Transportation and maritime law

Characteristics of common carriers:

(1) The common carrier undertakes to carry for all people indifferently; he holds himself out as ready to engage in the transportation of goods for hire as a public employment and not as a casual occupation, and he undertakes to carry for all persons indifferently, within the limits of his capacity and the sphere of the business required of him, so that he is bound to serve all who apply and is liable for refusal, without sufficient reason, to do so

(2) The common carrier cannot lawfully decline to accept a particular class of goods for carriage to the prejudice of the traffic in those goods

Exception : for some sufficient reason, where the discrimination in such goods is reasonable and necessary (substantial grounds)

(3) No monopoly is favored - the Commission has the power to say what is a reasonable compensation to the utility and to make reasonable rules and regulations for the convenience of the traveling public and to enforce them

(4) Public convenience - for the best interests of the public

Meaning of Public use.-- It is not confined to privileged individuals, but is open to the indefinite public; there must be a right which the law compels the owner to give to the general public. Public use is not synonymous with public interest. The true criterion is whether the public may enjoy it by right or only by permission
The law prohibits unreasonable discrimination by common carriers.-- The law requires common carriers to carry for all persons, either passengers or property, for exactly the same charge for a like or contemporaneous service in the transportation of like kind of traffic under substantially similar circumstances or conditions. The law prohibits common carriers (CC) from subjecting any person, etc. or locality, or any kind of traffic, to any undue or unreasonable prejudice or discrimination whatsoever.

Exception: When the actual cost of handling and transporting is different, then different rates may be charged

Cases : (1) merchandise of like quantity may not be considered alike - the quantity, kind and quality may be exactly the same, and yet not be alike, so far as the cost of transportation is concerned

(2) shipments may be alike although composed of different classes of merchandise - difference in the charge for handling and transporting may only be made when the difference is based upon actual cost

Determination of justifiable refusal:
This involves a consideration of the following--
(1) suitability of the vessels of the company for the transportation of such products;

(2) reasonable possibility of danger or disaster, resulting from their transportation in the form and under the conditions in which they are offered for carriage;

(3) the general nature of the business done by the carrier;

(4) all the attendant circumstances which might affect the question of the reasonable necessity for the refusal by the carrier to undertake the transportation of this class of merchandise

Case: The mere fact that the carriage of dynamites may lead to destructive explosions is not sufficient to justify refusal if it can be proven that in the condition in which it is offered for carriage there is no real danger to the carrier nor reasonable ground to fear that the vessel and those on board will be exposed to unnecessary or unreasonable risks

US vs Tan Piaco, 40 Phil 853

F: Tan Piaco rented two automobile trucks and was using them upon the highways of Leyte for the purpose of carrying some passengers and freight. He carried passengers and freight under a special contract in each case and had not held himself out to carry all passengers and freight for all persons who might offer passengers and freight. He was convicted for violation of the Public Utility Law for operating a public utility without permission from the Public Utility Commission.

Issue: WON defendant operated a public utility. NO.
Held: There is no public use. The trucks were used under special agreements to carry particular persons and property.

Under the Public Service Law, two things are necessary : (1) the individual, co-partnership, etc. must be a public utility; and (2) the business in which such individual, co-partnership, etc. is engaged must be for public use. "Public use" means the same as "use by the public." The essential feature of public use is that it is not confined to privileged individuals, but is open to the indefinite public. In determining whether a use is public, we must look not only to the character of the business to be done, but also to the proposed mode of doing it. If the use is merely optional with the owners, or the public benefit is merely incidental, it is not a public use, authorizing the exercise of the jurisdiction of the public utility commission. There must be, in general, a right which the law compels the owner to give to the general public. It is not enough that the general prosperity of the public is promoted. Public use is not synonymous with public interest. The true criterion by which to judge the character of the use is whether the public may enjoy it by right or only by permission.

