UTILITIES LAW
CASE DIGEST
Submitted by
LLB4302
Table of Contents
OBLIGATIONS OF THE PARTIES IN CONTRACT OF CARRIAGE
Transportation of Goods
Saludo, Jr. vs. Court of Appeals..........................................................................................1
Ganzon vs. Court of Appeals...............................................................................................3
Eastern Shipping Lines, Inc vs. BPI/MS Insurance Corp...............................................5
Westwind Shipping Corp. vs. UCPB General Insurance Co., Inc.................................7
Republic of the Philippines vs. Lorenzo Shipping Corp..................................................9
Benito Macam vs. Court of Appeals.................................................................................11
The Philippine American General Insurance Co. Inc.................................................... 13
Central Shipping Co., Inc. vs Insurance Co. of North America....................................14
Nocum vs Laguna Tayabas Bus Company.....................................................................15
Belgian Overseas Chartering and Shipping N.V............................................................17
Transportation of Passengers
Trans-Asia Shipping Lines, Inc vs Court of Appeals......................................................22
La Mallorca vs Court of Appeals.......................................................................................25
Aboitiz Shipping Corp. vs Court of Appeals....................................................................27
Presumption of Negligence
Regional Container Lines of Singapore vs The Netherlands Insurance Co..............29
Aboitiz Shipping Co. vs New India Assurance Co. Ltd..................................................31
Mariano, Jr. vs Callejas......................................................................................................32
Heirs of Jose Marcial K. Ochoa vs G &S Transport Corp.............................................33
Ong Yiu vs. Court of Appeals............................................................................................ 35
Belgian Overseas Chartering and Shipping N.V............................................................37
DEFENSES
Sealoader Shippine Corporation vs. Granc Cement Manufacturing...........................41
Philippine Charter Insurance Corp. vs Unknown Owner of the Vessel M/V Honor . 43
Belgian Chartering and Shipping, N.V. vs. Phil. First Insurance Co., Inc. ............... 47
2
Bill of Lading
Magellan Mfg. Marketing Corporation vs. Court of Appeals) .................................. 80
Lorenzo Shipping Corp. vs Chubb and Sons, Inc. .................................................. 84
MOF Company, Inc. vs Shin Yang Brokerage Corp. .............................................. 86
Ong Yiu vs. Court of Appeals ................................................................................. 88
Wallem Philippines Shipping Inc, et al vs Prudential Guarantee & Assurance, Inc 90
Ace Navigation Co., Inc vs FGU Insurance Corp. ................................................... 92
Asian Terminals, Inc. vs. Simon Enterprises, Inc. ................................................... 94
97
Philippine Charter Insurance Corp. vs. Chemoil Lighterage Corporation ............. 101
103
Philippine American General Insurance Co., Inc. vs Sweetlines, Inc .................... 105
LORENZO SHIPPING CORP., vs. CHUBB and SONS, Inc
C. TRANSPORTATION OF PASSENGERS
20. Trans-Asia Shipping Lines, Inc vs Court of Appeals, G.R. No. 118126, March 4,
1996
21. La Mallorca vs Court of Appeals, G.R. No. L-20761, July 27, 1966
22. Aboitiz Shipping Corp. vs Court of Appeals, G.R. No. 84458, November 6, 1989
D. PRESUMPTION OF NEGLIGENCE
23. Regional Container Lines of Singapore vs The Netherlands Insurance Co.
(Philippines), Inc. G.R. No. 168151, September 4, 2009
22. Aboitiz Shipping Co. vs New India Assurance Co. Ltd. G.R. No. 156978, May 2, 2006
25. Mariano, Jr. vs Callejas, G.R. No. 166640, July 31, 2009
26. Heirs of Jose Marcial K. Ochoa vs G &S Transport Corp., G.R. No. 170071 & 170125,
March 9, 2011
47.2 Ong Yiu vs. Court of Appeals, et 191 SCRA 223
55.1 Belgian Overseas Chartering and Shipping N.V. vs Philippine First Insurance Co.,
Inc., G. R. No. 143133, June 5, 2002
In any event, the contract has provided for such a situation by explicitly stating that the
above condition remains effective "notwithstanding that the same (fixed time for
completion of carriage, specified aircraft, or any particular route or schedule) may be
stated on the face hereof." While petitioners hinge private respondents' culpability on the
fact that the carrier "certifies goods described below were received for carriage," they
may have overlooked that the statement on the face of the airway bill properly and
completely reads
Carrier certifies goods described below were received for carriage subject to the
Conditions on the reverse hereof the goods then being in apparent good order
and condition except as noted hereon. (Emphasis ours.)
The petitioner has failed to show that the loss of the scraps was due to any of the
following causes enumerated in Article 1734 of the Civil Code, namely:
(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 packing or in the containers;
(5) Order or act of competent public authority.
Hence, the petitioner is presumed to have been at fault or to have acted negligently.
2. Yes.
In any case, the intervention of the municipal officials was not of a character that would
render impossible the fulfilment by the carrier of its obligation. The petitioner was not
duty bound to obey the illegal order to dump into the sea the scrap iron. Moreover, there
is absence of sufficient proof that the issuance of the same order was attended with
such force or intimidation as to completely overpower the will of the petitioners
employees.
3. No.
The petitioner could have been exempted from any liability had he been able to prove
that he observed extraordinary diligence in the vigilance over the goods in his custody,
according to all the circumstances of the case, or that the loss was due to an unforeseen
event or to force majeure. As it was, there was hardly any attempt on the part of the
petitioner to prove that he exercised such extraordinary diligence.
For Article 1735 of the Civil Code, conversely stated, means that the shipper will suffer
the losses and deterioration arising from the causes enumerated in Art. 1734; and in
these instances, the burden of proving that damages were caused by the fault or
negligence of the carrier rests upon him. However, the carrier must first establish that the
loss or deterioration was occasioned by one of the excepted causes or was due to an
unforeseen event or to force majeure.
Diego, Jasmine A.
EASTERN SHIPPING LINES INC. vs.BPI/MS INSURANCE CORP. and MITSUI SUM TOMO
INSURANCE CO. LTD
Case No. 12
Facts:
On August 29, 2003, Sumitomo Corporation shipped through MV Eastern Challenger V9-S, a vessel owned by petitioner Eastern Shipping Lines, Inc., 31 various steel sheets in coil
weighing 271,828 kilograms valued at US$125,417.26 from Yokohama, Japan for delivery in
favor of the consignee Calamba Steel Center Inc. This cargo was insured against all risk with
respondent Mitsui Sumitomo Insurance Co., Ltd. On or about September 6 2003, the shipment
arrived at the port of Manila. Upon unloading from the vessel, nine coils were observed to be in
bad condition as evidenced by the Turn Over Survey of Bad Order Cargo No. 67327. The cargo
was then turned over to Asian Terminals, Inc. (ATI) for stevedoring, storage and safekeeping
pending Calamba Steels withdrawal of the goods. When ATI delivered the cargo to Calamba
Steel, the latter rejected its damaged portion, valued at US$7,751.15, for being unfit for its
intended purpose. A second shipment was made for the 28 steel sheets in coil, weighing
215,817 kilograms, through petitioners MV Eastern Challenger V-10-S. It had a declared value
of US$121,362.59. However, upon unloading of the cargo from the said vessel, 11 coils were
found damaged as evidenced by the Turn Over Survey of Bad Order Cargo No. 67393. For the
third time, Sumitomo again shipped 117 various steel sheets in coil weighing 930,718 kilograms
which had a declared value of US$476,416.90 through petitioners vessel, MV Eastern Venus
V-17-S. Upon its discharge, six coils were observed to be in bad condition. The cargoes of these
two subsequent shipments in favour of Calamba Steel were then transferred to ATI. When ATI
delivered the goods, Calamba Steel rejected the damaged portion thereof for the same reason
of being unfit for its intended purpose. The value of the damaged portion of the cargo for the
second shipment amounted to US$7,677.12 and the value of US$14,782.05 for the damaged
cargo in the third shipment.
Calamba Steel filed an insurance claim with Mitsui through the latters settling agent,
respondent BPI/MS Insurance Corporation (BPI/MS) and was paid the total amount of
US$30,210.32. As insurer and subrogee of Calamba Steel, Mitsui and BPI/MS filed in the
Regional Trial Court (RTC), of Makati City, Branch 138 a Complaint for Damages against
petitioner and ATI. It rendered decision in favor of the plaintiff, ordering the defendants to pay
plaintiffs actual damages amounting to US$30,210.32 plus 6% legal interest thereon
commencing from the filing of this complaint, until the same is fully paid, attorneys fees in a
sum equivalent to 25% of the amount claimed, and costs of suit.
Aggrieved, petitioner and ATI appealed to the CA. On July 9, 2010, the CA in its assailed
Decision affirmed with modification the RTCs findings holding that both petitioner and ATI were
very negligent in the handling of the subject cargoes. Both petitioner and ATI filed their separate
petitions for review on certiorari before this Court. It gave due course to this present petition. In
its Memorandum, petitioner contends that the survey reports submitted by respondents clearly
show that the cause of the damage was the rough handling of the goods by ATI during the
5
Diego, Jasmine A.
August 30, 1994 until the judgment becomes final and executory. CA sustained the RTC
judgment that the claim against ATI already prescribed.
When their motions for reconsideration were denied, they elevated the case before the
Supreme Court via petitions for certiorari. Westwind argues that it no longer had actual or
constructive custody of the containers/skids at the time they were damaged by ATIs forklift
operator during the unloading operations. As for OFII, it maintains that it is not a common
carrier, but only a customs broker whose participation is limited to facilitating withdrawal of the
shipment in the custody of ATI by overseeing and documenting the turnover and
counterchecking if the quantity of the shipments were in tally with the shipping documents at
hand.
Issue: Whether petitioners Westwind and OFII are common carriers and therefore liable to
respondent UCPB General Insurance Corporation.
Held: Yes. Petitioner Westwind, a common carrier, from the nature of their business and for
reasons of public policy, is bound to observe extraordinary diligence in the vigilance over the
goods transported by them. Section 3 (2) of the COGSA then states that among the carriers
responsibilities are to properly and carefully load, handle, stow, carry, keep, care for, and
discharge the goods carried. The functions of an arrastre operator as the case of herein
petitioner OFII involve the handling of cargo deposited on the wharf or between the
establishment of the consignee or shipper and the ship's tackle. Being the custodian of the
goods discharged from a vessel, an arrastre operator's duty is to take good care of the goods
and to turn them over to the party entitled to their possession. Both the ARRASTRE and the
CARRIER are therefore charged with and obligated to deliver the goods in good condition to the
consignee.
In Regional Container Lines (RCL) of Singapore v. The Netherlands Insurance Co.
(Philippines), Inc., the Court echoed the doctrine that cargoes, while being unloaded, generally
remain under the custody of the carrier. There is actual delivery in contracts for the transport of
goods when possession has been turned over to the consignee or to his duly authorized agent
and a reasonable time is given him to remove the goods. In this case, since the discharging of
the containers/skids, which were covered by only one bill of lading, had not yet been completed
at the time the damage occurred, there is no reason to imply that there was already delivery,
actual or constructive, of the cargoes to ATI.
The contention of OFII is also untenable. A customs broker has been regarded as a
common carrier because transportation of goods is an integral part of its business. The
appellate court did not err in finding petitioner, a customs broker, to be also a common carrier,
as defined under Article 1732 of the Civil Code. It does not distinguish between one whose
principal business activity is the carrying of goods and one who does such carrying only as an
ancillary activity. Thus, for undertaking the transport of cargoes from ATI to SMCs warehouse in
Calamba, Laguna, OFII is considered a common carrier. As long as a person or corporation
holds itself to the public for the purpose of transporting goods as a business, it is already
considered a common carrier regardless of whether it owns the vehicle to be used or has to
actually hire one.
FACTS
On June 5, 1987, the Republic of the Philippines, through the DOH, and the
Cooperative for American Relief Everywhere, Inc. (CARE) signed an agreement wherein CARE
would acquire from the United States government donations of non-fat dried milk and other food
products. In turn, the Philippines would transport and distribute the donated commodities to the
intended beneficiaries in the country.
