Case Summary (G.R. No. 102316)
Procedural History
The Regional Trial Court (RTC) held both Seven Brothers and South Sea jointly liable for ₱2,000,000 plus interest and attorney’s fees, offsetting freight charges. The Court of Appeals affirmed South Sea’s liability but reversed Seven Brothers’ liability based on a liability‐exemption clause in the charter party.
Issue
Whether a stipulation in a private‐carrier charter party exempting the shipowner from liability for cargo loss, including negligent conduct of crew, is valid under public policy and applicable law.
Ruling on Exemption Clause Validity
Under American and Philippine jurisprudence, a common carrier chartered for a specific cargo or person becomes a private carrier. In private carriage, parties may validly stipulate exemption from liability, even for negligence. Civil Code Article 1306 permits freely negotiated provisions not contrary to law, morals, or public policy.
Application of Stare Decisis and Contractual Freedom
The Court applied Home Insurance Co. vs. American Steamship Agencies (23 SCRA 24) and upheld that private‐carrier exemption clauses are not contrary to public policy. The protective regime for common carriers does not extend to contracts freely negotiated between private parties.
Rejection of Common Carrier Provisions
Articles 1745 and related Civil Code provisions governing common‐carrier liability do not apply to private carriers absent express incorporation. The charter party expressly shifted all cargo risk to Valenzuela, obscuring any statutory duties of Seven Brothers.
Waiver of Statutory Rights under Code of Commerce
Valenzuela’s rights under Code of Commerce Articles 586 and 587 are patrimonial and thus waivable. By agreeing to the exemption clause, petitioner relinquished claims against the shipowner for captain’s negligence.
Non-Applicability of Civil Code Articles on Fault
Articles 1170 and 1173 govern obligor diligence where obligations remain. Here, the charter party reallocated the obligation to bear cargo loss entirely to Valenzuela, rendering these provisions inapplicable.
Distinction from Cited Precedents on Common Carriers
Cases cited by petitioner (Shewaram, Juan Ysmael, Manila Railroad, Standard Oil, Limpangco Sons) involve common carriers or different factual stipulations. Their stricter rules and public‐policy rationale do
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Facts
- On January 16, 1984, Valenzuela Hardwood and Industrial Supply, Inc. (“Valenzuela”) entered into a charter party with Seven Brothers Shipping Corporation to load 940 lauan round logs aboard M/V Seven Ambassador at Maconacon, Isabela for shipment to Manila.
- On January 20, 1984, Valenzuela insured the logs with South Sea Surety and Insurance Co., Inc. under Marine Cargo Insurance Policy No. 84/24229 for ₱2,000,000.00.
- On January 24, 1984, Valenzuela delivered to Mr. Victorio Chua—acting as agent—a check covering the premium.
- The vessel sank on January 25, 1984; the iron chains snapped and the logs rolled to portside due to the captain’s negligence, causing total loss of cargo.
- On January 30, 1984, Valenzuela tendered a ₱5,625.00 check for premium and documentary stamps, which South Sea refused and canceled the policy effective its inception under Insurance Code § 77.
- On February 2, 1984, Valenzuela demanded payment from South Sea, which denied liability; a parallel claim against Seven Brothers was likewise denied.
Trial Court Decision
- The Regional Trial Court, Branch 171, Valenzuela, Metro Manila, found the sinking resulted from the captain’s negligence and declared the charter‐party’s exempting clause void under Civil Code Article 1745 governing common carriers.
- It ordered South Sea to pay ₱2,000,000.00 plus legal interest from February 2, 1984, or alternatively Seven Brothers to pay the same from April 24, 1984; awarded attorney’s fees at 5% of claim and costs; and adjudge