Planters Products, Inc. v.

CA, Soriamont Steamship Agencies and Kyosei Kisen Kabushiki Kaisha

G.R. No. 101503 September 15, 1993
Bellossillo, J.

FACTS:
 Planters Products - purchased from Mitsubishi Inter’l Corp. 9.3K metric tons of Urea (fertilizer), 46% of which
the latter shipped in bulk aboard the cargo vessel M/V “Sun Plum” owned by Kyosei Kisen Kabushiki Kaisha
(KKKK)
 time charter-party on the vessel M/V “Sun Plum” pursuant to the Uniform General Charter was entered into
between Mitsubishi as shipper/charterer and KKKK as shipowner
 before loading the fertilizer aboard the vessel they were inspected by the charterer’s representative and
found fit
 After the Urea fertilizer was loaded in bulk by stevedores (somebody whose job is to load and unload ships)
hired by and under the supervision of the shipper, the steel hatches were closed with heavy iron lids, covered
with 3 layers of tarpaulin, then tied with steel bonds. The hatches remained closed and tightly sealed
throughout the entire voyage.
 port area was windy, certain portions of the route to the warehouse were sandy and the weather was variable,
raining occasionally while the discharge was in progress
 survey report revealed a shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer
approximating 18 M/T was contaminated with sand, rust and dirt
 Planters Products sent a claim letter to Soriamont Steamship Agencies, the resident agent of the carrier, for
damages

ISSUES: 1. WON a common carrier becomes a private carrier by reason of a charter-party; 2. in the negative,
WON the shipowner was able to prove that he had exercised that degree of diligence required of him under the
law

HELD: 1. Yes.
 charter-party – 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; contract of affreightment by which the owner of a ship or other
vessel lets the whole or a 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
 2 types of charter-party:
 a. contract of affreightment – involves the use of shipping space on vessels leased by the owner in part or as a
whole, to carry goods for others; may either be: i) time charter - vessel is leased to the charterer for a fixed
period of time; or ii) voyage charter - ship is leased for a single voyage
 b. charter by demise or bareboat charter – whole vessel is let to the charterer with a transfer to him of its
entire command and possession and consequent control over its navigation, including the master and the
crew, who are his servants
 In both types, the charter-party provides for the hire of vessel only, either for a determinate period of time or
for a single or consecutive voyage, the shipowner to supply the ship’s stores, pay for the wages of the master
and the crew, and defray the expenses for the maintenance of the ship.
 common or public carrier – see Art. 1732; extends to carriers either by land, air or water which hold
themselves out as ready to engage in carrying goods or transporting passengers or both for compensation as
a public employment and not as a casual occupation
 distinction between a “common or public carrier” and a “private or special carrier” lies in the character of the
business, such that if the undertaking is a single transaction, not a part of the general business or occupation,
although involving the carriage of goods for a fee, the person or corporation offering such service is a private
carrier
 common carrier - should observe extraordinary diligence in the vigilance over the goods they carry; in case of
loss, destruction or deterioration of the goods, it is presumed to be at fault or to have acted negligently, and
the burden of proving otherwise rests on it
 private carrier - exercise of ordinary diligence in the carriage of goods will suffice; no such presumption
applies to private carriers
 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
 when Planters Products chartered the vessel M/V “Sun Plum”, the ship captain, its officers and compliment
were under the employ of the shipowner and therefore continued to be under its direct supervision and
control. As stranger to the crew and to the ship, Planters Products did not have the duty of caring for its cargo
as it did not have control of the means in doing so.

HELD: 2. Yes.
 Before the fertilizer was loaded, the 4 hatches of the vessel were cleaned, dried and fumigated. After
completing the loading of the cargo in bulk in the ship’s holds, the steel pontoon hatches were closed and
sealed with iron lids, then covered with 3 layers of serviceable tarpaulins which were tied with steel bonds.
The hatches remained close and tightly sealed while the ship was in transit as the weight of the steel covers
made it impossible for a person to open without the use of the ship’s boom.
 the hull of the vessel was in good condition, foreclosing the possibility of spillage of the cargo into the sea or
seepage of water inside the hull of the vessel
 stevedores unloaded the cargo under the watchful eyes of the shipmates who were overseeing the whole
operation on rotation basis
 Urea also contains 46% nitrogen and is highly soluble in water. However, during storage, nitrogen and
ammonia do not normally evaporate even on a long voyage, provided that the temperature inside the hull
does not exceed 80 degrees centigrade.
 dissipation of quantities of fertilizer, or its deterioration in value, is caused either by an extremely high
temperature in its place of storage, or when it comes in contact with water
 probability of the cargo being damaged or getting mixed or contaminated with foreign particles was made
greater by the fact that the fertilizer was transported in “bulk,” thereby exposing it to the inimical effects of
 the elements and the grimy condition of the various pieces of equipment used in transporting and hauling it 
risk the shipper or the owner of the goods has to face
LOADSTAR SHIPPING VS. PIONEER ASIA
G.R. No. 157481 January 24, 2006

Facts:

Petitioner Loadstar Shipping is the registered owner and operator of the vessel M/V Weasel. On June 6, 1984, it
entered into a voyage-charter with Northern Mindanao Transport Company, Inc. for the carriage of 65,000 bags
of cement from Iligan City to Manila. The shipper was Iligan Cement Corporation, while the consignee
in Manila was Market Developers, Inc.

67,500 bags of cement were loaded on board M/V Weasel and stowed in the cargo holds for delivery to the
consignee. Prior to the voyage, the consignee insured the shipment of cement with respondent Pioneer Asia
Insurance Corporation for P1,400,000, for which there was a marine policy issued.

The vessel ran aground. Consequently, the entire shipment of cement was good as gone due to exposure to sea
water. Petitioner thus failed to deliver the goods to the consignee in Manila.

The consignee demanded from petitioner full reimbursement of the cost of the lost shipment. Petitioner refused
to reimburse despite repeated demands. The insurance company paid the consignee P1,400,000 plus an
additional amount ofP500,000, the value of the lost shipment of cement. In return, the consignee executed a
Loss and Subrogation Receipt in favor of respondent concerning the latter’s subrogation rights against
petitioner.

