G.R. No. 149019 August 15, 2006 the Caltex’s Bulk Depot Office boarded the vessel.

the Caltex’s Bulk Depot Office boarded the vessel. It was only then that they found out what
had happened. Thereafter, the duo immediately went ashore to see to it that the shore tank
DELSAN TRANSPORT LINES, INC., Petitioner, gate valve was closed. The loss of diesel oil due to spillage was placed at 113.788 k/l while
vs. some 435,081 k/l thereof backflowed from the shore tank.
AMERICAN HOME ASSURANCE CORPORATION, Respondent.
As a result of spillage and backflow of diesel oil, Caltex sought recovery of the loss from Delsan,
DECISION but the latter refused to pay. As insurer, AHAC paid Caltex the sum of P479,262.57 for spillage,
pursuant to Marine Risk Note No. 34-5093-6, and P1,939,575.37 for backflow of the diesel oil
pursuant to Inland Floater Policy No. AH-1F64-1011549P.
GARCIA, J.:

On February 19, 1985, AHAC, as Caltex’s subrogee, instituted Civil Case No. 85-29357 against
By this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Delsan
Delsan before the Manila RTC, Branch 9, for loss caused by the spillage. It likewise prayed that
Transport Lines, Inc. (Delsan hereafter) assails and seeks to set aside the Decision, 1 dated July
it be indemnified for damages suffered in the amount of P652,432.57 plus legal interest
16, 2001, of the Court of Appeals (CA) in CA-G.R. CV No. 40951 affirming an earlier decision of
thereon.
the Regional Trial Court (RTC) of Manila, Branch IX, in two separate complaints for damages
docketed as Civil Case No. 85-29357 and Civil Case No. 85-30559.
Also, on May 5, 1985, in the Manila RTC, Branch 31, AHAC instituted Civil Case No. 85-30559
against Delsan for the loss caused by the backflow. It likewise prayed that it be awarded the
The facts:
amount of P1,939,575.37 for damages and reasonable attorney’s fees. As counterclaim in both
cases, AHAC prayed for attorney’s fees in the amount of P200,000.00 and P500.00 for every
Delsan is a domestic corporation which owns and operates the vessel MT Larusan. On the court appearance.
other hand, respondent American Home Assurance Corporation (AHAC for brevity) is a foreign
insurance company duly licensed to do business in the Philippines through its agent, the
Since the cause of action in both cases arose out of the same incident and involved the same
American-International Underwriters, Inc. (Phils.). It is engaged, among others, in insuring
issues, the two were consolidated and assigned to Branch 9 of the court.
cargoes for transportation within the Philippines.

On August 31, 1989, the trial court rendered its decision 2 in favor of AHAC holding Delsan liable
On August 5, 1984, Delsan received on board MT Larusan a shipment consisting of 1,986.627 k/l
for the loss of the cargo for its negligence in its duty as a common carrier. Dispositively, the
Automotive Diesel Oil (diesel oil) at the Bataan Refinery Corporation for transportation and
decision reads:
delivery to the bulk depot in Bacolod City of Caltex Phils., Inc. (Caltex), pursuant to a Contract
of Afreightment. The shipment was insured by respondent AHAC against all risks under Inland
Floater Policy No. AH-IF64-1011549P and Marine Risk Note No. 34-5093-6. WHEREFORE, judgment is hereby rendered:

On August 7, 1984, the shipment arrived in Bacolod City. Immediately thereafter, unloading A). In Civil Case No. 85-30559:
operations commenced. The discharging of the diesel oil started at about 1:30 PM of the same
day. However, at about 10:30 PM, the discharging had to be stopped on account of the (1) Ordering the defendant (petitioner Delsan) to pay plaintiff (respondent AHAC) the sum
discovery that the port bow mooring of the vessel was intentionally cut or stolen by unknown of P1,939,575.37 with interest thereon at the legal rate from November 21, 1984 until fully paid
persons. Because there was nothing holding it, the vessel drifted westward, dragged and and satisfied; and
stretched the flexible rubber hose attached to the riser, broke the elbow into pieces, severed
completely the rubber hose connected to the tanker from the main delivery line at sea bed (2) Ordering defendant to pay plaintiff the sum of P10,000.00 as and for attorney’s fees.
level and ultimately caused the diesel oil to spill into the sea. To avoid further spillage, the
vessel’s crew tried water flushing to clear the line of the diesel oil but to no avail. In the
For lack of merit, the counterclaim is hereby dismissed.
meantime, the shore tender, who was waiting for the completion of the water flushing, was
surprised when the tanker signaled a "red light" which meant stop pumping. Unaware of what
happened, the shore tender, thinking that the vessel would, at any time, resume pumping, did B). In Civil Case No. 85-29357:
not shut the storage tank gate valve. As all the gate valves remained open, the diesel oil that
was earlier discharged from the vessel into the shore tank backflowed. Due to non-availability (1) Ordering defendant to pay plaintiff the sum of P479,262.57 with interest thereon at the legal
of a pump boat, the vessel could not send somebody ashore to inform the people at the rate from February 6, 1985 until fully paid and satisfied;
depot about what happened. After almost an hour, a gauger and an assistant surveyor from
(2) Ordering defendant to pay plaintiff the sum of P5,000.00 as and for attorney’s fees.