Home Insurance Co. vs American Steamship Agencies, 23 SCRA 24

F: A Peruvian firm shipped fishmeal through the SS Crowborough consigned to the SMB and insured by the Home Insurance Co. The cargo arrived with shortages. SMB demanded and Home Insurance Co. paid P14,000 in settlement of SMB's claim. Home Insurance filed for recovery from Luzon Stevedoring and American Steamship Agencies. Luzon Stevedoring claimed that it merely delivered what it received from the carrier in the same condition it received it. American Steamship contended that it was not liable because of a stipulation in the charter party that the charterer and not the shipowner was to be liable for any loss or damage to the cargo. The CFI absolved Luzon Stevedoring but ordered American Steamship to reimburse the P14,000 to Home Insurance, declaring that Art. 587 of the Code of Commerce makes the ship agent civilly liable for damages in favor of third persons due to the conduct of carrier's captain and that the stipulation in the charter party exempting owner from liability is against public policy under Art. 1744 of NCC.

Issue : Is the stipulation valid? YES.
Held : The provisions of our Civil Code on common carriers were taken from Anglo-American law. Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability for the negligence of its agents is not against public policy and is deemed valid.

The Civil Code provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier. The stipulation in the charter party absolving the owner from liability for loss due to the negligence of the agent would be void only if the strict public policy governing CC is applied. Such policy has no force where the public at large is not involved, as in the case of a ship totally chartered (as in this case) for the use of a single party. Based on the stipulation, recovery cannot be had, for loss or damage to the cargo against shipowners, unless the same is due to personal acts or negligence of said owner or its managers, as distinguished from agents or employees. No personal act or negligence has been proved.

In a charter of the entire vessel, the bill of lading issued by the master to the charterer, as shipper, is in fact and legal contemplation merely a receipt and a document of title and not a contract, for the contract is the charter party.
De Guzman vs CA, 168 SCRA 612
F: Cendana was a junk dealer and was engaged in buying used bottles and scrap materials in Pangasinan and brought these to Manila for resale. He used two 6-wheeler trucks. On the return trip to Pangasinan, he would load his vehicles with cargo which various merchants wanted delivered to Pangasinan. For that service, he charged freight lower than regular rates. General Milk Co. contracted with him for the hauling of 750 cartons of mild. On the way to Pangasinan, one of the trucks was hijacked by armed men who took with them the truck and its cargo and kidnapped the driver and his helper. Only 150 cartons of milk were delivered. The Milk Co. sued to claim the value of the lost merchandise based on an alleged contract of carriage. Cendana denied that he was a common carrier and contended that he could not be liable for the loss since it was due to force majeure. The TC ruled that he was a common carrier. The CA reversed.
Issue : WON Cendana is a common carrier. YES.
Held : Cendana is properly characterized as a common carrier even though he merely backhauled goods for other merchants, and even if it was done on a periodic basis rather than on a regular basis, and even if his principal occupation was not the carriage of goods.

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. It also avoids making a distinction between a person or enterprise offering transportation services on a regular or scheduled basis and one offering service on an occasional, episodic or unscheduled basis. Neither does it make a distinction between a carrier offering its services to the general public and one who offers services or solicits business only from a narrow segment of the population.

The fact that Cendana does not hold a CPC is no excuse to exempt him from incurring liabilities as a CC. Otherwise, it would be to reward persons who fail to comply with applicable statutory reqts. and would be offensive to public policy. The 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.
Issue : WON Cendana may be held liable for the loss of the milk. NO.
Held: Common carriers by the very nature of their business and for reasons of public policy are held to a very high degree of care and diligence (extra-ordinary diligence) in the carriage of goods as well as passengers. Article 1734 establishes the general rule that CC are responsible for the loss, destruction, or deterioration of the goods which they carry unless the same is due to the causes enumerated therein. Such enumeration is a closed list. Causes falling outside the list, even if they are force majeure, fall within the scope of Art. 1735 which provides that CC are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence required under Art. 1733.

However, Art. 1745 provides that a CC cannot be allowed to divest or diminish his responsibility even for acts of strangers like thieves or robbers, except where such thieves or robbers acted with grave or irresistible threat, violence or force. The limits of extraordinary diligence are reached where there is grave or irresistible threat, violence or force. In this case, the loss was quite beyond the control of the CC. Even CC are not made absolute insurers against all risks of travel and of transport of goods, and are not liable for acts or events which cannot be foreseen or are inevitable, provided that they shall have complied with the rigorous standard of extraordinary diligence.