Respondent filed a complaint against petitioner in the trial court for the recovery of the sum it paid. The trial
court ruled in favor of the insurance company.

Petitioner’s defense of force majeure was found bereft of factual basis. The RTC called attention to the PAG-ASA
report that at the time of the incident, tropical storm “Asiang” had moved away from the Philippines. Further,
records showed that the sea and weather conditions in the area of Hinubaan, Negros Occidental from 8:00
p.m. of June 24, 1984 to 8:00 a.m. the next day were slight and smooth. Thus, the trial court concluded that the
cause of the loss was not tropical storm “Asiang” or any other force majeure, but gross negligence of petitioner.

Petitioner appealed to the Court of Appeals. It affirmed the RTC Decision with modification that Loadstar shall
only pay the sum of 10% of the total claim for attorney’s fees and litigation expenses.

Hence this petition.

Issue:

1. WON petitioner is a common or a private carrier?

2. In either case, did petitioner exercise the required diligence: the extraordinary diligence of a common carrier
or the ordinary diligence of a private carrier?

Held: common carrier, No. Petition denied.

Ratio:

Petitioner is a corporation engaged in the business of transporting cargo by water and for compensation,
offering its services indiscriminately to the public. Thus, without doubt, it is a common carrier. The voyage-
charter agreement between petitioner and Northern Mindanao Transport Company, Inc. did not in any way
convert the common carrier into a private carrier.

Conformably, petitioner remains a common carrier notwithstanding the existence of the charter agreement with
the Northern Mindanao Transport Company, Inc. since the said charter is limited to the ship only and does not
involve both the vessel and its crew. As elucidated in Planters Products, this charter is only a voyage-charter,
not a bareboat charter.

It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common
carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned.
Indubitably, a shipowner in a time or voyage charter retains possession and control of the ship, although her
holds may, for the moment, be the property of the charterer.

As a common carrier, petitioner is required to observe extraordinary diligence in the vigilance over the goods it
transports. When the goods placed in its care are lost, petitioner is presumed to have been at fault or to have
acted negligently. Petitioner therefore has the burden of proving that it observed extraordinary diligence in
order to avoid responsibility for the lost cargo.

Article 1734 enumerates the instances when a carrier might be exempt from liability for the loss of the goods.
These are:

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

Petitioner claims that the loss of the goods was due to a fortuitous event under paragraph 1. Yet, its claim is not
substantiated. On the contrary, there was evidence that the loss of the entire shipment of cement was due to
the gross negligence of petitioner.
Records show that in the evening of June 24, 1984, the sea and weather conditions in the vicinity of Negros
Occidental were calm. The records reveal that petitioner took a shortcut route, instead of the usual route, which
exposed the voyage to unexpected hazard. Petitioner has only itself to blame for its misjudgment.

BA Finance Corporation vs. CA Case Digest

161 SCRA 608

Facts: Augusto Yulo, respondent, secured a loan from the petitioner, BA Finance Corp., as evidenced by his
signature on a promissory note in behalf of the A & L Industries. About two months prior to the loan, however,
Augusto Yulo had already left Lily Yulo and their children and had abandoned their conjugal home. When the
obligation became due and demandable, Augusto Yulo failed to pay the same.

Petitioner filed its amended complaint against the spouses on the basis of the promissory note. They also
prayed for the issuance of a writ of attachment that the said spouses were guilty of fraud in contracting the
debt. The trial court issued the writ of attachment thereby enabling the petitioner to attach the properties of A &
L Industries. Private respondent Lily Yulo filed her answer with counterclaim, alleging that Augusto had already
abandoned her and their children five months before the filing of the complaint and that they were already
separated when the promissory note was executed. She also alleged that her signature was forged in the
special power of attorney procured by Augusto.

Petitioner contends that even if the signature was forged or even if the attached properties were her exclusive
property, the same can be made answerable to the obligation because the said properties form part of the
conjugal partnership of the spouses Yulo.

Issue: Whether or not the exclusive property of private respondent forms part of the conjugal partnership of the
spouses and be made answerable to the obligation.

Ruling: SC ordered the release of the attachment of the said property. Though it is presumed that the single
proprietorship established during the marriage is conjugal and even if it is registered in the name of only one of
the spouses. However, for the said property to be held liable, the obligation contracted by the husband must
have redounded to the benefit of the conjugal partnership.

In the case at bar, the obligation which the petitioner is seeking to enforce against the conjugal property
managed by the private respondent was undoubtedly contracted by Augusto Yulo for his own benefit because at
the time he incurred the obligation he had already abandoned his family and had left their conjugal home.

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PHILIPPINE AIRLINES VS. CA
Facts:
The Stralight Flight of Philippine Airlines (PAL) with 33 passengers took off from Iloilo bpund for Manila.
An hour and fifteen after it crashed in Mindoro. The plane was manufacture 1942 and was acquired by the
airline 1948. It has been certified as airworthy by the Civil Aeronautics Administration.
Passenger Nicanor Padilla is 29 years old, single and dead. His only legal heir is his mother Natividad
Padilla who filed for damages. She demanded Php600,000 as actual and compensatory damages, exemplary
damages and Php60,000 attorney;s fees.

Issue:
How are damages computed.