The government entered into a contract of carriage of goods with herein petitioner
National Trucking and Forwarding Corporation (NTFC). Thus, the latter shipped 4,868 bags of
non-fat dried milk through herein respondent Lorenzo Shipping Corporation. The consignee
named in the bills of lading issued by the respondent was Abdurahman Jama, petitioners
branch supervisor in Zamboanga City.
On reaching the port of Zamboanga City, respondents agent, Efren Ruste Shipping
Agency, unloaded the 4,868 bags of non-fat dried milk and delivered the goods to petitioners
warehouse. Before each delivery, Rogelio Rizada and Ismael Zamora, both delivery checkers of
Efren Ruste Shipping Agency, requested Abdurahman to surrender the original bills of lading,
but the latter merely presented certified true copies thereof. Upon completion of each delivery,
Rogelio and Ismael asked Abdurahman to sign the delivery receipts. However, at times when
Abdurahman had to attend to other business before a delivery was completed, he instructed his
subordinates to sign the delivery receipts for him.
Notwithstanding the precautions taken, the petitioner allegedly did not receive the
subject goods. Thus, in a letter, petitioner NTFC filed a formal claim for non-delivery of the
goods shipped through respondent.
In its letter, the respondent explained that the cargo had already been delivered to
Abdurahman Jama. The petitioner then decided to investigate the loss of the goods. But before
the investigation was over, Abdurahman Jama resigned as branch supervisor of petitioner.
Noting but disbelieving respondents insistence that the goods were delivered, the
government through the DOH, CARE, and NTFC as plaintiffs filed an action for breach of
contract of carriage, against respondent as defendant, with the RTC of Manila.
After trial, the RTC resolved in favor of the defendant and against the plaintiffs.
Dissatisfied with the foregoing ruling, herein petitioner appealed to the Court of Appeals.
It faulted the lower court for not holding that respondent failed to deliver the cargo, and that
respondent failed to exercise the extraordinary diligence required of common carriers.
The Court of Appeals found that the trial court did not commit any reversible error. It
dismissed the appeal, and affirmed the assailed decision in toto.
ISSUE: WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED
TO APPRECIATE AND APPLY THE LEGAL STANDARD OF EXTRAORDINARY DILIGENCE IN
THE SHIPMENT AND DELIVERY OF GOODS TO THE RESPONDENT AS A COMMON
CARRIER.
RULING
Article 1733 of the Civil Code demands that a common carrier observe extraordinary
diligence over the goods transported by it. Extraordinary diligence is that extreme measure of
care and caution which persons of unusual prudence and circumspection use for securing and
preserving their own property or rights. This exacting standard imposed on common carriers in a
contract of carriage of goods is intended to tilt the scales in favor of the shipper who is at the
mercy of the common carrier once the goods have been lodged for shipment. Hence, in case of
loss of goods in transit, the common carrier is presumed under the law to have been at fault or
negligent. However, the presumption of fault or negligence, may be overturned by competent
evidence showing that the common carrier has observed extraordinary diligence over the
goods.
In the instant case, the Supreme Court agrees with the court a quo that the respondent
adequately proved that it exercised extraordinary diligence. Although the original bills of lading
remained with petitioner, respondents agents demanded from Abdurahman the certified true
copies of the bills of lading. They also asked the latter and in his absence, his designated
subordinates, to sign the cargo delivery receipts.
Also noted is that some delivery receipts were signed by Abdurahmans subordinates
and not by Abdurahman himself as consignee. Further, delivery checkers Rogelio and Ismael
testified that Abdurahman was always present at the initial phase of each delivery, although on
the few occasions when Abdurahman could not stay to witness the complete delivery of the
shipment, he authorized his subordinates to sign the delivery receipts for him. This, to the mind
of the Court, is sufficient and substantial compliance with the requirements.
WHEREFORE, the petition is GRANTED.
10
BENITO MACAM doing business under the name and style BEN-MAC ENTERPRISES vs.
COURT OF APPEALS, CHINA OCEAN SHIPPING CO., and/or WALLEM PHILIPPINES
SHIPPING, INC.,
Case No. 15
FACTS
Petitioner Benito Macam, doing business under the name and style Ben-Mac
Enterprises, shipped on board the vessel Nen Jiang, owned and operated by respondent China
Ocean Shipping Co., through local agent respondent Wallem Philippines Shipping, Inc.
(hereinafter WALLEM), 3,500 boxes of watermelons covered by Bill of Lading No. HKG 99012
and exported through a Letter of Credit issued by National Bank of Pakistan, Hongkong
(hereinafter PAKISTAN BANK) and 1,611 boxes of fresh mangoes covered by Bill of Lading No.
HKG 99013 and exported through a Letter of Credit also issued by PAKISTAN BANK. The Bills
of Lading contained the following pertinent provision: "One of the Bills of Lading must be
surrendered duly endorsed in exchange for the goods or delivery order. The shipment was
bound for Hongkong with PAKISTAN BANK as consignee and Great Prospect Company of
Kowloon, Hongkong (hereinafter GPC) as notify party.
On 6 April 1989, per letter of credit requirement, copies of the bills of lading and
commercial invoices were submitted to petitioner's depository bank, Consolidated Banking
Corporation (hereinafter SOLIDBANK), which paid petitioner in advance the total value of the
goods.
Upon arrival in Hongkong, the shipment was delivered by respondent WALLEM directly
to GPC, not to PAKISTAN BANK, and without the required bill of lading having been
surrendered. Subsequently, GPC failed to pay PAKISTAN BANK such that the latter, still in
possession of the original bills of lading, refused to pay petitioner through SOLIDBANK. Since
SOLIDBANK already pre-paid petitioner the value of the shipment, it demanded payment from
respondent WALLEM through five (5) letters but was refused. Petitioner was thus allegedly
constrained to return the amount involved to SOLIDBANK, then demanded payment from
respondent WALLEM in writing but to no avail.
Petitioner sought collection of the value of the shipment from respondents before the
Regional Trial Court of Manila, based on delivery of the shipment to GPC without presentation
of the bills of lading and bank guarantee.
Respondents contended that the shipment was delivered to GPC without presentation of the
bills of lading and bank guarantee per request of petitioner himself because the shipment
consisted of perishable goods.
The trial court opined that respondents breached the provision in the bill of lading
requiring that "one of the Bills of Lading must be surrendered duly endorsed in exchange for the
goods or delivery order," when they released the shipment to GPC without presentation of the
bills of lading and the bank guarantee that should have been issued by PAKISTAN BANK in lieu
of the bills of lading. The trial court added that the shipment should not have been released to
11
GPC at all since the instruction contained in the telex was to arrange delivery to the respective
consignees and not to any party.
Respondent Court of Appeals appreciated the evidence in a different manner. According
to it, as established by previous similar transactions between the parties, shipped cargoes were
sometimes actually delivered not to the consignee but to notify party GPC without need of the
bills of lading or bank guarantee. Moreover, the bills of lading were viewed by respondent court
to have been properly superseded by the telex instruction and to implement the instruction, the
delivery of the shipment must be to GPC, the real importer/buyer of the goods as shown by the
export invoices, and not to PAKISTAN BANK since the latter could very well present the bills of
lading in its possession;
ISSUE: Whether or not respondents are liable to petitioner for releasing the goods to GPC
without the bills of lading or bank guarantee.
RULING
The instruction in the telex of 5 April 1989 was "to deliver the shipment to respective
consignees." There is no mistake that the originals of the two (2) subject Bills of Lading are still
in the possession of the Pakistani Bank. The appealed decision affirms this fact. Conformably, to
implement the said telex instruction, the delivery of the shipment must be to GPC, the notify
party or real importer/buyer of the goods and not the Pakistani Bank since the latter can very
well present the original Bills of Lading in its possession. Likewise, if it were the Pakistani Bank
to whom the cargoes were to be strictly delivered, it will no longer be proper to require a bank
guarantee as a substitute for the Bill of Lading. To construe otherwise will render meaningless
the telex instruction.
WHEREFORE, the petition is DENIED.
12
Escobar, Rosaline O.
The Philippine American General Insurance Co., Inc. v. Court of Appeals
Case No. 16
Facts:
On July 6, 1983 Coca-Cola Bottlers Philippines, Inc., loaded on board "MV Asilda," a
vessel owned and operated by respondent Felman Shipping Lines, 7,500 cases of 1-liter CocaCola softdrink bottles to be transported from Zamboanga City to Cebu City. The shipment was
insured with petitioner Philippine American General Insurance Co., Inc., under Marine Open. On
July 7, 1983, the vessel sank in the waters of Zamboanga del Norte bringing down her entire
cargo with her including the subject 7,500 cases of 1-liter Coca-Cola softdrink bottles. On
November 29, 1983 PHILAMGEN sued the shipowner for sum of money and damages. On
February 15, 1985 FELMAN filed a motion to dismiss based on the affirmative defense that
FELMAN had abandoned all its rights, interests and ownership over "MV Asilda" together with
her freight and appurtenances for the purpose of limiting and extinguishing its liability under Art.
587 of the Code of Commerce.
Issue:Whether the Doctrine of Limited Liability applies.
Ruling:
The Court ruled that Art. 587 of the Code of Commerce is not applicable. The ship agent
is liable for the negligent acts of the captain in the care of goods loaded on the vessel. This
liability however can be limited through abandonment of the vessel, its equipment and
freightage as provided in Art. 587. Nonetheless, there are exceptional circumstances wherein
the ship agent could still be held answerable despite the abandonment, as where the loss or
injury was due to the fault of the shipowner and the captain. The international rule is to the effect
that the right of abandonment of vessels, as a legal limitation of a shipowner's liability, does not
apply to cases where the injury or average was occasioned by the shipowner's own fault. It must
be stressed at this point that Art. 587 speaks only of situations where the fault or negligence is
committed solely by the captain. Where the shipowner is likewise to be blamed, Art. 587 will not
apply. It was already established at the outset that the sinking of "MV Asilda" was due to its
unseaworthiness even at the time of its departure from the port of Zamboanga. Closer
supervision on the part of the shipowner could have prevented this fatal miscalculation. As such,
FELMAN was equally negligent. It cannot therefore escape liability by filing a notice of
abandonment of the vessel by virtue of Art. 587 of the Code of Commerce.
13
Escobar, Rosaline O.
Central Shipping Company, Inc. v. Insurance Company of North America
Case No. 17
Facts:
On July 25, 1990 at Puerto Princesa, Palawan, the petitioner received on board its
vessel, the M/V Central Bohol, 376 pieces of Philippine Apitong Round Logs and undertook to
transport said shipment to Manila for delivery to Alaska Lumber Co., Inc. During the voyage the
degree of the position of the ship changed due to the shifting of the logs inside, eventually at
about 15 degrees, the captain ordered everyone to abandon the ship. Respondent alleged that
the total loss of the shipment was caused by the fault and negligence of the petitioner and its
captain. Petitioner interposed the defense that the vessel was fully manned, fully equipped and
in all respects seaworthy, and that all the logs were properly loaded and secured, and that the
vessels master exercised due diligence to prevent or minimize the loss before, during and after
the occurrence of the storm. It raised as its main defense that the proximate and only cause of
the sinking of its vessel and the loss of its cargo was a natural disaster, a tropical storm which
neither the petitioner nor the captain of its vessel could have foreseen. The RTC was
unconvinced that the sinking of M/V Central Bohol had been caused by the weather or any other
caso fortuito. It noted that monsoons, which were common occurrences during the months of
July to December, could have been foreseen and provided for by an ocean-going vessel.
Applying the rule of presumptive fault or negligence against the carrier, the trial court held
petitioner liable for the loss of the cargo. The CA affirmed the trial courts finding that the
southwestern monsoon encountered by the vessel was not unforeseeable. Given the season of
rains and monsoons, the ship captain and his crew should have anticipated the perils of the sea.