Planters Products vs CA, G.R. 101503 (Sept. 15, 1993)
F: Planters purchased urea fertilizer from Mitsubishi, New York. The fertilizer was shipped on MV Sun Plum, which is owned by KKKK, from Alaska to San Fernando, La Union. A time charter party was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner. Upon arrival in the port, PPI unloaded the cargo. It took PPI 11 days to unload the cargo. PPI hired a marine and cargo surveyor to determine if there was any shortage. A shortage and contamination of the fertilizer was discovered. PPI sent a claim letter to SSA, the resident agent of KKKK for the amount of the loss. An action for damages was filed. SSA contended that the provisions on CC do not apply to them because they have become private carriers by reason of the charter-party. The TC awarded damages. The CA reversed.
Issue : Does a charter party between a shipowner and a charterer transform a CC into a private one as to negate the civil law presumption of negligence in case of loss or damage to its cargo? NO.
Held : 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. There are 2 kinds: (1) contract of affreightment which involves the use of shipping space or vessels leased by the owner in part or as a whole, to carry goods for others; and (2) charter by demise or bareboat charter where the whole vessel is let to the charterer with a transfer to him of its entire command and possession and consequent control over its navigation, including the master and the crew, who are his servants.

It is not disputed that the carrier operates as a CC in the ordinary course of business. When PPI chartered the vessel, the ship captain, its officers and crew were under the employ of the shipowner and therefore continued to be under its direct supervision and control. Thus it continued to be a public carrier.

It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel, provided the charter is limited to the ship only, as in the case of a time-charter or a voyage-charter. It is only when the charter includes both the vessel and the crew, as in a bareboat or demise that a CC becomes private, insofar as such particular voyage is concerned.
Issue : WON the carrier is liable for damages. NO.
Held : The presumption of negligence on the part of respondent carrier has been overcome by the showing of extraordinary zeal and assiduity exercised by the carrier in the care of the cargo. On the other hand, no proof was adduced by the petitioner showing that the carrier was remiss in the exercise of due diligence in order to minimize the loss or damage to the goods it carried.


Coastwise Lighterage Corp. vs. CA, GR No. 114167, July 12, 1995
F: Pag-asa Sales, Inc. entered into a contract to transport molasses from Negros to Mla. w/ Coastwise, using the latter's dumb barges. The barges were towed in tandem by the tugboat MT Marcia, w/c is likewise owned by Coastwise.

Upon reaching Mla. Bay, while approaching Pier 18, one of the barges, "Coastwise 9," struck an unknown sunken object. The forward buoyancy compartment was damaged, and water gushed in through a hole 2 inches wide and 22 inches long. As a consequence, the molasses at the cargo tanks were contaminated and rendered unfit for the use it was intended. This prompted the consignee, Pag-asa to reject the shipment of molasses as a total loss. Thereafter, Pag-asa filed a formal claim w/ the insurer of its cargo, herein pvt. resp., Phil. Gen. Insurance Co. (Philgen) and against the carrier, herein petitioner Coastwise. Coastwise denied the claim and it was Philgen w/c paid the consignee the amount of P700,000 representing the value of the damaged cargo of molasses.

In turn, Phil-gen filed an action agsint Coastwise bef. RTC-Mla. seeking to recover the P700,000 it paid to Pag-asa. RTC ruled in favor of Philgen. CA affirmed the RTC decision. Hence, this petition.
RULINGS: (1) Bareboat charter and contract of affreightment, difference; Coastwise, by the contract of affreightment, was not converted into a private carrier, but remained a common carrier.-- Under the demise or bareboat charter of the vessel, the charterer will generally be regarded as the owner of the voyage or service stipulated. The charterer mans the vessel w/ his own people and becomes the owner pro hac vice, subject to liability to others for damages caused by negligence. To create a demise, the owner of a vessel must completely and exclusively relinquish possession, command and navigation thereof to the charterer; anything short of such a complete transfer is a contract of affreightment (time or voyage charter party) or not a charter party at all.

A contract of affreightment is one in w/c 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 and under such contract the general owner retains the possession, command and navigation of the ships, the charterer or freighter merely having use of the space in the vessel in return for his payment of the charter hire. xxx

xxx

Although a charter party may transform a common carrier into a private one, the same, however, is not true in a contract of affreightment on account of the aforementioned distinctions bet. the two.