For lack of merit, the counterclaim is hereby dismissed.
Costs against the defendant.
SO ORDERED.
In time, Delsan appealed to the CA whereat its recourse was docketed as CA-G.R. CV No.
40951.
In the herein challenged decision, 3 the CA affirmed the findings of the trial court. In so ruling,
the CA declared that Delsan failed to exercise the extraordinary diligence of a good father of
a family in the handling of its cargo. Applying Article 1736 4 of the Civil Code, the CA ruled that
since the discharging of the diesel oil into Caltex bulk depot had not been completed at the
time the losses occurred, there was no reason to imply that there was actual delivery of the
cargo to Caltex, the consignee. We quote the fallo of the CA decision:
WHEREFORE, premises considered, the appealed Decision of the Regional Trial Court of Manila,
Branch 09 in Civil Case Nos. 85-29357 and 85-30559 is hereby AFFIRMED with a modification that
attorney’s fees awarded in Civil Case Nos. 85-29357 and 85-30559 are hereby DELETED.
SO ORDERED.
Delsan is now before the Court raising substantially the same issues proffered before the CA.
Principally, Delsan insists that the CA committed reversible error in ruling that Article 1734 of the
Civil Code cannot exculpate it from liability for the loss of the subject cargo and in not
applying the rule on contributory negligence against Caltex, the shipper-owner of the cargo,
and in not taking into consideration the fact that the loss due to backflow occurred when the
diesel oil was already completely delivered to Caltex.
We are not persuaded.
In resolving this appeal, the Court reiterates the oft-stated doctrine that factual findings of the
CA, affirmatory of those of the trial court, are binding on the Court unless there is a clear
showing that such findings are tainted with arbitrariness, capriciousness or palpable error. 5
Delsan would have the Court absolve it from liability for the loss of its cargo on two grounds.
First, the loss through spillage was partly due to the contributory negligence of Caltex; and
Second, the loss through backflow should not be borne by Delsan because it was already
delivered to Caltex’s shore tank.
Common carriers are bound to observe extraordinary diligence in the vigilance over the goods
transported by them. They are presumed to have been at fault or to have acted negligently if
the goods are lost, destroyed or deteriorated. 6 To overcome the presumption of negligence in
case of loss, destruction or deterioration of the goods, the common carrier must prove that it
exercised extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of
the Civil Code enumerates the instances when the presumption of negligence does not
attach:
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the
goods, unless the same is due to any of the following causes only:
1) Flood storm, earthquake, lightning, or other natural disaster or calamity;
2) Act of the public enemy in war, whether international or civil;
3) Act or omission of the shipper or owner of the goods;
4) The character of the goods or defects in the packing or in the containers;
5) Order or act of competent public authority.
Both the trial court and the CA uniformly ruled that Delsan failed to prove its claim that there
was a contributory negligence on the part of the owner of the goods – Caltex. We see no
reason to depart therefrom. As aptly pointed out by the CA, it had been established that the
proximate cause of the spillage and backflow of the diesel oil was due to the severance of the
port bow mooring line of the vessel and the failure of the shore tender to close the storage
tank gate valve even as a check on the drain cock showed that there was still a product on
the pipeline. To the two courts below, the actuation of the gauger and the escort surveyor,
both personnel from the Caltex Bulk Depot, negates the allegation that Caltex was remiss in its
duties. As we see it, the crew of the vessel should have promptly informed the shore tender
that the port mooring line was cut off. However, Delsan did not do so on the lame excuse that
there was no available banca. As it is, Delsan’s personnel signaled a "red light" which was not a
sufficient warning because such signal only meant that the pumping of diesel oil had been
finished. Neither did the blowing of whistle suffice considering the distance of more than 2
kilometers between the vessel and the Caltex Bulk Depot, aside from the fact that it was not
the agreed signal. Had the gauger and the escort surveyor from Caltex Bulk Depot not gone
aboard the vessel to make inquiries, the shore tender would have not known what really
happened. The crew of the vessel should have exerted utmost effort to immediately inform the
shore tender that the port bow mooring line was severed.
To be sure, Delsan, as the owner of the vessel, was obliged to prove that the loss was caused
by one of the excepted causes if it were to seek exemption from responsibility. 7 Unfortunately,
it miserably failed to discharge this burden by the required quantum of proof.