14
It is undisputed that before the box containing the firecrackers were allowed to be loaded in the
bus by the conductor, inquiry was made with the passenger carrying the same as to what was in
it, since its "opening was folded and tied with abaca. According to the lower court, "if proper
and rigid inspection were observed by the defendant, the contents of the box could have been
discovered and the accident avoided. Refusal by the passenger to have the package opened
was no excuse because, as stated by Dispatcher Cornista, employees should call the police if
there were packages containing articles against company regulations. However, according to
the Supreme Court the law does not require as much. Article 1733 is not as unbending for it
reasonably qualifies the extraordinary diligence required of common carriers for the safety of the
passengers transported by them to be "according to all the circumstances of each case." In fact,
Article 1755 repeats this same qualification: "A common carrier is bound to carry the
passengers safely as far as human care and foresight can provide, using the utmost diligence of
very cautious persons, with due regard for all the circumstances."
Although it must be considered that while it is true the passengers of appellant's bus should not
be made to suffer for something over which they had no control, fairness demands that in
measuring a common carrier's duty towards its passengers, allowance must be given to the
reliance that should be reposed on the sense of responsibility of all the passengers in regard to
their common safety. It is to be presumed that a passenger will not take with him anything
15
dangerous to the lives and limbs of his co-passengers, not to speak of his own. Not to be lightly
considered must be the right to privacy to which each passenger is entitled. He cannot be
subjected to any unusual search, when he protests the innocuousness of his baggage and
nothing appears to indicate the contrary, as in the case at bar. In other words, inquiry may be
verbally made as to the nature of a passenger's baggage when such is not outwardly
perceptible, but beyond this, constitutional boundaries are already in danger of being
transgressed. Calling a policeman to his aid, as suggested by the service manual invoked by
the trial judge, in compelling the passenger to submit to more rigid inspection, after the
passenger had already declared that the box contained mere clothes and other miscellaneous,
could not have justified invasion of a constitutionally protected domain. Police officers acting
without judicial authority secured in the manner provided by law are not beyond the pale of
constitutional inhibitions designed to protect individual human rights and liberties. Withal, what
must be importantly considered here is not so much the infringement of the fundamental sacred
rights of the particular passenger herein involved, but the constant threat any contrary ruling
would pose on the right of privacy of all passengers of all common carriers, considering how
easily the duty to inspect can be made an excuse for mischief and abuse. Of course, when
there are sufficient indications that the representations of the passenger regarding the nature of
his baggage may not be true, in the interest of the common safety of all, the assistance of the
police authorities may be solicited, not necessarily to force the passenger to open his baggage,
but to conduct the needed investigation consistent with the rules of propriety and, above all, the
constitutional rights of the passenger. It is in this sense that the mentioned service manual
issued by appellant to its conductors must be understood.
16
Chan, Richard P.
FACTS:
On June 13, 1990, CMC Trading A.G. shipped on board the M/V 'Anangel Sky' at
Hamburg, Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation to
Manila consigned to the Philippine Steel Trading Corporation. On July 28, 1990, M/V Anangel
Sky arrived at the port of Manila and, within the subsequent days, discharged the subject cargo.
4 coils were found to be in bad order. Finding the 4 coils in their damaged state to be unfit for
the intended purpose, the consignee Philippine Steel Trading Corporation declared the same as
total loss.
Plaintiff-appellant paid the consignee P506,086.50, and was subrogated to the latter's
rights and causes of action against defendants-appellees. Subsequently, plaintiff-appellant
instituted this complaint for recovery of the amount paid by them, to the consignee as insured.
Defendants-appellees argued that their liability, if there be any, should not exceed the
limitations of liability provided for in the bill of lading and other pertinent laws.
The RTC dismissed the Complaint.
In reversing the trial court, the CA held that the package limitation under COGSA was
not applicable, because the words "L/C No. 90/02447" indicated that a higher valuation of the
cargo had been declared by the shipper.
ISSUE: Whether the package limitation of liability is applicable.
HELD:
A bill of lading serves two functions. First, it is a receipt for the goods shipped. Second, it
is a contract by which three parties -- namely, the shipper, the carrier, and the consignee -undertake specific responsibilities and assume stipulated obligations. In a nutshell, the
acceptance of the bill of lading by the shipper and the consignee, with full knowledge of its
contents, gives rise to the presumption that it constituted a perfected and binding contract.
Further, a stipulation in the bill of lading limiting to a certain sum the common carrier's
liability for loss or destruction of a cargo -- unless the shipper or owner declares a greater value
-- is sanctioned by law. There are, however, two conditions to be satisfied: (1) the contract is
reasonable and just under the circumstances, and (2) it has been fairly and freely agreed upon
by the parties. The rationale for this rule is to bind the shippers by their agreement to the value
(maximum valuation) of their goods.
17
It is to be noted, however, that the Civil Code does not limit the liability of the common
carrier to a fixed amount per package. In all matters not regulated by the Civil Code, the right
and the obligations of common carriers shall be governed by the Code of Commerce and
special laws. Thus, the COGSA, which is suppletory to the provisions of the Civil Code,
supplements the latter by establishing a statutory provision limiting the carrier's liability in the
absence of a shipper's declaration of a higher value in the bill of lading. The provisions on
limited liability are as much a part of the bill of lading as though physically in it and as though
placed there by agreement of the parties.
In the case before us, there was no stipulation in the Bill of Lading limiting the carrier's
liability. Neither did the shipper declare a higher valuation of the goods to be shipped. This fact
notwithstanding, the insertion of the words "L/C No. 90/02447 cannot be the basis for
petitioners' liability.
First, a notation in the Bill of Lading which indicated the amount of the Letter of Credit
obtained by the shipper for the importation of steel sheets did not effect a declaration of the
value of the goods as required by the bill. That notation was made only for the convenience of
the shipper and the bank processing the Letter of Credit.
Second, in Keng Hua Paper Products v. Court of Appeals, we held that a bill of lading
was separate from the Other Letter of Credit arrangements. We ruled thus:
"(T)he contract of carriage, as stipulated in the bill of lading in the present case, must be
treated independently of the contract of sale between the seller and the buyer, and the contract
of issuance of a letter of credit between the amount of goods described in the commercial
invoice in the contract of sale and the amount allowed in the letter of credit will not affect the
validity and enforceability of the contract of carriage as embodied in the bill of lading. As the
bank cannot be expected to look beyond the documents presented to it by the seller pursuant to
the letter of credit, neither can the carrier be expected to go beyond the representations of the
shipper in the bill of lading and to verify their accuracy vis--vis the commercial invoice and the
letter of credit. Thus, the discrepancy between the amount of goods indicated in the invoice and
the amount in the bill of lading cannot negate petitioner's obligation to private respondent arising
from the contract of transportation."
In the light of the foregoing, petitioners' liability should be computed based on US$500
per package and not on the per metric ton price declared in the Letter of Credit. In Eastern
Shipping Lines, Inc. v. Intermediate Appellate Court, we explained the meaning of packages:
"When what would ordinarily be considered packages are shipped in a container
supplied by the carrier and the number of such units is disclosed in the shipping documents,
each of those units and not the container constitutes the 'package' referred to in the liability
limitation provision of Carriage of Goods by Sea Act."
Considering, therefore, the ruling in Eastern Shipping Lines and the fact that the Bill of
Lading clearly disclosed the contents of the containers, the number of units, as well as the
nature of the steel sheets, the four damaged coils should be considered as the shipping unit
subject to the US$500 limitation.
WHEREFORE, the Petition is partly granted and the assailed Decision MODIFIED.
Petitioners' liability is reduced to US$2,000 plus interest at the legal rate of six percent from the
18
time of the filing of the Complaint on July 25, 1991 until the finality of this Decision, and 12
percent thereafter until fully paid. No pronouncement as to costs.
SO ORDERED.
19
have to pay P51,271.02, but with the last paragraph thereof stating as follows:
Please can you advise within 15 days of receipt of this letter whether you intend
to take delivery of this shipment, as alternatively we will have to take legal
proceedings in order to have the cargo auctioned to recover the costs involved,
as well as free the container which are (sic) urgently required for export cargoes.
Clearly, therefore, private respondents unequivocally offered petitioner the option of paying the
shipping and demurrage charges in order to take delivery of the goods or of abandoning the
same so that private respondents could sell them at public auction and thereafter apply the
proceeds in payment of the shipping and other charges.
Responding thereto, in a letter dated April 3, 1981, petitioner seasonably communicated its
decision to abandon to the goods in favor of private respondents with the specific instruction
20
that any excess of the proceeds over the legal costs and charges be turned over to petitioner.
Receipt of said letter was acknowledged by private respondents, as revealed by the testimony
of Edwin Mabazza, a claim officer of F.E. Zuellig, Inc., on cross-examination.
Despite petitioner's exercise of the option to abandon the cargo, however, private respondents
sent a demand letter on June 22, 1981 insisting that petitioner should pay the entire amount of
P298,150.93 and, in another letter dated Apiril 30, 1981, they stated that they win not accept the
abandonment of the goods and demanded that the outstanding account be settled. The
testimony of said Edwin Mabazza definitely admits and bears this out.
Now, there is no dispute that private respondents expressly and on their own volition granted
petitioner an option with respect to the satisfaction of freightage and demurrage charges.
Having given such option, especially since it was accepted by petitioner, private respondents
are estopped from reneging thereon. Petitioner, on its part, was well within its right to exercise
said option. Private respondents, in giving the option, and petitioner, in exercising that option,
are concluded by their respective actions. To allow either of them to unilaterally back out on the
offer and on the exercise of the option would be to countenance abuse of rights as an order of
the day, doing violence to the long entrenched principle of mutuality of contracts.
21
Facts
1) Plaintiff Atty. Renato Arroyo bought a ticket from defendant Trans-Asia Shipping Lines,
Inc., a corporation engaged inter-island shipping, for the voyage of M/V Asia Thailand
vessel to Cagayan de Oro City from Cebu City on November 12, 1991. At around 5:30 in
the evening of November 12, 1991, plaintiff boarded the M/V Asia Thailand vessel. At
that instance, plaintiff noticed that some repair works were being undertaken on the
engine of the vessel. The vessel departed at around 11:00 in the evening with only one
(1) engine running.
2) After an hour of slow voyage, the vessel stopped near Kawit Island and dropped its
anchor thereat. After half an hour of stillness, some passengers demanded that they
should be allowed to return to Cebu City for they were no longer willing to continue
their voyage to, Cagayan de Oro City. The captain acceded to their request and thus
the vessel headed back to Cebu City.
3) At Cebu City, plaintiff together with the other passengers who requested to be brought
back to Cebu City, were allowed to disembark. Thereafter, the vessel proceeded to
Cagayan de Oro City. Plaintiff, the next day, boarded the M/V Asia Japan for its voyage
to Cagayan de Oro City, likewise a vessel of defendant.
4) On account of this failure of defendant to transport him to the place of destination on
November 12, 1991, plaintiff filed before the trial court an action for damages arising
from bad faith, breach of contract and from tort, against petitioner. The trial court ruled
only for breach of contract. The Court of Appeals reversed the decision and awarded
moral and exemplary damages. It did not, however, grant the actual or compensatory
damages, reasoning that no delay was incurred since there was no demand, as required
by Article 1169 of the Civil Code.
Issues
1) Whether the failure of a common carrier to maintain in seaworthy condition its
vessel constitutes breach of its duty prescribed in Article 1755 of NCC
2) Whether Article 1169 of NCC applies in case the delay in a contract of carriage is
incurred after the commencement of such voyage
3) Whether the petitioner is liable for moral and exemplary damages
4)
22
Ruling
1) The failure of a common carrier to maintain in seaworthy condition its vessel involved in
a contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil
Code. Before commencing the contracted voyage, the petitioner undertook some repairs
on the cylinder head of one of the vessel's engines. But even before it could finish these
repairs, it allowed the vessel to leave the port of origin on only one functioning engine,
instead of two. Moreover, even the lone functioning engine was not in perfect condition
as sometime after it had run its course, it conked out. This caused the vessel to stop and
remain a drift at sea, thus in order to prevent the ship from capsizing, it had to drop
anchor. Plainly, the vessel was unseaworthy even before the voyage began. For a
vessel to be seaworthy, it must be adequately equipped for the voyage and manned with
a sufficient number of competent officers and crew.
