ABDULMOIN W.
MOHAMMAD MV Dona Paz carried an estimated 4000 passenger
LLB – 3B
1.)
Effect of Charter Party
Caltex (Philippines), Inc. vs. CA
G.R. No. 131166. September 30, 1999
FACTS:
Vector Shipping Corporation is the owner and
operator of MT Vector. Caltex entered into a special
contract of charter party with VSC wherein it
shipped 8,000 barrels of petroleum from Bataan to
Masbate on Dec 19, 1987 at 8PM.
On the other hand, on Dec 20, 1987 at 6:30AM MV
Dona Paz left Tacloban port headed to Manila with
complements of 59 crew members and passengers
totaling 1,493 as indicated in the Coast Guard
Clearance. At about 10:30PM, the two vessels
collided with each other; all of the passengers and
crew of MV Dona Paz died while 2 crews MT Vector
who were sleeping at the time of incident survived.
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which is beyond what is indicated in the clearance.
Among those passengers are Sebastian Canezal
and daughter Corazon.
The Board of Marine Inquiry found that MT Vector, its
registered operator Francisco Soriano and VSC were
at fault and responsible for its collision with MV Dona
Paz. The heirs of Canezal filed a complaint for
damages arising from breach of contract of
carriage against Sulpicio Lines, Inc, owner of MV
Dona Paz. In turn, Sulpicio filed a third-party
complaint against VSC and Caltex.
RTC: Dismissed the case against Caltex.
CA: Reversed the decision of RTC and included
Caltex.
ISSUE: Whether or not Caltex is liable.
RULING: The respective rights and duties of a shipper
and the carrier depends not on whether the carrier
is public or private, but on whether the contract of
carriage is a bill of lading or equivalent shipping
documents on the one hand, or a charter party or
similar contract on the other.
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.
Under a demise or bareboat charter on the other
hand, the charterer mans the vessel with his own
people and becomes, in effect, the owner for the
voyage or service stipulated, subject to liability for
damages caused by negligence. 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. MT
Vector fits the definition of a common carrier under
Article 1732 of the Civil Code.
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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 Civil Code
demands diligence which is required by the
nature of the obligation and that which corresponds
with the circumstances of the persons, the time and
the place. Hence, considering the nature of the
obligation between Caltex and MT
Vector, the liability as found by the Court of Appeals
is without basis.
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 vesselss 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. By
the same token, we cannot expect passengers to
inquire every time they board a common carrier,
whether the carrier possesses the necessary papers
or that all the carrier’s employees are qualified. Such
a practice would be an absurdity in a business
where time is always of the essence.