Delsan’s argument that it should not be held liable for the loss of diesel oil due to backflow
because the same had already been actually and legally delivered to Caltex at the time it
entered the shore tank holds no water. It had been settled that the subject cargo was still in
the custody of Delsan because the discharging thereof has not yet been finished when the
backflow occurred. Since the discharging of the cargo into the depot has not yet been
completed at the time of the spillage when the backflow occurred, there is no reason to imply
that there was actual delivery of the cargo to the consignee. Delsan is straining the issue by ATTESTATION
insisting that when the diesel oil entered into the tank of Caltex on shore, there was legally, at
that moment, a complete delivery thereof to Caltex. To be sure, the extraordinary responsibility
I attest that the conclusions in the above decision were reached in consultation before the
of common carrier lasts from the time the goods are unconditionally placed in the possession
case was assigned to the writer of the opinion of the Court’s Division.
of, and received by, the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to a person who has the right to receive
them. 8 The discharging of oil products to Caltex Bulk Depot has not yet been finished, Delsan REYNATO S. PUNO
still has the duty to guard and to preserve the cargo. The carrier still has in it the responsibility to Associate Justice
guard and preserve the goods, a duty incident to its having the goods transported. Chairperson, Second Division

To recapitulate, common carriers, from the nature of their business and for reasons of public CERTIFIC ATI ON
policy, are bound to observe extraordinary diligence in vigilance over the goods and for the
safety of the passengers transported by them, according to all the circumstances of each Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation,
case. 9 The mere proof of delivery of goods in good order to the carrier, and their arrival in the it is hereby certified that the conclusions in the above decision were reached in consultation
place of destination in bad order, make out a prima facie case against the carrier, so that if no before the case was assigned to the writer of the opinion of the Court.
explanation is given as to how the injury occurred, the carrier must be held responsible. It is
incumbent upon the carrier to prove that the loss was due to accident or some other ARTEMIO V. PANGANIBAN
circumstances inconsistent with its liability.10 Chief Justice

All told, Delsan, being a common carrier, should have exercised extraordinary diligence in the Footnotes
performance of its duties. Consequently, it is obliged to prove that the damage to its cargo
was caused by one of the excepted causes if it were to seek exemption from 1
responsibility. 11 Having failed to do so, Delsan must bear the consequences. Penned by Associate Justice Bienvenido L. Reyes with Associate Justices Eubulo G. Verzola
and Marina L. Buzon, concurring; Rollo, pp. 51-66.
2
WHEREFORE, petition is DENIED and the assailed decision of the CA is AFFIRMED in toto. Rollo, pp. 103-107.
3
Supra note 1.
Cost against petitioner. 4
Art. 1736. The extraordinary responsibility of the common carrier lasts from the time the
goods are unconditionally placed in the possession of, and received by the carrier for
SO ORDERED. transportation until the same are delivered, actually or constructively, by the carrier to the
consignee, or to the person who has a right to receive them, without prejudice to the
CANCIO C. GARCIA provisions of Article 1738.
Associate Justice 5
Maximino Fuentes v. The Hon. Court of Appeals, Thirteenth Division, and Virgilio Uy,
WE CONCUR:
Brigido
Saguindang, Leoncio Caligang, et al., G.R. No. 109849, February 26, 1997, 268 SCRA 703.
6
REYNATO S. PUNO Asia Lighterage and Shipping, Inc. v. Court of Appeals and Prudential Guarantee And
Associate Justice Assurance, Inc., G.R. No. 147246, August 19, 2003, 403 SCRA 340.
Chairperson 7
Martini Limited v. Macondray and Co., 39 Phil. 934 (1919).
8
Article 1736, Civil Code.
ANGELINA SANDOVAL-GUTIERREZ RENATO C. CORONA 9
Article 1733, Civil Code.
Associate Justice Associate Justice 10
Ynchausti Steamship v. Dexter & Unson, 41 Phil. 289 (1920).
11
Supra note 6.
ADOLFO S. AZCUNA
Associate Justice
G.R. No. 149019 August 15, 2006
DELSAN TRANSPORT LINES, INC., Petitioner,
vs.
AMERICAN HOME ASSURANCE CORPORATION, Respondent.
FACTS:
Delsan is a domestic corporation which owns and operates the vessel MT Larusan. On the
other hand, respondent American Home Assurance Corporation (AHAC for brevity) is a foreign
insurance company duly licensed to do business in the Philippines through its agent, the
American-International Underwriters, Inc. (Phils.). It is engaged, among others, in insuring
cargoes for transportation within the Philippines.
On August 5, 1984, Delsan received on board MT Larusan a shipment consisting of 1,986.627 k/l
Automotive Diesel Oil (diesel oil) at the Bataan Refinery Corporation for transportation and
delivery to the bulk depot in Bacolod City of Caltex Phils., Inc. (Caltex), pursuant to a Contract
of Afreightment. The shipment was insured by respondent AHAC against all risks under Inland
Floater Policy No. AH-IF64-1011549P and Marine Risk Note No. 34-5093-6.