Held:
The award of damages for death is computed on the life expectancy of the deceased and not of the
beneficiary. Artcle 1764 of the Civil Code provides that article 2206 shall also applu to death of passenger
caused by the breach of contract by the common carrier.
The manner of computing damages is taken from Davila vs. CA. Net yearly income multiplied by the Life
Expectancy of the deceased. The Life Expectancy is based on the American Expectancy Table of Mortality
formula (2/3x[80-30]) cited from Villa Rey Transit Inc. vs. CA.
The income and salary of Nicanor Padilla is evidenced by witnesses, the auditor and manager of Allied
Overseas Trading, pay rolls of the companies and his income tax returns.
The trial court determined the deceased gross annual income to be Php23,100 from his yearly salary
from Padilla shipping Company and Allied Overseas Trading Company. The court considered that he is single
and thus deducted Php9, 200 as yearly living expenses.
His NET INCOME is thus, 13,900 with a life expectancy of 30 years. (Net income x Life Expectancy) is
Php417, 000. This is the amount of indemnity his mother is to receive.
This includes a legal rate of interest of 6% annum from date of judgment on 31August1973 until fully
paid.
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National Development Company v. Court of Appeals
164 SCRA 593

Facts:
In accordance with a memorandum entered into between defendants National Development Company
(NDC) and Maritime Company of the Philippines (MCP) on September 13, 1962, defendant NDC as the first
preferred mortgagee of three ocean-going vessels including one the name “Doña Nati” appointed defendant
MCP as its agent to manage and operate said vessels in its behalf.The E. Phillipp Corporation of the New York
loaded on board the vessel “Doña Nati” at San Francisco, California, a total of 1,200 bales of American raw
cotton consigned to Manila Banking Corporation, Manila and the People’s Bank and Trust Company acting for
and in behalf of the Pan Asiatic Commercial Company, Inc., who represents Riverside Mills Corporation.The
vessel figured in a collision at Ise Bay, Japan with a japanese vessel as a result of which 550 bales of aforesaid
cargo were lost and/or destroyed The damage and lost cargo was worth P344,977.86 which amount, the plaintiff
Development Insurance and Surety Corporation as insurer, paid to the Riverside Mills Corporation as holder of
the negotiable bills of lading duly endorsed.The insurer filed before the CFI of Manila an action for the recovery
of said amount from NDC and MCP.

Issue:
Whether or not the law of country or port of destination shall apply.

Held:
In Easter Shipping Lines, Inc., v. IAC, 150 SCRA 469 (1987), we held under similar circumstances that
the law of the country to which the goods are to be transported governs the liability of the common carrier in
case of their loss, destruction or deterioration. Thus, the rule was specifically laid down that for cargoes
transported from Japan to the Philippines, the liability of the carrier is governed primarily by the Civil Code and
in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the
Code of Commerce and by especial laws (Article 1766, Civil Code). Hence, the carriage of Goods by Sea Act, a
special law, is merely suppletory to the provisions of the Civil Code. The goods in question were being
transported from San Francisco, California and Tokyo, Japan to the Philippines and that they were lost or
damaged due to a collision which was found to have been caused by negligence or fault of both captains of the
colliding vessels.Under the above ruling, it is evident that laws of the Philippines will apply, and it is immaterial
that the collision actually occurred in foreign waters, such as Ise Bay, Japan. It appears, however, that collision
falls among matters not specifically regulated by the Civil Code, so that no reversible error can be found in
respondent court’s application to the case at bar of Articles 826 to 839, Book Three of the Code of
Commerce, which deal exclusively with collision of vessels. Article 826 of the Code of Commerce provides that
where collision is imputable to the personnel of a vessel, the owner of the vessel at fault shall indemnify the
losses and damages incurred after an expert appraisal. But more in point to the instant case in is Article 827 of
the same Code, which provides that if the collision is imputable to both vessels, each one shall suffer its own
damages and both shall be solidarily responsible for the losses and damages suffered by their cargoes.There is,
therefore, no room for NDCs interpretation that the Code of Commerce should apply only to domestic trade and
not to foreign trade.MCP next contends that it cannot be liable solidarily with NDC because it is merely the
manager and operator of the vessel “Doña Nati”, nor a ship agent. As the general managing agent, according,
to MCP, it can only be liable if it acted in excess of its authority. The Memorandum Agreement of September 13,
1962 shows that NDC appointed MCP as agent, a term broad enough to include the concept of ship agent in
Maritime Law. In fact, MCP was even conferred all the powers of the owner of the vessel, including the power to
contract in the name of the NDC. Consequently, under the circumstances, MCP cannot escape liability. It is well-
settled that both the owner and agent of the offending vessel are liable for the damage done where both are
impleaded.

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American Home Assurance Co. vs. CA

FACTS:

American Home Assurance Co. and the National Marine Corporation (NMC) are foreign corporations licensed to
do business in the Philippines. On or about 19 June 1988, Cheng Hwa Pulp Corporation shipped 5,000 bales
(1,000 ADMT) of bleached kraft pulp from Haulien, Taiwan on board “SS Kaunlaran”, which is owned and
operated by NMC. The said shipment was consigned to Mayleen Paper, Inc. of Manila, which insured the
shipment with American Home Assurance Co..

On 22 June 1988, the shipment arrived in Manila and was discharged into the custody of the Marina Port
Services, Inc., for eventual delivery to the consignee-assured.

However, upon delivery of the shipment to Mayleen Paper, Inc., it was found that 122 bales had either been
damaged or lost. The loss was calculated to be 4,360 kilograms with an estimated value of P61,263.41. Mayleen
Paper, Inc. then duly demanded indemnification from NMC for the damages and losses in the shipment but to no
avail. Mayleen Paper, Inc. sought recovery from American Home Assurance Co.. Upon demand and submission
of proper documentation, American Home Assurance paid Mayleen Paper, Inc. the adjusted amount of P31,
506.75 for the damages/losses suffered by the shipment, hence, AHA was subrogated to the rights and interests
of Mayleen Paper, Inc.

AHA brought a suit against respondent NMC for the amount it paid Mayleen Paper, Inc.
The RTC rendered a decision dismissing the complaint, such decision was affirmed by the CA.

ISSUE:

Is American Home Assurance Company is entitled to reimbursement from NMC of what it paid to Mayleen
Paper?

RULING:

YES.

The Supreme Court reversed the decisions of both the Court of Appeals and the Regional Trial Court of Manila,
Branch 41, appealed from; and ordered NMC to reimburse the subrogee, American Home Assurance, the
amount of P31,506.75.

