Loadstar Shipping Co., Inc. vs. Pioneer Asia Insurance Corp.

A common carrier remains a common carrier notwithstanding a voyage-charter or time-charter agreement, provided the charter is limited to the ship only and does not include both the vessel and its crew as in a bareboat or demise charter.

Loadstar Shipping Co., Inc., the registered owner and operator of M/V Weasel, entered into a voyage-charter with Northern Mindanao Transport Company, Inc. for the carriage of cement from Iligan City to Manila. The consignee, Market Developers, Inc., insured the shipment with Pioneer Asia Insurance Corporation. After the vessel was forced aground and the entire shipment of cement was ruined by seawater, the insurer paid the consignee and was subrogated to the latter's rights. The insurer subsequently sued Loadstar, alleging the vessel was unseaworthy and the carrier was negligent.

• The Voyage-Charter: On June 6, 1984, Loadstar entered a voyage-charter with Northern Mindanao Transport Company, Inc. to carry 65,000 bags of cement from Iligan City to Manila. The shipper was Iligan Cement Corporation, and the consignee was Market Developers, Inc.
• The Shipment and Insurance: On June 24, 1984, 67,500 bags of cement were loaded onto M/V Weasel, covered by Loadstar's Bill of Lading. Prior to the voyage, the consignee insured the shipment with Pioneer Asia Insurance Corporation for P1,400,000 under Marine Open Policy No. MOP-006.
• The Incident: M/V Weasel departed Iligan City at 12:50 PM on June 24, 1984, in good weather. At 4:31 AM the following day, the vessel's master, Captain Vicente C. Montera, ordered the ship forced aground. The entire shipment of cement was exposed to seawater and deemed lost.
• Subrogation and Demand: The consignee demanded reimbursement from Loadstar, which refused. On March 11, 1985, Pioneer Asia paid the consignee P1,400,000 plus P500,000, executing a Loss and Subrogation Receipt.
• Lower Court Findings: The RTC found that PAG-ASA reports indicated tropical storm "Asiang" had already moved away from the Philippines at the time of the incident. Sea and weather conditions in the vicinity of Hinubaan, Negros Occidental, were slight and smooth. The trial court concluded the loss was caused by gross negligence, specifically Loadstar's decision to take a shortcut route that exposed the voyage to unexpected hazards, rather than force majeure.

• Status as Private Carrier: Petitioner argued that the voyage-charter converted it into a private carrier, thus the statutory presumption of negligence against common carriers should not apply. Any stipulation in the charter absolving it from liability was valid and binding on respondent.
• Force Majeure and Extraordinary Diligence: Petitioner maintained that the proximate cause of the loss was a fortuitous event. It insisted it exercised due diligence to make the ship seaworthy, properly manned, and equipped, and that no fault or negligence could be attributed to it.
• Attorney's Fees: Petitioner pointed out that the award of attorney's fees and litigation expenses appeared only in the dispositive portion of the RTC decision without factual or legal justification, and the CA erred in affirming it.

• Common Carrier Status: Respondent countered that the CA correctly held petitioner remained a common carrier because the charter was limited to the ship only, constituting a voyage-charter rather than a bareboat charter.
• Factual Issues: Respondent argued that the inquiries into whether the loss was due to force majeure or negligence, and whether respondent was entitled to attorney's fees, are factual issues beyond the scope of a petition for review on certiorari.

• Status of the Carrier: Whether petitioner is a common carrier or a private carrier under Article 1732 of the Civil Code given the existence of a voyage-charter agreement.
• Proximate Cause and Diligence: Whether the proximate cause of the loss of cargo was a fortuitous event or petitioner's failure to exercise extraordinary diligence.
• Attorney's Fees: Whether the award of attorney's fees and litigation expenses was proper.

• Status of the Carrier: Petitioner remained a common carrier notwithstanding the voyage-charter. A voyage-charter or time-charter, which is limited to the ship only and does not include the vessel's crew, does not convert a common carrier into a private carrier. Only a bareboat or demise charter, which includes both the vessel and its crew, alters the carrier's status to private. Because the shipowner in a voyage-charter retains possession and control of the ship, the common carrier obligations persist.
• Proximate Cause and Diligence: The loss was due to gross negligence, not force majeure. As a common carrier, petitioner was bound to observe extraordinary diligence and was presumed negligent upon the loss of the goods. The burden to prove extraordinary diligence was not discharged. Evidence showed that weather conditions were calm and that the vessel took a shortcut route exposing it to unexpected hazards. The claim of force majeure under Article 1734(1) was unsubstantiated.
• Attorney's Fees: The award of attorney's fees and litigation expenses equivalent to 10% of the total claim was affirmed. The contract between the parties contained a stipulation limiting attorney's fees and litigation expenses to 10% of the total monetary award, rendering the amount just and equitable.

• Doctrine on Charter Parties and Common Carrier Status — A public carrier remains as such notwithstanding the charter of the whole or a portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in a time-charter or voyage-charter. The carrier becomes a private carrier only when the charter includes both the vessel and its crew, as in a bareboat or demise charter. In a voyage or time charter, the shipowner retains possession and control of the vessel.
• Presumption of Negligence against Common Carriers — When goods placed under a common carrier's care are lost, destroyed, or deteriorated, the carrier is presumed to have been at fault or to have acted negligently. The burden is on the carrier to prove that it observed extraordinary diligence or that the loss falls under the exclusive exceptions under Article 1734 of the Civil Code.

• "It is therefore 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." — Reiterating the distinction between voyage/time charters and bareboat/demise charters in determining carrier status.

• Planters Products, Inc. v. Court of Appeals, G.R. No. 101503, September 15, 1993 — Followed. Established the controlling rule that a voyage or time charter does not convert a common carrier into a private carrier because the charter is limited to the ship only and the shipowner retains possession and control.
• Compania Maritima v. Court of Appeals, No. L-31379, August 29, 1988 — Followed. Defined the extraordinary diligence required of common carriers and the burden to prove that the loss was due to accident or circumstances inconsistent with liability.
• Home Insurance Co. v. American Steamship Agencies, Inc., No. L-25599, April 4, 1968 — Distinguished. Involved a private carrier, not a common carrier.
• Valenzuela Hardwood and Industrial Supply, Inc. v. Court of Appeals, G.R. No. 102316, June 30, 1997 — Distinguished. Involved a private carrier and the validity of a stipulation absolving the private carrier from liability for negligence.

• Article 1732, Civil Code — Defines a common carrier as persons, corporations, firms, or associations engaged in the business of carrying or transporting passengers or goods by land, water, or air, for compensation, offering their services to the public. Applied to classify petitioner as a common carrier engaged in transporting cargo by water for compensation.
• Article 1733, Civil Code — Requires common carriers to observe extraordinary diligence in the vigilance over the goods transported. Applied to set the standard of diligence required of petitioner.
• Article 1734, Civil Code — Enumerates the exclusive instances when a common carrier is exempt from liability for loss (flood, storm, act of public enemy, act of shipper, character of goods, order of public authority). Applied to reject petitioner's claim of force majeure under paragraph 1 due to lack of factual basis.
• Article 1735, Civil Code — Presumes common carriers at fault or negligent for lost, destroyed, or deteriorated goods, unless extraordinary diligence is proven. Applied to shift the burden to petitioner to prove it observed extraordinary diligence.

Carpio, Carpio Morales, Tinga