On August 7, 1984, the shipment arrived in Bacolod City. Immediately thereafter, unloading
operations commenced. The discharging of the diesel oil started at about 1:30 PM of the same
day. However, at about 10:30 PM, the discharging had to be stopped on account of the
discovery that the port bow mooring of the vessel was intentionally cut or stolen by unknown
persons. Because there was nothing holding it, the vessel drifted westward, dragged and
stretched the flexible rubber hose attached to the riser, broke the elbow into pieces, severed
completely the rubber hose connected to the tanker from the main delivery line at sea bed
level and ultimately caused the diesel oil to spill into the sea. To avoid further spillage, the
vessel’s crew tried water flushing to clear the line of the diesel oil but to no avail. In the
meantime, the shore tender, who was waiting for the completion of the water flushing, was
surprised when the tanker signaled a "red light" which meant stop pumping. Unaware of what
happened, the shore tender, thinking that the vessel would, at any time, resume pumping, did
not shut the storage tank gate valve. As all the gate valves remained open, the diesel oil that
was earlier discharged from the vessel into the shore tank backflowed. Due to non-availability
of a pump boat, the vessel could not send somebody ashore to inform the people at the
depot about what happened. After almost an hour, a gauger and an assistant surveyor from
the Caltex’s Bulk Depot Office boarded the vessel. It was only then that they found out what
had happened. Thereafter, the duo immediately went ashore to see to it that the shore tank
gate valve was closed. The loss of diesel oil due to spillage was placed at 113.788 k/l while
some 435,081 k/l thereof backflowed from the shore tank.
As a result of spillage and backflow of diesel oil, Caltex sought recovery of the loss from Delsan,
but the latter refused to pay. As insurer, AHAC paid Caltex the sum of P479,262.57 for spillage,
pursuant to Marine Risk Note No. 34-5093-6, and P1,939,575.37 for backflow of the diesel oil
pursuant to Inland Floater Policy No. AH-1F64-1011549P.
On February 19, 1985, AHAC, as Caltex’s subrogee, instituted Civil Case No. 85-29357 against
Delsan before the Manila RTC, Branch 9, for loss caused by the spillage. It likewise prayed that
it be indemnified for damages suffered in the amount of P652,432.57 plus legal interest
thereon.
Also, on May 5, 1985, in the Manila RTC, Branch 31, AHAC instituted Civil Case No. 85-30559
against Delsan for the loss caused by the backflow. It likewise prayed that it be awarded the
amount of P1,939,575.37 for damages and reasonable attorney’s fees. As counterclaim in both
cases, AHAC prayed for attorney’s fees in the amount of P200,000.00 and P500.00 for every
court appearance.
ISSUE:
whether or not Delsan should be held liable for the loss of its cargo.
whether or not there is contributory negligence on the part of Caltex
HELD:
Common carriers are bound to observe extraordinary diligence in the vigilance over
the goods transported by them. They are presumed to have been at fault or to have acted
negligently if the goods are lost, destroyed or deteriorated. 6 To overcome the presumption of
negligence in case of loss, destruction or deterioration of the goods, the common carrier must
prove that it exercised extraordinary diligence. There are, however, exceptions to this rule.
Article 1734 of the Civil Code enumerates the instances when the presumption of negligence
does not attach:
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the
goods, unless the same is due to any of the following causes only:
1) Flood storm, earthquake, lightning, or other natural disaster or calamity;
2) Act of the public enemy in war, whether international or civil;
3) Act or omission of the shipper or owner of the goods;
4) The character of the goods or defects in the packing or in the containers;
5) Order or act of competent public authority.
Delsan’s argument that it should not be held liable for the loss of diesel oil due to backflow
because the same had already been actually and legally delivered to Caltex at the time it
entered the shore tank holds no water. It had been settled that the subject cargo was still in
the custody of Delsan because the discharging thereof has not yet been finished when the
backflow occurred. Since the discharging of the cargo into the depot has not yet been
completed at the time of the spillage when the backflow occurred, there is no reason to imply
that there was actual delivery of the cargo to the consignee. Delsan is straining the issue by
insisting that when the diesel oil entered into the tank of Caltex on shore, there was legally, at
that moment, a complete delivery thereof to Caltex. To be sure, the extraordinary responsibility
of common carrier lasts from the time the goods are unconditionally placed in the possession
of, and received by, the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to a person who has the right to receive
them. 8 The discharging of oil products to Caltex Bulk Depot has not yet been finished, Delsan
still has the duty to guard and to preserve the cargo. The carrier still has in it the responsibility to
guard and preserve the goods, a duty incident to its having the goods transported.

WHEREFORE, petition is DENIED and the assailed decision of the CA is AFFIRMED in toto.