Under Article 1733 of the Civil Code, common carriers from the nature of their business and for reasons of public
policy are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of
passengers transported by them according to all circumstances of each case. Thus, under Article 1735 of the
same Code, in all cases other than those mentioned in Article 1734 thereof, the common carrier shall be
presumed to have been at fault or to have acted negligently, unless it proves that it has observed the
extraordinary diligence required by law.

Common carriers cannot limit their liability for injury or loss of goods where such injury or loss was caused by its
own negligence. Otherwise stated, the law on averages under the Code of Commerce cannot be applied in
determining liability where there is negligence.

Under the foregoing principle and in line with the Civil Code’s mandatory requirement of extraordinary diligence
on common carriers in the care of goods placed in their stead, it is but reasonable to conclude that the issue of
negligence must first be addressed before the proper provisions of the Code of Commerce on the extent of
liability may be applied.

As resolved in National Development Co. v. C.A. (164 SCRA 593 [1988]; citing Eastern Shipping Lines, Inc. v.
I.A.C., 150 SCRA 469, 470 [1987], “the law of the country to which the goods are to be transported governs the
liability of the common carrier in case of their loss, destruction or deterioration.” (Article 1753, Civil Code).
Herein, thus, for cargoes transported to the Philippines, the liability of the carrier is governed primarily by the
Civil Code and in all matters not regulated by said Code, the rights and obligations of common carrier shall be
governed by the Code of Commerce and by special laws (Article 1766, Civil Code).

The filing of a motion to dismiss on the ground of lack of cause of action carries with it the admission of the
material facts pleaded in the complaint (Sunbeam Convenience Foods, Inc. v. C.A., 181 SCRA 443 [1990]).
Herein, upon delivery of the shipment in question at Mayleen’s warehouse in Manila, 122 bales were found to be
damaged/lost with straps cut or loose, calculated by the so-called “percentage method” at 4,360 kilograms and
amounting to P61,263.41. Instead of presenting proof of the exercise of extraordinary diligence as required by
law, NMC filed its Motion to Dismiss dated 7 August 1989, hypothetically admitting the truth of the facts alleged
in the complaint to the effect that the loss or damage to the 122 bales was due to the negligence or fault of
NMC. Such being the case, it is evident that the Code of Commerce provisions on averages cannot apply.

Article 1734 of the Civil Code provides that common carriers are responsible for loss, destruction or
deterioration of the goods, unless due to any of the causes enumerated therein. Herein, it is obvious that the
present case does not fall under any of the exceptions. Thus, American Home Assurance Company is entitled to
reimbursement of what it paid to Mayleen Paper, Inc. as insurer.

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---------- Philippine Airlines vs Civil Aeronautics Board Case Digest
Philippine Airlines, Inc. vs. Civil Aeronautics Board

Facts: Grand Air applied for a Certificate of Public Convenience and Necessity with the Civil Aeronautics Board
(CAB). The Chief Hearing Officer issued a notice of hearing directing Grand Air to serve a copy of the application
and notice to all scheduled Philippine Domestic operators. Grand Air filed its compliance and requested for a
Temporary Operating Permit (TOP). PAL filed an opposition to the application on the ground that the CAB had no
jurisdiction to hear the application until Grand Air first obtains a franchise to operate from Congress. The Chief
Hearing Officer denied the opposition and the CAB approved the issuance of the TOP for a period of 3 months.
The opposition for the TOP was likewise denied. The CAB justified its assumption of jurisdiction over Grand Air’s
application on the basis of Republic Act 776 which gives it the specific power to issue any TOP or Certificate of
Public Convenience and Necessity.

Issue: Whether or not the CAB can issue a Certificate of Public Convenience and Necessity or TOP even though
the prospective operator does not have a legislative franchise?
Held: Yes, as mentioned by the CAB, it is duly authorized to do so under Republic Act 776 and a legislative
franchise is not necessary before it may do so, since Congress has delegated the authority to authorize the
operation of domestic air transport services to the CAB, an administrative agency. The delegation of such
authority is not without limits since Congress had set specific standard and limitations on how such authority
should be exercised.

Public convenience and necessity exists when the proposed facility will meet a reasonable want of the public
and supply a need which the existing facilities do not adequately afford.

Thus, the Board should be allowed to continue hearing the application, since it has jurisdiction over it provided
that the applicant meets all the requirements of the law.

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Philippine Airlines v. Court of Appeals
106 SCRA 391

Facts:
Samson is a licensed aviator employed by the Philippine Airlines. He was partnered with another pilot
Bustamante. Samson had complained on previous occasions to PAL that Bustamante was slow in reacting and
was having lapses of poor judgment during flights. PAL however still allowed Bustamante to continue flying.
On a certain flight, Bustamante overshot the airfield while landing the plane at the Daet airport. Samson
tried to control the plane, but did not succeed. The plane crash-landed beyond the runway into a mangrove.
Samson hit his head on the windshield due to the impact of the crash. He suffered head injuries such as brain
concussions and wounds on his forehead. To make matters worse, plaintiff was discharged from employment.
Samson then filed an action for damages against PAL.

Issue:
Whether or not PAL is liable for damages.

Held:
The Court held that PAL is liable for damages. There was gross negligence on the part of PAL because
despite the knowledge of Bustamante’s condition the still allowed him to continue flying. Bustamante had a
tumor in his nasopharynx which affected his vision. As provided in Articles 1732, 1733, and 1756 of the NCC,
PAL being a common carrier should have exercised extraordinary diligence in the supervision of their employees
and utmost diligence in bringing passengers to their destination.
The court affirmed the decision of the trial court in awaring damages. Private respondent is entitled to
P198,000.00 as unearned income or compulsory damages, P80,000.00 for moral damages, P20,000 as
attorney’s fees and P5,000 as expenses for litigation. This claim of the plaintiff for loss and impairment of
earning capacity is based on the provision of Art. 2205, NCC. Even from the standpoint of the petitioner that
there is employer-employee relationship between it and private respondent arising from the contract of
employment, private respondent is still entitled to moral damages in view of the finding of bad faith or malice,
applying the provisions of Art. 2220 of the NCC.
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Coastwise Lighterage Corporation v. CA

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 latter's dumb barges. The barges were
towed in tandem by the tugboat MT Marica, which is likewise owned by Coastwise. Upon reaching Manila Bay,
one of the barges, "Coastwise 9", struck an unknown sunken object. The forward buoyancy 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. Pag-asa filed a claim against Philippine
General Insurance Company, the insurer of its cargo. Philgen paid P700,000 for the value of the molasses lost.

