this petition.

resultantly caused damage to the latter. Menor's negligence was not

suciently proved, considering that the only evidence presented was
petitioner's uncorroborated narration of the events. It is well-settled that the
party alleging a fact has the burden of proving it and a mere allegation
cannot take the place of evidence. If the plainti, upon whom rests the
burden of proving his cause of action, fails to show in a satisfactory manner
facts upon which he bases his claim, the defendant is under no obligation to
prove his exception or defense. Contrary to petitioner's claim, the evidence
on record showed that respondent exercised due diligence in performing its
obligation under the contract and followed standard procedure in rendering
its services to petitioner. Accordingly, petitioner was ordered to pay
respondent the amount of P12,901.00 representing the balance of the price
of the British Pageant Package tour.

ISSUE:
W/N there was contributory negligence, thus, respondent was also
negligent.
RULING: None.
The Court did not agree with the nding of the lower court that
Menor's negligence concurred with the negligence of petitioner and

2. G.R. No. 146018.

EDGAR COKALIONG

SHIPPING

LINES,

June
25,
2003
INC.,vs. UCPB GENERAL

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INSURANCE
PANGANIBAN, J.:

COMPANY,

INC.,

DOCTRINE: The liability of a common carrier for the loss of goods may, by
stipulation in the bill of lading, be limited to the value declared by the
shipper. On the other hand, the liability of the insurer is determined by the
actual value covered by the insurance policy and the insurance premiums
paid therefor, and not necessarily by the value declared in the bill of lading.
CAST: Cokaliong Shipping Lines- carrier
M/V Tandag- vessel
Nestor Angelia shipper and consignee (Bill of Lading No. 58- amt : 6500)
Zosimo Mercado shipper and consignee (Bill of Lading No. 59-amt: 14000)
Feliciana Legaspi insured the cargoes
UCPB insurer

FACTS: Sometime on December 11, 1991, Nestor Angelia delivered to the

Cokaliong Shipping Lines cargo consisting of one (1) carton of Christmas
decor and two (2) sacks of plastic toys to be transported on board the M/V
Tandag from Cebu City to Tandag, Surigao del Sur. Cokaliong issued Bill of
Lading No. 58, freight prepaid, covering the cargo.
Zosimo Mercado likewise delivered cargo to Cokaliong consisting of two (2)
cartons of plastic toys and Christmas decor, one (1) roll of floor mat and one
(1) bundle of various or assorted goods for transportation thereof from Cebu
City to Tandag, Surigao del Sur, on board the said vessel, and said voyage. A
Bill of Lading No. 59 covering the cargo was issued. On December 12, 1991,
Feliciana Legaspi insured the cargo, covered by Bill of Lading No. 59, with
the UCPB for the amount of P100,000.00 against all risks for which she was
issued a Marine Risk Note. She also insured the cargo covered by Bill of
Lading No. 58for the amount of P50,000.00.
When the vessel left port, it had 34 passengers and assorted cargo on board,
including the goods of Legaspi. After the vessel had passed by the Mandaue
Mactan Bridge, fire ensued in the engine room, and, despite earnest efforts
of the officers and crew of the vessel, the fire engulfed and destroyed the
entire vessel resulting in the loss of the vessel and the cargoes therein. The
Captain
filed
the
required
Marine
Protest.