 Republic of the Philippines 24 CS PLP MTS 456.00
SUPREME COURT
Manila 37 CS CS WOODEN MTS 673.40
SECOND DIVISION
8 CS LAGERLITE PLASTIC MTS 128.00
G.R. No. 98243 July 1, 1992
ALEJANDRO ARADA, doing business under the name and style "SOUTH NEGROS 640 CS STENEI PLASTIC MTS 14,080.00
ENTERPRISES", petitioner,
9,824 CS P176,824.80
vs.
HONORABLE COURT OF APPEALS, respondents. On March 24, 1982, petitioner thru its crew master, Mr. Vivencio Babao, applied for a
clearance with the Philippine Coast Guard for M/L Maya to leave the port of San Carlos City,
PARAS, J.: but due to a typhoon, it was denied clearance by SNI Antonio Prestado PN who was then
This is a petition for review on certiorari which seeks to annul and set aside the decision * of assigned at San Carlos City Coast Guard Detachment (Rollo, p. 122).
the Court of Appeals dated April 8, 1991 in CA-G.R. CV No. 20597 entitled "San Miguel On March 25, 1982 M/L Maya was given clearance as there was no storm and the sea was
Corporation v. Alejandro Arada, doing business under the name and style "South Negros calm. Hence, said vessel left for Mandaue City. While it was navigating towards Cebu, a
Enterprises", reversing the decision of the RTC, Seventh Judicial Region, Branch XII, Cebu typhoon developed and said vessel was buffeted on all its sides by big waves. Its rudder was
City, ordering petitioner to pay the private respondent the amount of P172,284.80 destroyed and it drifted for sixteen (16) hours although its engine was running.
representing the value of the cargo lost on board the ill-fated, M/L Maya with interest On March 27, 1982 at about 4:00 a.m., the vessel sank with whatever was left of its cargoes.
thereon at the legal rate from the date of the filing of the complaint on March 25, 1983 until The crew was rescued by a passing pump boat and was brought to Calanggaman Island.
fully paid, and the costs. Later in the afternoon, they were brought to Palompon, Leyte, where Vivencio Babao filed a
marine protest (Rollo, p. 10).
The undisputed facts of the case are as follows: On the basis of such marine protest, the Board of Marine Inquiry conducted a hearing of the
Alejandro Arada, herein petitioner, is the proprietor and operator of the firm South sinking of M/L Maya wherein private respondent was duly represented. Said Board made its
Negros Enterprises which has been organized and established for more than ten (10) years. findings and recommendation dated November 7, 1983, the dispositive portion of which
It is engaged in the business of small scale shipping as a common carrier, servicing the reads as:
hauling of cargoes of different corporations and companies with the five (5) vessels it was WHEREFORE, premises considered, this Board recommends as it is hereby recommended
operating (Rollo, p. 121). that the owner/operator, officers and crew of M/L Maya be exonerated or absolved from
On March 24, 1982. petitioner entered into a contract with private respondent to safely any administrative liability on account of this incident (Exh. 1).
transport as a common carrier, cargoes of the latter from San Carlos City, Negros Occidental The Board's report containing its findings and recommendation was then forwarded to the
to Mandaue City using one of petitioner's vessels, M/L Maya. The cargoes of private headquarters of the Philippine Coast Guard for appropriate action. On the basis of such
respondent consisted of 9,824 cases of beer empties valued at P176,824.80, were itemized report, the Commandant of the Philippine Coast Guard rendered a decision dated December
as follows: 21, 1984 in SBMI Adm. Case No. 88-82 exonerating the owner/operator officers and crew of
the ill-fated M/L Maya from any administrative liability on account of said incident (Exh. 2).
NO. OF CASES CARGO VALUE
On March 25, 1983, Private respondent filed a complaint in the Regional Trial Court its first
7,515 CS PPW STENIE MTS P136.773.00 cause of action being for the recovery of the value of the cargoes anchored on breach of
contract of carriage. After due hearing, said court rendered a decision dated July 18, 1988,
1,542 CS PLW GRANDE MTS 23,438.40 the dispositive portion of which reads
WHEREFORE, judgment is hereby rendered as follows:
58 CS G.E. PLASTIC MTS 1,276.00 (1) With respect to the first cause of action, claim of plaintiff is hereby dismissed;
(2) Under the second cause of action, defendant must pay plaintiff the sum of P2,000.00;
(3) In the third cause of action, the defendant must pay plaintiff the sum of P2,849.20;
(4) Since the plaintiff has withheld the payment of P12,997.47 due the defendant, the
plaintiff should deduct the amount of P4,849.20 from the P12,997.47 and the balance of
P8,148.27 must be paid to the defendant; and
(5) Defendant's counterclaim not having been substantiated by evidence is likewise
dismissed. NO COSTS. (Orig. Record, pp. 193-195).
Thereafter, private respondent appealed said decision to the Court of Appeals claiming that
the trial court erred in —
(1) holding that nothing was shown that the defendant, or any of his employees who
manned the M/L Maya was negligent in any way nor did they fail to observe extraordinary
diligence over the cargoes of the plaintiff; and
(2) holding that the sinking of said vessel was caused by the storm, consequently, dismissing
the claim of plaintiff in its first cause of action for breach of contract of carriage of goods
(Rollo, pp. 33-34; Decision, pp. 3-4).