Philgen then filed an action against Coastwise to recover the money it paid, claiming to be subrogated to the
claims which the consignee may have against the carrier. Both the trial court and the Court of Appeals ruled
against Coastwise.

Issues:

(1) Whether Coastwise was transformed into a private carrier by virtue of the contract it entered into with Pag-
asa, and whether it exercised the required degree of diligence

(2) Whether Philgen was subrogated into the rights of the consignee against the carrier

Held:

(1) Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order to carry cargo from one point to
another, but the possession, command mid navigation of the vessels remained with petitioner Coastwise
Lighterage. 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. The law and jurisprudence on common carriers both
hold that the mere proof of delivery of goods in good order to a carrier and the subsequent arrival of the same
goods at the place of destination in bad order makes for a prima facie case against the carrier. 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. This presumption, which is overcome only by proof of the
exercise of extraordinary diligence, remained unrebutted in this case. Jesus R. Constantino, the patron of the
vessel "Coastwise 9" admitted that he was not licensed. Coastwise Lighterage cannot safely claim to have
exercised extraordinary diligence, by placing a person whose navigational skills are questionable, at the helm of
the vessel which eventually met the fateful accident. It may also logically, follow that a person without license
to navigate, lacks not just the skill to do so, but also the utmost familiarity with the usual and safe routes taken
by seasoned and legally authorized ones. Had the patron been licensed he could be presumed to have both the
skill and the knowledge that would have prevented the vessel's hitting the sunken derelict ship that lay on their
way to Pier 18. 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.

(2) Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the insured property
is destroyed or damaged through the fault or negligence of a party other than the assured, then the insurer,
upon payment to the assured will be subrogated to the rights of the assured to recover from the wrongdoer to
the extent that the insurer has been obligated to pay. Payment by the insurer to the assured operated as an
equitable assignment to the former of all remedies which the latter may have against the third party whose
negligence or wrongful act caused the loss. The right of subrogation is not dependent upon, nor does it grow out
of, any private of contract or upon written assignment of, claim. It accrues simply upon payment of the
insurance claim by the insurer

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Cebu Salvage Corporation vs Philippine Home Assurance Corp. | Corona, J. January 25, 2007|

FACTS

- Petitioner Cebu Salvage Corp. (as carrier) and Maria Cristina Chemicals Industries, Inc. [MCCII] (as charterer)
entered into a voyage charter where petitioner was to load 800-1,100 metric tons of silica quartz on board M/T
Espiritu Santo for transport and discharge from Negros Occidental to Misamis Oriental, to consignee
Ferrochrome Phils., Inc.

-However, the shipment never reached its destination because the vessel sank resulting in the total loss of the
cargo.

-MCII filed a claim for the loss of the shipment with its insurer, respondent Philippine Home Assurance Corp.

-Respondent paid the claim and was subrogated to the rights of MCCII, after which it filed a case against
petitioner for reimbursement of the amount it paid MCCII.

-TC and CA: ordered petitioner to pay respondent

ISSUE:

WoN a carrier may be held liable for the loss of cargo resulting from the sinking of a ship it doesn’t own? YES

Petitioner argues the agreement was just a contract of hire where MCCII hired the vessel from its owner, ALS
Timber. Since it wasn’t the owner of the vessel, it didn’t have control and supervision over it and its crew. Thus,
it shouldn’t be held liable.

RULING:

1. Petitioner and MCCII entered into a “voyage charter,” a.k.a contract of affreightment where the ship was
leased for a single voyage for the conveyance of the goods, in consideration of the payment of freight. Under a
voyage charter, the shipowner retains possession, command and navigation of the ship, the
charterer/freighter just has the use of the space in the vessel in return for his payment of freight. An owner
who retains possession of the ship remains liable as carrier and must answer for loss or non-
delivery of the goods received for transportation.

2. The agreement parties signed was a contract of carriage under which the petitioner was a common carrier.
From the nature of their business and reasons of public policy, common carriers are bound to
observe extraordinary diligence over the goods they transport according to the circumstances of
each case. In case of loss of the goods, the common carriers are responsible, unless they can prove the causes
under Art. 1734 CC or that they observed extraordinary diligence.

3. In this case, Petitioner was the one which contracted with MCCII for the transport of the cargo. It had control
over what vessel it would use. The fact that it did not own the vessel it decided to use to consummate
the contract of carriage didn’t negate its character and duties as a common carrier.
The bill of lading issued by ALS was just a receipt to evidence the fact that the goods have been received for
transportation. It is true that a bill of lading may serve as the contract of carriage between the parties
but it cannot prevail over the express provision of the voyage charter.

The voyage charter stipulated that cargo insurance was for the charterer’s account, accdg to
petitioner. This just means that the charterer would have the goods insured. It couldn’t exculpate
the carrier from liability for the breach of its contract of carriage.

MCCII never dealt with ALS and yet petitioner insists that MCCII should sue ALS for reimbursement for its loss.
To permit a common carrier to escape its responsibility for the goods it agreed to transport would
derogate from the carrier’s duty of extraordi

----------------------------------------------------------------------------------------------------------------------------------------
------------- Calvo v. UCPB General Insurance Case Digest
Calvo v. UCPB General Insurance

G.R. No. 148496 March 19, 2002

Facts: Petitioner Virgines Calvo, owner of Transorient Container Terminal Services, Inc. (TCTSI), and a custom
broker, entered into a contract with San Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical
fluting paper and 124 reels of kraft liner board from the port area to the Tabacalera Compound, Ermita, Manila.
The cargo was insured by respondent UCPB General Insurance Co., Inc.