2) Article 1169 of the Civil Code finds no application in this case because, as found by the
respondent Court, there was in fact no delay in the commencement of the contracted
voyage. If any delay was incurred, it was after the commencement of such voyage,
more specifically, when the voyage was subsequently interrupted when the vessel had
to stop near Kawit Island after the only functioning engine conked out. As to the rights
and duties of the parties strictly arising out of such delay, the Civil Code is silent.
However, as correctly pointed out by the petitioner, Article 698 of the Code of Commerce
specifically provides for such a situation. It reads:
In case a voyage already begun should be interrupted, the passengers
shall be obliged to pay the fare in proportion to the distance covered,
without right to recover for losses and damages if the interruption is
due to fortuitous event or force majeure, but with a right to indemnity if
the interruption should have been caused by the captain exclusively. If
the interruption should be caused by the disability of the vessel and a
passenger should agree to await the repairs, he may not be required to
pay any increased price of passage, but his living expenses during the
stay shall be for his own account.
This article applies suppletorily pursuant to Article 1766 of the Civil Code. Article 698
must then be read together with Articles 2199, 2200, 2201, and 2208 in relation to Article 21
of the Civil Code. So read, it means that the petitioner is liable for any pecuniary loss or
loss of profits which the private respondent may have suffered by reason thereof. For the
private respondent, such would be the loss of income if unable to report to his office on the
day he was supposed to arrive were it not for the delay. This, however, assumes that he
stayed on the vessel and was with it when it thereafter resumed its voyage; but he did not.
Any further delay then in the private respondent's arrival at the port of destination was
caused by his decision to disembark. Had he remained on the first vessel, he would have
reached his destination at noon of 13 November 1991, thus been able to report to his office
in the afternoon. He, therefore, would have lost only the salary for half of a day. But actual
or compensatory damages must be proved, which the private respondent failed to do.
There is no convincing evidence that he did not receive his salary for 13 November 1991
nor that his absence was not excused.
3) The petitioner is liable for moral and exemplary damages. In allowing its unseaworthy
M/V Asia Thailand to leave the port of origin and undertake the contracted voyage, with
full awareness that it was exposed to perils of the sea, it deliberately disregarded its
23
solemn duty to exercise extraordinary diligence and obviously acted with bad faith and
in a wanton and reckless manner.
24
Issues
1) Whether as to the child, who was already led by the father to a place about 5 meters
away from the bus, the liability of the carrier for her safety under the contract of
carriage also persisted
2) Whether petitioner may be held liable for quasi-delict
Ruling
1) In the circumstances obtaining in this case, it cannot be claimed that the carrier's agent had
exercised the "utmost diligence" of a "very cautions person" required by Article 1755 of the
Civil Code to be observed by a common carrier in the discharge of its obligation to transport
safely its passengers. In the first place, the driver, although stopping the bus, nevertheless
did not put off the engine. Secondly, he started to run the bus even before
25
the bus conductor gave him the signal to go and while the latter was still unloading part
of the baggages of the passengers Mariano Beltran and family. The presence of said
passengers near the bus was not unreasonable and they are, therefore, to be
considered still as passengers of the carrier, entitled to the protection under their
contract of carriage.
2) The complaint contained an allegation for quasi-delict. The inclusion of this averment
for quasi-delict, while incompatible with the other claim under the contract of carriage, is
permissible under Section 2 of Rule 8 of the New Rules of Court, which allows a plaintiff
to allege causes of action in the alternative, be they compatible with each other or not, to
the end that the real matter in controversy may be resolved and determined. Thus, even
assuming arguendo that the contract of carriage has already terminated, herein
petitioner can be held liable for the negligence of its driver pursuant to Article 2180 of the
Civil Code. The presentation of proof of the negligence of its employee gave rise to the
presumption that the defendant employer did not exercise the diligence of a good father
of the family in the selection and supervision of its employees. Petitioner had failed to
overcome. Consequently, petitioner must be adjudged peculiarily liable for the death of
the child Raquel Beltran.
26
ISSUE: Whether or not Viana is still considered a passenger at the time of the incident?
RULING:
Yes. The rule is that the relation of carrier and passenger continues until the passenger
has been landed at the port of destination and has left the vessel owners dock or premises.
Once created, the relationship will not ordinarily terminate until the passenger has, after
reaching his destination, safely alighted from the carriers conveyance or had a reasonable
opportunity to leave the carriers premises. All persons who remain on the premises a
reasonable time after leaving the conveyance are to be deemed passengers, and what is a
reasonable time or a reasonable delay within this rule is to be determined from all the
circumstances, and includes a reasonable time to see after his baggage and prepare for his
departure. The carrier-passenger relationship is not terminated merely by the fact that the
person transported has been carried to his destination if, for example, such person remains in
the carriers premises to claim his baggage.
It is not definitely shown that one (1) hour prior to the incident, the victim had already
disembarked from the vessel. Petitioner failed to prove this. What is clear is that at the time the
27
victim was taking his cargoes, the vessel had already docked an hour earlier. In consonance
with common shipping procedure as to the minimum time of one (1) hour allowed for the
passengers to disembark, it may be presumed that the victim had just gotten off the vessel
when he went to retrieve his baggage. Yet, even if he had already disembarked an hour earlier,
his presence in petitioner's premises was not without cause. The victim had to claim his
baggage which was possible only one (1) hour after the vessel arrived since it was admittedly
standard procedure in the case of petitioner's vessels that the unloading operations shall start
only after that time. Consequently, under the foregoing circumstances, the victim Anacleto Viana
is still deemed a passenger of said carrier at the time of his tragic death.
The reasonableness of the time should be made to depend on the attending
circumstances of the case, such as the kind of common carrier, the nature of its business, the
customs of the place, and so forth, and therefore precludes a consideration of the time element
per se without taking into account such other factors.
28
29
ISSUE:
Whether or not RCL and EDSA Shipping are liable as common carriers under the theory of
presumption of negligence.
RULING:
Yes. A common carrier is presumed to have been negligent if it fails to prove that it
exercised extraordinary vigilance over the goods it transported. When the goods shipped are
either lost or arrived in damaged condition, a presumption arises against the carrier of its failure
to observe that diligence, and there need not be an express finding of negligence to hold it
liable.
To overcome the presumption of negligence, the common carrier must establish by
adequate proof that it exercised extraordinary diligence over the goods. It must do more than
merely show that some other party could be responsible for the damage.
In the present case, RCL and EDSA Shipping failed to prove that they did exercise that
degree of diligence required by law over the goods they transported. Indeed, there is sufficient
evidence showing that the fluctuation of the temperature in the refrigerated container van, as
recorded in the temperature chart, occurred after the cargo had been discharged from the
vessel and was already under the custody of the arrastre operator, ICTSI. This evidence,
however, does not disprove that the condenser fan, which caused the fluctuation of the
temperature in the refrigerated container, was not damaged while the cargo was being unloaded
from the ship. It is settled in maritime law jurisprudence that cargoes while being unloaded
generally remain under the custody of the carrier. RCL and EDSA Shipping failed to dispute this.
RCL and EDSA Shipping could have offered evidence before the trial court to show that
the damage to the condenser fan did not occur: (1) while the cargo was in transit; (2) while they
were in the act of discharging it from the vessel; or (3) while they were delivering it actually or
constructively to the consignee. They could have presented proof to show that they exercised
extraordinary care and diligence in the handling of the goods, but they opted to file a demurrer
to evidence. As the order granting their demurrer was reversed on appeal, the CA correctly ruled
that they are deemed to have waived their right to present evidence, and the presumption of
negligence must stand.
30
31
32
33
death was due to the reckless driving and gross negligence of G & S driver, thereby holding G
& S liable for breach of contract of carriage
Also to be exempt from liability for death of Jose Marcial due to Fortuitous event, G & S
must clearly show that the proximate cause of the casualty was entirely independent of human
will & that it was impossible to avoid. Here, Padillas extreme negligence was the immediate &
proximate cause of the accident hence it cannot be considered as due to fortuitous event
34
Casipe, Rommel T.
Ong Yiu v. Court of Appeals
Case No. 47.2
Facts:
Petitioner was a fare paying passenger of respondent Philippine Air Lines, Inc. (PAL), on
board Flight No. 463-R, from Mactan Cebu, bound for Butuan City. As a passenger, he checked
in one of piece of luggage, a blue maleta. Upon arrival, petitioner claimed his luggage but it
could not be found. PAL Butuan sent a message to PAL Cebu, inquiring about the missing
luggage, which message was, in turn relayed in full to the Mactan Airport teletype operator that
same afternoon. It must have been transmitted immediately, for at the same afternoon, PAL
Manila wired PAL Cebu advising that the luggage had been over carried to Manila aboard Flight
No. 156 and that it would be forwarded to Cebu Flight No. 345 of the same day. Instructions
were also given that the luggage be immediately forwarded to Butuan City on the first available
flight. Of the same afternoon, PAL Cebu sent a message to PAL Butuan that the luggage would
be forwarded on Flight No. 963. However, this message was not received by PAL Butuan as all
the personnel had already left since there were no more incoming flights that afternoon.
Petitioner wired PAL Cebu demanding the delivery of his baggage, otherwise, he would
hold PAL liable for damages, and stating that PALs gross negligence had caused him undue
inconvenience, worry, anxiety and extreme embarrassment. Messrs. De Leon, Narvasi, and
Agustin, all of PAL Cebu, went to petitioners office to deliver the maleta. Petitioner filed a
complaint against PAL for damages for breach of contract of transportation with the Court of
First Instance of Cebu. After the trial, the lower court found PAL to have acted in bad faith and
declared petitioner entitled to moral damages in the sum of P80, 000. Both parties appealed to
the Court of Appealspetitioner in so far as he was awarded only the sum of P80, 000 as moral
damages; and defendant because of the unfavorable judgment rendered against it. The Court of
Appeals found that PAL was guilty of simple negligence, reversed the judgment of the trial court
granting petitioner moral and exemplary damages.
Issue: Whether or not the Court of Appeals was correct when it declared that there was no
gross negligence on the part of PAL and that it had not acted fraudulently or in bad faith as to
entitle petitioner to an award of moral and exemplary damages.
Held: From the facts of the case, we agree with respondent Court that PAL had not acted in bad
faith. Bad faith means a breach of a known duty through some motive of interest or ill will. It was
the duty of PAL to look for petitioners luggage which had been miscarried. PAL exerted due
diligence in complying with such duty. Neither was the failure of PAL Cebu to reply to petitioners
rush telegram indicative bad faith. The telegram was dispatched by petitioner around
10:00 P.M. of August 26, 1967. The PAL supervisor at Mactan Airport was notified of it only in
the morning of the following day. At that time the luggage was already to be forwarded to Butuan
City. There was no bad faith, therefore, in the assumption made by said supervisor that the
plane carrying the bag would arrive at the Butuan earlier than a reply telegram. Had
35
petitioner waited or caused someone to wait at the Bancasi Airport for the arrival of the morning
flight, he would have been able to retrieve his luggage sooner. In the absence of a wrongful act
omission or fraud or bad faith, petitioner is not entitled to moral damages.
36
Chan, Richard P.
FACTS:
On June 13, 1990, CMC Trading A.G. shipped on board the M/V 'Anangel Sky' at
Hamburg, Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation to
Manila consigned to the Philippine Steel Trading Corporation. On July 28, 1990, M/V Anangel
Sky arrived at the port of Manila and, within the subsequent days, discharged the subject cargo.
4 coils were found to be in bad order. Finding the 4 coils in their damaged state to be unfit for
the intended purpose, the consignee Philippine Steel Trading Corporation declared the same as
total loss.
Plaintiff-appellant paid the consignee P506,086.50, and was subrogated to the latter's
rights and causes of action against defendants-appellees. Subsequently, plaintiff-appellant
instituted this complaint for recovery of the amount paid by them, to the consignee as insured.
