Synopsis/Syllabi In its answer, LOADSTAR denied any liability for the loss of the shippers goods and claimed

In its answer, LOADSTAR denied any liability for the loss of the shippers goods and claimed that the
sinking of its vessel was due to force majeure. PGAI, on the other hand, averred that MIC had no cause of
FIRST DIVISION action against it, LOADSTAR being the party insured. In any event, PGAI was later dropped as a party
defendant after it paid the insurance proceeds to LOADSTAR.
As stated at the outset, the court a quo rendered judgment in favor of MIC, prompting LOADSTAR to
elevate the matter to the Court of Appeals, which, however, agreed with the trial court and affirmed its
[G.R. No. 131621. September 28, 1999]
decision in toto.
In dismissing LOADSTARs appeal, the appellate court made the following observations:
1) LOADSTAR cannot be considered a private carrier on the sole ground that there was a single
LOADSTAR SHIPPING CO., INC., petitioner, vs. COURT OF APPEALS and THE MANILA shipper on that fateful voyage. The court noted that the charter of the vessel was limited to the
INSURANCE CO., INC., respondents. ship, but LOADSTAR retained control over its crew. [4]

DECISION 2) As a common carrier, it is the Code of Commerce, not the Civil Code, which should be applied
in determining the rights and liabilities of the parties.
DAVIDE, JR., C.J.:
3) The vessel was not seaworthy because it was undermanned on the day of the voyage.  If it had
been seaworthy, it could have withstood the natural and inevitable action of the sea on 20
Petitioner Loadstar Shipping Co., Inc. (hereafter LOADSTAR), in this petition for review November 1984, when the condition of the sea was moderate. The vessel sank, not because
on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, seeks to reverse and set aside the following: of force majeure, but because it was not seaworthy. LOADSTARS allegation that the sinking
(a) the 30 January 1997 decision [1] of the Court of Appeals in CA-G.R. CV No. 36401, which affirmed the was probably due to the convergence of the winds, as stated by a PAGASA expert, was not
decision of 4 October 1991[2] of the Regional Trial Court of Manila, Branch 16, in Civil Case No. 85-29110, duly proven at the trial. The limited liability rule, therefore, is not applicable considering that,
ordering LOADSTAR to pay private respondent Manila Insurance Co. (hereafter MIC) the amount of in this case, there was an actual finding of negligence on the part of the carrier. [5]
P6,067,178, with legal interest from the filing of the complaint until fully paid, P8,000 as attorneys fees, and
the costs of the suit; and (b) its resolution of 19 November 1997, [3] denying LOADSTARs motion for 4) Between MIC and LOADSTAR, the provisions of the Bill of Lading do not apply because said
reconsideration of said decision. provisions bind only the shipper/consignee and the carrier. When MIC paid the shipper for the
goods insured, it was subrogated to the latters rights as against the carrier, LOADSTAR. [6]
The facts are undisputed.
5) There was a clear breach of the contract of carriage when the shippers goods never reached their
On 19 November 1984, LOADSTAR received on board its M/V Cherokee (hereafter, the vessel) the destination. LOADSTARs defense of diligence of a good father of a family in the training and
following goods for shipment: selection of its crew is unavailing because this is not a proper or complete defense in  culpa
a) 705 bales of lawanit hardwood; contractual.