On July 14, 1990, contained in 30 metal vans, arrived in Manila on board “M/V Hayakawa Maru”. After 24 hours,
they were unloaded from vessel to the custody of the arrastre operator, Manila Port Services, Inc. From July 23
to 25, 1990, petitioner, pursuant to her contract with SMC, withdrew the cargo from the arrastre operator and
delivered it to SMC’s warehouse in Manila. On July 25, the goods were inspected by Marine Cargo Surveyors,
reported that 15 reels of the semi-chemical fluting paper were “wet/stained/torn” and 3 reels of kraft liner board
were also torn. The damages cost P93,112.00.

SMC collected the said amount from respondent UCPB under its insurance contract. Respondent on the other
hand, as a subrogee of SMC, brought a suit against petitioner in RTC, Makati City. On December 20, 1995, the
RTC rendered judgment finding petitioner liable for the damage to the shipment. The decision was affirmed by
the CA.

Issue: Whether or not Calvo is a common carrier?

Held: In this case the contention of the petitioner, that he is not a common carrier but a private carrier, has no
merit.

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 ancillary activity. Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation service on a regular or scheduled
basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow segment of the general
population. We think that Article 1733 deliberately refrained from making such distinction. (De Guzman v. CA,
68 SCRA 612)

Te concept of “common carrier” under Article 1732 coincide with the notion of “public service”, under the Public
Service Act which partially supplements the law on common carrier. Under Section 13, paragraph (b) of the
Public Service Act, it includes:

“ x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for
general business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without fixed route and whatever may be its classification,
freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water
craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or
dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply
and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless
broadcasting stations and other similar public services. x x x”

----------------------------------------------------------------------------------------------------------------------------------------------------------
Aboitiz Shipping Corporation vs. Court of Appeals
188 SCRA 387

Facts:
 Anacleto Viana was a passenger of M/V Antonia bound for Manila which was owned by defendant
Aboitiz. After the said vessel has landed, the Pioneer Stevedoring Corp., as the arrastre operator, took over the
exclusive control of the cargoes loaded on it. One hour after the passengers had disembarked, Pioneer
Stevedoring started operation by unloading the cargoes using its crane. Viana who had already disembarked
remembered that some of his cargoes were still inside the vessel. While pointing to the crew of the vessel the
place where his cargoes were, the crane hit him, pinning him between the side of the vessel and the crane
which resulted to his death. Viana’s wife filed a complaint for damages against Aboitiz for breach of contract f
carriage. Aboitiz, however filed a third party complaint against Pioneer since it had control completely over the
vessel during the incident. Furthermore, petitioner contends that one hour has already elapsed from the time
Viana disembarked, thus he has already ceased to be a passenger.

Issue:
Whether or not Aboitiz is liable for the death of Viana.

Held:
The Supreme Court held that the failure of Aboitiz to exercise extraordinary diligence for the safety of its
passengers makes Aboitiz liable. It has been recognized as a rule that the relation of the carrier and passenger
does not cease the moment the passenger alights from the carrier’s vehicle, but continues until the passenger
has had a reasonable time or a reasonable opportunity to leave the carrier’s premises. A reasonable time or a
reasonable delay within this rule is to be determined from all the circumstances. The primary factor to be
considered is the existence of a reasonable cause as will justify the presence of the victim on or near the
petitioner’s vessel. In the case at bar, such justifiable cause exists because he had to come back for his cargo.
Aboitiz has failed to safeguard its passenger with extraordinary diligence in requiring or seeing to it that
precautionary measures were strictly and actually enforced to subserve their purpose of preventing entry into a
forbidden area

TRASPO TABACALERA INSURANCE CO VS NORTH FRONT SHIPPING SERVICES case digest

TABACALERA INSURANCE CO., PRUDENTIAL GUARANTEE & ASSURANCE, INC., and NEW ZEALAND
INSURANCE CO., LTD., vs.NORTH FRONT SHIPPING SERVICES, INC., and COURT OF APPEALS,

Facts:

Sacks of grains were loaded on board a vessel owned by North Front Shipping (common carrier); the consignee:
Republic Floor Mills. The vessel was inspected by representatives of the shipper prior to the transport and was
found fitting to carry the cargo; it was also issued a Permit to Sail. The goods were successfully delivered but it
was not immediately unloaded by the consignee. There were a shortage of 23.666 metric tons and some of the
merchandise was already moldy and deteriorating. Hence, the consignee rejected all the cargo and demanded
payment of damages from the common carrier. Upon refusal, the insurance companies (petitioners) were
obliged to pay. Petitioners now allege that there was negligence on the part of the carrier. The trial court ruled
that only ordinary diligence was required since the charter-party agreement converted North Front Shipping into
a private carrier.

Issues:

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 cargo’s 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

-----------------------------------------------------------------------------------------------------------------------------------

SULPICIO LINES, INC., petitioner, vs. FIRST LEPANTO-TAISHO INSURANCE

CORPORATION, respondent.

G.R. No. 140349. June 29, 2005

FACTS: Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros, Inc. (shipper) entered into a contract,
evidenced by Bill of Lading issued by the latter in favor of the owner of the goods, for Delbros, Inc. to transport
a shipment of goods consisting of 3 wooden crates containing 136 cartons of inductors and LC compound on
board the V Singapore V20 from Cebu City to Singapore in favor of the consignee, Taiyo Yuden Singapore Pte,
Ltd.
For the carriage of said shipment from Cebu City to Manila, Delbros, Inc. engaged the services of the vessel M/V
Philippine Princess, owned and operated by petitioner Sulpicio Lines, Inc. (carrier). During the unloading of the
shipment, one crate containing 42 cartons dropped from the cargo hatch to the pier apron. The owner of the
goods examined the dropped cargo, and upon an alleged finding that the contents of the crate were no longer
usable for their intended purpose, they were rejected as a total loss and returned to Cebu City.

