Caltex [Philippines], Inc. vs. Sulpicio Lines, Inc.

Facts:

On December 20, 1987, motor tanker MV Vector, carrying petroleum products of Caltex, collided in the open sea
with passenger ship MV Doña Paz, causing the death of all but 25 of the latter’s passengers. Among those who died
were Sebastian Canezal and his daughter Corazon Canezal. On March 22, 1988, the board of marine inquiry found
that Vector Shipping Corporation was at fault. On February 13, 1989, Teresita Cañezal and Sotera E. Cañezal,
Sebastian Cañezal’s wife and mother respectively, filed with the Regional Trial Court of Manila a complaint for
damages arising from breach of contract of carriage against Sulpicio Lines. Sulpicio filed a third-party complaint
against Vector and Caltex. The trial court dismissed the complaint against Caltex, but the Court of Appeals included
the same in the liability. Hence, Caltex filed this petition.

Issue:

Is the charterer of a sea vessel liable for damages resulting from a collision between the chartered vessel and a
passenger ship?

Held:

First: The charterer has no liability for damages under Philippine Maritime laws.

Petitioner and Vector entered into a contract of affreightment, also known as a voyage charter.

A charter party is 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 use; a contract of affreightment is one by which the owner of a ship or other vessel
lets the whole or part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in
consideration of the payment of freight. A contract of affreightment may be either time charter, wherein the leased
vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single
voyage. In both cases, the charter-party provides for the hire of the vessel only, either for a determinate period of
time or for a single or consecutive voyage, the ship owner to supply the ship’s store, pay for the wages of the master
of the crew, and defray the expenses for the maintenance of the ship. If the charter is a contract of affreightment,
which leaves the general owner in possession of the ship as owner for the voyage, the rights and the responsibilities
of ownership rest on the owner. The charterer is free from liability to third persons in respect of the ship.

Second: MT Vector is a common carrier

The charter party agreement did not convert the common carrier into a private carrier. The parties entered into a
voyage charter, which retains the character of the vessel as a common carrier. It is imperative that a public carrier
shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons,
provided the charter is limited to the ship only, as in the case of a time-charter or voyage charter. It is only when the
charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at
least insofar as the particular voyage covering the charter-party is concerned. Indubitably, a ship-owner in a time or
voyage charter retains possession and control of the ship, although her holds may, for the moment, be the property
of the charterer. A common carrier is a person or corporation whose regular business is to carry passengers or
property for all persons who may choose to employ and to remunerate him. 16 MT Vector fits the definition of a
common carrier under Article 1732 of the Civil Code.

The public must of necessity rely on the care and skill of common carriers in the vigilance over the goods and safety
of the passengers, especially because with the modern development of science and invention, transportation has
become more rapid, more complicated and somehow more hazardous. For these reasons, a passenger or a shipper
of goods is under no obligation to conduct an inspection of the ship and its crew, the carrier being obliged by law to
impliedly warrant its seaworthiness.
Third: Is Caltex liable for damages under the Civil Code?

The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it chartered
complied with all legal requirements. The duty rests upon the common carrier simply for being engaged in "public
service." The relationship between the parties in this case is governed by special laws. Because of the implied
warranty of seaworthiness, shippers of goods, when transacting with common carriers, are not expected to inquire
into the vessel’s seaworthiness, genuineness of its licenses and compliance with all maritime laws. To demand more
from shippers and hold them liable in case of failure exhibits nothing but the futility of our maritime laws insofar as
the protection of the public in general is concerned. Such a practice would be an absurdity in a business where time
is always of the essence. Considering the nature of transportation business, passengers and shippers alike
customarily presume that common carriers possess all the legal requisites in its operation.
Case digest for Puromines vs Court of Appeals

Nocon, J:

Facts:

Pursuant to a contract of sale executed between Puromines Inc (petitioner) and Philipp Brothers Oceanic, Inc., (private
respondent) as charterer of M/V Liliana Dimitrova, 3 Bills of Lading were executed bound for the Iloilo and Manila of 15,000
metric tons of prilled urea.

However, upon reaching the port of Manila it was found out that the shipment (urea) were already contaminated with
rust and dirt.

This prompted petitioner to file an action for breach of contract of carriage against Maritime Factors, Inc as ship agent
here in the Philippines for the owners of M/V Liliana in the complaint moreover private respondent Philipp Brothers Oceanic
Inc., was impleaded as charterer of the said vessel.

