Case Digest: Loadstar Shipping Co. v. CA, G.R. No. 131621, September 28, 1999
Commercial Laws 2: Common Carriers
Davide, Jr., J.
Recit Ver:
On November 19, 1984, Loadstar Shipping Co. received goods for shipment on its vessel, M/V "Cherokee," which sank the following day, causing the total loss of the cargo. The shipment was insured by Manila Insurance Co. (MIC) for P6,067,178, and Loadstar's vessel was insured by Prudential Guarantee & Assurance, Inc. (PGAI) for P4 million. After Loadstar ignored the consignee's claim, MIC paid the insured amount and later sued Loadstar for negligence. Loadstar denied liability, claiming the sinking was due to force majeure caused by a typhoon. However, the lower courts found Loadstar negligent, stating the vessel was unseaworthy and undermanned.
The courts ruled that Loadstar was a common carrier, not a private one, despite Loadstar's claims. It was held that the vessel did not need a certificate of public convenience to be considered a common carrier, and the absence of a charter party or special arrangement confirmed its common carrier status. The courts also rejected Loadstar’s defenses of force majeure and limited liability, as the vessel was found unseaworthy, and the sinking occurred under moderate weather conditions, not a severe typhoon. MIC's claim was found to have been timely filed, and Loadstar was held liable for breaching its duty to deliver the goods safely.
Facts:
On November 19, 1984, Loadstar Shipping Co. received goods (lawanit hardwood, tilewood assemblies, mouldings) for shipment on its vessel, M/V "Cherokee."
The shipment, valued at P6,067,178, was insured with Manila Insurance Co. for the same amount, covering total loss due to vessel loss.
The vessel was insured by Prudential Guarantee & Assurance, Inc. for P4 million.
On November 20, 1984, the vessel sank off Limasawa Island, resulting in the total loss of the cargo.
The consignee’s claim to Loadstar was ignored, and MIC paid P6,075,000 to the insured.
On February 4, 1985, MIC sued Loadstar and PGAI, claiming the sinking was due to Loadstar's fault and negligence.
Loadstar denied liability, asserting the sinking was caused by force majeure.
PGAI was later dropped from the case after paying the insurance proceeds to Loadstar.
RTC-Manila: Ruled in favor of MIC, holding Loadstar liable.
CA: Affirmed the decision, observing:
Loadstar was a common carrier, not a private one, even though there was only one shipper.
The Code of Commerce applied, not the Civil Code.
The vessel was not seaworthy, as it was undermanned, and the sea conditions were moderate, disproving the force majeure defense.
The "limited liability" rule did not apply due to Loadstar's negligence.
The Bill of Lading provisions did not apply between MIC and Loadstar, as MIC was subrogated to the shipper's rights.
Loadstar breached the contract of carriage by failing to deliver the goods.
Loadstar failed to prove that the damage to the goods was caused by a legally exempting factor like force majeure or fortuitous events.
Issues:
Whether M/V "Cherokee" a private or a common carrier.
Whether LOADSTAR observed due and/or ordinary diligence in these premises.
Regarding the first issue, LOADSTAR submits that the vessel was a private carrier because it was not issued 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.
As regards the second error, LOADSTAR argues that as a private carrier, it cannot be presumed to have been negligent, and the burden of proving otherwise devolved upon MIC.
LOADSTAR also maintains that the vessel was seaworthy. Before the fateful voyage on 19 November 1984, the vessel was allegedly dry docked at Keppel Philippines Shipyard and was duly inspected by the maritime safety engineers of the Philippine Coast Guard, who certified that the ship was fit to undertake a voyage. Its crew at the time was experienced, licensed and unquestionably competent. With all these precautions, there could be no other conclusion except that LOADSTAR exercised the diligence of a good father of a family in ensuring the vessel's seaworthiness.
LOADSTAR further claims that it was not responsible for the loss of the cargo, such loss being due to force majeure. It points out that when the vessel left Nasipit, Agusan del Norte, on 19 November 1984, the weather was fine until the next day when the vessel sank due to strong waves. MCI's witness, Gracelia Tapel, fully established the existence of two typhoons, "WELFRING" and "YOLING," inside the Philippine area of responsibility. In fact, on 20 November 1984, signal no. 1 was declared over Eastern Visayas, which includes Limasawa Island. Tapel also testified that the convergence of winds brought about by these two typhoons strengthened wind velocity in the area, naturally producing strong waves and winds, in turn, causing the vessel to list and eventually sink.
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. Therefore, the Court of Appeals erred in holding that the provisions of the bills of lading apply only to the shipper and the carrier, and not to the insurer of the goods, which conclusion runs counter to the Supreme Court's ruling in the case of St. Paul Fire & Marine Co. v. Macondray & Co., Inc., and National Union Fire Insurance Company of Pittsburgh v. Stolt-Nielsen Phils., Inc.