Impugning the propriety of the suit against them, defendants-appellees imputed that the
damage and/or loss was due to pre-shipment damage, to the inherent nature, vice or defect of
the goods, or to perils, danger and accidents of the sea, or to insufficiency of packing thereof, or
to the act or omission of the shipper of the goods or their representatives. Defendants-appellees
averred that, in any event, they exercised due diligence and foresight required by law to prevent
any damage/loss to said shipment.
The RTC dismissed the Complaint.
In reversing the trial court, the CA ruled that petitioners were liable for the loss or the
damage of the goods shipped, because they had failed to overcome the presumption of
negligence imposed on common carriers. The CA further held as inadequately proven
petitioners' claim that the loss or the deterioration of the goods was due to pre-shipment
damage.
ISSUE: Whether petitioners have overcome the presumption of negligence of a common carrier.
HELD:
Well-settled is the rule that common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence and vigilance with respect
to the safety of the goods and the passengers they transport. Thus, common carriers are
required to render service with the greatest skill and foresight and "to use all reasonable means
to ascertain the nature and characteristics of the goods tendered for shipment, and to exercise
due care in the handling and stowage, including such methods as their nature requires." The
extraordinary responsibility lasts from the time the goods are unconditionally placed in the
37
possession of and received for transportation by the carrier until they are delivered, actually or
constructively, to the consignee or to the person who has a right to receive them.
This strict requirement is justified by the fact that, without a hand or a voice in the
preparation of such contract, the riding public enters into a contract of transportation with
common carriers. Even if it wants to, it cannot submit its own stipulations for their approval.
Hence, it merely adheres to the agreement prepared by them.
Owing to this high degree of diligence required of them, common carriers, as a general
rule, are presumed to have been at fault or negligent if the goods they transported deteriorated
or got lost or destroyed. That is, unless they prove that they exercised extraordinary diligence in
transporting the goods. In order to avoid responsibility for any loss or damage, therefore, they
have the burden of proving that they observed such diligence.
However, the presumption of fault or negligence will not arise if the loss is due to any of
the following causes: (1) flood, storm, earthquake, lightning, or other natural disaster or
calamity; (2) an act of the public enemy in war, whether international or civil; (3) an act or
omission of the shipper or owner of the goods; (4) the character of the goods or defects in the
packing or the container; or (5) an order or act of competent public authority. This is a closed
list. If the cause of destruction, loss or deterioration is other than the enumerated
circumstances, then the carrier is liable therefor.
Corollary to the foregoing, mere proof of delivery of the goods in good order to a
common carrier and of their arrival in bad order at their destination constitutes a prima facie
case of fault or negligence against the carrier. If no adequate explanation is given as to how the
deterioration, the loss or the destruction of the goods happened, the transporter shall be held
responsible.
Petitioners failed to rebut the prima facie presumption of negligence is revealed in the
case at bar by a review of the records and more so by the evidence adduced by respondent.
First, as stated in the Bill of Lading, petitioners received the subject shipment in good order and
condition in Hamburg, Germany. Second, prior to the unloading of the cargo, an Inspection
Report prepared and signed by representatives of both parties showed the steel bands broken,
the metal envelopes rust-stained and heavily buckled, and the contents thereof exposed and
rusty. Third, Bad Order Tally Sheet No. 15497928 issued by Jardine Davies Transport Services,
Inc., stated that the four coils were in bad order and condition. Normally, a request for a bad
order survey is made in case there is an apparent or a presumed loss or damage. Fourth, the
Certificate of Analysis stated that, based on the sample submitted and tested, the steel sheets
found in bad order were wet with fresh water. Fifth, petitioners -- in a letter addressed to the
Philippine Steel Coating Corporation and dated October 12, 1990 -- admitted that they were
aware of the condition of the four coils found in bad order and condition.
Further, petitioners failed to prove that they observed the extraordinary diligence and
precaution which the law requires a common carrier to know and to follow to avoid damage to or
destruction of the goods entrusted to it for safe carriage and delivery.
True, the words "metal envelopes rust stained and slightly dented" were noted on the Bill
of Lading; however, there is no showing that petitioners exercised due diligence to forestall or
lessen the loss. Having been in the service for several years, the master of the vessel should
have known at the outset that metal envelopes in the said state would eventually deteriorate
when not properly stored while in transit. Equipped with the proper knowledge of the nature of
38
steel sheets in coils and of the proper way of transporting them, the master of the vessel and his
crew should have undertaken precautionary measures to avoid possible deterioration of the
cargo. But none of these measures was taken. Having failed to discharge the burden of proving
that they have exercised the extraordinary diligence required by law, petitioners cannot escape
liability for the damage to the four coils.
39
DEFENSES
27. Sealoader Shippine Corporation vs. Granc Cement Manufacturing, G.R. Nos.
167363 and 177466, December 15, 2010
28. Philippine Charter Insurance Corp. vs Unknown Owner of the Vessel M/V Honor,
G.R. No. 161833, July 8, 2005
29. Belgian Chartering and Shipping, N.V. vs. Phil. First Insurance Co., Inc., G.R.
No.143133, June 5, 2002
30. Delsan Transport Lines vs. CA, G.R. No. 127897, November 15, 2001
31. Phil American General Insurance Company vs PKS Shipping Company, G.R. No.
149038, April 09, 2003
32. Edgar Cokaliong Shipping Lines, Inc. vs UCPB General Insurance Company, G.R.
No. 146018, June 25, 2003
33. Central Shipping Co. Inc. vs Insurance Co. of N.A. September 20, 2004, 438 SCRA
511
34. Bascos vs Court of Appeals G.R. No. 101089, April 7, 1993
35. Pilapil vs. Court of Appeals, G.R. No.52159, December 22, 1989
36. Fortune Expree, Inc. vs Court of Appeals, G. R. No.119756, March 18, 1999
37. Gacal, et al. vs Philippine Airlines, Inc. G.R. No. 55300, March 15, 1990
38. Southern Lines, Inc. vs Court of Appeals
39. Ganzon vs. Court of Appeals, et al., G.R. No. L-48757, May 30, 1988
40. Bachelor Express, Inc. and Cresencio Rivera vs Court of Appeals, G.R.No. 85691,
July 31, 1990
41. Isaac vs. A.L. Ammen Transportation Co. Inc. G.R. No. L-9671, August 23, 1957,
101 Phil 1046
42. Compania Maritima vs. Court of Appeals, G.R. No. L-31379, August 29, 1988
43. Philippine National Railways vs. Court of Appeals, G.R. No. L-55347, October 04,
1985
41
Here, Sealoader had the responsibility to inform itself of the prevailing weather conditions in the
areas where its vessel was to sail. It cannot merely rely on other vessels for weather updates
and warnings on approaching storms. For to do so would be to gamble with the safety of its own
vessel, putting the lives of its crew under the mercy of the sea, as well as running the rick of
causing damage to property of third parties for which it would necessarily be liable
42
for P2,547,270.00 with the Philippine Charter Insurance Corporation (PCIC) thru its general
agent, Family Insurance and Investment Corporation,[9] under Marine Risk Note No. 68043
dated October 24, 1994.[10]
The M/V National Honor arrived at the Manila International Container Terminal (MICT) on
November 14, 1995. The International Container Terminal Services, Incorporated (ICTSI) was
furnished with a copy of the crate cargo list and bill of lading, and it knew the contents of the
crate.[11] The following day, the vessel started discharging its cargoes using its winch crane. The
crane was operated by Olegario Balsa, a winchman from the ICTSI, [12] the exclusive arrastre
operator of MICT.
Denasto Dauz, Jr., the checker-inspector of the NSCP, along with the crew and the
surveyor of the ICTSI, conducted an inspection of the cargo. They inspected the hatches,
checked the cargo and found it in apparent good condition. Claudio Cansino, the stevedore of
the ICTSI, placed two sling cables on each end of Crate No. 1. [15] No sling cable was fastened
on the mid-portion of the crate. In Dauzs experience, this was a normal procedure. [16] As the
crate was being hoisted from the vessels hatch, the mid-portion of the wooden flooring
suddenly snapped in the air, about five feet high from the vessels twin deck, sending all its
contents crashing down hard,[17] resulting in extensive damage to the shipment.
BMICIs customs broker, JRM Incorporated, took delivery of the cargo in such damaged
condition.[18] Upon receipt of the damaged shipment, BMICI found that the same could no
longer be used for the intended purpose.
BMICI subsequently filed separate claims against the NSCP,[20] the ICTSI,[21] and its
insurer, the PCIC,[22] for US$61,500.00. When the other companies denied liability, PCIC paid
the claim and was issued a Subrogation Receipt[23] for P1,740,634.50.
On March 22, 1995, PCIC, as subrogee, filed with the RTC of Manila, Branch 35, a
Complaint for Damages[24] against the Unknown owner of the vessel M/V National Honor,
NSCP and ICTSI, as defendants.
PCIC alleged that the loss was due to the fault and negligence of the defendants, and
prayed for damages.
ICTSI, for its part, filed its Answer with Counterclaim and Cross-claim against its codefendant NSCP, claiming that the loss/damage of the shipment was caused exclusively by the
defective material of the wooden battens of the shipment, insufficient packing or acts of the
shipper.
The trial court rendered judgment for PCIC and ordered the complaint dismissed.
According to the trial court, the loss of the shipment contained in Crate No. 1 was due to the
internal defect and weakness of the materials used in the fabrication of the crates. The middle
wooden batten had a hole (bukong-bukong). The trial court rejected the certification of the
shipper, stating that the shipment was properly packed and secured, as mere hearsay and
devoid of any evidentiary weight, the affiant not having testified.
The CA rendered judgment affirming in toto the appealed decision, with thisfallo
The appellate court ratiocinated that the loss of the shipment was due to an excepted cause
the character of the goods or defects in the packing or in the containers and the failure of the
shipper to indicate signs to notify the stevedores that extra care should be employed in handling
44
the shipment. It blamed the shipper for its failure to use materials of stronger quality to support
the heavy machines and to indicate an arrow in the middle portion of the cargo where additional
slings should be attached. The CA concluded that common carriers are not absolute insurers
against all risks in the transport of the goods.
The petitioner posits that the loss/damage was caused by the mishandling of the shipment
by therein respondent ICTSI, the arrastre operator, and not by its negligence.
The petitioner insists that the respondents did not observe extraordinary diligence in the
care of the goods. Respondent NSCP counters that if ever respondent ICTSI is adjudged liable,
it is not solidarily liable with it. It further avers that the carrier cannot discharge directly to the
consignee because cargo discharging is the monopoly of the arrastre. Liability, therefore, falls
solely upon the shoulder of respondent ICTSI, inasmuch as the discharging of cargoes from the
vessel was its exclusive responsibility.
ISSUES:
WHETHER OR NOT RESPONDENT COMMON CARRIER IS LIABLE FOR THE DAMAGE
SUSTAINED BY THE SHIPMENT IN THE POSSESSION OF THE ARRASTRE OPERATOR.
WHETHER OR NOT THE STATUTORY PRESUMPTION OF FAULT AND NEGLIGENCE IS
APPLICABLE IN THE CASE AT BAR.
WHETHER OR NOT THE DAMAGE SUSTAINED BY THE SHIPMENT WAS DUE TO ITS
DEFECTIVE PACKING AND NOT TO THE FAULT AND NEGLIGENCE OF THE
RESPONDENTS.
RULING:
The petition is denied for lack of merit. We agree with the trial and appellate courts.
We agree with the contention of the petitioner that common carriers, from the nature of their
business and for reasons of public policy, are mandated to observe extraordinary diligence in
the vigilance over the goods and for the safety of the passengers transported by them,
according to all the circumstances of each case.
The extraordinary diligence in the vigilance over the goods tendered for shipment requires the
common carrier to know and to follow the required precaution for avoiding damage to, or
destruction of the goods entrusted to it for sale, carriage and delivery. It requires common
carriers to render service with the greatest skill and foresight and to use all reasonable means
to ascertain the nature and characteristic of goods tendered for shipment, and to exercise due
care in the handling and stowage, including such methods as their nature requires.