2.)
Loadstar Shipping Co. Inc. vs CA
Facts:
On November 19, 1984, Loadstar received on board
its vessel M/V Cherokee the following goods for
shipment:
1. 705 bales of lawanit hardwood
2. 27 boxes and crates of tilewood assemblies and
others
3. 49 bundles of mouldings R & W (3) Apitong
Bolidenized
The goods, amounting to P6,067,178, were insured
by Manila Insurance Co. The vessel is insured by
Prudential Guarantee and Assurance, Inc. On
November 20, 1984, on its way to Manila from
Agusan, the vessel sank off Limasawa Island. MIC
paid the consignee P6,075,000 for the value of the
goods lost, and filed a complaint against Loadstar
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and PGAI, claiming subrogation into the rights of the
consignee. When PGAI paid Loadstar, it was
dropped from the complaint. The trial court ruled
against Loadstar, and this was affirmed by the Court
of Appeals.
Loadstar submits that the vessel was a private carrier
because it was not issued a certificate of public
convenience, it did not have a regular trip or
schedule nor a fixed route, and there was only "one
shipper, one consignee for a special cargo." In
refutation, MIC argues that the issue as to the
classification of the M/V "Cherokee" was not timely
raised below; hence, it is barred by estoppel. While it
is true that the vessel had on board only the cargo
of wood products for delivery to one consignee, it
was also carrying passengers as part of its regular
business. Moreover, the bills of lading in this case
made no mention of any charter party but only a
statement that the vessel was a "general cargo
carrier." Neither was there any "special
arrangement" between LOADSTAR and the shipper
regarding the shipment of the cargo. The singular
fact that the vessel was carrying a particular type of
cargo for one shipper is not sufficient to convert the
vessel into a private carrier.
LOADSTAR argues that as a private carrier, it cannot
be presumed to have been negligent, and the
burden of proving otherwise devolved upon MIC. It
also maintains that the vessel was seaworthy, and
that the loss was due to force majeure. LOADSTAR
goes on to argue that, being a private carrier, any
agreement limiting its liability, such as what
transpired in this case, is valid. Since the cargo was
being shipped at "owner’s risk," LOADSTAR was not
liable for any loss or damage to the same. Finally,
LOADSTAR avers that MIC’s claim had already
prescribed, the case having been instituted beyond
the period stated in the bills of lading for instituting
the same — suits based upon claims arising from
shortage, damage, or non-delivery of shipment shall
be instituted within sixty days from the accrual of the
right of action. MIC, on the other hand, claims that
LOADSTAR was liable, notwithstanding that the loss
of the cargo was due to force majeure, because
the same concurred with LOADSTAR’s fault or
negligence. Secondly, LOADSTAR did not raise the
issue of prescription in the court below; hence, the
same must be deemed waived. Thirdly, the "limited
liability" theory is not applicable in the case at bar
because LOADSTAR was at fault or negligent, and
because it failed to maintain a seaworthy vessel.
Authorizing the voyage notwithstanding its
knowledge of a typhoon is tantamount to
negligence.
Issues:
(1) Whether Loadstar was a common carrier or a
private carrier
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(2) Whether Loadstar exercised the degree of
diligence required under the circumstances
(3) Whether the stipulation that the goods are at
“the owner’s risk” is valid
(4) Whether the action has prescribed
Held:
(1) We hold that LOADSTAR is a common carrier. It is
not necessary that the carrier be issued a certificate
of public convenience, and this public character is
not altered by the fact that the carriage of the
goods in question was periodic, occasional,
episodic or unscheduled. There was no charter
party. The bills of lading failed to show any special
arrangement, but only a general provision to the
effect that the M/V "Cherokee" was a "general
cargo carrier." Further, the bare fact that the vessel
was carrying a particular type of cargo for one
shipper, which appears to be purely coincidental, is
not reason enough to convert the vessel from a
common to a private carrier, especially where, as in
this case, it was shown that the vessel was also
carrying passengers.
(2) The doctrine of limited liability does not apply
where there was negligence on the part of the
vessel owner or agent. LOADSTAR was at fault or
negligent in not maintaining a seaworthy vessel and
in having allowed its vessel to sail despite
knowledge of an approaching typhoon. In any
event, it did not sink because of any storm that may
be deemed as force majeure, inasmuch as the wind
condition in the area where it sank was determined
to be moderate. Since it was remiss in the
performance of its duties, LOADSTAR cannot hide
behind the "limited liability" doctrine to escape
responsibility for the loss of the vessel and its cargo.
(3) Three kinds of stipulations have often been made
in a bill of lading. The first is one exempting the
carrier from any and all liability for loss or damage
occasioned by its own negligence. The second is
one providing for an unqualified limitation of such
liability to an agreed valuation. And the third is one
limiting the liability of the carrier to an agreed
valuation unless the shipper declares a higher value
and pays a higher rate of freight. According to an
almost uniform weight of authority, the first and
second kinds of stipulations are invalid as being
contrary to public policy, but the third is valid and
enforceable. Since the stipulation in question is null
and void, it follows that when MIC paid the shipper,
it was subrogated to all the rights which the latter
has against the common carrier, LOADSTAR.
(4) MIC’s cause of action had not yet prescribed at
the time it was concerned. Inasmuch as neither the
Civil Code nor the Code of Commerce states a
specific prescriptive period on the matter, the
Carriage of Goods by Sea Act (COGSA) — which
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provides for a one-year period of limitation on
claims for loss of, or damage to, cargoes sustained
during transit — may be applied suppletorily to the
