SCHMITZ vs.
TRANSPORT VENTURE
On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from the port of
Ilyichevsk, Russia on board M/V "Alexander Saveliev" 545 hot rolled steel sheets in
coil weighing 6,992,450 metric tons.
cargoes, which were to be discharged at the port of Manila in favor of the
consignee, Little Giant Steel Pipe Corporation (Little Giant),4 were insured against
all risks with Industrial Insurance Company Ltd.
Schmitz Transport, whose services the consignee engaged to secure the requisite
clearances, to receive the cargoes from the shipside, and to deliver them to its (the
consignee's) warehouse at Cainta, Rizal, in turn engaged the services of TVI to send
a barge and tugboat at shipside.
TVI's tugboat "Lailani" towed the barge "Erika V" to shipside.
On the same day, the tugboat, after positioning the barge alongside the vessel, left
and returned to the port terminal. Operator Ocean Terminal Services Inc.
commenced to unload 37 of the 545 coils from the vessel unto the barge.
October 27, 1991 during which the weather condition had become inclement due to
an approaching storm, the unloading unto the barge of the 37 coils was
accomplished.10 No tugboat pulled the barge back to the pier, however.
At around 5:30 a.m. of October 27, 1991, due to strong waves, 11 the crew of the
barge abandoned it and transferred to the vessel. The barge pitched and rolled with
the waves and eventually capsized, washing the 37 coils into the sea.
Earnest efforts on the part of both the consignee Little Giant and Industrial
Insurance to recover the lost cargoes proved futile.
Little Giant thus filed a formal claim against Industrial Insurance
Industrial Insurance later filed a complaint against Schmitz Transport, TVI, and
Black Sea through its representative Inchcape (the defendants) before the RTC of
Manila, for the recovery of the amount it paid to Little Giant plus adjustment fees,
attorney's fees, and litigation expenses. And faulted the defendants for undertaking
the unloading of the cargoes while typhoon signal No. 1 was raised in Metro Manila
RTC - held all the defendants negligent for unloading the cargoes outside of the
breakwater notwithstanding the storm signal.
Schmitz Transport and TVI filed a joint motion for reconsideration assailing the
finding that they are common carriers and the award of excessive attorney's fees of
more than P1,000,000. And they argued that they were not motivated by gross or
evident bad faith and that the incident was caused by a fortuitous event.
CA – Affirmed
In discrediting the defense of fortuitous event, the appellate court held that
"although defendants obviously had nothing to do with the force of nature, they
however had control of where to anchor the vessel, where discharge will take place
and even when the discharging will commence
Schmitz Transport (hereinafter referred to as petitioner) filed the present petition
against TVI, Industrial Insurance and Black Sea.
Petitioner asserts that in chartering the barge and tugboat of TVI, it was acting for
its principal, consignee Little Giant, hence, the transportation contract was by and
between Little Giant and TVI.
Issue: WON Schmitz is a common carrier
Ruling: Contrary to petitioner's insistence, this Court, as did the appellate court,
finds that petitioner is a common carrier. For it undertook to transport the cargoes
from the shipside of "M/V Alexander Saveliev" to the consignee's warehouse at
Cainta, Rizal. As the appellate court put it, "as long as a person or corporation holds
[itself] to the public for the purpose of transporting goods as [a] business, [it] is
already considered a common carrier regardless if [it] owns the vehicle to be used
or has to hire one. That petitioner is a common carrier, the testimony of its own
Vice-President and General Manager Noel Aro that part of the services it offers to its
clients as a brokerage firm includes the transportation of cargoes reflects so.
A customs broker may be regarded as a common carrier.
The appellate court did not err in finding petitioner, a customs broker, to be also a
common carrier
Article 1732 does not distinguish between one whose principal business activity is
the carrying of goods and one who does such carrying only as an ancillary activity.
The contention, therefore, of petitioner that it is not a common carrier but a
customs broker whose principal function is to prepare the correct customs
declaration and proper shipping documents as required by law is bereft of merit.
Loadstar vs CA
Facts: LOADSTAR received on board its M/V "Cherokee" (hereafter, the vessel) the following
goods for shipment: a) 705 bales of lawanit hardwood; b) 27 boxes and crates of tilewood
assemblies and the others ;and c) 49 bundles of mouldings R & W (3) Apitong Bolidenized.
The goods, amounting to P6,067,178, were insured for the same amount with MIC against various
risks including "TOTAL LOSS BY TOTAL OF THE LOSS THE VESSEL." The vessel, in turn, was
insured by Prudential Guarantee & Assurance, Inc. (hereafter PGAI) for P4 million.
On its way to Manila from the port of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank
off Limasawa Island. As a 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 executed a subrogation receipt therefor.
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 ordered to
pay the insurance proceeds from the loss the vessel directly to MIC, said amount to be deducted
from MIC's claim from LOADSTAR.
LOADSTAR denied any liability for the loss of the shipper's goods and claimed that sinking of its
vessel was due to force majeure. PGAI, on the other hand, averred that MIC had no cause of action
against it, LOADSTAR being the party insured.