Feliciana Legaspi filed a claim with the carrier for the value of the cargo
insured and covered by Bill of Lading No. 58 & 59. UCPB approved the claim
of Feliciana Legaspi and drew and issued UCPB Checks No. 612939, dated
March 9, 1992, in the total amount of P148,500.00, in settlement of her
claim after which she executed a Subrogation Receipt/Deed, for said amount,
in favor of UCPB
On July 14, 1992, UCPB, as subrogee of Feliciana Legaspi, filed a complaint
anchored on torts against Cokaliong, with RTC MAKATI, for the collection of
the total principal amount of P148,500.00, which it paid to Feliciana Legaspi
for the loss of the cargo.
RTC: absolved Cokaliong.
CA: Cokaliong is liable. Liability should be based on the actual insured value
of the goods and not from actual valuation declared by the shipper/consignee
in the bill of lading.
ISSUES: (1) Is petitioner liable for the loss of the goods? - YES
(2) If yes, what is the extent of its liability?
(1) The uncontroverted findings of the Philippine Coast Guard show that the
M/V Tandag sank due to a fire, which resulted from a crack in the auxiliary
engine fuel oil service tank. The fire could not have been caused by force
majeure. Broadly speaking, force majeure generally applies to a natural
accident, such as that caused by a lightning, an earthquake, a tempest or a
public enemy. Hence, fire is not considered a natural disaster or calamity.
Where loss of cargo results from the failure of the officers to inspect their
ship frequently so as to discover the existence of cracked parts, that loss
cannot be attributed to force majeure, but to the negligence of those officials.

The law provides that a common carrier is presumed to have been

negligent if it fails to prove that it exercised extraordinary vigilance
over the goods it transported. Ensuring the seaworthiness of the vessel is
the first step in exercising the required vigilance. Petitioner did not present
sufficient evidence showing what measures or acts it had undertaken to
ensure the seaworthiness of the vessel. It failed to show when the last
inspection and care of the auxiliary engine fuel oil service tank was made,
what the normal practice was for its maintenance, or some other evidence to
establish that it had exercised extraordinary diligence. It merely stated that

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constant inspection and care were not possible, and that the last time the
vessel was dry-docked was in November 1990. Necessarily, in accordance
with Article 1735 17 of the Civil Code, we hold petitioner responsible for the
loss of the goods covered by Bills of Lading Nos. 58 and 59.
(2)

Extent

of

Liability

UCPB contends that petitioners liability should be based on the actual

insured value of the goods, subject of this case. On the other hand,
COKALIONG claims that its liability should be limited to the value declared by
the
shipper/consignee
in
the
Bill
of
Lading.
SC: A stipulation in the bill of lading limiting the common carriers liability for
loss or destruction of a cargo to a certain sum, unless the shipper or owner
declares a greater value, is sanctioned by law, particularly Articles 1749 and
1750
of
the
Civil
Code
which
provides:
Art. 1749. A stipulation that the common carriers liability is limited to the
value of the goods appearing in the bill of lading, unless the shipper or owner
declares
a
greater
value,
is
binding.
Art. 1750. A contract fixing the sum that may be recovered by the owner or
shipper for the loss, destruction, or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has been freely and fairly
agreed
upon.
3.
TABACALERA
INSURANCE
CO.,
PRUDENTIAL
GUARANTEE
& ASSURANCE, INC., and NEW ZEALAND INSURANCE CO., LTD.,
vs.NORTH FRONT SHIPPING SERVICES, INC., and COURT OF
APPEALS,
G.R. No. 119197. May 16, 1997
Facts:
August 2, 1990 on board North Front 777 (owned by North Front Shipping
Services)

Cargo: 20,234 sacks of corn grains worth Php3,500,640

Consigned to Republic Four Mills Corp

Bill Lading No. 001

Insured w/ Prudential Guarantee and Assurance Inc and New

Zealand Insurance Co

Inspected by representatives of shipper and was found fit to

carry the merchandise

Concededly, the purpose of the limiting stipulation in the Bill of Lading is to

protect the common carrier. Such stipulation obliges the shipper/consignee to
notify the common carrier of the amount that the latter may be liable for in
case of loss of the goods. The common carrier can then take appropriate
measures getting insurance, if needed, to cover or protect itself. This
precaution on the part of the carrier is reasonable and prudent. Hence, a
shipper/consignee that undervalues the real worth of the goods it seeks to
transport does not only violate a valid contractual stipulation, but commits a
fraudulent act when it seeks to make the common carrier liable for more than
the
amount
it
declared
in
the
bill
of
lading.
Here, Zosimo Mercado and Nestor Angelia misled petitioner by undervaluing
the goods in their respective Bills of Lading. Hence, petitioner was exposed to
a risk that was deliberately hidden from it, and from which it could not
protect
itself.
It is well to point out that, for assuming a higher risk (the alleged actual
value of the goods) the insurance company was paid the correct higher
premium by Feliciana Legaspi; while petitioner was paid a fee lower than
what it was entitled to for transporting the goods that had been deliberately
undervalued by the shippers in the Bill of Lading. Between the two of them,
the insurer should bear the loss in excess of the value declared in the
Bills of Lading. This is the just and equitable solution. Cokaliong should not
be held liable for more than what was declared by the shippers/consignees as
the
value
of
the
goods
in
the
bills
of
lading.

