NATIONAL FOOD AUTHORITY vs. CA G.R. No.

96453, August 4, 1999

Thursday, January 29, 2009 Posted by Coffeeholic Writes
Labels: Case Digests, Commercial Law
Facts: National Food Authority (NFA), thru its officers, entered into a Letter of Agreement for Vessel/Barge Hire with
Hongfil for the shipment of 200,000 bags of corn grains from Cagayan de Oro City to Manila.
The loading of bags of corn grains in the vessel commenced but it took a longer period of 21 days, 15 hours, and 18
minutes to finish than as was certified by the arrastre firm as there was a strike staged by the arrastre workers in view of
the refusal of the striking stevedores to attend to their work. The vessel was allowed to depart for the port of Manila and
arrived there, but unfortunately, it took a longer period of 20 days, 14 hours and 33 minutes to finish the unloading than
the discharging rate certified by the Port of Manila, due to the unavailability of a berthing space for the vessel M/V
CHARLIE/DIANE.
Only
166,798
bags
were
unloaded
at
the
Port
of
Manila.
After the discharging was completed, NFA paid Hongfil the amount of P1,006,972.11 covering the shipment of corn
grains. Thereafter, Hongfil sent its billing to NFA claiming payment for freight covering the shut-out load or deadfreight as
well as demurrage, allegedly sustained during the loading and unloading of subject shipment of corn grains. When NFA
refused to pay the amount reflected in the billing, Hongfil brought the present action against NFA.
Issues:
1)
2)

Can
Can

petitioners
petitioners

be
be

held
held

liable
liable

for
for

deadfreight?
demurrage?

Held: 1) Yes. It bears stressing that subject Letter of Agreement is considered a Charter Party. A charter party is
classified into (1) bareboat or demise charter and (2) contract of affreightment. Subject contract is one of
affreightment, whereby the owner of the vessel leases part or all of its space to haul goods for others. It is a contract for
special service to be rendered by the owner of the vessel. Under such contract, the ship retains possession, command,
and navigation of the ship, the charterer or freighter merely having use of the space in the vessel in return for his
payment
of
the
charter
hire.
Under the law, the cargo not loaded is considered a deadfreight. It is the amount paid by or recoverable from a charterer
of a ship for the portion of the ships capacity the latter contracted for but failed to occupy. Explicit and succinct is the law
that the liability for deadfreight is on the charterer. (Article 680 of the Code of Commerce).
2) No. Demurrage is the sum fixed in a charter party as a remuneration to the owner of the ships for the detention of his
vessel beyond the number of days allowed by the charter party for loading or unloading or for sailing. Liability for
demurrage, using the word in its technical sense, exists only when expressly stipulated in the contract.
Shipper or charterer is liable for the payment of demurrage claims when he exceeds the period for loading and unloading
as agreed upon or the agreed laydays. The period for such may or may not be stipulated in the contract. A charter party
may either provide for a fixed laydays or contain general or indefinite words such as customary quick dispatch or as
fast as the streamer can load. In the case at bar, the charter party provides merely for a general or indefinite words of
customary quick dispatch. Such stipulation implies that loading and unloading of the cargo should be within a
reasonable
time.
The charterer NFA could not be held liable for demurrage for it appears that cause of delay was not imputable to either of
the parties. The cause of delay during the loading was the strike staged by the crew of the arrastre operator, and the
unavailability of a berthing space for the vessel during the unloading. Here, the Court holds that the delay sued upon was
still within the reasonable time embraced in the stipulation of Customary Quick Dispatch.
Furthermore, considering the subject contract of affreightment contains an express provision Demurrage/Dispatch:
NONE, the same left the parties with no recourse but to apply the literal meaning of such stipulation.

Syllabi/Synopsis
THIRD DIVISION
[G.R. No. 96453. August 4, 1999]
NATIONAL FOOD AUTHORITY, ROSELINDA GERALDEZ, RAMON SARGAN and ADELINA A. YAP, petitioners, vs. THE
HON. COURT OF APPEALS AND HONGFIL SHIPPING CORPORATION, respondents.

