05 Loadstar Shipping v.

Pioneer Insurance
G.R. No. 157481 (24 January 2006)
Quisumbing, J. / tita K

Subject Matter: Common Carriers; In general, definitions; essential elements

Summary:
Loadstar’s M/V Weasel was supposed to transport bags of Cement from Iligan to Manila. The shipment was insured by
Pioneer Insurance. However, Loadstar failed to deliver the bags and so Pioneer had to pay for the value of the shipment.
Pioneer filed a complaint against Loadstar alleging Loadstar’s negligence. In this case, the SC ruled that Loadstar was a
common carrier, that in case of voyage-charter, a common carrier remains as such. As a common carrier, it failed to
observe extraordinary diligence.

Doctrines:
 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.
 The voyage-charter agreement does not convert a common carrier into a private carrier.

Parties:

Petitioner Loadstar Shipping Co., Inc. (Loadstar)

Respondent Pioneer Asia Insurance Corp. (Pioneer)

Facts:
Loadstar is the registered owner and operator of M/V Weasel.

Loadstar entered into a voyage charter with Northern Mindanao Transport Co. for the carriage of 65,000 bags of
cement from Iligan City to Manila.

The consignee, Market Developers Inc., insured the shipment of cement with Pioneer.

At 12:50PM of June 24, 1984, M/V Weasel left Iligan in good weather. However, at 4:31AM of June 25, 1984, the
master of M/V Weasel, Capt. Montera, ordered the vessel to be forced aground. Consequently, the entire shipment
of cement was good as gone due to exposure to sea water.

Loadstar failed to deliver the goods to the consignee in Manila.

Pioneer paid the consignee the value of lost shipment of cement (P1.4Million plus an additional P500k).

Pioneer filed a complaint with the RTC against Loadstar.

Pioneer alleged that:

(1) M/V Weasel was not seaworthy at the commencement of the voyage,
(2) The weather and sea conditions were usual and expected for that time of the year, as an ordinary peril of the
voyage,
(3) Petitioner was negligent in the selction and supervision of its agents and employees then manning the M/V
Weasel.

RTC – decided in favor of Pioneer. It held that Loadstar, as a common carrier, bears the burden of proving that it
exercised extraordinary diligence in its vigilance over the goods it transported;

-that in case of loss or destruction, a statutory presumption arises that the common carrier was negligent unless
it could prove that it had observed extraordinary diligence;
 - force majeure was bereft of factual basis because typhoon Asiang had already moved away from the
Philippines at the time of the incident.

CA- affirmed RTC decision.

Issues:

1. WON the petitioner is a common carrier. (YES)

2. WON the petitioner has observed extraordinary diligence. (NO)

Arguments:

Petitioner contends:

a. The preseumption of negligence against common carrier should not apply because the carrier’s voyage-charter
with the shipper converted it into a private carrier.
b. The stipulation in the voyage-charter holding it free from liability is valid and binding.
c. It exercised extraordinary diligence.
d. The proximate cause of the loss of the cargo was a fortuitous event.

Ratio:

Yes – The petitioner is a common carrier.

 Art. 1732 of the Civil Code defines “common carrier.

Art. 1732. Common Carriers are persons’ corporations firms or associations engaged in the bussiness of carrying
or transporting passengers or goods, or both, by land, water, or air, for compensation, offering their services to
the public.

o Petitioner is a corporation engaged in the business of transporting cargo by water and for
compensation, offering its services indiscrimntely to the public.

The voyage-charter agreement did not convert the common carrier into a private carrier.
 In Planters Products, Inc. v, CA, the Court ruled that:
“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 person, provided the charter is limited only to the ship only, as in the
case of a time-charter or voyage-charter. It is only when the charter includes both vessel and its crew, as in
bareboat or demise that a common carrier becomes private, atleast insofar as the particular voyage covering the
charter-party is concerned. Indubitably, a shipowner in a time or voyage charter retains possession and control
of the ship, although her holds may, for the moment, be the propety of the charterer.”
o Petitioner remains a common carrier since the charter was limited to the ship only and does not
involve both the vessel and its crew.

No – Petitioner did not observe extraordinary diligence.

 As a common carrier, petitioner is required to observe extraordinary diligence in the vigilance over the goods it
transports. When the goods placed in its care are lost, petitioner is presumed to have been at fault or to have
acted negligently. Petitioner has the burden of proving that it observed extraordinary diligence in order to avoid
responsibility for the lost cargo.
 Art. 1734 enumerates the exemptions of a common carrier from liability which are:
a. flood, storm earthquake, lightning or other natural disaster or calamity;
b. act of the public enemy in war, whether international or civil;
c. act or omission of the shipper or owner of the goods;
 d. the character of the goods or defects in the packing or in the containers; and
e. order or act of competent public authority
o Petitioner failed to substantiate its claim that the loss was due to a fortuitous event under par. A.
o The trial court and CA found that the loss of the entire shipment was due to petitioner’s gross
negligence.
 The sea and weather conditions were calm.
 Petitioner took a shortcut, instead of the usual route, which exposed the voyage to unexpected
hazard.

Wherefore, the petition is denied.