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 decision in toto.
One of the issues raised by loadstar is that it cannot be considered a private carrier on the sole
ground that there was a single shipper on that fateful voyage. The court noted that the charter of the
vessel was limited to the ship, but LOADSTAR retained control over its crew. 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.
Issue: Is LOADSTAR a common carrier?
Ruling: YES. 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.
Under the facts and circumstances obtaining in this case, LOADSTAR fits the definition of a common
carrier under Article 1732 of the Civil Code.
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
Victory Liner vs Gammad
Facts: Marie Grace Pagulayan-Gammad,3 was on board an air-conditioned Victory
Liner bus bound for Tuguegarao, Cagayan from Manila. At about 3:00 a.m., the bus
while running at a high speed fell on a ravine somewhere in Barangay Baliling, Sta.
Fe, Nueva Vizcaya, which resulted in the death of Marie Grace and physical injuries
to other passengers. On May 14, 1996, respondent heirs of the deceased filed a
complaint5 for damages arising from culpa contractual against petitioner.
Victory Liner - incident was purely accidental and that it has always exercised
extraordinary diligence in its 50 years of operation.
For failure to appear on the said date, petitioner was declared as in
default.9 However, on petitioner's motion10 to lift the order of default, the same was
granted by the trial court.
Petitioner did not want to admit the proposed stipulation that the deceased was a
passenger of the Victory Liner Bus which fell on the ravine and that she was issued
Passenger Ticket No. 977785. Respondents, for their part, did not accept
petitioner's proposal to pay P50,000.00.
Trial Court - in favor of the plaintiffs and against the defendant Victory Liner,
CA – affirmed Trial Court
ISSUE: whether petitioner should be held liable for breach of contract of carriage
Ruling – YES
Petitioner was correctly found liable for breach of contract of carriage. A common
carrier is bound to carry its passengers safely as far as human care and foresight
can provide, using the utmost diligence of very cautious persons, with due regard
to all the circumstances. In a contract of carriage, it is presumed that the common
carrier was at fault or was negligent when a passenger dies or is injured. Unless the
presumption is rebutted, the court need not even make an express finding of fault
or negligence on the part of the common carrier. This statutory presumption may
only be overcome by evidence that the carrier exercised extraordinary diligence.
In the instant case, there is no evidence to rebut the statutory presumption that
the proximate cause of Marie Grace's death was the negligence of petitioner.
Hence, the courts below correctly ruled that petitioner was guilty of breach of
contract of carriage.
LEAMER vs MALAYAN
Facts: Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries, Inc., for the
shipment of 900 metric tons of silica sand valued at ₱565,000. Consigned to Vulcan Industrial and
Mining Corporation, the cargo was to be transported from Palawan to Manila. On October 25, 1991,
the silica sand was placed on board Judy VII, a barge leased by Lea Mer. During the voyage, the
vessel sank, resulting in the loss of the cargo.
Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost cargo. 8 To recover the
amount paid and in the exercise of its right of subrogation, Malayan demanded reimbursement from
Lea Mer, which refused to comply. Consequently, Malayan instituted a Complaint with the Regional
Trial Court (RTC) of Manila on September 4, 1992, for the collection of ₱565,000 representing the
amount that respondent had paid Vulcan.
Trial Court – dismissed the complaint because the loss was due to fortuitous event
The RTC noted that the vessel had sunk because of the bad weather condition brought about by
Typhoon Trining. The court ruled that petitioner had no advance knowledge of the incoming typhoon,
and that the vessel had been cleared by the Philippine Coast Guard to travel from Palawan to
Manila.
CA – Reversed, CA held that the vessel was not seaworthy when it sailed for Manila. Thus, the loss
of the cargo was occasioned by petitioner’s fault, not by a fortuitous event.
Issue: WON petitioner is liable for the loss of the cargo
Ruling :
1. On Common Carriers - Petitioner is clearly a common carrier, because it offers to the public
its business of transporting goods through its vessels. 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 -- when this service is offered to the
public for compensation.
2. Extraordinary Diligence Required - Common carriers are bound to
observe extraordinary diligence in their vigilance over the goods and the safety of the
passengers they transport, as required by the nature of their business and for reasons of
public policy.24 Extraordinary diligence requires rendering service with the greatest skill and
foresight to avoid damage and destruction to the goods entrusted for carriage and delivery.
Common carriers are presumed to have been at fault or to have acted negligently for loss or
damage to the goods that they have transported. 26 This presumption can be rebutted only by
proof that they observed extraordinary diligence
3. On Fortuitous Events - Jurisprudence defines the elements of a "fortuitous event" as follows:
(a) the cause of the unforeseen and unexpected occurrence, or the failure of the debtors to
comply with their obligations, must have been independent of human will; (b) the event that
constituted the caso fortuito must have been impossible to foresee or, if foreseeable,
impossible to avoid; (c) the occurrence must have been such as to render it impossible for
the debtors to fulfill their obligation in a normal manner; and (d) the obligor must have been
free from any participation in the aggravation of the resulting injury to the creditor. To excuse
the common carrier fully of any liability, the fortuitous event must have been the proximate
and only cause of the loss.