DECISION
PURISIMA, J.:
At bar is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court of the Decision,i[1] of the Court
of Appeals which affirmed the decision of Branch 165 of the Regional Trial Court, Pasig City in Civil Case No. 55892,
entitled Hongfil Shipping Corporation vs. National Food Authority, Roselinda Geraldez, Ramon Sargan and Adelina A.
Yap,ii[2] ordering the National Food Authority to pay plaintiffs claim for demurrage and deadfreight.
The facts that matter are undisputed.
National Food Authority (NFA), thru its officers then, Emil Ong, Roselinda Geraldez, Ramon Sargan and Adelina A. Yap,
entered into a Letter of Agreement for Vessel /Barge Hireiii[3] with Hongfil Shipping Corporation (Hongfil) for the
shipment of 200,000 bags of corn grains from Cagayan de Oro City to Manila, under the following terms and conditions,
to wit:
1. Name of Vessel/Barge

: MV CHARLIE/DIANE

2. Cargo

: Corn grains in bag

3. Quantity

: Two Hundred Thousand bags, more or less

4. Loading Port

: One Safe Berth at Cagayan de Oro Port

5. Discharging Port

: One Safe Berth at North Harbor, Manila

6. Laydays (Loading and Unloading):

: Customary Quick Dispatch (CQD)

7. Demurrage/Dispatch

: None

8. Freight Rate

: Seven Pesos 30/100 (P7.30) per bar

or a total of P1,460,000.00 based on out-turn weight at 50 kilos
per bag

9. Payment of Freight

: Loading - 25% upon completion of loading;

25% upon commence-ment of discharge and balance 15 days
after presentation of complete billing documents subject to usual
accounting auditing regulations and procedures.

NFA sent Hongfil a Letter of Advice that its (Hongfil) vessel should proceed to Cagayan de Oro City. On February 6,
1987, M/V DIANE/CHARLIE of Hongfil arrived in Cagayan de Oro City 1500 hours. Hongfil notified the Provincial
Manager of NFA in Cagayan de Oro, Eduardo A. Mercado, of its said vessels readiness to load and the latter received
the said notification on February 9, 1987.iv[4]
A certification of charging rate was then issued by Gold City Integrated Port Services, Inc. (INPORT), the arrastre firm in
Cagayan de Oro City, which certified that it would take them (INPORT) seven (7) days, eight (8) hours and forty-three
(43) minutesv[5] to load the 200,000 bags of NFA corn grains.
On February 10, 1987, loading on the vessel commenced and was terminated on March 4, 1987. As there was a strike
staged by the arrastre workers and in view of the refusal of the striking stevedores to attend to their work, the loading of
said corn grains took twenty-one (21) days, fifteen hours (15) and eighteen (18) minutes to finish.
On March 6, 1987, the NFA Provincial Manager allowed MV CHARLIE/DIANE to depart for the Port of Manila. On March
11, 1987, the vessel arrived at the Port of Manila and a certification of discharging rate was issued at the instance of
Hongfil, stating that it would take twelve (12) days, six (6) hours and twenty-two (22) minutes to discharge the 200, 000
bags of corn grains.
Unfortunately, unloading only commenced on March 15, 1987 and was completed on April 7, 1987. It took a total period
of twenty (20) days, fourteen (14) hours and thirty-three (33) minutes to finish the unloading, due to the unavailability of a
berthing space for M/V CHARLIE/DIANE.