Cargo covered with tarpaulins and wooden boards

Shipment is from Cagayan de Oro to Manila and arrived on August 16, 1990
Republic Flour Mills Corp was advised of the arrival but did not immediately
commenced unloading
Unloading stopped on certain days

Variable weather conditions

No particular reason
Unloading finished on September 5, 1990

Shortage of 26.333 metric tons after unloading

Remaining merchandise was already moldy, rancid and

deteriorating
Precision Analytical Services was hired to examine the corn grains and
determine cause of deterioration

Corn grains had 18.56% moisture content

Wetting due to contact with salt water

Molding can still be arrested by drying

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Republic Flour Mills Corp rejected the entire cargo and demanded North
Front to pay the damages it suffered but North Front refused to pay so the
insurance companies paid Php 2,189,433.40
Insurance companies filed complaint against North Front and hired Marine
Cargo Adjusters to conduct survey on the ship

Cracks were found in the bodega of the barge and heavy

concentration of molds on the tarpaulins and wooden boards

No seals in the hatches

Tarpaulins not brand new and there were patches in it, which
makes it possible for water to seep in

Bulkhead of the barge was rusty

Captain Solomon Villanueva, master of the vessel, claims that they cannot
be held liable because:

Barge was inspected by shippers representative prior to the actual

loading and was found adequate and seaworthy

Issued a permit to sail by Coast Guard

Tarpaulins were doubled and brand new

Hatches were properly sealed

Did not encounter big waves for it was impossible for water to seep in

Corn grains were farm wet and not properly dried when loaded
Lower Court:

Contract between the two is charter-party agreement so only

ordinary diligence is required

Diligence is met when prior inspection was done and permit to sail
issued
Court of Appeals:

North Front is common carrier

Requirements of extraordinary diligence met when it was issued a

permit to sail

Complaint dismissed and motion for reconsideration rejected

Issue:
WON North Front Shipping is a common carrier. If indeed, did it fail to
exercise the required diligence and thus should be held liable?
Held:
North Front Shipping is a common carrier. Thus, it has the burden of proving
that it observed extraordinary diligence in order to avoid responsibility for the
lost cargo.
The charter-party agreement between North Front Shipping Services, Inc.,
and Republic Flour Mills Corporation did not in any way convert the common
carrier into a private carrier. A charter-party is defined as a contract by
which an entire ship, or some principal part thereof, is let by the owner to
another person for a specified time or usex x x

Having been in the service since 1968, the master of the vessel would have
known at the outset that corn grains that were farm wet and not properly
dried would eventually deteriorate when stored in sealed and hot
compartments as in hatches of a ship. Equipped with this knowledge, the
master of the vessel and his crew should have undertaken precautionary
measures to avoid or lessen the cargos possible deterioration as they were
presumed knowledgeable about the nature of such cargo.
But none of such measures was taken.
It did not even endeavor to establish that the loss, destruction or
deterioration of the goods was due to the following: (a) flood, storm,
earthquake, lightning, or other natural disaster or calamity; (b) act of the
public enemy in war, whether international or civil; act or omission of the
shipper or owner of the goods; (d) the character of the goods or defects in
the packing or in the containers; (e) order or act of competent public
authority. This is a closed list. If the cause of destruction, loss or
deterioration is other than the enumerated circumstances, then the carrier is
rightly liable therefor.
However, the destruction, loss or deterioration of the cargo cannot be
attributed solely to the carrier. The consignee Republic Flour Mills Corporation
is guilty of contributory negligence. It was seasonably notified of the arrival
of the barge but did not immediately start the unloading operations.