The common carriers duty to observe the requisite diligence in the shipment of goods lasts
from the time the articles are surrendered to or unconditionally placed in the possession of, and
received by, the carrier for transportation until delivered to, or until the lapse of a reasonable
time for their acceptance, by the person entitled to receive them. When the goods shipped are
either lost or arrive in damaged condition, a presumption arises against the carrier of its failure
45
to observe that diligence, and there need not be an express finding of negligence to hold it
liable. To overcome the presumption of negligence in the case of loss, destruction or
deterioration of the goods, the common carrier must prove that it exercised extraordinary
diligence.
However, under Article 1734 of the New Civil Code, the presumption of negligence does not
apply to any of the following causes:
1.
2.
3.
4.
5.
It bears stressing that the enumeration in Article 1734 of the New Civil Code which exempts
the common carrier for the loss or damage to the cargo is a closed list. To exculpate itself from
liability for the loss/damage to the cargo under any of the causes, the common carrier is
burdened to prove any of the aforecited causes claimed by it by a preponderance of evidence. If
the carrier succeeds, the burden of evidence is shifted to the shipper to prove that the carrier is
negligent.
Defect is the want or absence of something necessary for completeness or perfection; a
lack or absence of something essential to completeness; a deficiency in something essential to
the proper use for the purpose for which a thing is to be used. On the other hand, inferior means
of poor quality, mediocre, or second rate. A thing may be of inferior quality but not necessarily
defective. In other words, defectiveness is not synonymous with inferiority.
The petitioner failed to adduce any evidence to counter that of respondent ICTSI. The
petitioner failed to rebut the testimony of Dauz, that the crates were sealed and that the
contents thereof could not be seen from the outside. While it is true that the crate contained
machineries and spare parts, it cannot thereby be concluded that the respondents knew or
should have known that the middle wooden batten had a hole, or that it was not strong enough
to bear the weight of the shipment.
There is no showing in the Bill of Lading that the shipment was in good order or condition
when the carrier received the cargo, or that the three wooden battens under the flooring of the
cargo were not defective or insufficient or inadequate. On the other hand, under Bill of Lading
No. NSGPBSML512565 issued by the respondent NSCP and accepted by the petitioner, the
latter represented and warranted that the goods were properly packed, and disclosed in writing
the condition, nature, quality or characteristic that may cause damage, injury or detriment to the
goods. Absent any signs on the shipment requiring the placement of a sling cable in the midportion of the crate, the respondent ICTSI was not obliged to do so.
The statement in the Bill of Lading, that the shipment was in apparent good condition, is
sufficient to sustain a finding of absence of defects in the merchandise. Case law has it that
such statement will create a prima facie presumption only as to the external condition and not to
that not open to inspection.
46
47
ISSUES:
1. Whether petitioners have overcome the presumption of negligence of a common carrier
2. Whether the notice of loss was timely filed
3. Whether the package limitation of liability is applicable
RULING:
The Petition is partly granted and the assailed Decision MODIFIED. Petitioners liability is
reduced to US$2,000 plus interest at the legal rate of six percent from the time of the filing of the
Complaint on July 25, 1991 until the finality of this Decision, and 12 percent thereafter until fully
paid. That petitioners failed to rebut the prima facie presumption of negligence is revealed in the
case at bar by a review of the records and more so by the evidence adduced by respondent.
First, as stated in the Bill of Lading, petitioners received the subject shipment in good order
and condition in Hamburg, Germany.
Second, prior to the unloading of the cargo, an Inspection Report prepared and signed by
representatives of both parties showed the steel bands broken, the metal envelopes ruststained and heavily buckled, and the contents thereof exposed and rusty.
Third, Bad Order Tally Sheet No. 154979 issued by Jardine Davies Transport Services, Inc.,
stated that the four coils were in bad order and condition. Normally, a request for a bad order
survey is made in case there is an apparent or a presumed loss or damage.]
Fourth, the Certificate of Analysis stated that, based on the sample submitted and tested,
the steel sheets found in bad order were wet with fresh water.
Fifth, petitioners -- in a letter addressed to the Philippine Steel Coating Corporation and
dated October 12, 1990 -- admitted that they were aware of the condition of the four coils found
in bad order and condition.
All these conclusively prove the fact of shipment in good order and condition and the
consequent damage to the four coils while in the possession of petitioner, [33] who notably failed
to explain why.[34]
Further, petitioners failed to prove that they observed the extraordinary diligence and
precaution which the law requires a common carrier to know and to follow, to avoid damage to
or destruction of the goods entrusted to it for safe carriage and delivery.[35]
True, the words metal envelopes rust stained and slightly dented were noted on the Bill of
Lading; however, there is no showing that petitioners exercised due diligence to forestall or
lessen the loss.[36] Having been in the service for several years, the master of the vessel should
have known at the outset that metal envelopes in the said state would eventually deteriorate
when not properly stored while in transit.[37] Equipped with the proper knowledge of the nature of
steel sheets in coils and of the proper way of transporting them, the master of the vessel and his
crew should have undertaken precautionary measures to avoid possible deterioration of the
cargo. But none of these measures was taken. [38] Having failed to discharge the burden of
proving that they have exercised the extraordinary diligence required by law, petitioners cannot
escape liability for the damage to the four coils.
Petitioners claim that pursuant to Section 3, paragraph 6 of the Carriage of Goods by Sea
Act (COGSA), respondent should have filed its Notice of Loss within three days from
48
delivery. They assert that the cargo was discharged on July 31, 1990, but that respondent filed
its Notice of Claim only on September 18, 1990.
We are not persuaded. First, the above-cited provision of COGSA provides that the notice
of claim need not be given if the state of the goods, at the time of their receipt, has been the
subject of a joint inspection or survey. As stated earlier, prior to unloading the cargo, an
Inspection Report as to the condition of the goods was prepared and signed by representatives
of both parties.
Second, as stated in the same provision, a failure to file a notice of claim within three days
will not bar recovery if it is nonetheless filed within one year. This one-year prescriptive period
also applies to the shipper, the consignee, the insurer of the goods or any legal holder of the bill
of lading.
In the present case, the cargo was discharged on July 31, 1990, while the Complaint [51]
was filed by respondent on July 25, 1991, within the one-year prescriptive period.
Assuming arguendo they are liable for respondents claims, petitioners contend that their
liability should be limited to US$500 per package as provided in the Bill of Lading and by
Section 4(5)[52] of COGSA.[53]
On the other hand, respondent argues that Section 4(5) of COGSA is inapplicable, because
the value of the subject shipment was declared by petitioners beforehand, as evidenced by the
reference to and the insertion of the Letter of Credit or L/C No. 90/02447 in the said Bill of
Lading.
A bill of lading serves two functions. First, it is a receipt for the goods shipped. Second, it is
a contract by which three parties -- namely, the shipper, the carrier, and the consignee -undertake specific responsibilities and assume stipulated obligations. In a nutshell, the
acceptance of the bill of lading by the shipper and the consignee, with full knowledge of its
contents, gives rise to the presumption that it constituted a perfected and binding contract.
Further, a stipulation in the bill of lading limiting to a certain sum the common carriers
liability for loss or destruction of a cargo -- unless the shipper or owner declares a greater value
-- is sanctioned by law. There are, however, two conditions to be satisfied: (1) the contract is
reasonable and just under the circumstances, and (2) it has been fairly and freely agreed upon
by the parties. The rationale for, this rule is to bind the shippers by their agreement to the value
(maximum valuation) of their goods.
In the case before us, there was no stipulation in the Bill of Lading [66] limiting the carriers
liability. Neither did the shipper declare a higher valuation of the goods to be shipped. This fact
notwithstanding, the insertion of the words L/C No. 90/02447 cannot be the basis for
petitioners liability.
First, a notation in the Bill of Lading which indicated the amount of the Letter of Credit
obtained by the shipper for the importation of steel sheets did not effect a declaration of the
value of the goods as required by the bill. [67] That notation was made only for the convenience
of the shipper and the bank processing the Letter of Credit.[68]
Second, in Keng Hua Paper Products v. Court of Appeals,[69] we held that a bill of lading
was separate from the Other Letter of Credit arrangements.
In the light of the foregoing, petitioners liability should be computed based on US$500 per
package and not on the per metric ton price declared in the Letter of Credit. [71] In Eastern
Shipping Lines, Inc. v. Intermediate Appellate Court[72] we explained the meaning of package:
49
When what would ordinarily be considered packages are shipped in a container supplied by the
carrier and the number of such units is disclosed in the shipping documents, each of those units
and not the container constitutes the package referred to in the liability limitation provision of
Carriage of Goods by Sea Act.
Considering, therefore, the ruling in Eastern Shipping Lines and the fact that the Bill of
Lading clearly disclosed the contents of the containers, the number of units, as well as the
nature of the steel sheets, the four damaged coils should be considered as the shipping unit
subject to the US$500 limitation.
50
Issues: 1. Whether the payment made by American Home to Caltex for the insured value of the
lost cargo amounted to an admission that the vessel was seaworthy, thus precluding any action
for recovery against the petitioner?
2. Whether the non-presentation of the marine insurance policy bars the complaint for
recovery of sum of money for lack of cause of action?
Held:
1. No. The payment made by American Home for the insured value of the lost cargo operates
as waiver of its right to enforce the term of the implied warranty against Caltex under the marine
insurance policy. However, the same cannot be validly interpreted as an automatic admission of
the vessels seaworthiness by American Home as to foreclose recourse against Delsan for any
liability under its contractual obligation as a common carrier. The fact of payment grants
American Home subrogatory right which enables it to exercise legal remedies that would
otherwise be available to Caltex as owner of the lost cargo against Delsan, the common carrier.
From the nature of their business and for reasons of public policy, common carriers are bound
to observe extraordinary diligence in the vigilance over the goods and for the safety of
passengers transported by them, according to all the circumstances of each case. In the event
of loss, destruction or deterioration of the insured goods, common carriers shall be responsible
unless the same is brought about, among others, by flood, storm, earthquake, lightning or other
51
natural disaster or calamity. In all other cases, if the goods are lost, destroyed or deteriorated,
common carriers are presumed to have been at fault or to have acted negligently, unless they
prove they observed extraordinary diligence. In order to escape liability for the loss of its cargo
of industrial fuel oil belonging to Caltex, Delsan attributes the sinking of MT Maysun to fortuitous
event or force majeure. Although the testimony of the captain and chief mate that there were
strong winds and waves 20 feet high was effectively rebutted and belied by the weather report
of PAGASA. Thus, as the CA correctly ruled, Delsans vessel, MT Maysun, sank with its entire
cargo for the reason that it was not seaworthy. There was no squall or bad weather or extremely
poor sea condition in the vicinity where the said vessel sank.
2. No. It is the view of the SC that the presentation in evidence of the marine insurance policy
is not indispensable in this case before the insurer may recover from the common carrier the
insured value of the lost cargo in the exercise of its subrogatory right. The subrogation receipt,
by itself, is sufficient to establish not only the relationship of American Home as insurer and
Caltex, as the assured shipper of the lost cargo of industrial fuel oil, but also the amount paid to
settle the insurance claim. The right of subrogation accrues simply upon payment by the
insurance company of the insurance claim.
52
53
Quintua, Angeli
54
Contention of Petitioner:
-
That it was cleared by the Board of Marine Inquiry of any negligence in the burning of the
vessel;
The shippers/consignee had already been paid the value of the goods as stated in the Bill of
Lading and, hence, petitioner cannot be held liable for the loss of the cargo beyond the value
thereof declared in the Bill of Lading.
After respondent rested its case, petitioner prayed for and was allowed, by the Court a
quo, to take the depositions of Chester Cokaliong and it has been proved that that the claim of
Nestor Angelia in the amount of P6,500.00 was paid but since the latter owed Chester
Marketing, Inc., for some purchases, petitioner merely set off the amount due to Nestor Angelia
under Bill of Lading No. 58 against his account with Chester Marketing, Inc.
Ruling of the RTC
- Dismissed the case.
Ruling of the CA
It ordered petitioner to pay respondent the amount of P148,500. It held that petitioner had
failed to prove that the fire which consumed the vessel and its cargo was caused by something
other than its negligence in the upkeep, maintenance and operation of the vessel.
Hence, instant petition.
Issues: (1) Is petitioner liable for the loss of the goods? (2) If it is liable, what is the extent of
its liability.