After the discharging was completed, NFA paid Hongfil the amount of P1,006,972.11 covering the shipment of corn
grains. Thereafter, Hongfil sent its billing to NFA, claiming payment for freight covering the shut-out load or deadfreight
as well as demurrage, allegedly sustained during the loading and unloading of subject shipment of corn grains.
When NFA refused to pay the amount reflected in the billing, Hongfil brought an action against NFA and its officers for
recovery of deadfreight and demurrage, docketed as Civil Case No. 55892 before Branch 165 of the Regional Trial Court
in Pasig City.
On February 29, 1989, after trial, the Regional Trial Court handed down its decisionvi[6] in favor of Hongfil and against
NFA and its officers, disposing thus:
IN VIEW OF THE FOREGOING, the Court hereby renders judgment in favor of plaintiff and against the defendants,
ordering:
1. defendant National Food Authority, and the public defendants, to pay the plaintiff the following:
a) P242,367.30, in and as payment of the deadfreight or unloaded cargo; and
B) P1,152,687.50, in and as payment as of demurrage claim;
2. defendants to pay plaintiff, jointly and severally the amount of P50,000.00, for and as attorneys fees; and
3. Expenses of litigation or the costs of this suit.
The counterclaim of defendants are hereby dismissed for lack of merit.
SO ORDERED.
On appeal, the Court of Appeals affirmed with modification the judgment by deleting therefrom the award of attorneys
fees.
Undaunted, petitioners have come to this Court via the instant petition for review under Rule 45 of the Revised Rules of
Court, raising as issues:
I
WHETHER OR NOT PETITIONERS CAN BE HELD LIABLE FOR DEADFREIGHT;
II
WHETHER OR NOT PETITIONERS CAN BE HELD LIABLE FOR DEMURRAGE; AND
III
WHETHER OR NOT PERSONAL CIVIL LIABILITY MAY ATTACH TO THE OFFICERS OF NFA.
It bears stressing that subject Letter of Agreement is considered a Charter Party. A charter party is classified into (1)
bareboat or demise charter and (2) contract of affreightment. Subject contract is one of affreightment, whereby the
owner of the vessel leases part or all of its space to haul goods for others. It is a contract for special service to be
rendered by the owner of the vessel. Under such contract the ship owner retains the possession, command and
navigation of the ship, the charterer or freighter merely having use of the space in the vessel in return for his payment of
the charter hire.vii[7]
Anent the first issue, petitioners contend that the respondent corporation is not entitled to deadfreight as the contract
itself limited their liability. Section 7 of the Letter Agreement for Vessel/Barge Hire provided a freight rate of Seven and
30/100 (P7.30) Pesos per bag or a total of P1,460,000 based on out-turn weight of 50 kilos per bag.
The Court of Appeals, however, held that since the charter of MV CHARLIE/DIANE was for the whole vessel, and
inasmuch as the vessel may no longer accept any other cargo without the consent of the charterer NFA, the latter is
liable to pay the total amount of P1,460,000.00 based on 200,000 bags, at the rate of P7.30 per bag; in accordance with
the Letter of Agreement for Vessel/Barge Hire which stipulated:

xxxxxx xxx
2. Cargo

: Corn Grains in Bags

3. Quantity
xxx

xxx

: Two Hundred Thousand Bags, more or less

xxx

7. Freight Rate

: Seven Pesos 30/100 (P7.30) per bag

or a total of P1,460,000.00 based on out-turn weight at 50 kilos
per bag. (Exh. A)

The submission of petitioners is unsustainable. They theorize that what should be paid for was what was actually
unloaded and not the number of bags of corn grains NFA contracted to load.
Under the law, the cargo not loaded is considered as deadfreight. It is the amount paid by or recoverable from a
charterer of a ship for the portion of the ships capacity the latter contracted for but failed to occupy. viii[8] Explicit and
succinct is the law that the liability for deadfreight is on the charterer. The law in point is Article 680 of the Code of
Commerce, which provides:
Art. 680. A charterer who does not complete the full cargo he bound himself to ship shall pay the freightage of the
amount he fails to ship, if the captain does not take other freight to complete the load of the vessel, in which case the first
charterer shall pay the difference, should there be any.
Petitioners anchor their stance on the phrase 200,000 bags, more or less, which, according to them, meant more than
200,000 or less than 200,000 bags. As what was actually unloaded was less than 200,000 bags, NFA should only to pay
for the freight therefor and not for 200,000 bags; petitioners contend.
Petitioners contention is untenable. The words more or less when used in relation to quantity or distance, are words of
safety and caution, intended to cover some slight or unimportant inaccuracy. It allows an adjustment to the demands of
circumstances which do not weaken or destroy the statements of distance and quantity when no other guides are
available.ix[9]In fact, it is further disclosed by the evidence that there was a communication from NFA Administrator Emil
Ong to Oscar Sanchez, Manager of Hongfil Shipping Corporation, stating clearly that the vessel M/V CHARLIE/DIANE
was chartered to load our 200,000 bags corn grains from Cagayan de Oro to Manila at P7.30 per 50 kg./bag.x[10]
Therefrom, it can be gleaned unerringly that the charter party was to transport 200,000 bags of corn grains.It is thus
decisively clear that the letter of agreement covered 200,000 bags of corn grains but only 166,798 bags were unloaded
at the Port of Manila. Consequently, shut-out load or deadfreight of 33,201 bags at P7.30 per bag or P242,367.30 should
be paid by NFA to Hongfil Shipping Corporation.
On the second issue of whether or not petitioner is liable for the payment of demurrage, petitioners theorize that NFA is
not liable for the payment of demurrage since the Letter of Agreement for Vessel/Barge Hire expressly stipulated
Demurrage/Dispatch: NONE.
The Court of Appeals, however, adjudged petitioners liable for demurrage, ratiocinating thus:
As regards the claim for demurrage, the letter of agreement between the parties does not contain any provision for the
amount of demurrage, which is the sum fixed by the contract of carriage, or which is allowed, as remuneration to the
owner of the ship for the detention of his vessel beyond the number of days allowed by the charter party for loading or
unloading or for sailing (Agbayani, Commercial Laws of the Philippines, Vol. IV, 1983 ed, p. 243). Nonetheless, despite
the absence of an express provision on demurrage in the agreement, such demurrage may be demanded under the law.
Article 656 of the Code of Commerce provides:
Article 656. If in the charter party the time in which the loading or unloading are to take place is not stated, the usages
of the port where these acts are to take place shall be observed. After the stipulated customary period has passed, and
there is no express provision in the charter party fixing the indemnity for delay, the Captain shall be entitled to demand
demurrage for the lay days and extra lay days which may have elapsed in loading and unloading.(underscoring
supplied)
While the right to demand demurrage is vested in the captain of the vessel, the said right may very well be exercised by
the shipowner appellee which is the principal of the captain.
Moreover, while the causes of delay may not be wholly attributable to appellant NFA (except the old and defective bags
or sacks used), the same may not also be blamed on appellee Hongfil (except the allegedly defective munkcrane).