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4. THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY,

INC.vs. COURT OF APPEALS and FELMAN SHIPPING LINES,
G.R. No. 116940 June 11, 1997
BELLOSILLO, J.:

FACTS:
On 6 July 1983 Coca-Cola Bottlers Philippines, Inc., loaded on board
"MV Asilda," a vessel owned and operated by respondent Felman Shipping
Lines, 7,500 cases of 1-liter Coca-Cola softdrink bottles to be transported
from Zamboanga City to Cebu City for consignee Coca-Cola Bottlers
Philippines, Inc., Cebu. The shipment was insured with petitioner Philippine
American General Insurance Co., Inc. "MV Asilda" left the port of Zamboanga
in fine weather at eight o'clock in the evening of the same day. At around
eight forty-five the following morning, 7 July 1983, the vessel sank in the
waters of Zamboanga del Norte bringing down her entire cargo with her
including the subject 7,500 cases of 1-liter Coca-Cola softdrink bottles.
On 15 July 1983 the consignee Coca-Cola Bottlers Philippines, Inc.,
Cebu plant, filed a claim with respondent FELMAN for recovery of damages it
sustained as a result of the loss of its softdrink bottles that sank with "MV

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Asilda." Respondent denied the claim thus prompting the consignee to file an
insurance claim with PHILAMGEN which paid its claim of P755,250.00.
Claiming its right of subrogation PHILAMGEN sought recourse against
respondent FELMAN which disclaimed any liability for the loss. In its
complaint PHILAMGEN alleged that the sinking and total loss of "MV Asilda"
and its cargo were due to the vessel's unseaworthiness as she was put to sea
in an unstable condition.

ISSUES:

On 15 February 1985 FELMAN filed a motion to dismiss based on the

affirmative defense that no right of subrogation in favor of PHILAMGEN was
transmitted by the shipper, and that, in any event, FELMAN had abandoned
all its rights, interests and ownership over "MV Asilda" together with her
freight and appurtenances for the purpose of limiting and extinguishing its
liability under Art. 587 of the Code of Commerce.

(c) Whether or not PHILAMGEN has the right of subrogation to the

rights and legal actions which the shipper had against FELMAN, the
shipowner.

The trial court dismissed the complaint of PHILAMGEN. On appeal the

Court of Appeals set aside the dismissal and remanded the case to the lower
court for trial on the merits. FELMAN filed a petition for certiorari with this
Court but it was subsequently denied on.
On 28 February 1992 the trial court rendered judgment in favor of
FELMAN. It ruled that "MV Asilda" was seaworthy when it left the port of
Zamboanga as confirmed by certificates issued by the Philippine Coast Guard
and the ship owner's surveyor attesting to its seaworthiness. Thus the loss of
the vessel and its entire shipment could only be attributed to either a
fortuitous event, in which case, no liability should attach unless there was a
stipulation to the contrary, or to the negligence of the captain and his crew,
in which case, Art. 587 of the Code of Commerce should apply.
PHILAMGEN appealed the decision to the Court of Appeals. On 29
August 1994 respondent appellate court rendered judgment finding "MV
Asilda" unseaworthy for being top-heavy as 2,500 cases of Coca-Cola
softdrink bottles were improperly stowed on deck. In other words, while the
vessel possessed the necessary Coast Guard certification indicating its
seaworthiness with respect to the structure of the ship itself, it was not
seaworthy with respect to the cargo. Nonetheless, the appellate court denied
the claim of PHILAMGEN on the ground that the assured's implied warranty of
seaworthiness was not complied with. Hence this petition.

(a) Whether or not "MV Asilda" was seaworthy when it left the port of
Zamboanga.
(b) Whether or not the limited liability under Art. 587 of the Code of
Commerce should apply.