Held:
(1) First Issue: Liability for Loss
Yes. Broadly speaking, force majeure generally applies to a natural accident, such as that
caused by a lightning, an earthquake, a tempest or a public enemy. Hence, fire is not
considered a natural disaster or calamity.
The law provides that a common carrier is presumed to have been negligent if it fails to prove
that it exercised extraordinary vigilance over the goods it transported. Ensuring the
seaworthiness of the vessel is the first step in exercising the required vigilance. Petitioner did
not present sufficient evidence showing what measures or acts it had undertaken to ensure the
seaworthiness of the vessel.It failed to show when the last inspection and care of the auxiliary
engine fuel oil service tank was made, what the normal practice was for its maintenance, or
some other evidence to establish that it had exercised extraordinary diligence. It merely stated
that constant inspection and care were not possible, and that the last time the vessel was drydocked was in November 1990. Necessarily, in accordance with Article 1735[17] of the Civil
Code, we hold petitioner responsible for the loss of the goods covered by Bills of Lading Nos. 58
and 59.
In the present case, the stipulation limiting petitioners liability is not contrary to
public policy. In fact, its just and reasonable character is evident.
The purpose of the limiting stipulation in the Bill of Lading is to protect the common carrier. Such
stipulation obliges the shipper/consignee to notify the common carrier of the amount that the
latter may be liable for in case of loss of the goods. The common carrier can then take
appropriate measures -- getting insurance, if needed, to cover or protect itself. This precaution
on the part of the carrier is reasonable and prudent. Hence, a shipper/consignee that
undervalues the real worth of the goods it seeks to transport does not only violate a valid
contractual stipulation, but commits a fraudulent act when it seeks to make the common carrier
liable for more than the amount it declared in the bill of lading.
However, respondent was, however, able to prove that it was Feliciana Legaspi who owned
those goods, and who was thus entitled to payment for their loss. Hence, the claim for the
goods under Bill of Lading No. 59 cannot be deemed to have been extinguished, because
payment was made to a person who was not entitled thereto.
WHEREFORE, the Petition is hereby PARTIALLY GRANTED. The assailed Decision is
MODIFIED in the sense that petitioner is ORDERED to pay respondent the sums of
P14,000 and P6,500, which represent the value of the goods stated in Bills of Lading Nos.
59 and 58, respectively. No costs.
56
Quintua, Angeli
CENTRAL SHIPPING COMPANY, INC. vs. INSURANCE COMPANY OF NORTH AMERICA,
Case No. 33
Doctrine: A common carrier is presumed to be at fault or negligent. It shall be liable for the loss,
destruction or deterioration of its cargo, unless it can prove that the sole and proximate cause of
such event is one of the causes enumerated in Article 1734 of the Civil Code, or that it
exercised extraordinary diligence to prevent or minimize the loss. In the present case, the
weather condition encountered by petitioners vessel was not a storm or a natural disaster
comprehended in the law. Given the known weather condition prevailing during the voyage, the
manner of stowage employed by the carrier was insufficient to secure the cargo from the rolling
action of the sea. The carrier took a calculated risk in improperly securing the cargo. Having lost
that risk, it cannot now disclaim any liability for the loss.
Facts
On July 25, 1990 at Puerto Princesa, Palawan, the petitioner received on board its
vessel, the M/V Central Bohol, 376 pieces of Philippine Apitong Round Logs and undertook to
transport said shipment to Manila for delivery to Alaska Lumber Co., Inc. The cargo was insured
for P3,000,000.00 against total loss under respondents Marine Cargo Policy No. MCPB-00170.
The cargo never reached its destination because at about 0130 hours on July 26 the
vessel completely sank and the cargo was totally lost.
Insurance Company paid the claim of Alaska Lumber Co. As consignee claim and now
seeks to be subrogated to all the rights and actions of the consignee as against the petitioner.
Contention of Petitioner:
It raised as its main defense that the proximate and only cause of the sinking of its vessel
and the loss of its cargo was a natural disaster, a tropical storm which neither [petitioner] nor the
captain of its vessel could have foreseen.
Ruling of the RTC
It applied the rule on presumptive fault or negligence against the carrier thus, liable for
the loss of the cargo.
57
Held:
(1) First Issue: Liability for Lost Cargo
The evidence indicated that strong southwest monsoons were common occurrences during the
month of July. Thus, the officers and crew of M/V Central Bohol should have reasonably
anticipated heavy rains, strong winds and rough seas. They should then have taken extra
precaution in stowing the logs in the hold, in consonance with their duty of observing
extraordinary diligence in safeguarding the goods. But the carrier took a calculated risk in
improperly securing the cargo. Having lost that risk, it cannot now escape responsibility for the
loss.
(2) Second Issue: Doctrine of Limited Liability
The doctrine of limited liability under Article 587 of the Code of Commerce[36] is not applicable
to the present case. This rule does not apply to situations in which the loss or the injury is due to
the concurrent negligence of the shipowner and the captain. It has already been established
that the sinking of M/V Central Bohol had been caused by the fault or negligence of the ship
captain and the crew, as shown by the improper stowage of the cargo of logs. Closer
supervision on the part of the shipowner could have prevented this fatal miscalculation. As
such, the shipowner was equally negligent. It cannot escape liability by virtue of the limited
liability rule.
WHEREFORE, the Petition is DENIED, and the assailed Decision and Resolution AFFIRMED.
Costs against petitioner.
SO ORDERED.
58
when the presumption of negligence does not attach and these instances are enumerated in
Article 1734. In those cases where the presumption is applied, the common carrier must prove
that it exercised extraordinary diligence in order to overcome the presumption. The presumption
of negligence was raised against petitioner. It was petitioner's burden to overcome it. Thus,
contrary to her assertion, private respondent need not introduce any evidence to prove her
negligence. Her own failure to adduce sufficient proof of extraordinary diligence made the
presumption conclusive against her.
60
61
Issues: Whether or not the petitioner is exempted from liability on the ground of fortuitous
event, and whether or not Atty. Caorong is guilty of contributory negligence.
Ruling:
The seizure of petitioner's bus is not a case of force majeure and Atty. Caorong is not
guilty of contributory negligence.
Art. 1763 of the Civil Code provides that a common carrier is responsible for injuries
suffered by a passenger on account of wilfull acts of other passengers, if the employees of the
common carrier could have prevented the act through the exercise of the diligence of a good
father of a family. In the present case, it is clear that because of the negligence of petitioner's
employees, the seizure of the bus by Mananggolo and his men was made possible. Despite
warning by the Philippine Constabulary at Cagayan de Oro that the Maranaos were planning to
take revenge on the petitioner by burning some of its buses and the assurance of petitioner's
operation manager, Diosdado Bravo, that the necessary precautions would be taken, petitioner
did nothing to protect the safety of its passengers. Had petitioner and its employees been
vigilant they would not have failed to see that the malefactors had a large quantity of gasoline
with them. Under the circumstances, simple precautionary measures to protect the safety of
passengers, such as frisking passengers and inspecting their baggages, preferably with nonintrusive gadgets such as metal detectors, before allowing them on board could have been
employed without violating the passenger's constitutional rights. From the foregoing, it is evident
that petitioner's employees failed to prevent the attack on one of petitioner's buses because
they did not exercise the diligence of a good father of a family. Hence, petitioner should be held
liable for the death of Atty. Caorong.
The petitioner contends that the seizure of its bus by the armed assailants was a
fortuitous event for which it could not be held liable.Art. 1174 of the Civil Code defines a
fortuitous event as an occurence which could not be foreseen, is inevitable. In Yobido v. Court
of Appeals, we held that to considered as force majeure, it is necessary that (1) the cause of the
breach of the obligation must be independent of the human will; (2) the event must be either
unforeseeable or unavoidable; (3) the occurence must be render it impossible for the debtor to
fulfill the obligation in a normal manner; and (4) the obligor must be free of participation in, or
aggravation of, the injury to the creditor. The absence of any of the requisites mentioned above
would prevent the obligor from being excused from liability.
Art. 1755 of the Civil Code provides that "a common carrier is bound to carry the
passengers as far as human care and foresight can provide, using the utmost diligence of very
cautious persons, with due regard for all the circumstances." Thus, we held in Pilapil and De
Guzman that the respondents therein were not negligent in failing to take special precautions
against threats to the safety of passengers which could not be foreseen, such as tortious or
criminal acts of third persons. In the present case, this factor of unforeseeability (the second
requisite for an event to be considered force majeure) is lacking. As already stated, despite the
report of PC agent Generalao that the Maranaos were planning to burn some of petitioner's
buses and the assurance of petitioner's operation manager (Diosdado Bravo) that the
necessary precautions would be taken, nothing was really done by petitioner to protect the
safety of passengers.
63
The petitioner contends that Atty. Caorong was guilty of contributory negligence in
returning to the bus to retrieve something. But Atty. Caorong did not act recklessly. It should be
pointed out that the intended targets of the violence were petitioners and its employees, not its
passengers. The assailant's motive was to retaliate for the loss of life of two Maranaos as a
result of the collision between petitioner's bus and the jeepney in which the two Maranaos were
riding. Mananggolo, the leader of the group which had hijacked the bus, ordered the passengers
to get off the bus as they intended to burn it and its driver. The armed men actually allowed Atty.
Caorong to retrieve something from the bus. What apparently angered them was his attempt to
help the driver of the bus by pleading for his life. He was playing the role of the good Samaritan.
Certainly, this act cannot considered an act of negligence, let alone recklessness.
64
65
Respondent Airline averred that in the performance of its obligation to safely transport
passengers as far as human care and foresight can provide, it has exercised the utmost
diligence of a very cautious person with due regard to all circumstances, but the security checks
and measures and surveillance precautions in all flights, including the inspection of baggages
and cargo and frisking of passengers at the Davao Airport were performed and rendered solely
by military personnel who under appropriate authority had assumed exclusive jurisdiction over
the same in all airports in the Philippines.
The trial court, on August 26, 1980, dismissed the complaints finding that all the
damages sustained in the premises were attributed to force majeure. Hence, the petitioners
appealed to the Supreme Court.
Issue: Whether or not hijacking or air piracy during martial law and under the circumstances of
the case, is a caso fortuito or force majeure which would exempt an aircraft from payment of
damages to its passengers.
Ruling:
Yes. In order to constitute a caso fortuito or force majeure that would exempt a person
from liability under Article 1174 of the Civil Code, it is necessary that the following elements
must concur: (a) the cause of the breach of the obligation must be independent of the human
will (the will of the debtor or the obligor); (b) the event must be either unforeseeable or
unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner; and (d) the debtor must be free from any participation in, or
aggravation of the injury to the creditor. Caso fortuito or force majeure, by definition, are
extraordinary events not foreseeable or avoidable, events that could not be foreseen, or which,
though foreseen, are inevitable. It is, therefore, not enough that the event should not have been
foreseen or anticipated, as is commonly believed, but it must be one impossible to foresee or to
avoid. The mere difficulty to foresee the happening is not impossibility to foresee the same.
Applying the above guidelines to the case at bar, the failure to transport petitioners
safely from Davao to Manila was due to the skyjacking incident staged by six (6) passengers of
the same plane, all members of the Moro National Liberation Front (MNLF), without any
connection with private respondent, hence, independent of the will of either the PAL or of its
passengers.
Under normal circumstances, PAL might have foreseen the skyjacking incident which
could have been avoided had there been a more thorough frisking of passengers and inspection
of baggages as authorized by R.A. No. 6235. But the incident in question occurred during
Martial Law where there was a military take-over of airport security including the frisking of
passengers and the inspection of their luggage preparatory to boarding domestic and
international flights. In fact military take-over was specifically announced on October 20, 1973
by General Jose L. Rancudo, Commanding General of the Philippine Air Force in a letter to Brig.
Gen. Jesus Singson, then Director of the Civil Aeronautics Administration later confirmed shortly
before the hijacking incident of May 21, 1976 by Letter of Instruction No. 399 issued on April 28,
1976.