case at bar. This one-year prescriptive period also
applies to the insurer of the goods. In this case, the
period for filing the action for recovery has not yet
elapsed. Moreover, a stipulation reducing the one-
year period is null and void; it must, accordingly, be
struck down.
3.)
First Philippine Industrial Corp. vs. CA (GR 125948)
Facts:
Petitioner is a grantee of a pipeline concession
under Republic Act No. 387. Sometime in January
1995, petitioner applied for mayor’s permit in
Batangas. However, the Treasurer required petitioner
to pay a local tax based on gross receipts
amounting to P956,076.04. In order not to hamper its
operations, petitioner paid the taxes for the first
quarter of 1993 amounting to P239,019.01 under
protest. On January 20, 1994, petitioner filed a letter-
protest to the City Treasurer, claiming that it is
exempt from local tax since it is engaged in
transportation business. The respondent City
Treasurer denied the protest, thus, petitioner filed a
complaint before the Regional Trial Court of
Batangas for tax refund. Respondents assert that
pipelines are not included in the term “common
carrier” which refers solely to ordinary carriers or
motor vehicles. The trial court dismissed the
complaint, and such was affirmed by the Court of
Appeals.
Issue:
Whether a pipeline business is included in the term
“common carrier” so as to entitle the petitioner to
the exemption
Held:
Article 1732 of the Civil Code defines a "common
carrier" as "any person, corporation, firm or
association engaged in the business of carrying or
transporting passengers or goods or both, by land,
water, or air, for compensation, offering their
services to the public."
The test for determining whether a party is a
common carrier of goods is:
(1) He must be engaged in the business of carrying
goods for others as a public employment, and must
hold himself out as ready to engage in the
transportation of goods for person generally as a
business and not as a casual occupation;
(2) He must undertake to carry goods of the kind to
which his business is confined;
(3) He must undertake to carry by the method by
which his business is conducted and over his
established roads; and
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(4) The transportation must be for hire.
Based on the above definitions and requirements,
there is no doubt that petitioner is a common
carrier. It is engaged in the business of transporting
or carrying goods, i.e. petroleum products, for hire
as a public employment. It undertakes to carry for
all persons indifferently, that is, to all persons who
choose to employ its services, and transports the
goods by land and for compensation. The fact that
petitioner has a limited clientele does not exclude it
from the definition of a common carrier.
4.)
G.R. No. 120334 January 20, 1998
NORTHWEST AIRLINES, INC. petitioner,
vs.
COURT OF APPEALS and ROLANDO I. TORRES,
respondents.
DAVIDE, JR., J.:
Facts:
Rolando Torres, allegedly on a special mission to
purchase firearms for the Philippine Senate,
purchased a round trip ticket from Northwest for his
travel to Chicago and back to Manila.
After purchasing firearms and on the way back to
Manila, his baggage was required to be opened.
Torres showed his authorization from the Philippine
government and the purchase receipts. Northwest
sealed the baggage and placed a red tag with the
marking "CONTAINS FIREARMS".
Upon arrival, Torres did not receive one of the bags.
He was informed that it was recalled back to
Chicago for US Customs verification. However, the
firearms were missing when the baggage arrived.
Northwest refused to settle, so Torres filed a case for
the Airlines to pay actual damages, moral
damages, temperate damages, exemplary
damages and attorney's fees.
In its defense, NORTHWEST argued that the Warsaw
Convention and the contract of carriage limited its
liability to US$640.
TC ruled in favour of Torres.
a. award of US$9,009.32 (value of the lost
firearms)  "the act of NORTHWEST's personnel
in Tokyo or Narita Airport in just guessing which
baggage contained the firearms was careless
and imprudent, amounting to careless
disregard for the safety of the luggage of the
passenger constituted willful misconduct
which brought the case beyond the
application of Section 22(2) of the Warsaw
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Convention, thereby depriving NORTHWEST of
the limitation of the liability provided for in said
section.
b. attorney's fees and expenses of
litigationunjustifiable refusal to settle Torres’
claim
CA affirmed.
a. TORRES was entitled to actual damages, since
NORTHWEST had, in effect, admitted the loss
of the firearms when it insisted that its liability
was limited to $9.07 per pound or $20 per kilo.
b. NORTHWEST's guessing of which luggage
contained the firearms amounted to willful
misconduct under Section 25(1) of the
Warsaw Convention which entitled TORRES to
claim actual damages in excess of the
limitation provided for under Section 22(2) of
said Convention.
ISSUE: Whether Northwest’s liability for actual
damages may be limited by Warsaw convention
NORTHWEST's liability for actual damages may not
be limited to that prescribed in Section 22(2) of the
Warsaw Convention.
In Alitalia v. Intermediate Appellate Court, the Court
held:
A limit of liability would only be in those cases where
the cause of the death or injury to person, or
destruction, loss or damage to property or delay in
its transport is not attributable to or attended by any
willful misconduct, bad faith, recklessness, or
otherwise improper conduct on the part of any
official or employee for which the carrier is
responsible, and there is otherwise no special or
extraordinary form of resulting injury. The
Convention's provisions, in short, do not "regulate or
exclude liability for other breaches of contract by
the carrier" or misconduct of its officers and
employees, or for some particular or exceptional
type of damage.

In this case, the Court held that the guessing of

which luggage contained the firearms amounted to
willful misconduct under Section 25(1) of the Warsaw
Convention.

Thus, Northwest cannot use Section 22(2) of the

Warsaw Convention as defense.

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