HELD:
(a) NO. "MV Asilda" was unseaworthy when it left the port of
Zamboanga. This Court subscribe to the findings of the Elite
Adjusters, Inc., and the Court of Appeals that the proximate cause of
the sinking of "MV Asilda" was its being top-heavy. Contrary to the
ship captain's allegations, evidence shows that approximately 2,500
cases of softdrink bottles were stowed on deck. Several days after
"MV Asilda" sank; an estimated 2,500 empty Coca-Cola plastic cases
were recovered near the vicinity of the sinking. Considering that the
ship's hatches were properly secured, the empty Coca-Cola cases
recovered could have come only from the vessel's deck cargo. It is
settled that carrying a deck cargo raises the presumption of
unseaworthiness unless it can be shown that the deck cargo will not
interfere with the proper management of the ship. However, in this
case it was established that "MV Asilda" was not designed to carry
substantial amount of cargo on deck. The inordinate loading of cargo
deck resulted in the decrease of the vessel's metacentric height thus
making it unstable. The strong winds and waves encountered by the
vessel are but the ordinary vicissitudes of a sea voyage and as such
merely contributed to its already unstable and unseaworthy
condition.

(b) NO. Art. 587 of the Code of Commerce is not applicable to the case
at bar. The ship agent is liable for the negligent acts of the captain in
the care of goods loaded on the vessel. This liability however can be

TRANSPO DIGESTS 2| 7
limited through abandonment of the vessel, its equipment and
freightage as provided in Art. 587. Nonetheless, there are exceptional
circumstances wherein the ship agent could still be held answerable
despite the abandonment, as where the loss or injury was due to the
fault of the ship owner and the captain. The international rule is to
the effect that the right of abandonment of vessels, as a legal
limitation of a ship owners liability, does not apply to cases where
the injury or average was occasioned by the ship owner's own fault.
It must be stressed at this point that Art. 587 speaks only of
situations where the fault or negligence is committed solely by the
captain. Where the ship owner is likewise to be blamed, Art. 587 will
not apply, and such situation will be covered by the provisions of the
Civil Code on common carrier. It was already established at the
outset that the sinking of "MV Asilda" was due to its unseaworthiness
even at the time of its departure from the port of Zamboanga. As
such, FELMAN was equally negligent. It cannot therefore escape
liability through the expedient of filing a notice of abandonment of
the vessel by virtue of Art. 587 of the Code of Commerce.
Under Art 1733 of the Civil Code, "(c)ommon carriers, from the
nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the goods and
for the safety of the passengers transported by them, according to all
the circumstances of each case . . ." In the event of loss of goods,
common carriers are presumed to have acted negligently. FELMAN,
the shipowner, was not able to rebut this presumption.

(c) YES. PHILAMGEN's action against FELMAN is squarely sanctioned by

Art. 2207 of the Civil Code which provides:
Art. 2207. If the plaintiff's property has been insured, and he
has received indemnity from the insurance company for the injury or
loss arising out of the wrong or breach of contract complained of, the
insurance company shall be subrogated to the rights of the insured
against the wrongdoer or the person who has violated the contract. If
the amount paid by the insurance company does not fully cover the
injury or loss, the aggrieved party shall be entitled to recover the
deficiency from the person causing the loss or injury.

The doctrine of subrogation has its roots in equity. It is

designed to promote and to accomplish justice and is the mode which
equity adopts to compel the ultimate payment of a debt by one who
in justice, equity and good conscience ought to pay. Therefore, the
payment made by PHILAMGEN to Coca-Cola Bottlers Philippines, Inc.,
gave the former the right to bring an action as subrogee against
FELMAN. Having failed to rebut the presumption of fault, the liability
of FELMAN for the loss of the 7,500 cases of 1-liter Coca-Cola
softdrink bottles is inevitable.