Private respondent, Philipp Brothers, instead of filing its answer filed a motion to dismiss on the ground of no cause of
action. Private respondent also avers that Puromines Inc. should comply with the arbitration clause provided for in the sales
contract.

Facts show that the sales contract executed between Puromines Inc., and Philipp Brothers Oceanic, Inc., provides for an
arbitration clause wherein it states that:

“Any disputes arising under this contract shall be settled by arbitration in London in accordance with the Arbitration Act
1950 and any statutory amendment or modification thereof. Each party is to appoint an Arbitrator, and should they be unable to
agree, the decision of an Umpire appointed by the them be final. The Arbitrators and Umpire are all to be commercial men and
resident in London. This submission may be made a rule of the High Court of Justice in England by either party.”

Petitioner moved to oppose the said motion to dismiss alleging that the arbitration clause is not applicable on the case
because the complaint did not arise from the violation of the terms and conditions of the sales contract but rather for claims of
cargo agreement.

The trial court ruled in favor of the petitioner. On appeal, the CA reversed the decision of the trial court and found that
the arbitration clause is applicable.

Hence this petition.

Issue: whether petitioner is bound by the arbitration clause in the sales contract.

RATIO:

Yes, petitioner is bound by the arbitration clause provided for in the contract. Arbitration has been held valid and
constitutional. Even before the enactment of RA no. 876, the Supreme Court has countenanced the settlement of disputes
through arbitration. The rule now is that unless the agreement is such absolutely close the doors of the courts against the
parties, which agreement would be void, the courts will look with favor upon such amicable arrangements and will only interfere
with great reluctance to anticipate or nullify the action of the arbitrator.

At the case at bar, the sales contract is comprehensive enough to include claims for damages arising from carriage and
delivery of the goods. Puromines, Inc derived his right to the cargo from the bill of lading which is the contract of affreihtment
together with the sales contract. Consequently, Puromines is bound by the provisions and terms of the bill of lading and of the
arbitration clause.

Moreover the court also ruled that, whether the liability of respondent should be based on the sales contract or that of
the bill of lading, the parties are nevertheless obligated to respect the arbitration provisions on sales contract and/or the bill of
lading. Petitioner being a signatory and party to the sales contract cannot escape from his obligation under the arbitration clause
as stated therein.
 As pointed out in the case of Mindanao Portland Cement Corp. vs Mc Donough Construction Company of Florida the
court ruled:

“With a written provision for arbitration as well as failure on respondent's part to comply, parties must proceed to their
arbitration in accordance with the terms of their agreement (Sec. 6, RA 876). Proceeding in court is merely a summary remedy to
enforce the agreement to arbitrate. The duty of the court in this case is not to resolve the merits of the parties' claims but only
to determine if they should proceed to arbitration or not . And although it has been ruled that a frivolous or patently baseless
claim should not be ordered to arbitration it is also recognized that the mere fact that a defense exist against a claim does not
make it frivolous or baseless.

WHEREFORE, the decision of the CA is affirmed, petition is dismissed.

De Guzman v. CA

Facts:

Respondent Ernesto Cendana was a junk dealer. He buys scrap materials and brings those that he gathered to
Manila for resale using 2 six-wheeler trucks. On the return trip to Pangasinan, respondent would load his
vehicle with cargo which various merchants wanted delivered, charging fee lower than the commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman contracted with respondent for the delivery of
750 cartons of Liberty Milk. On December 1, 1970, respondent loaded the cargo. Only 150 boxes were
delivered to petitioner because the truck carrying the boxes was hijacked along the way. Petitioner
commenced an action claiming the value of the lost merchandise. Petitioner argues that respondent, being a
common carrier, is bound to exercise extraordinary diligence, which it failed to do. Private respondent
denied that he was a common carrier, and so he could not be held liable for force majeure. The trial court
ruled against the respondent, but such was reversed by the Court of Appeals.

Issues:

(1) Whether or not private respondent is a common carrier

(2) Whether private respondent is liable for the loss of the goods

Held:

(1) Article 1732 makes no distinction between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary activity. Article 1732 also
carefully avoids making any distinction between a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the
general community or population, and one who offers services or solicits business only from a narrow
segment of the general population. It appears to the Court that private respondent is properly characterized
as a common carrier even though he merely "back-hauled" goods for other merchants from Manila to
Pangasinan, although such backhauling was done on a periodic or occasional rather than regular or
scheduled manner, and even though private respondent's principal occupation was not the carriage of goods
for others. There is no dispute that private respondent charged his customers a fee for hauling their goods;
that fee frequently fell below commercial freight rates is not relevant here. A certificate of public
convenience is not a requisite for the incurring of liability under the Civil Code provisions governing
common carriers.