Incidentally , the Office of the Government Corporate Counsel, in its Opinion No. 130, series of 1987, dated December 9,
1987, which is of persuasive force, opined that appellant NFA is liable for both deadfreight and demurrage (Exhs. O and
P).xi[11]Demurrage is the sum fixed in a charter party as a renumeration to the owner of the ship for the detention of his
vessel beyond the number of days allowed by the charter party for loading or unloading or for sailing.xii[12] Liability for
demurrage, using the word in its strict technical sense, exists only when expressly stipulated in the contract.xiii[13]Shipper
or charterer is liable for the payment of demurrage claims when he exceeds the period for loading or unloading as
agreed upon or the agreed laydays. The period for such may or may not be stipulated in the contract.xiv[14] A charter
party may either provide for a fixed laydays or contain general or indefinite words such as customary quick dispatch or
as fast as the steamer can load.In the case under scrutiny, the charter party provides merely for a general or indefinite
words of customary quick dispatch.
The stipulation Laydays (Loading and Unloading): Customary Quick Dispatch implies that loading and unloading of the
cargo should be within a reasonable period of time. Due diligence should be exercised according to the customs and
usages of the port or ports of call. The circumstances obtaining at the time of loading and unloading are to be taken into
account in the determination of Customary Quick Dispatch.xv[15]What is a reasonable time depends on the existing as
opposed to normal circumstances, at the port of loading and the custom of the port.xvi[16]While what was certified to by
the arrastre did not tally with the actual period of loading and unloading, it appears that the cause of delay was not
imputable to either of the parties. The cause of delay during the loading was the strike staged by the crew of the arrastre
operator, and the unavailability of a berthing space for the vessel during the unloading. The lack of a berthing space was
understandable under the circumstances since the North Harbor in Manila, where the unloading took place, is a large
port but there was congestion due to the number of ships or vessels which were all waiting to dock.
Delay in loading or unloading, to be deemed as a demurrage, runs against the charterer as soon as the vessel is
detained for an unreasonable length of time from the arrival of the vessel because no available berthing space was
provided for the vessel due to the negligence of the charterer or by reason of circumstances caused by the fault of the
charterer.
In the present case, charterer NFA could not be held liable for demurrage for the delay resulting from the aforementioned
circumstances. The provision Laydays: Customary Quick Dispatch invoked by Hongfil is unavailing as a basis for
requiring the charterer to pay for demurrage absent convincing proof that the time for the loading or unloading in
question was beyond the reasonable time within the contemplation of the charter party. Here, the Court holds that the
delay sued upon was still within the reasonable time embraced in the stipulation of Customary Quick Dispatch.
In a contract of affreightment, the shipper or charterer merely contracts a vessel to carry its cargo with the corresponding
duty to provide for the berthing space for the loading or unloading. Charterer is merely required to exercise ordinary
diligence in ensuring that a berthing space be made available for the vessel. The charterer does not make itself an
absolute insurer against all events which cannot be foreseen or are inevitable. The law only requires the exercise of due
diligence on the part of the charterer to scout or look for a berthing space.
Furthermore, considering that subject contract of affreightment contains an express provision Demurrage/Dispatch:
NONE, the same left the parties with no other recourse but to apply the literal meaning of such stipulation. The cardinal
rule is that where, as in this case, the terms of the contract are clear and leave no doubt over the intention of the
contracting parties, the literal meaning of its stipulations is controlling.xvii[17]The provision Demurrage/Dispatch: NONE
can be interpreted as a waiver by Hongfil of the right to claim for demurrages. Waiver is a renunciation of what has been
established in favor of one or for his benefit, because he prejudices nobody thereby; if he suffers loss, he is the one to
blame.xviii[18] As Hongfil freely entered into subject charter party which providing for Demurrage/Dispatch: NONE, it
cannot escape the inevitable consequence of its inability to collect demurrage. Well-settled is the doctrine that a contract
between parties which is not contrary to law, morals, good customs, public order or public policy, is the law binding on
both of them.xix[19]On the issue of whether personal civil liability may attach to the officers of NFA, the court rules in the
negative.
In the case of MAM Realty vs. NLRC,xx[20] the Court held that a corporation, being a juridical entity, may act only through
its officers, directors and employees. Obligations incurred or contracted by them, acting as such corporate agents, are
not theirs but the direct accountability of the corporation they represent.The exceptions wherein personal civil liability
may attach to a corporate officer are:
1. When directors and trustees or, in appropriate cases, the officers of a corporationa. vote for or assent to patently unlawful acts of the corporation;
b. act in bad faith or with gross negligence in directing the corporate affairs;
c. are guilty of conflict of interest to the prejudice of the corporation, its stockholders or members, and
other persons.