The owner of the goods filed a claim with herein petitioner-carrier for the recovery of the value of the rejected
cargo which was refused by the latter. Thereafter, the owner of the goods sought payment from respondent
First Lepanto-Taisho Insurance Corporation (insurer) under a marine insurance policy issued to the former.
Respondent-insurer paid the claim less thirty-five percent (35%) salvage value or P194, 220.31.

The payment of the insurance claim of the owner of the goods by the respondent-insurer subrogated the latter
to whatever right or legal action the owner of the goods may have against Delbros, Inc. and petitioner-carrier,
Sulpicio Lines, Inc. Thus, respondent-insurer then filed claims for reimbursement from Delbros, Inc. and
petitioner-carrier Sulpicio Lines, Inc. which were subsequently denied.

In 1992, respondent-insurer filed a suit for damages with the trial court against Delbros, Inc. and herein
petitioner-carrier.

Delbros, Inc. filed on 15 April 1993 its Answer with Counterclaim and Cross-claim, alleging that assuming the
contents of the crate in question were truly in bad order, fault is with herein petitioner-carrier which was
responsible for the unloading of the crates.

Petitioner-carrier filed its Answer to Delbros, Inc.’s cross-claim asserting that it observed extraordinary diligence
in the handling, storage and general care of the shipment and that subsequent inspection of the shipment by
the Manila Adjusters and Surveyors Company showed that the contents of the third crate that had fallen were
found to be in apparent sound condition, except that “2 cello bags each of 50 pieces ferri inductors No. LC FL
112270K-60 (c) were unaccounted for and missing as per packaging list.”

After hearing, the trial court dismissed the complaint for damages as well as the counterclaim filed by therein
defendant Sulpicio Lines, Inc. and the cross-claim filed by Delbros, Inc on the grounds that plaintiff has failed to
prove its case.

The CA reversed the RTC decision and ordered Delbros and Sulpicio Lines to pay, jointly and severally, plaintiff-
appellant the sum of P194,220.31 representing actual damages, plus legal interest counted from the filing of the
complaint until fully paid.

ISSUE: whether or not, based on the evidence presented during the trial, the owner of the goods, respondent-
insurer’s predecessor-in-interest, did incur damages, and if so, whether or not petitioner-carrier is liable for the
same

RULING:

It cannot be denied that the shipment sustained damage while in the custody of petitioner-carrier. It is not
disputed that one of the 3 crates did fall from the cargo hatch to the pier apron while petitioner-carrier was
unloading the cargo from its vessel. Neither is it impugned that upon inspection, it was found that 2 cartons
were torn on the side and the top flaps were open and that 2 cello bags, each of 50 pieces ferri inductors, were
missing from the cargo.

Petitioner-carrier contends that its liability, if any, is only to the extent of the cargo damage or loss and should
not include the lack of fitness of the shipment for transport to Singapore due to the damaged packing. This is
erroneous. Petitioner-carrier seems to belabor under the misapprehension that a distinction must be made
between the cargo packaging and the contents of the cargo. According to it, damage to the packaging is not
tantamount to damage to the cargo. It must be stressed that in the case at bar, the damage sustained by the
packaging of the cargo while in petitioner-carrier’s custody resulted in its unfitness to be transported to its
consignee in Singapore. Such failure to ship the cargo to its final destination because of the ruined
packaging, indeed, resulted in damages on the part of the owner of the goods.

The falling of the crate during the unloading is evidence of petitioner-carrier’s negligence in handling the cargo.
As a common carrier, it is expected to observe extraordinary diligence in the handling of goods placed in its
possession for transport.[12] The standard of extraordinary diligence imposed upon common carriers is
considerably more demanding than the standard of ordinary diligence, i.e., the diligence of a
good paterfamilias established in respect of the ordinary relations between members of society.
[13]
A common carrier is bound to transport its cargo and its passengers safely "as far as human
care and foresight can provide, using the utmost diligence of a very cautious person, with due
regard to all circumstances.”[14] The extraordinary diligence in the vigilance over the goods
tendered for shipment requires the common carrier to know and to follow the required precaution
for avoiding the damage to, or destruction of, the goods entrusted to it for safe carriage and
delivery.[15] It requires common carriers to render service with the greatest skill and foresight and
“to use all reasonable means to ascertain the nature and characteristic of goods tendered for
shipment, and to exercise due care in the handling and stowage, including such methods as their
nature requires.”[16]

Thus, when the shipment suffered damages as it was being unloaded, petitioner-carrier is
presumed to have been negligent in the handling of the damaged cargo. Under Articles
1735[17] and 1752[18] of the Civil Code, common carriers are presumed to have been at fault or to
have acted negligently in case the goods transported by them are lost, destroyed or had
deteriorated. To overcome the presumption of liability for loss, destruction or deterioration of
goods under Article 1735, the common carrier must prove that they observed extraordinary
diligence as required in Article 1733[19] of the Civil Code.[20]

Petitioner-carrier miserably failed to adduce any shred of evidence of the required extraordinary diligence to
overcome the presumption that it was negligent in transporting the cargo.
Coming now to the issue of the extent of petitioner-carrier’s liability, it is undisputed that respondent-insurer
paid the owner of the goods under the insurance policy the amount of P194,220.31 for the alleged damages the
latter has incurred. Neither is there dispute as to the fact that Delbros, Inc. paid P194,220.31 to respondent-
insurer in satisfaction of the whole amount of the judgment rendered by the Court of Appeals. The question
then is: To what extent is Sulpicio Lines, Inc., as common carrier, liable for the damages suffered by
the owner of the goods?