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. The vessel sank on 20 November 1984; yet, the case for recovery was filed only on 4 February 1985.
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.
We find no merit in this petition.
Anent the first assigned error, 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.
In support of its position, LOADSTAR relied on the 1968 case of Home Insurance Co. v. American Steamship Agencies, Inc., where this Court held that a common carrier transporting special cargo or chartering the vessel to a special person becomes a private carrier that is not subject to the provisions of the Civil Code. Any stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent is void only if the strict policy governing common carriers is upheld. Such policy has no force where the public at is not involved, as in the case of a ship totally chartered for the use of a single party. LOADSTAR also cited Valenzuela Hardwood and Industrial Supply, Inc. v. Court of Appeals and National Steel Corp. v. Court of Appeals, both of which upheld the Home Insurance doctrine.
These cases invoked by LOADSTAR are not applicable in the case at bar for the simple reason that the factual settings are different. The records do not disclose that the M/V "Cherokee," on the date in question, undertook to carry a special cargo or was chartered to a special person only. 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.
Under the facts and circumstances obtaining in this case, LOADSTAR fits the definition of a common carrier under Article 1732 of the Civil Code. In the case of De Guzman v. Court of Appeals, the Court juxtaposed the statutory definition of "common carriers" with the peculiar circumstances of that case, viz.:
The Civil Code defines "common carriers" in the following terms:
Art. 1732. 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.
The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as ancillary activity (in local idiom, as "a sideline". Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1733 deliberately refrained from making such distinctions.
xxx xxx xxx
It appears to the Court that private respondent is properly characterized as a common carrier even though he merely "back-hauled" goods for other merchants from Manila to Pangasinan, although such backhauling was done on a periodic or occasional rather than regular or scheduled manner, and eventhough private respondent's principal occupation was not the carriage of goods for others. There is no dispute that private respondent charged his customers a fee for hauling their goods; that fee frequently fell below commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of public convenience, and concluded he was not a common carrier. This is palpable error. A certificate of public convenience is not a requisite for the incurring of liability under the Civil Code provisions governing common carriers. That liability arises the moment a person or firm acts as a common carrier, without regard to whether or not such carrier has also complied with the requirements of the applicable regulatory statute and implementing regulations and has been granted a certificate of public convenience or other franchise. To exempt private respondent from the liabilities of a common carrier because he has not secured the necessary certificate of public convenience, would be offensive to sound public policy; that would be to reward private respondent precisely for failing to comply with applicable statutory requirements The business of a common carrier impinges directly and intimately upon the safety and well being and property of those members of the general community who happen to deal with such carrier. The law imposes duties and liabilities upon common carriers for the safety and protection of those who utilize their services and the law cannot allow a common carrier to render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and authorizations.
Moving on to the second assigned error, we find that the M/V "Cherokee" was not seaworthy when it embarked on its voyage on 19 November 1984. The vessel was not even sufficiently manned at the time. "For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. The failure of a common carrier to maintain in seaworthy condition its vessel involved in a contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code."
Neither do we agree with LOADSTAR's argument that the "limited liability" theory should be applied in this case. 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 performance of its duties, LOADSTAR cannot hide behind the "limited liability" doctrine to escape responsibility for the loss of the vessel and its cargo.
LOADSTAR also claims that the Court of Appeals erred in holding it liable for the loss of the goods, in utter disregard of this Court's pronouncements in St. Paul Fire & Marine Ins. Co. v. Macondray & Co., Inc., and National Union Fire Insurance v. Stolt-Nielsen Phils., Inc. It was ruled in these two cases that after paying the claim of the insured for damages under the insurance policy, the insurer is subrogated merely to the rights of the assured, that is, it can recover only the amount that may, in turn, be recovered by the latter. Since the right of the assured in case of loss or damage to the goods is limited or restricted by the provisions in the bills of lading, a suit by the insurer as subrogee is necessarily subject to the same limitations and restrictions. We do not agree.
In the first place, the cases relied on by LOADSTAR involved a limitation on the carrier's liability to an amount fixed in the bill of lading which the parties may enter into, provided that the same was freely and fairly agreed upon (Articles 1749-1750). On the other hand, the stipulation in the case at bar effectively reduces the common carrier's liability for the loss or destruction of the goods to a degree less than extraordinary (Articles 1744 and 1745), that is, the carrier is not liable for any loss or damage to shipments made at "owner's risk." Such stipulation is obviously null and void for being contrary to public policy." It has been said:
Three kinds of stipulations have often been made in a bill of lading. The first 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.
Neither is there merit to the contention that the claim in this case was barred by prescription. 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 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.
WHEREFORE, the instant petition is DENIED and the challenged decision of 30 January 1997 of the Court of Appeals in CA-G.R. CV No. 36401 is AFFIRMED. Costs against petitioner.
SO ORDERED.
Puno, Kapunan, Pardo and Ynares-Santiago, JJ., concur.
Comments
Post a Comment