In its decision Promulgated on April 8, 1991, the Court of Appeals reversed the decision of
the court a quo, the dispositive portion and the dispositive part of its decision reads as:
WHEREFORE, that part of the Judgment appeal6d from is REVERSED and the appellee
Aleiandro Arada, doing business by the name and style, "South Negros Enterprises", ordered
(sic) to pay unto the appellant San Miguel Corporation the amount of P176,824.80
representing the value of the cargo lost on board the ill-fated vessel, M/L Maya, with
interest thereon at the legal rate from date of the filing of the complaint on March 25, 1983,
until fully paid, and the costs. (Rollo, p. 37)
The Court of Appeals ruled that "in view of his failure to observe extraordinary diligence
over the cargo in question and his negligence previous to the sinking of the carrying vessel,
as above shown, the appellee is liable to the appellant for the value of the lost cargo.
Hence the present recourse.
On November 20, 1991, this Court gave due course to the petition. The pivotal issue to be
resolved is whether or not petitioner is liable for the value of the lost cargoes.
Petitioner contends that it was not in the exercise of its function as a common carrier when
it entered into a contract with private respondent,but was then acting as a private carrier
not bound by the requirement of extraordinary diligence (Rollo, p. 15) and that the factual
findings of the Board of Marine Inquiry and the Special Board of Marine Inquiry are binding
and conclusive on the Court (Rollo, pp. 16-17).
Private respondent counters that M/L Maya was in the exercise of its function as a common
carrier and its failure to observe the extraordinary diligence required of it in the vigilance
over their cargoes makes Petitioner liable for the value of said cargoes.
The petition is devoid of merit.
Common carriers are persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water or air, for
compensation offering their services to the public (Art. 1732 of the New Civil Code).
In the case at bar, there is no doubt that petitioner was exercising its function as a common
carrier when it entered into a contract with private respondent to carry and transport the
latter's cargoes. This fact is best supported by the admission of petitioner's son, Mr. Eric
Arada, who testified as the officer-in-charge for operations of South Negros Enterprises in
Cebu City. In substance his testimony on January 14, 1985 is as follows:
Q. How many vessels are you operating?
A. There were all in all around five (5).
Q. And you were entering to service hauling of cargoes to different companies, is that
correct?
A. Yes, sir.
Q. In one word, the South Negros Enterprises is engaged in the business of common carriers,
is that correct?
A. Yes, sir,
Q. And in fact, at the time of the hauling of the San Miguel Beer, it was also in the same
category as a common carrier?
A. Yes, sir,
(TSN. pp. 3-4, Jan. 29, 1985)
A common carrier, both from the nature of its business and for insistent reasons of public
policy is burdened by law with the duty of exercising extraordinary diligence not only in
ensuring the safety of passengers, but in caring for the goods transported by it. The loss or
destruction or deterioration of goods turned over to the common carrier for the conveyance
to a designated destination raises instantly a presumption of fault or negligence on the part
of the carrier, save only where such loss, destruction or damage arises from extreme
circumstances such as a natural disaster or calamity ... (Benedicto v. IAC, G.R. No. 70876,
July 19, 1990, 187 SCRA 547) (Emphasis supplied).
In order that the common carrier may be exempted from responsibility, the natural disaster
must have been the proximate and only cause of the loss. However, the common carrier
must exercise due diligence to prevent or minimize the loss before, during and after the
occurrence of flood, storm or other natural disaster in order that the common carrier may
be exempted from liability for the destruction or deterioration of the goods (Article 1739,
New Civil Code).
In the instant case, the appellate court was correct in finding that petitioner failed to
observe the extraordinary diligence over the cargo in question and he or the master in his
employ was negligent previous to the sinking of the carrying vessel. In substance, the
decision reads:
... VIVENCIO BABAO, the master of the carrying vessel, knew that there was a typboon
coming before his departure but did not check where it was.
xxx xxx xxx
If only for the fact that he was first denied clearance to depart on March 24, 1982, obviously
because of a typhoon coming, Babao, as master of the vessel, should have verified first
where the typhoon was before departing on March 25, 1982. True, the sea was calm at breaking waves
departure time. But that might be the calm before the storm. Prudence dictates that he
should have ascertained first where the storm was before departing as it might be on his begin to be blown
path. (Rollo, pp. 35-36)
Respondent court's conclusion as to the negligence of petitioner is supported by evidence. It in streaks along
will be noted that Vivencio Babao knew of the impending typhoon on March 24, 1982 when
the Philippine Coast Guard denied M/L Maya the issuance of a clearance to sail. Less than 24 the direction of
hours elapsed since the time of the denial of said clearance and the time a clearance to sail
the wind;
was finally issued on March 25, 1982. Records will show that Babao did not ascertain where
the typhoon was headed by the use of his vessel's barometer and radio (Rorlo, p. 142). Spindrift begins
Neither did the captain of the vessel monitor and record the weather conditions everyday as
required by Art, 612 of the Code of Commerce (Rollo, pp. 142-143). Had he done so while 2 AM 30 3.7 rough sea heaps up
navigating for 31 hours, he could have anticipated the strong winds and big waves and taken
shelter (Rollo, pp- 36; 145). His testimony on May 4, 1982 is as follows: white foam from