Upon respondent-insurer’s payment of the alleged amount of loss suffered by the insured (the owner of the
goods), the insurer is entitled to be subrogated pro tanto to any right of action which the insured
may have against the common carrier whose negligence or wrongful act caused the loss.
[21]
Subrogation is the substitution of one person in the place of another with reference to a lawful claim or right,
so that he who is substituted succeeds to the rights of the other in relation to a debt or claim, including its
remedies or securities.[22]The rights to which the subrogee succeeds are the same as, but not greater than,
those of the person for whom he is substituted, that is, he cannot acquire any claim, security or remedy the
subrogor did not have. [23] In other words, a subrogee cannot succeed to a right not possessed by the subrogor.
[24]
A subrogee in effect steps into the shoes of the insured and can recover only if the insured likewise could
have recovered.[25]

As found by the Court of Appeals, there was damage suffered by the goods which consisted in the destruction of
one wooden crate and the tearing of two (2) cardboard boxes therein which rendered them unfit to be sent to
Singapore.[26] The falling of the crate was negligence on the part of Sulpicio Lines, Inc. for which it
cannot exculpate itself from liability because it failed to prove that it exercised extraordinary
diligence.[27]

Hence, we uphold the ruling of the appellate court that herein petitioner-carrier is liable to pay the
amount paid by respondent-insurer for the damages sustained by the owner of the goods.

------------------------------------------------------------------------------------------------------------------------------------------------------------
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 Corporation
2. 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.

------------------------------------------------------------------------------------------------------------------------------------------------------------
----------

Eastern Shipping vs. CA

Art. 1175 & 1176, Legal Interest

Issues
 Whether the payment of legal interest on an award for loss or damage is to be computed
from the time of complaint is filed or from the date the decision appealed from is
rendered?

 Whether the applicable rate of interest is 12% or 6%?

Facts
 Petitioner Eastern Shipping made a shipment which was insured under Insurance Policy
with Defendant Mercantile Insurance
 One drum of riboflavin was said to be in bad order upon receipt of the consignee (person
to whom the shipment is to be delivered)
 Mercantile was compelled to pay the consignee
 There is sufficient evidence that the shipment sustained damage while in the possession
of petitioner. Eastern was held liable for payment of damages
 Held:
Established rule on interest in the concept of actual/compensatory damages
1. Payment of sum of money in the form of loan/forbearance
a. if stipulated in writing – interest shall earn from the time it is judicially demanded
b. in the absence of stipulation – 12% per annum to be computed fron time of default (from time
of judicial/extra-judicial demand was made under Art. 1169)
2. NOT in the form of loan/forbearance
- may be imposed at the discretion of the court at 6% per annum
NO INTEREST SHALL BE ADJUDGED ULESS THE DEMAND CAN BE ESTABLISHED WITH
REASONABLE CERTAINTY
a. When demand is established with reasonable certainty – interest begin to run from the time
claim is made judicially/extra-judicially
b. When demand is not certain – interest shall begin to run only from date of judgment of court
is made
Base for Computation – amount finally adjudged
3. When judgment awarding sum of money becomes final and executory – legal interest
both 1 & 2 shall be 12% until its satisfaction (Reason: Interim period being deemed to
be by then an equivalent to a forbearance of credit)

*Eastern was ordered to pay 6% on the amount due computed from the decision dated February
3, 1988, and 12% interest, in lieu of 6%, was imposed on such amount upon finality of the SC
decision until the payment thereof.
------------------------------------------------------------------------------------------------------------------------------------------------------------
DELSAN TRANSPORT LINES, INC., vs. THE HON. COURT OF APPEALS and
-------------
AMERICAN HOME ASSURANCE CORPORATION

FACTS: The facts show that Caltex Philippines (Caltex for brevity) entered into a contract of
affreightment with the petitioner, Delsan Transport Lines, Inc., for a period of one year whereby the said
common carrier agreed to transport Caltex’s industrial fuel oil from the Batangas-Bataan Refinery to
different parts of the country. Under the contract, petitioner took on board its vessel, MT Maysun
2,277.314 kiloliters of industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in
Zamboanga City. The shipment was insured with the private respondent, American Home Assurance
Corporation. During the voyage, the vessel sank. The insurer paid Caltex and now seeks recovery under
the right of subrogation. The trial court found the vessel seaworthy and the incident was caused by force
majeure hence, exempt from liability. CA reversed the trial court’s decision, explaining that petitioner was
liable as a common carrier due to lack of manpower and absent any explanation why the vessel sank.

ISSUE: Whether or not there was an implied admission of seaworthiness thus precluding the right of
recovery by private respondent as insurer.

Whether or not the non-presentation of the marine insurance policy bars the complaint for recovery of
sum of money for lack of cause of action.

RULING: No. The payment made by the private respondent for the insured’s value of the lost cargo
operates as waiver of its (private respondent) right to enforce the term of the implied warranty against
Caltex under the marine insurance policy. However, the same cannot be validly interpreted as an
automatic admission of the vessel’s seaworthiness by the private respondent as to foreclose recourse
against the petitioner for any liability under its contractual obligation as a common carrier. The fact of
payment grants the private respondent subrogatory right which enables it to exercise legal remedies that
would otherwise be available to Caltex as owner of the lost cargo against the petitioner common carrier.
From the nature of their business and for reasons of public policy, common carriers are bound to observe
extraordinary diligence in the vigilance over the goods and for the safety of passengers transported by
them, according to all the circumstance of each case.In the event of loss, destruction or deterioration of
the insured goods, common carriers shall be responsible unless the same is brought about, among others,
by flood, storm, earthquake, lightning or other natural disaster or calamity. In all other cases, if the goods
are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence. The said presumption was not
overturned by petitioner in this case. Hence, private respondent as insurer can exercise its right of
subrogation against petitioner.

Thus, as the appellate court correctly ruled, petitioner’s vessel, MT Maysun, sank with its entire cargo for
the reason that it was not seaworthy. There was no squall or bad weather or extremely poor sea condition
in the vicinity when the said vessel sank.

Anent the second issue, it is our view and so hold that the presentation in evidence of the marine
insurance policy is not indispensable in this case before the insurer may recover from the common carrier
the insured value of the lost cargo in the exercise of its subrogatory right. The subrogation receipt, by
itself, is sufficient to establish not only the relationship of herein private respondent as insurer and Caltex,
as the assured shipper of the lost cargo of industrial fuel oil, but also the amount paid to settle the
insurance claim. The right of subrogation accrues simply upon payment by the insurance company of the
insurance claim.