2. When a director or officer has consented to the issuance of watered stocks, or who, having knowledge thereof, did not
forth with file with the corporate secretary his written objection thereto.
3. When a director, trustee or officer has contractually agreed or stipulated to hold himself personally and solidarily liable
with the corporation.
4. When a director, trustee or officer is made, by specific provision of law, personally liable for his corporate action.xxi[21]
(italics supplied)The present case under scrutiny does not fall under any of such exceptions. A careful perusal of the
contract litigated upon reveals that the petitioners, as officers of NFA, did not bind themselves to be personally liable nor
did they ink any undertaking that should NFA fail to pay Hongfils claims, they would be personally liable. Hongfil has not
cited any provision of law under which the officers of NFA are liable under the contract entered into.
What is more, there is nothing on record to show that the petitioner-officers acted in bad faith or were guilty of gross
negligence, to warrant personal liability. Neither the trial court nor the Court of Appeals found of bad faith or gross
negligence on the part of the said officers of NFA.
Bad faith or negligence is a question of fact and is evidentiary. It has been held that bad faith does not simply mean bad
judgment or negligence; it imparts a dishonest purpose or some moral obliquity and conscious doing of wrong. It means
a breach of a known duty through some motive or interest or ill-will; it partakes of the nature of fraud.xxii[22]As regards
the deletion by the Court of Appeals of the attorneys fees awarded below, the same is upheld, absent any factual and
legal basis therefor.
WHEREFORE, the decision of the Court of Appeals, dated November 29, 1990, in CA G.R. CV No. 21243 is hereby
AFFIRMED with MODIFICATION. Petitioner NFA is ordered to pay Hongfil Shipping Corporation the amount of
P242,367.30 for deadfreight. The award of P1,152,687.50 for demurrage is deleted and set aside for lack of proper
basis.
Petitioners Roselinda Geraldez, Ramon Sargan and Adelina A. Yap are absolved of any liability to the respondent
corporation.
No pronouncement as to costs.
SO ORDERED.
Melo, (Chairman), Vitug, Panganiban, and Gonzaga-Reyes, JJ., concur.