b) 27 boxes and crates of tilewood assemblies and others; and 6) Art. 361 (of the Code of Commerce) has been judicially construed to mean that when goods are
delivered on board a ship in good order and condition, and the shipowner delivers them to the
c) 49 bundles of mouldings R & W (3) Apitong Bolidenized. shipper in bad order and condition, it then devolves upon the shipowner to both allege and
prove that the goods were damaged by reason of some fact which legally exempts him from
The goods, amounting to P6,067,178, were insured for the same amount with MIC against various risks liability. Transportation of the merchandise at the risk and venture of the shipper means that
including TOTAL LOSS BY TOTAL LOSS OF THE VESSEL. The vessel, in turn, was insured by Prudential the latter bears the risk of loss or deterioration of his goods arising from fortuitous
Guarantee & Assurance, Inc. (hereafter PGAI) for P4 million. On 20 November 1984, on its way to Manila events, force majeure, or the inherent nature and defects of the goods, but not those caused by
from the port of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank off Limasawa Island.  As a the presumed negligence or fault of the carrier, unless otherwise proved. [7]
result of the total loss of its shipment, the consignee made a claim with LOADSTAR which, however, ignored
the same. As the insurer, MIC paid P6,075,000 to the insured in full settlement of its claim, and the latter The errors assigned by LOADSTAR boil down to a determination of the following issues:
executed a subrogation receipt therefor.
(1) Is the M/V Cherokee a private or a common carrier?
On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking of
the vessel was due to the fault and negligence of LOADSTAR and its employees. It also prayed that PGAI be (2) Did LOADSTAR observe due and/or ordinary diligence in these premises?
ordered to pay the insurance proceeds from the loss of the vessel directly to MIC, said amount to be deducted Regarding the first issue, LOADSTAR submits that the vessel was a private carrier because it was not
from MICs claim from LOADSTAR. 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.

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 In refutation, MIC argues that the issue as to the classification of the M/V Cherokee was not timely Anent the first assigned error, we hold that LOADSTAR is a common carrier. It is not necessary that the
raised below; hence, it is barred by estoppel. While it is true that the vessel had on board only the cargo of carrier be issued a certificate of public convenience, and this public character is not altered by the fact that the
wood products for delivery to one consignee, it was also carrying passengers as part of its regular carriage of the goods in question was periodic, occasional, episodic or unscheduled.
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 In support of its position, LOADSTAR relied on the 1968 case of Home Insurance Co. v. American
and the shipper regarding the shipment of the cargo. The singular fact that the vessel was carrying a particular Steamship Agencies, Inc.,[11] where this Court held that a common carrier transporting special cargo or
type of cargo for one shipper is not sufficient to convert the vessel into a private carrier. 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
As regards the second error, LOADSTAR argues that as a private carrier, it cannot be presumed to have negligence of its agent is void only if the strict policy governing common carriers is upheld.  Such policy has
been negligent, and the burden of proving otherwise devolved upon MIC. [8] no force where the public at large 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
LOADSTAR also maintains that the vessel was seaworthy. Before the fateful voyage on 19 November Appeals[12] and National Steel Corp. v. Court of Appeals, [13] both of which upheld the Home
1984, the vessel was allegedly dry docked at Keppel Philippines Shipyard and was duly inspected by the Insurance doctrine.
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 These cases invoked by LOADSTAR are not applicable in the case at bar for simple reason that the
precautions, there could be no other conclusion except that LOADSTAR exercised the diligence of a good factual settings are different. The records do not disclose that the M/V Cherokee, on the date in question,
father of a family in ensuring the vessels seaworthiness. 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
LOADSTAR further claims that it was not responsible for the loss of the cargo, such loss being due Cherokee was a general cargo carrier.[14] Further, the bare fact that the vessel was carrying a particular type of
to force majeure. It points out that when the vessel left Nasipit, Agusan del Norte, on 19 November 1984, the cargo for one shipper, which appears to be purely coincidental, is not reason enough to convert the vessel from
weather was fine until the next day when the vessel sank due to strong waves. MICs witness, Gracelia Tapel, a common to a private carrier, especially where, as in this case, it was shown that the vessel was also carrying
fully established the existence of two typhoons, WELFRING and YOLING, inside the Philippine area of passengers.
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 Under the facts and circumstances obtaining in this case, LOADSTAR fits the definition of a common
strengthened wind velocity in the area, naturally producing strong waves and winds, in turn, causing the vessel carrier under Article 1732 of the Civil Code. In the case of De Guzman v. Court of Appeals,[15] the Court
to list and eventually sink. juxtaposed the statutory definition of common carriers with the peculiar circumstances of that case, viz.:
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 The Civil Code defines common carriers in the following terms:
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 Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of
conclusion runs counter to the Supreme Courts ruling in the case of St. Paul Fire & Marine Insurance Co. v. carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their
Macondray & Co., Inc.,[9] and National Union Fire Insurance Company of Pittsburg v. Stolt-Nielsen Phils., services to the public.
Inc.[10]
Finally, LOADSTAR avers that MICs claim had already prescribed, the case having been instituted The above article makes no distinction between one whose principal business activity is the carrying of
beyond the period stated in the bills of lading for instituting the same suits based upon claims arising from persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a
shortage, damage, or non-delivery of shipment shall be instituted within sixty days from the accrual of the sideline. Article 1732 also carefully avoids making any distinction between a person or enterprise offering
right of action. The vessel sank on 20 November 1984; yet, the case for recovery was filed only on 4 February transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic
1985. 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
MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding that the loss of the cargo from a narrow segment of the general population. We think that Article 1733 deliberately refrained from
was due to force majeure, because the same concurred with LOADSTARs fault or negligence. making such distinctions.
Secondly, LOADSTAR did not raise the issue of prescription in the court below; hence, the same must
be deemed waived. xxx