(2) Article 1734 establishes the general rule 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 disaster or calamity;

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

c. 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; and

e. Order or act of competent public authority."

The hijacking of the carrier's truck - does not fall within any of the five (5) categories of exempting causes
listed in Article 1734. Private respondent as common carrier is presumed to have been at fault or to have
acted negligently. This presumption, however, may be overthrown by proof of extraordinary diligence on
the part of private respondent. We believe and so hold that the limits of the duty of extraordinary diligence
in the vigilance over the goods carried are reached where the goods are lost as a result of a robbery which is
attended by "grave or irresistible threat, violence or force." we hold that the occurrence of the loss must
reasonably be regarded as quite beyond the control of the common carrier and properly regarded as a
fortuitous event. It is necessary to recall that even common carriers are not made absolute insurers against all
risks of travel and of transport of goods, and are not held liable for acts or events which cannot be foreseen
or are inevitable, provided that they shall have complied with the rigorous standard of extraordinary
diligence.
 MARKET DEVELOPERS v. IAC
GR No. 74978. September 8, 1989
CRUZ, J:

FACTS: On June 20, 1978, petitioner Market Developers, Inc. (MADE) entered into a written barging and towage
contract with private respondent Gaudioso Uy for the shipment of the former's cargo from Iligan City to Kalibo,
Aklan, at the rate of P1.45 per bag.
The petitioner was allowed 4 lay days and agreed to pay demurrage at the rate of P5,000.00 for every day of
delay, or in excess of the stipulated allowance. On June 26, 1978, Uy sent a barge and a tugboat to Iligan City and
loading of the petitioner's cargo began immediately. It is not clear who made the request, but upon completion of
the loading on June 29, 1978, the parties agreed to divert the barge to Culasi, Roxas City, with the cargo being
consigned per bill of lading to Modern Hardware in that city. This new agreement was not reduced to writing.
The shipment arrived in Roxas City on July 13, 1978, and the cargo was eventually unloaded and duly
received by the consignee. There is some dispute as to the time consumed for such unloading. At any rate, about six
months later, Uy demanded payment of demurrage charges in the sum of P40,855.40 for an alleged delay of eight
days and 4/25 hours.
MADE ignored this demand, and Uy filed suit. He was sustained by the trial court, which ordered the
petitioner to pay him the said amount with interest plus P4,000.00 attorney's fees and the cost of the suit. This
decision was fully affirmed on appeal to the respondent court, which is the reason for this petition. Agreeing with
the trial court, the respondent court held that since the diversion of the cargo to Roxas City was not covered by a
new written agreement, the original agreement must prevail.

ISSUE: Whether or not the first written contract must prevail since the new contract did not contain any stipulation
for demurrage and because it was not in writing.

HELD: No.
To hold that the old agreement was still valid and subsisting notwithstanding this substantial change was to impose
upon the petitioner a condition he had not, and would not have, accepted under the new agreement.

Article 1356 of the Civil Code provides:

Contracts shall be obligatory in whatever form they may have been entered into, provided all the
essential requisites for their validity are present. However, when the law requires that a contract
be in some form in order that it may be valid or enforceable, or that a contract be proved in a
certain way, that requirement is absolute and indispensable . . .

We affirmed this rule only recently when we said in Tong v. Intermediate Appellate Court that "a contract may be
entered into in whatever form except where the law requires a document or other special form as in the contracts
enumerated in Article 1388 of the Civil Code. The general rule, therefore, is that a contract may be oral or written."

The contract executed by MADE and Uy was a contract of affreightment. As defined, a contract of affreightment is a
contract with the shipowner to hire his ship or part of it, for the carriage of goods, and generally takes the form
either of a charter party or a bill of lading.

Article 652 of the Code of Commerce provides that "a charter party must be drawn in duplicate and signed by the
contracting parties" and enumerates the conditions and information to be embodied in the contract, including "the
lay days and extra lay days to be allowed and the demurrage to be paid for each of them." (requisites of charter
party)

But while the rule clearly shows that this kind of contract must be in writing, the succeeding Article 653 just as
clearly provides:

If the cargo should be received without a charter party having been signed, the contract shall be
understood as executed in accordance with what appears in the bill of lading, the sole evidence of
title with regard to the cargo for determining the rights and obligations of the ship agent, of the
captain and of the charterer. (form of charter party)
We read this last provision as meaning that the charter party may be oral, in which case the terms thereof, not
having been reduced to writing, shall be those embodied in the bill of lading.