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"Consorcio Pesquero del Peru of South America" shipped freight prepaid 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. During the delivery, there were
shortages amounting to P12,033.85.
Because Luzon Stevedoring Corporation and the American Steamship
Agencies, owner and operator of SS Crowborough, denied liability, Home
Insurance Company paid the consignee P14,870.71 as the insurance value of
the loss, as full settlement of the claim. As subrogee, Home Insurance filed
against American Steamship Agencies and Luzon Stevedoring Corp. a
complaint for recovery of P14,870.71 with legal interest, plus attorney's fees.
The CFI, 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 since
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 and the stipulation in the charter party contract exempting the owner
from liability is against public policy under Article 1744 of the Civil Code.
On appeal, American Steamship Agencies denied liability by alleging
that the charterer, not the shipowner, is responsible for any loss or damage of
the cargo.

6. Home Insurance Company vs. American Steamship Agencies Inc.

Gr. No. L-25599

Bengzon, J.P., J.:

FACTS:

April 4, 1968

ISSUES :
1. Whether or not the Civil Code provisions on common carriers apply to
chartered parties.
2. Whether or not a stipulation in a charter party on
from liability for loss is valid.

absolving the owner

TRANSPO DIGESTS 2| 9
would deliver the artificial trees to the consignee, Al-Mohr International
Group, in Riyadh, Saudi Arabia.

HELD:
1.

2.

No. The provisions of the Civil Code of the Philippines on common

carriers were taken from Anglo-American law. According to American
jurisprudence, a common carrier undertaking to carry a special cargo
or chartered to a special person only, becomes a private carrier. 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.
Yes. Section 2, paragraph 2 of the charter party, provides that the
owner is liable for loss or damage to the goods caused by personal
want of due diligence on its part or its manager to make the vessel in
all respects seaworthy and to secure that she be properly manned,
equipped and supplied or by the personal act or default of the owner
or its manager. Said paragraph, however, exempts the owner of the
vessel from any loss or damage or delay arising from any other
source, even from the neglect or fault of the captain or crew or some
other person employed by the owner on board, for whose acts the
owner would ordinarily be liable except for said paragraph. The strict
policy governing common carriers 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. The stipulation exempting the owner from
liability for the negligence of its agent is not against public policy and
is deemed valid.

7. DSR-SENATOR LINES AND C.F. SHARP AND COMPANY, INC., vs.

FEDERAL PHOENIX ASSURANCE CO.,

Under the Bill of Lading, the port of discharge for the cargo was at
the Khor Fakkan port and the port of delivery was Riyadh, Saudi Arabia, via
Port Dammam. The cargo was loaded in M/S "Arabian Senator." Federal
Phoenix Assurance Company, Inc. (Federal Phoenix) insured the cargo
against all risks in the amount of P941,429.61. On June 7, 1993, M/S
"Arabian Senator" left the Manila South Harbor for Saudi Arabia with the
cargo on board. When the vessel arrived in Khor Fakkan Port, the cargo was
reloaded on board DSR-Senator Lines feeder vessel, M/V "Kapitan Sakharov,"
bound for Port Dammam, Saudi Arabia.
However, while in transit, the vessel and all its cargo caught fire. On
July 5, 1993, DSR-Senator Lines informed Berde Plants that M/V "Kapitan
Sakharov" with its cargo was gutted by fire and sank. On December 16,
1993, CF Sharp issued a certification to that effect. Consequently, Federal
Phoenix paid Berde Plants P941,429.61 corresponding to the amount of
insurance for the cargo. In turn Berde Plants executed in its favor a
"Subrogation Receipt" dated Jan. 17, 1994. On Feb 8, 1994, Federal Phoenix
sent a letter to CF Sharp demanding payment of P941,429.61 on the basis of
the Subrogation Receipt. CF Sharp denied any liability on the ground that
such liability was extinguished when the vessel carrying the cargo was gutted
by fire. Thus, on March 11, 1994, Federal Phoenix filed with the RTC a
complaint for damages against DSR-Senator Lines and CF Sharp. On August
22, 1995, the RTC ruled in favor of Federal Phoenix. CA affirmed the RTC
Decision and denied the motion for reconsideration of DSRSenator Lines and
CF Sharp.
ISSUE: WON DSR-Senator and CF Sharp may be exempted from liability on
the ground that the vessel with the cargo was gutted by fire
HELD: NO 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:

INC. G.R. No. 135377 October 7, 2003

(1)Flood, storm, earthquake, lightning, or other natural disaster or calamity;

FACTS:

(2) Act of the public enemy in war, whether international or civil;

Berde Plants, Inc. (Berde Plants) delivered 632 units of artificial trees
to C.F. Sharp and Company, Inc (CF Sharp), the general ship agent of DSRSenator Lines, a foreign shipping corporation. It was agreed that CF Sharp

(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;

TRANSPO DIGESTS 2| 10
(5) Order or act of competent public authority.
Fire is not one of those enumerated under the above provision which
exempts a carrier from liability for loss or destruction of the cargo. Even if
fire were to be considered a natural disaster within the purview of Article
1734, it is required under Article 1739 of the same Code that the natural
disaster must have been the proximate and only cause of the loss, and that
the carrier has exercised due diligence to prevent or minimize the loss
before, during or after the occurrence of the disaster.
A common carriers duty to observe the requisite diligence in the
shipment of goods lasts from the time the articles are surrendered to or
unconditionally placed in the possession of, and received by, the carrier for
transportation until delivered to or until the lapse of a reasonable time for
their acceptance by the person entitled to receive them. Common carriers are
obliged to observe extraordinary diligence in the vigilance over the goods
transported by them. Accordingly, they are presumed to have been at fault or
to have acted negligently if the goods are lost, destroyed or deteriorated.
There are very few instances when the presumption of negligence does not
attach and these instances are enumerated in Article 1734.
In those cases where the presumption is applied, the common carrier
must prove that it exercised extraordinary diligence in order to overcome the
presumption Federal Phoenix raised the presumption of negligence against
petitioners. However, they failed to overcome it by sufficient proof of
extraordinary diligence.

8. Sarkies Tours Philippines, Inc. v. CA, Elino Fortades, Marisol

Fortades and Fatima Minerva Fortades G.R. No. 108897, October 2,
1997
FACTS: The case arose from a damage suit filed by private respondents
against petitioner for breach of contract of carriage allegedly attended by bad
faith. Fatima boarded Sarkies Tours bus in Manila on her way to Legazpi City.
She had her 3pieces of luggage containing all of her optometry review books,
materials and equipment, trial lenses, trial contact lenses, passport and visa,
as well as her mother Marisols U.S. immigration (green) card, among other
important documents and personal belongings loaded in the bus luggage
compartment. During a stopover at Daet, it was discovered that only one bag
remained in the open compartment. The others, including Fatimas things,

were missing and might have dropped along the way. Fatima filed an action
against Sarkies Tours, claiming that the loss was due to its failure to observe
extraordinary diligence in the care of her luggage and that Sarkies Tours
dealt with them in bad faith from the start. Petitioner, on the other hand,
disowned any liability for the loss on the ground that Fatima allegedly did not
declare any excess baggage upon boarding its bus. The trial court adjudged
the case in favour of respondents. On appeal, the appellate court affirmed
the trials courts judgement, but deleted the award of moral and exemplary
damages. Its motion for reconsideration was likewise rejected by the Court of
Appeals. Hence, this petition.
ISSUE: Whether or not Sarkies Tours is liable.
HELD: Yes.
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, and this liability 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 person who has a right to receive them, unless the loss is
due to any of the excepted causes under Art. 1734. The cause of the loss was
Sarkies Tours negligence in not ensuring that the doors of the baggage
compartment of its bus were securely fastened. As a result of this lack of
care, almost all the luggages were lost to the prejudice of the paying
passengers. As the Court of Appeals correctly observed: ". . . Where the
common carrier accepted its passengers baggage for transportation and
even had it placed in the vehicle by its own employee, its failure to collect the
freight charge is the common carriers own lookout. It is responsible for the
consequent loss of the baggage. In the instant case, defendant appellants
employee even helped Fatima Minerva Fortades and her brother load the
luggages/baggages in the bus baggage compartment, without asking that
they be weighed, declared, receipted or paid for. Neither was this required of
the other passengers