Petitioner admits that the contract it entered into w/ the consignee was one of afreightment. We agree. Pag-asa only leased 3 of petitioner's vessels, in order to carry cargo from one point to another, but the possession, command and navigation of the vessels remained w/ petitioner.
(2) Petitioner is liable for breach of contract of carriage, having failed to overcome the presumption of negligence w/ the loss and destruction of goods it transported, by proof of its exercise of extraordinary diligence.-- Mere proof of delivery of goods 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. Jesus Constantino, the patron of the vessel "Coastwise 9" admitted that he was not licensed. This violates the rule in the Code of Commerce (Art. 609) w/c requires that patrons must "have the legal capacity to contract in accordance w/ this code, and prove the skill, capacity and qualifications necessary to command and direct the vessel xxx and must be qualified xxx for the discharge of the duties of the position. xxx" Coastwise cannot safely claim to have extraordinary diligence, by placing a person whose navigational skills are questionable, at the helm of the vessel w/c eventually met the fateful accident. xxx 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 8. RAM.

2. Nature of business; power of State to regulate

Art. 1765. The [Public Service Commission] Board of Transportation may, on its own motion or on petition of any interested party, after due hearing, cancel the certificate of public convenience granted to any common carrier that repeatedly fails to comply with his or its duty to observe extraordinary diligence as prescribed in this Section.
4 Agbayani:
Common carriers are subject to legislative regulation.-- The business of a common carrier holds such a peculiar relation to the public interest that there is superinduced upon it the right of public regulation. The business of a common carrier is affected with public interest. When, therefore, one devotes his property to a use in which the public has an interest, he, in effect, grants to the public an interest in that use, and must submit to be controlled by the public for the common good, to the extent of the interest he had thus created.
Limitation on power to regulate.-- Such regulations must not have the effect of depriving an owner of his property without due process of law, nor of confiscating, or appropriating private property without just compensation, nor of limiting or prescribing irrevocably vested rights or privileges lawfully acquired under a charter or franchise [just compensation, due process of law]
When judiciary may interfere with legislative regulation of common carriers.-- The judiciary ought not to interfere with legislative regulations unless they are so plainly and palpably unreasonable as to make their enforcement equivalent to the taking of property for public use without such compensation as under all circumstances is just both to the owner and to the public.

Pantranco vs PSC, 70 Phil 221
F: Pantranco has been engaged for the past 20 years in the business of transporting passengers by means of motor vehicles in accordance with the CPCN issued to it. It filed with the PSC an application for authorization to operate 10 addtl. new trucks. The application was granted with two conditions : (1) that the CPCN would be valid for only 25 years and (2) that the service can be acquired by the govt. upon payment of cost price of its useful eqpt. less reasonable depreciation. Pantranco challenged the constitutionality of Art. 15, CA 146 as an undue delegation of legislative powers.
Issue : WON the PSC may prescribe the 2 conditions as a prerequisite to the issuance of the CPCN.
Held : Yes. CA 146 provides a sufficient standard, which is public interest, by which the PSC is guided in imposing such conditions.

The business of a common carrier holds such a peculiar relation to the public interest that there is superinduced upon it the right of public regulation. When private property is affected with a public interest, it ceases to be juris privati only. When, therefore, one devotes his property to a use in which the public has an interest, he, in effect, grants to the public an interest in that use, and must submit to be controlled by the public for the common good, to the extent of the interest he had thus created. He may withdraw his grant by discontinuing the use, but so long as he maintains the use, he must submit to control. Indeed this right is so far beyond question that it is settled that the power of the state to exercise legislative control over public utilities may be exercised through the board of commissioners. This right of the state to regulate public utilities is founded upon the police power, and statutes for the control and regulation of utilities are a legitimate exercise thereof, for the protection of the public as well as the utilities themselves. Such statutes are not unconstitutional, either as impairing the obligation of contracts, taking property without due process, or denying the equal protection of the laws, especially inasmuch as the question WON private property shall be devoted to a public use and the consequent burdens assumed is ordinarily for the owner to decide; and if he voluntarily places his property in public service he cannot complain that it becomes subject to the regulatory powers of the state. This is more so in the light of authorities which hold that a CPC constitutes neither a franchise nor a contract, confers no property rights and is a mere license or privilege.

3. Nature and Basis of Liability
Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to the circumstances of each case.

Such extraordinary diligence in the vigilance over the goods is further expressed in Articles 1734, 1735, and 1745, Nos. 5,6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in Articles 1755 and 1756.
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packaging or in the containers;