Thirdly, the limited liability theory is not applicable in the case at bar because LOADSTAR was at fault It appears to the Court that private respondent is properly characterized as a common carrier even though he
or negligent, and because it failed to maintain a seaworthy vessel. Authorizing the voyage notwithstanding its merely back-hauled goods for other merchants from Manila to Pangasinan, although such backhauling was
knowledge of a typhoon is tantamount to negligence. done on a periodic or occasional rather than regular or scheduled manner, and even though private
We find no merit in this petition. respondents principal occupation was not the carriage of goods for others. There is no dispute that private

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respondent charged his customers a fee for hauling their goods; that that fee frequently fell below commercial unqualified limitation of such liability to an agreed valuation. And the third is one limiting the liability of the
freight rates is not relevant here. 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
The Court of Appeals referred to the fact that private respondent held no certificate of public convenience, and invalid as being contrary to public policy, but the third is valid and enforceable. [21]
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 Since the stipulation in question is null and void, it follows that when MIC paid the shipper, it was subrogated
liability arises the moment a person or firm acts as a common carrier, without regard to whether or not such to all the rights which the latter has against the common carrier, LOADSTAR.
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 Neither is there merit to the contention that the claim in this case was barred by prescription. MICs cause
respondent from the liabilities of a common carrier because he has not secured the necessary certificate of of action had not yet prescribed at the time it was concerned. Inasmuch as neither the Civil Code nor the Code
public convenience, would be offensive to sound public policy; that would be to reward private respondent of Commerce states a specific prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA)
precisely for failing to comply with applicable statutory requirements. The business of a common carrier which provides for a one-year period of limitation on claims for loss of, or damage to, cargoes sustained
impinges directly and intimately upon the safety and well being and property of those members of the general during transit may be applied suppletorily to the case at bar. This one-year prescriptive period also applies to
community who happen to deal with such carrier. The law imposes duties and liabilities upon common carriers the insurer of the good.[22] In this case, the period for filing the action for recovery has not yet
for the safety and protection of those who utilize their services and the law cannot allow a common carrier to elapsed. Moreover, a stipulation reducing the one-year period is null and void; [23] it must, accordingly, be
render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and struck down.
authorizations. 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.
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 SO ORDERED.
vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of Puno, Kapunan, Pardo, and Ynares-Santiago, JJ., concur.
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. [16]
Neither do we agree with LOADSTARs argument that the limited liability theory should be applied in [4] 
this case. The doctrine of limited liability does not apply where there was negligence on the part of the vessel Citing Planters Products, Inc. v. Court of Appeals, 226 SCRA 476 [1993].
owner or agent.[17] LOADSTAR was at fault or negligent in not maintaining a seaworthy vessel and in having [5] 
Citing Aboitiz Shipping Corp. v. General Accident Fire and Life Assurance Corp., Ltd., 217 SCRA 359
allowed its vessel to sail despite knowledge of an approaching typhoon. In any event, it did not sink because of [1993].
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 [6] 
Citing Firemans Fund Insurance Co. v. Jamila & Co., Inc., 70 SCRA 323 [1976].
behind the limited liability doctrine to escape responsibility for the loss of the vessel and its cargo.
[7] 
Rollo, 18.
LOADSTAR also claims that the Court of Appeals erred in holding it liable for the loss of the goods, in
[8] 
utter disregard of this Courts pronouncements in St. Paul Fire & Marine Ins. Co. v. Macondray & Co., Inc., Citing National Steel Corporation v. Court of Appeals, 283 SCRA 45 [1997].
[18]
 and National Union Fire Insurance v. Stolt-Nielsen Phils., Inc. [19] It was ruled in these two cases that after [9] 
70 SCRA 122 [1976].
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 [10] 
184 SCRA 682 [1990].
the right of the assured in case of loss or damage to the goods is limited or restricted by the provisions in the
[11] 
bills of lading, a suit by the insurer as subrogee is necessarily subject to the same limitations and 23 SCRA 24 [1968].
restrictions. We do not agree. In the first place, the cases relied on by LOADSTAR involved a limitation on [12] 
the carriers liability to an amount fixed in the bill of lading which the parties may enter into, provided that the 274 SCRA 642 [1997].
same was freely and fairly agreed upon (Articles 1749-1750). On the other hand, the stipulation in the case at [13] 
Supra note 8.
bar effectively reduces the common carriers liability for the loss or destruction of the goods to a degree less
[14] 
than extraordinary (Articles 1744 and 1745), that is, the carrier is not liable for any loss or damage to A general ship carrying goods for hire, whether employed in internal, in coasting, or in foreign commerce is
shipments made at owners risk. Such stipulation is obviously null and void for being contrary to public policy. a common carrier. (Baer, Senior & Co.s Successors v. La Compania Maritima, 6 Phil. 215, 217-218, quoting
[20]
 It has been said: Liverpool Steamship Co. v. Phoenix Ins. Co., 129 U.S. 397, 437), cited in 3 TEODORICO C. MARTIN,
PHILIPPINE COMMERCIAL LAWS 118 (Rev. Ed. 1989).
Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the carrier from [15] 
168 SCRA 612, 617-619 [1988].
any and all liability for loss or damage occasioned by its own negligence. The second is one providing for an