TRANSPO DIGESTS 2| 11
compartment was damaged, and water gushed in through a hole "two inches
wide and twenty-two inches long." As a consequence, the molasses at the
cargo tanks were contaminated and rendered unfit for the use it was
intended. This prompted the consignee, Pag-asa Sales, Inc. to reject the
shipment of molasses as a total loss. Thereafter, Pag-asa Sales, Inc. filed a
formal claim with the insurer of its lost cargo, herein private respondent,
Philippine General Insurance Company (PhilGen, for short) and against the
carrier, herein petitioner, Coastwise Lighterage. Coastwise Lighterage denied
the claim and it was PhilGen which paid the consignee, Pag-asa Sales, Inc.,
the amount of P700,000.00 representing the value of the damaged cargo of
molasses.
In turn, PhilGen then filed an action against Coastwise Lighterage before the
Regional Trial Court of Manila, seeking to recover the amount of P700,000.00
which it paid to Pag-asa Sales, Inc. for the latters lost cargo
RTC awarded the amount prayed for by PhilGen. CA affirmed.
ISSUE: whether or not petitioner Coastwise Lighterage was transformed into
a private carrier, by virtue of the contract of affreightment which it entered
into with the consignee, Pag-asa Sales, Inc..
HELD: NO. The distinction between the two kinds of charter parties (i.e.
bareboat or demise and contract of affreightment) is more clearly set out in
the case of Puromines, Inc v. Court of Appeals:

9. COASTWISE LIGHTERAGE CORPORATION, Petitioner, v. COURT OF

APPEALS
and
the
PHILIPPINE
GENERAL
INSURANCE
COMPANY, Respondents.
FACTS:
Pag-asa Sales Inc. entered into a contract to transport molasses from the
province of Negros to Manila with Coastwise Lighterage Corporation
(Coastwise for brevity), using the latters dumb barges. The barges were
towed in tandem by the tugboat MT Marica, which is likewise owned by
Coastwise.
Upon reaching Manila Bay, while approaching Pier 18, one of the barges,
"Coastwise 9", struck an unknown sunken object. The forward buoyancy

"Under the demise or bareboat charter of the vessel, the charterer will
generally be regarded as the owner for the voyage or service stipulated. The
charterer mans the vessel with his own people and becomes 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.
On the other hand a contract of affreightment is one in which the owner of
the vessel leases part or all of its space to haul goods for others. Under such
contract the general owner retains the possession, command and navigation
of the ship, the charterer or freighter merely having use of the space in the
vessel in return for his payment or the charter hire.
Although a charter party may transform a common carrier into a
private one, the same however is not true in a contract of

TRANSPO DIGESTS 2| 12
affreightment on account of the aforementioned distinctions between
the two.
Petitioner admits that the contract it entered into with the consignee was one
of affreightment. Pursuant therefore to the ruling in the aforecited
Puromines case, Coastwise Lighterage, by the contract of
affreightment, was not converted into a private carrier, but remained
a common carrier and was still liable as such.
It follows then that the presumption of negligence that attaches to common
carriers, once the goods it is sports are lost, destroyed or deteriorated,
applies to the petitioner. Petitioner contends that navigational hazard was
the efficient cause of the accident. Thus, being unaware of the hidden danger
that lies in its path, it became impossible for the petitioner to avoid the
same.

However, petitioners assertion is belied by the evidence on record. Jesus

Constantino, the patron of the vessel "Coastwise 9" admitted that he was not
licensed.
Clearly, petitioner Coastwise Lighterages embarking on a voyage with an
unlicensed patron violates Art. 609 of the Code of Commerce. It cannot
safely claim to have exercised extraordinary diligence, by placing a person
whose navigational skills are questionable. As a common carrier, petitioner is
liable for breach of the contract of carriage, having failed to overcome the
presumption of negligence with the loss and destruction of goods it
transported, by proof of its exercise of extraordinary diligence. PETITION IS
DENIED.