View full case

LOADSTAR SHIPPING CO. v. PIONEER ASIA INSURANCE CORP.

FACTS:

Loadstar Shipping Co., Inc. (Loadstar) entered into a voyage-charter with Northern Mindanao Transport Company, Inc. for the carriage of 65,000 bags of cement from Iligan City to Manila. The vessel used for the transport was M/V Weasel, owned and operated by Loadstar. The shipment was covered by a bill of lading issued by Loadstar. Prior to the voyage, the consignee, Market Developers, Inc., insured the shipment with Pioneer Asia Insurance Corporation for P1,400,000. On June 24, 1984, M/V Weasel departed from Iligan City for Manila but was forced aground on June 25, 1984, causing the shipment of cement to be exposed to seawater and considered lost. The consignee demanded reimbursement from Loadstar, but the latter refused.

Respondent insurance company paid the consignee the value of the lost shipment and executed a Loss and Subrogation Receipt in favor of respondent. As a result, respondent filed a complaint against Loadstar alleging that the vessel was not seaworthy, the weather conditions were an ordinary peril of the voyage, and petitioner was negligent in the selection and supervision of its employees.

The trial court ruled in favor of respondent, holding Loadstar liable for negligence. The Court of Appeals affirmed the decision with a modification on the amount of attorney's fees and litigation expenses. Loadstar filed a petition for review on certiorari before the Supreme Court, raising issues on its liability as a common carrier, the cause of the loss, and the award of attorney's fees and litigation expenses.

ISSUES:

  1. Whether or not petitioner is a common carrier under Article 1732 of the Civil Code.

  2. Whether or not the proximate cause of the loss of cargo was a fortuitous event or due to the failure of petitioner to exercise extraordinary diligence.

  3. Whether or not the award of attorney's fees and litigation expenses in favor of respondent is proper.

RULING:

  1. The Court of Appeals did not err in holding that petitioner is a common carrier under Article 1732 of the Civil Code. As the registered owner and operator of the vessel M/V Weasel and engaged in the business of carrying goods for hire, petitioner is considered a common carrier.

  2. The Court of Appeals did not err in holding that the proximate cause of the loss of cargo was the failure of petitioner to exercise extraordinary diligence. The trial court found that petitioner's defense of force majeure was unsupported by evidence. The trial court also considered the PAG-ASA report, which showed that the weather conditions at the time of the incident were slight and smooth. The cause of the loss was determined to be the gross negligence of petitioner.

  3. The Court of Appeals did not err in affirming the award of attorney's fees and litigation expenses in favor of respondent. It is within the discretion of the trial court to award attorney's fees and litigation expenses when it is found that the defendant's act or omission compelled the plaintiff to incur expenses to protect their rights, and the court agrees that such an award is just and equitable.

PRINCIPLES:

  • The registered owner and operator of a vessel engaged in the business of carrying goods for hire is considered a common carrier under Article 1732 of the Civil Code.

  • In case of loss or destruction of goods, a statutory presumption arises that the common carrier was negligent unless it can prove that it observed extraordinary diligence.

  • The defense of force majeure must be supported by evidence to be given weight by the court.

  • The proximate cause of loss or damage to goods must be determined based on the circumstances and evidence presented.

  • The award of attorney's fees and litigation expenses is within the discretion of the trial court, and may be granted when the defendant's act or omission compelled the plaintiff to incur such expenses to protect their rights.