Therefore, the first written contract was cancelled and replaced by the second verbal contract because of the change
in the destination of the cargo.

G.R. No. 166250 July 26, 2010

UNSWORTH TRANSPORT INTERNATIONAL (PHILS.), INC., Petitioner,
vs.
COURT OF APPEALS and PIONEER INSURANCE AND SURETY CORPORATION, Respondents.

Facts: On August 31, 1992, the shipper Sylvex Purchasing Corporation delivered to UTI a shipment of 27 drums of various raw
materials for pharmaceutical manufacturing, consisting of: "1) 3 drums (of) extracts, flavoring liquid, flammable liquid x x x
banana flavoring; 2) 2 drums (of) flammable liquids x x x turpentine oil; 2 pallets. STC: 40 bags dried yeast; and 3) 20 drums (of)
Vitabs: Vitamin B Complex Extract." UTI issued Bill of Lading No. C320/C15991-2, covering the aforesaid shipment. The subject
shipment was insured with private respondent Pioneer Insurance and Surety Corporation in favor of Unilab against all risks in
the amount of P1,779,664.77 under and by virtue of Marine Risk Note Number MC RM UL 0627 92 and Open Cargo Policy No.
HO-022-RIU.
On the same day that the bill of lading was issued, the shipment was loaded in a sealed 1x40 container van, with no.
APLU-982012, boarded on APL’s vessel M/V "Pres. Jackson," Voyage 42, and transshipped to APL’s M/V "Pres. Taft" for delivery
to petitioner in favor of the consignee United Laboratories, Inc. (Unilab).
On September 30, 1992, the shipment arrived at the port of Manila. On October 6, 1992, petitioner received the said
shipment in its warehouse after it stamped the Permit to Deliver Imported Goods procured by the Champs Customs Brokerage.
Three days thereafter, or on October 9, 1992, Oceanica Cargo Marine Surveyors Corporation (OCMSC) conducted a stripping
survey of the shipment located in petitioner’s warehouse.
Consequently, Unilab’s quality control representative rejected one paper bag containing dried yeast and one steel drum
containing Vitamin B Complex as unfit for the intended purpose. On November 7, 1992, Unilab filed a formal claim for the
damage against private respondent and UTI. On November 20, 1992, UTI denied liability on the basis of the gate pass issued by
Jardine that the goods were in complete and good condition; while private respondent paid the claimed amount on March 23,
1993. By virtue of the Loss and Subrogation Receipt issued by Unilab in favor of private respondent, the latter filed a complaint
for Damages against APL, UTI and petitioner with the RTC of Makati.

Issue: Whether or not petitioner is a common carrier.

Held: Admittedly, petitioner is a freight forwarder. The term "freight forwarder" refers to a firm holding itself out to the general
public (other than as a pipeline, rail, motor, or water carrier) to provide transportation of property for compensation and, in the
ordinary course of its business, (1) to assemble and consolidate, or to provide for assembling and consolidating, shipments, and
to perform or provide for break-bulk and distribution operations of the shipments; (2) to assume responsibility for the
transportation of goods from the place of receipt to the place of destination; and (3) to use for any part of the transportation a
carrier subject to the federal law pertaining to common carriers.
A freight forwarder’s liability is limited to damages arising from its own negligence, including negligence in choosing the
carrier; however, where the forwarder contracts to deliver goods to their destination instead of merely arranging for their
transportation, it becomes liable as a common carrier for loss or damage to goods. A freight forwarder assumes the
responsibility of a carrier, which actually executes the transport, even though the forwarder does not carry the merchandise
itself.
Undoubtedly, UTI is liable as a common carrier. Common carriers, as a general rule, are presumed to have been at fault
or negligent if the goods they transported deteriorated or got lost or destroyed. That is, unless they prove that they exercised
extraordinary diligence in transporting the goods. In order to avoid responsibility for any loss or damage, therefore, they have
the burden of proving that they observed such diligence. Mere proof of delivery of the goods in good order to a common carrier
and of their arrival in bad order at their destination constitutes a prima facie case of fault or negligence against the carrier. If no
adequate explanation is given as to how the deterioration, loss, or destruction of the goods happened, the transporter shall be
held responsible.