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[16] 
Trans-Asia Shipping Lines, Inc. v. Court of Appeals, 254 SCRA 260, 272-273 [1996], citing Chan Keep v.
Chan Gioco, 14 Phil. 5.
[17] 
See JOSE C. VITUG, PANDECT OF COMMERCIAL LAW AND JURISPRUDENCE 311-313 (3rd ed.
1997) (hereinafter VITUG). Also, Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance
Corporation, Ltd., 217 SCRA 359 [1993]; American Home Assurance, Co. v. CA, 208 SCRA 343 [1992],
citing National Development Co. v. Court of Appeals, 164 SCRA 593 [1988]; Heirs of Amparo de los
Santos v. Court of Appeals, 186 SCRA 649 [1990].
[18] 
70 SCRA 122 [1976].
[19] 
184 SCRA 682 [1990].
[20] 
The stipulations on the limitations on the common carriers liability, subject matter of Articles 1749-1750
and Articles 1744-1745 of the New Civil Code are not to be confused with each other. (See VITUG 244)
[21] 
3 MARTIN, 96-97, citing H.E. Heacock Co. v. Macondray & Co., Inc., 42 Phil. 205. See Arts. 1744 and
1745 of the New Civil Code.
[22] 
VITUG, 220-222, 224, 256 and 334, citing Filipino Merchants Insurance Co., Inc. v. Alejandro, 145 SCRA
42 (1986); see also 3 MARTIN 302, 307 and Sec. 3. (6) of the Carriage of Goods by Sea Act, which
provides, inter alia.
Sec. 3. (6) xxx.
In any event the carrier and the ship shall be discharged from all liability in respect of the loss or damage
unless suit is brought within one year after delivery of the goods or the date when the goods should have been
delivered
[23] 
VITUG, 334, citing Elser, Inc. v. Court of Appeals, 96 Phil. 264

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