Q. Did you not check on your own where the typhoon was?
A. No. sir. (TSN, May 4, 1982, pp. 58-59) breaking waves
Noteworthy is the fact that as Per official records of the Climatological Division of the
begin to be blown
Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAG-ASA for
brevity) issued by its Chief of Climatological Division, Primitivo G. Ballan, Jr. as to the in streaks along
weather and sea conditions that prevailed in the vicinity of Catmon, Cebu during the period
March 25-27, 1982, the sea conditions on March 25, 1982 were slight to rough and the the direction of the wind;
weather conditions then prevailing during those times were cloudy skies with rainshowers
and the small waves grew larger and larger, to wit: Spindrift begins
SPEED WAVE HT. SEA WEATHER (Exh. 3)
A common carrier is obliged to observe extraordinary diligence and the failure of Babao to
KNOTS (METERS) CONDITIONS ascertain the direction of the storm and the weather condition of the path they would be
traversing, constitute lack of foresight and minimum vigilance over its cargoes taking into
March 25 account the surrounding circumstances of the case.
While the goods are in the possession of the carrier, it is but fair that it exercises
8 AM 15 1-2 slight cloudy skies
extraordinary diligence in protecting them from loss or damage, and if loss occurs, the law
w/ rainshowers presumes that it was due to the carrier's fault or negligence; that is necessary to protect the
interest of the shipper which is at the mercy of the carrier (Art. 1756, Civil Code, Aboitiz
2 PM 20-25 2.0-3.0 moderate overcast skies Shipping Corporation v. Court of Appeals, G.R. No. 89757, Aug. 6, 1990, 188 SCRA 387).
Furthermore, the records show that the crew of M/L Maya did not have the required
to rough w/ some rains qualifications provided for in P.D. No. 97 or the Philippine Merchant Marine Officers Law, all
of whom were unlicensed. While it is true that they were given special permit to man the
8 PM 30 3.7 rough sea heaps up vessel, such permit was issued at the risk and responsibility of the owner (Rollo, p. 36).
Finally, petitioner claims that the factual findings of the Special Board of Marine Inquiry
white foam from
exonerating the owner/operator, crew officers of the ill-fated vessel M/L Maya from any
administrative liability is binding on the court.
In rejecting petitioner's claim, respondent court was correct in ruling that "such exoneration
was but with respect to the administrative liability of the owner/operator, officers and crew
of the ill-fated" vessel. It could not have meant exoneration of appellee from liability as a
common carrier for his failure to observe extraordinary diligence in the vigilance over the
goods it was transporting and for the negligent acts or omissions of his employees. Such is
the function of the Court, not the Special Board of Marine Inquiry." (Rollo, P. 37, Annex A, p.
7)
The Philippine Merchant Marine Rules and Regulations particularly Chapter XVI thereof
entitled "Marine Investigation and Suspension and Revocation Proceedings" prescribes the
Rules governing maritime casualties or accidents, the rules and Procedures in administrative
investigation of all maritime cases within the jurisdiction or cognizance of the Philippine
Coast Guard and the grounds for suspension and revocation of licenses/certificates of
marine officers and seamen (1601 — SCOPE); clearly, limiting the jurisdiction of the Board of
Marine Inquiry and Special Board of Marine Inquiry to the administrative aspect of marine
casualties in so far as it involves the shipowners and officers.
PREMISES CONSIDERED, the appealed decision is AFFIRMED.
SO ORDERED.
Narvasa, C. J., (Chairman), Regalado and Nocon, JJ., concur.
Padilla, J. took no part.
Footnotes
* Penned by Associate Justice Pedro A. Ramirez and concurred in by Associate Justices
Fernando A. Santiago and Fermin A. Martin, Jr.
G.R. No. 98243 July 1, 1992
ALEJANDRO ARADA, doing business under the name and style "SOUTH NEGROS
ENTERPRISES", petitioner,
vs.
HONORABLE COURT OF APPEALS, respondents.
CASE DIGEST
FACTS:
Alejandro Arada, petitioner, is the proprietor and operator of the firm South Negros
Enterprises which has been organized and established for more than ten (10) years. It is
engaged in the business of small scale shipping as a common carrier, servicing the hauling of
cargoes of different corporations and companies with the five (5) vessels it was operating
.Petitioner entered into a contract with private respondent to safely transport as a common
carrier, cargoes of the latter from San Carlos City, Negros Occidental to Mandaue City using
one of petitioner's vessels, M/L Maya. The cargoes of private respondent consisted of 9,824
cases of beer empties valued at P176,824.80.