As the common carrier, petitioner bore the burden of proving that it had exercised extraordinary
diligence to avoid the loss, or that the loss had been occasioned by a fortuitous event. Lea Mer
claimed that the loss of the cargo was due to the bad weather condition brought about by
Typhoon Trining. Evidence was presented to show that petitioner had not been informed of the
incoming typhoon, and that the Philippine Coast Guard had given it clearance to begin the
voyage. The evidence presented by petitioner in support of its defense of fortuitous event was
sorely insufficient. As required by the pertinent law, it was not enough for the common carrier to
show that there was an unforeseen or unexpected occurrence. It had to show that it was free
from any fault -- a fact it miserably failed to prove.
First, petitioner presented no evidence that it had attempted to minimize or prevent the loss
before, during or after the alleged fortuitous event. Its witness, Joey A. Draper, testified that he
could no longer remember whether anything had been done to minimize loss when water started
entering the barge.
Second, the alleged fortuitous event was not the sole and proximate cause of the loss. There is
a preponderance of evidence that the barge was not seaworthy when it sailed for Manila.
Respondent was able to prove that, in the hull of the barge, there were holes that might have
caused or aggravated the sinking. Petitioner offered no evidence to rebut the existence of the
holes. Its witness, Domingo A. Luna, testified that the barge was in "tip-top" or excellent
condition, but did not inspect it when it left Palawan
FABRE VS CA
Facts: Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus.
They used the bus principally in connection with a bus service for school children which they
operated in Manila. The couple had a driver, Porfirio J. Cabil, whom they hired in 1981, after
trying him out for two weeks, His job was to take school children to and from the St.
Scholastica's College in Malate, Manila.
November 2, 1984 private respondent Word for the World Christian Fellowship Inc. (WWCF)
arranged with petitioners for the transportation of 33 members of its Young Adults Ministry from
Manila to La Union and back in consideration of which private respondent paid petitioners the
amount of P3,000.00.
The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at
Carmen was under repair, sot hat petitioner Cabil, who was unfamiliar with the area (it being his
first trip to La Union), was forced to take a detour through the town of Baay in Lingayen,
Pangasinan. Around 11:30 that night, petitioner Cabil came upon a sharp curve on the highway,
running on a south to east direction, which he described as "siete." The road was slippery
because it was raining, causing the bus, which was running at the speed of 50 kilometers per
hour, to skid to the left road shoulder. The bus hit the left traffic steel brace and sign along the
road and rammed the fence of one Jesus Escano, then turned over and landed on its left side,
coming to a full stop only after a series of impacts. The bus came to rest off the road. A coconut
tree which it had hit fell on it and smashed its front portion. Several passengers were injured.
The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said he was
not familiar with the area and he could not have seen the curve despite the care he took in
driving the bus, because it was dark and there was no sign on the road. He said that he saw the
curve when he was already within 15 to 30 meters of it. He allegedly slowed down to 30
kilometers per hour, but it was too late.
RTC - No convincing evidence was shown that the minibus was properly checked for travel to a
long distance trip and that the driver was properly screened and tested before being admitted for
employment. Indeed, all the evidence presented have shown the negligent act of the defendants
CA – Affirmed
Issue: WON Petitioners were negligent
Ruling: YES. The fact that it was raining and the road was slippery, that it was dark, that he
drove his bus at 50 kilometers an hour when even on a good day the normal speed was only 20
kilometers an hour, and that he was unfamiliar with the terrain, Cabil was grossly negligent and
should be held liable for the injuries suffered by private respondent Amyline Antonio.
Fabres, in allowing Cabil to drive the bus to La Union, apparently did not consider the fact that
Cabil had been driving for school children only, from their homes to the St. Scholastica's College
in Metro Manila. They had tested him for certain matters, such as whether he could remember
the names of the children he would be taking to school, which were irrelevant to his qualification
to drive on a long distance travel, especially considering that the trip to La Union was his first.
The existence of hiring procedures and supervisory policies cannot be casually invoked to
overturn the presumption of negligence on the part of an employer.
Furthermore, Petitioners argue that they are not liable because under the contract, the WWCF
was directly responsible for the conduct of the trip. The contention holds no water. A person who
hires a public automobile and gives the driver directions as to the place to which he wishes to be
conveyed, but exercises no other control over the conduct of the driver, is not responsible for
acts of negligence of the latter or prevented from recovering for injuries suffered from a collision.
Regarding Contract of Carrige - Petitioners, the Fabres, did not have to be engaged in the
business of public transportation for the provisions of the Civil Code on common carriers to apply
to them. ART 1732 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 an 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. As common
carriers, the Fabres were bound to exercise "extraordinary diligence" for the safe transportation
of the passengers to their destination. This duty of care is not excused by proof that they
exercise the diligence of a good father of the family in the selection and supervision of their
employee.