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

Facts:
On December 20, 1987, motor tanker MV Vector, carrying petroleum products of Caltex, collided in the open sea with
passenger ship MV Doa Paz, causing the death of all but 25 of the latters passengers. Among those who died were
Sebastian Canezal and his daughter Corazon Canezal. On March 22, 1988, the board of marine inquiry found that
Vector Shipping Corporation was at fault. On February 13, 1989, Teresita Caezal and Sotera E. Caezal, Sebastian
Caezals wife and mother respectively, filed with the Regional Trial Court of Manila a complaint for damages arising
from breach of contract of carriage against Sulpicio Lines. Sulpicio filed a third-party complaint against Vector and
Caltex. The trial court dismissed the complaint against Caltex, but the Court of Appeals included the same in the liability.
Hence, Caltex filed this petition.
Issue:
Is the charterer of a sea vessel liable for damages resulting from a collision between the chartered vessel and a
passenger ship?
Held:
First: The charterer has no liability for damages under Philippine Maritime laws.
Petitioner and Vector entered into a contract of affreightment, also known as a voyage charter.

A charter party is a contract by which an entire ship, or some principal part thereof, is let by the owner to another person
for a specified time or use; a contract of affreightment is one by which the owner of a ship or other vessel lets the whole
or part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the
payment of freight. A contract of affreightment may be either time charter, wherein the leased vessel is leased to the
charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the
charter-party provides for the hire of the vessel only, either for a determinate period of time or for a single or consecutive
voyage, the ship owner to supply the ships store, pay for the wages of the master of the crew, and defray the expenses
for the maintenance of the ship. If the charter is a contract of affreightment, which leaves the general owner in
possession of the ship as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The
charterer is free from liability to third persons in respect of the ship.
Second: MT Vector is a common carrier
The charter party agreement did not convert the common carrier into a private carrier. The parties entered into a voyage
charter, which retains the character of the vessel as a common carrier. It is imperative that a public carrier shall remain
as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is
limited to the ship only, as in the case of a time-charter or voyage charter. It is only when the charter includes both the
vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular
voyage covering the charter-party is concerned. Indubitably, a ship-owner in a time or voyage charter retains possession
and control of the ship, although her holds may, for the moment, be the property of the charterer. A common carrier is a
person or corporation whose regular business is to carry passengers or property for all persons who may choose to
employ and to remunerate him. 16 MT Vector fits the definition of a common carrier under Article 1732 of the Civil Code.
The public must of necessity rely on the care and skill of common carriers in the vigilance over the goods and safety of
the passengers, especially because with the modern development of science and invention, transportation has become
more rapid, more complicated and somehow more hazardous. For these reasons, a passenger or a shipper of goods is
under no obligation to conduct an inspection of the ship and its crew, the carrier being obliged by law to impliedly warrant
its seaworthiness.
Third: Is Caltex liable for damages under the Civil Code?
The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it chartered complied
with all legal requirements. The duty rests upon the common carrier simply for being engaged in "public service." The
relationship between the parties in this case is governed by special laws. Because of the implied warranty of
seaworthiness, shippers of goods, when transacting with common carriers, are not expected to inquire into the vessels
seaworthiness, genuineness of its licenses and compliance with all maritime laws. To demand more from shippers and
hold them liable in case of failure exhibits nothing but the futility of our maritime laws insofar as the protection of the
public in general is concerned. Such a practice would be an absurdity in a business where time is always of the essence.
Considering the nature of transportation business, passengers and shippers alike customarily presume that common
carriers possess all the legal requisites in its operation.

i
ii
iii
iv
vLoadstar Shipping Co. v. 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 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 "owners risk," LOADSTAR was not liable for any
loss or damage to the same. Finally, LOADSTAR avers that MICs 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 LOADSTARs 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
(2) Whether Loadstar exercised the degree of diligence required under the circumstances
(3) Whether the stipulation that the goods are at the owners 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) MICs 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 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 oneyear period is null and void; it must, accordingly, be struck down.

vi
viiFacts: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.
Posted by princesslawyer at 12:47 AM No comments:

viiiFacts:Nicanor Navidad, then drunk, entered the LRT EDSA station after purchasing a

token. While he was standing on the platform, a security guard approached him. A
misunderstanding occurred and led to a fist fight.
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