On March 24, 1982, Arada thru its crew master, Mr. Vivencio Babao, applied for a
clearance with the Philippine Coast Guard for M/L Maya to leave the port of San Carlos City,
but due to a typhoon, it was denied clearance by SNI Antonio Prestado PN who was then
assigned at San Carlos City Coast Guard Detachment. On the following day, M/L Maya was
given clearance as there was no storm and the sea was calm. Hence, said vessel left for
Mandaue City.
While it was navigating towards Cebu, a typhoon developed and said vessel was buffeted on
all its sides by big waves. Its rudder was destroyed and it drifted for sixteen (16) hours
although its engine was running.
On March 27, 1982 at about 4:00 a.m., the vessel sank with whatever was left of its
cargoes. The crew was rescued by a passing pump boat and was brought to Calanggaman
Island. Later in the afternoon, they were brought to Palompon, Leyte, where Vivencio Babao
filed a marine protest .The Board of Marine Inquiry conducted a hearing of the sinking of
M/L Maya and recommended that the owner/operator, officers and crew of M/L Maya be
exonerated or absolved from any administrative liability on account of this incident. This
recommendation was then forwarded to the headquarters of the Philippine Coast Guard for
appropriate action. The Commandant of the Philippine Coast Guard rendered a decision
dated December 21, 1984 in SBMI Adm. Case No. 88-82 exonerating the owner/operator
officers and crew of the ill-fated M/L Maya from any administrative liability on account of storm or other natural disaster in order that the common carrier may be exempted from
said incident. liability for the destruction or deterioration of the goods (Article 1739, New Civil Code).

Private respondent filed a complaint in the Regional Trial Court its first cause of action being
for the recovery of the value of the cargoes anchored on breach of contract of carriage. RTC
dismissed the claim of plaintiff. Private respondent appealed said decision to the Court of
Appeals and the Judgment appealed from is REVERSED and ruled that the appellee
Aleiandro Arada, ordered (sic) to pay unto the appellant San Miguel Corporation the amount
of P176,824.80 representing the value of the cargo lost on board the ill-fated vessel, M/L
Maya, with interest thereon at the legal rate from date of the filing of the complaint on
March 25, 1983, until fully paid, and the costs. The Court of Appeals ruled also that "in view
of his failure to observe extraordinary diligence over the cargo in question and his
negligence previous to the sinking of the carrying vessel, as above shown, the appellee is
liable to the appellant for the value of the lost cargo.
Hence the present recourse.
ISSUE:
Whether or not petitioner is liable for the value of the lost cargoes.
In the instant case, the appellate court was correct in finding that petitioner failed
to observe the extraordinary diligence over the cargo in question and he or the master in his
employ was negligent previous to the sinking of the carrying vessel. A common carrier is
obliged to observe extraordinary diligence and the failure of Babao to ascertain the
direction of the storm and the weather condition of the path they would be traversing,
constitute lack of foresight and minimum vigilance over its cargoes taking into account the
surrounding circumstances of the case. While the goods are in the possession of the carrier,
it is but fair that it exercises extraordinary diligence in protecting them from loss or damage,
and if loss occurs, the law presumes that it was due to the carrier's fault or negligence; that
is necessary to protect the interest of the shipper which is at the mercy of the carrier.
In rejecting petitioner's claim, respondent court was correct in ruling that "such
exoneration was but with respect to the administrative liability of the owner/operator,
officers and crew of the ill-fated" vessel. It could not have meant exoneration of appellee
from liability as a common carrier for his failure to observe extraordinary diligence in the
vigilance over the goods it was transporting and for the negligent acts or omissions of his
employees.

RULING: PREMISES CONSIDERED, the appealed decision is AFFIRMED.

SO ORDERED.
YES.

There is no doubt that petitioner was exercising its function as a common carrier
when it entered into a contract with private respondent to carry and transport the latter's
cargoes. This fact is best supported by the admission of petitioner's son, Mr. Eric Arada, who
testified as the officer-in-charge for operations of South Negros Enterprises in Cebu City.

A common carrier, both from the nature of its business and for insistent reasons of
public policy is burdened by law with the duty of exercising extraordinary diligence not only
in ensuring the safety of passengers, but in caring for the goods transported by it. The loss
or destruction or deterioration of goods turned over to the common carrier for the
conveyance to a designated destination raises instantly a presumption of fault or negligence
on the part of the carrier, save only where such loss, destruction or damage arises from
extreme circumstances such as a natural disaster or calamity. In order that the common
carrier may be exempted from responsibility, the natural disaster must have been
the proximate and only cause of the loss. However, the common carrier must exercise due
diligence to prevent or minimize the loss before, during and after the occurrence of flood,