66
Otherwise stated, these events rendered it impossible for PAL to perform its obligations
in a nominal manner and obviously it cannot be faulted with negligence in the performance of
duty taken over by the Armed Forces of the Philippines to the exclusion of the former.
Finally, there is no dispute that the fourth element has also been satisfied. Consequently
the existence of force majeure has been established exempting respondent PAL from the
payment of damages to its passengers who suffered death or injuries in their persons and for
loss of their baggages.
67
Facts
Sometime in 1948, the City of Iloilo requisitioned for rice from the National Rice and
Corn Corporation (hereafter referred to as NARIC) in Manila. On the same year, NARIC,
pursuant to the order, shipped 1,726 sacks of rice consigned to the City of Iloilo on board the SS
"General Wright" belonging to the Southern Lines, Inc. Each sack of rice weighed 75 kilos and
the entire shipment as indicated in the bill of lading had a total weight of 129,450 kilos.
According to the bill of lading, the cost of the shipment was P63,115.50. The City of Iloilo
received the shipment and paid the amount of P63,115.50. However, it was noted that the foot
of the bill of lading that the City of Iloilo 'Received the above mentioned merchandise apparently
in same condition as when shipped, save as noted below: actually received 1685 sacks with a
gross weight of 116,131 kilos upon actual weighing. Total shortage ascertained 13,319 kilos."
The shortage was equivalent to 41 sacks of rice with a net weight of 13,319 kilos, the
proportionate value of which was P6,486.35.
The City of Iloilo filed a complaint in the CFI Iloilo against NARIC and the Southern
Lines, Inc. for the recovery of the amount of P6,486.35 representing the value of the shortage of
the shipment of rice. After trial, the lower court absolved NARIC from the complaint, but
sentenced the Southern Lines, Inc. to pay the amount of P4,931.41 which is the difference
between the sum of P6,486.35 and P1,554.94 representing the latter's counterclaim for handling
and freight. The Southern Lines, Inc. appealed to CA which affirmed the judgment of the trial
court.
Issue: Whether or not herein petitioner, is liable for the loss or shortage of the rice shipped.
Ruling
Yes, Article 361 of the Code of Commerce provides that: The merchandise shall be
transported at the risk and venture of the shipper, if the contrary has not been expressly
stipulated. As a consequence, all the losses and deteriorations which the goods may suffer
during the transportation by reason of fortuitous event, force majeure, or the inherent nature and
defect of the goods, shall be for the account and risk of the shipper. Proof of these accidents is
incumbent upon the carrier.
Article 362 of the same Code provides: Nevertheless, the carrier shall be liable for the
losses and damages resulting from the causes mentioned in the preceding article if it is proved,
as against him, that they arose through his negligence or by reason of his having failed to take
the precautions which usage his established among careful persons, unless the shipper has
committed fraud in the bill of lading, representing the goods to be of a kind or quality different
from what they really were. Under the provisions of Article 361, the defendant-carrier in order to
free itself from liability was only obliged to prove that the damages suffered by the goods were
"by virtue of the nature or defect of the articles." Under the provisions of Article 362, the plaintiff,
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in order to hold the defendant liable, was obliged to prove that the damages to the goods by
virtue of their nature occurred on account of its negligence or because the defendant did not
take the precaution adopted by careful persons. (Government v. Ynchausti & Co., 40 Phil. 219,
223).
Petitioner claims exemption from liability by contending that the shortage in the shipment
of rice was due to such factors as the shrinkage, leakage or spillage of the rice on account of
the bad condition of the sacks at the time it received the same and the negligence of the agents
of respondent City of Iloilo in receiving the shipment. The contention is untenable, for, if the fact
of improper packing is known to the carrier or his servants, or apparent upon ordinary
observation, but it accepts the goods notwithstanding such condition, it is not relieved of liability
for loss or injury resulting therefrom. Furthermore, according to CA, appellant itself frankly
admitted that the strings that tied the bags of rice were broken; some bags were with holes and
plenty of rice was spilled inside the hull of the boat, and that the personnel of the boat collected
no less than 26 sacks of rice which they had distributed among themselves." This finding, which
is binding upon this Court, shows that the shortage resulted from the negligence of petitioner.
Decision of the CA is affirmed.
69
70
applied by Mayor Jose to shakedown the appellant for P5,000.00. The order of the acting mayor
did not constitute valid authority for Ganzon and his representatives to carry out.
In any case, the intervention of the municipal officials was not in any case, of a character
that would render impossible the fulfillment by the carrier of its obligation. The petitioner was not
duty bound to obey the illegal order to dump into the sea the scrap iron. Moreover, there is
absence of sufficient proof that the issuance of the same order was attended with such force or
intimidation as to completely overpower the will of the petitioner's employees. The mere difficulty
in the fulfillment of the obligation is not considered force majeure. We agree with the private
respondent that the scraps could have been properly unloaded at the shore or at the NASSCO
compound, so that after the dispute with the local officials concerned was settled, the scraps
could then be delivered in accordance with the contract of carriage. Decision of the Court of
Appeals is affirmed.
71
Villanueva, Liezl
Issue:
Whether or not the petitioner is liable for the death of passengers Beter and Rautraut
caused by force majeure or caso fortuito over which the common carrier did not have any
control
72
Held:
Yes. The running amuck of the passenger was the proximate cause of the incident as it
triggered off a commotion and panic among the passengers such that the passengers started
running to the sole exit shoving each other resulting in the falling off the bus by passengers
Beter and Rautraut causing them fatal injuries. The sudden act of the passenger who stabbed
another passenger in the bus is within the context of force majeure. However, in order that a
common carrier may be absolved from liability in case of force majeure, it is not enough that the
accident was caused by force majeure. The common carrier must still prove that it was not
negligent in causing the injuries resulting from such accident. In this case, Bachelor was
negligent.
Considering the factual findings of the Court of Appeals-the bus driver did not
immediately stop the bus at the height of the commotion; the bus was speeding from a full stop;
the victims fell from the bus door when it was opened or gave way while the bus was still
running; the conductor panicked and blew his whistle after people had already fallen off the bus;
and the bus was not properly equipped with doors in accordance with law.
73
Villanueva, Liezl
Issue:
Whether the defendant observed extraordinary diligence or the utmost diligence of every
cautious person, having due regard for all circumstances, in avoiding the collision which
resulted in the injury caused to the plaintiff?
74
Held:
Yes. principles governing the liability of a common carrier: 1) the liability of a carrier is
contractual and arises upon breach of its obligation. There is breach if it fails to exert
extraordinary diligence according to all circumstances of each case; 2) a carrier is obliged to
carry its passenger with the utmost diligence of a very cautious person, having due regard for all
the circumstances; 3) a carrier is presumed to be at fault or to have acted negligently in case of
death of, or injury to, passengers, it being its duty to prove that it exercised extraordinary
diligence; 4) the carrier is not an insurer against all risks of travel.
Where a carrier's employee is confronted with a sudden emergency, the fact that he is obliged
to act quickly and without a chance for deliberation must be taken into account, and he is held to the
some degree of care that he would otherwise be required to exercise in the absence of such
emergency but must exercise only such care as any ordinary prudent person would exercise under
like circumstances and conditions, and the failure on his part to exercise the best judgment the case
renders possible does not establish lack of care and skill on his part.
Herein, when Isaac boarded the bus in question, he seated himself on the left side
thereof resting his left arm on the window sill but with his left elbow outside the window, this
being his position in the bus when the collision took place. It is for this reason that the collision
resulted in the severance of said left arm from the body of appellant thus doing him a great
damage. Had he not placed his left arm on the window sill with a portion thereof protruding
outside, perhaps the injury would have been avoided as is the case with the other passengers.
It is to be noted that Isaac was the only victim of the collision. It is apparent that Isaac is guilty of
contributory negligence
Considering all the circumstances, we are persuaded to conclude that the driver of the
bus has done what a prudent man could have done to avoid the collision
It is true that Isaac's contributory negligence cannot relieve A.L. Ammen of its liability but
will only entitle it to a reduction of the amount of damage caused (Article 1762, new Civil Code),
but this is a circumstance which further militates against the position taken by Isaac
75
Ruling:
1. YES. The PNR has all the powers, the characteristics and attributes of a corporation
under the Corporation Law. There can be no question then that the PNR may sue and
be sued and may be subjected to court processes just like any other corporation. In the
case of Manila Hotel Employees Association v. Manila Hotel Co., the Court laid down the
rule that when the government enters into commercial business, it abandons its
sovereign capacity and is to be treated like any other corporation. In Prisco v. CIR, the
Court said that when the government engages in business, it abdicates part of its
sovereign prerogatives and descends to the level of a citizen, x x x.
2. YES. As a rule, death or injury suffered by any of its passengers gives rise to the
presumption that a common carrier is negligent in the performance of its obligation under
the contract of carriage. The petitioner failed to overthrow such presumption of
negligence with clear and convincing evidence.
3. YES. Since he opted to sit on the open platform between the coaches of the train,
he should have held tightly and tenaciously on the upright metal bar found at the
side of said platform to avoid falling off from the speeding train.
76
Issue: WON the act of private respondent in furnishing petitioner with an inaccurate weight
was the proximate and only cause of the damage
Ruling:
NO. The general rule under Article 1735 and 1752 of the Civil Code is that common
carriers are presumed to have been at fault or to have acted negligently in case the goods
transported by them are lost, destroyed or had deteriorated. To overcome the presumption of
liability for the loss, destruction or deterioration of the goods under Article 1735, the common
carriers must prove that they observed extraordinary diligence as required in Article 1733 of the
Civil Code.
As found by the respondent Court of Appeals, the fact is that petitioner used a 5-ton
capacity lifting apparatus to lift and unload a visibly heavy cargo like a payloader. Private
respondent has, likewise sufficiently established the laxity and carelessness of petitioners crew
in their methods of ascertaining the weight of heavy cargoes offered for shipment before loading
and unloading them, as is customary among careful persons.
While the act of private respondent in furnishing petitioner with an inaccurate weight of the
payloader cannot successfully be used as an excuse by petitioner to avoid liability to the
77
damage thus caused, said act constitutes a contributory circumstance to the damage caused on
the payloader, which mitigates the liability for damages of petitioner.
78
BILL OF LADING
44.1
Magellan Mfg. Marketing Corporation vs. Court of Appeals, G.R. No. 95529, August
22, 1991
44.2
Magellan Mfg. Marketing Corporation vs. Court of Appeals, G.R. No. 95529, August
22, 1991
45. Lorenzo Shipping Corp. vs Chubb and Sons, Inc. G.R. No. 172822, December 18, 2009
46. MOF Company, Inc. vs Shin Yang Brokerage Corp. G.R. No. 172822, December 18,
2009
47.2 Ong Yiu vs. Court of Appeals, et al, 91 SCRA 223
48. Wallem Philippines Shipping Inc, et al vs Prudential Guarantee & Assurance, Inc et al,
G.R. No. 1521158, February 7, 2003
49. Ace Navigation Co., Inc vs FGU Insurance Corp., G.R. No. 171591, June 25, 2011
50. Asian Terminals, Inc. vs. Simon Enterprises, Inc. G.R. No. 177116, February 27, 2013
80
According to the Supreme Court there was transhipment within this contemplation as
there unmistakably appears on the face of the bill of lading the entry "Hong Kong" in the blank
space labeled "Transhipment," which can only mean that transhipment actually took place. This
fact is further bolstered by the certification issued by private respondent F.E. Zuellig, Inc. dated
July 19, 1980, although it carefully used the term "transfer" instead of transhipment.
Nonetheless, no amount of semantic juggling can mask the fact that transhipment in truth
occurred in this case.
The holding in most jurisdictions has been that a shipper who receives a bill of lading
without objection after an opportunity to inspect it, and permits the carrier to act on it by
proceeding with the shipment is presumed to have accepted it as correctly stating the contract
and to have assented to its terms. In other words, the acceptance of the bill without dissent
raises the presumption that all the terms therein were brought to the knowledge of the shipper
and agreed to by him and, in the absence of fraud or mistake, he is estopped from thereafter
denying that he assented to such terms. This rule applies with particular force where a shipper
accepts a bill of lading with full knowledge of its contents and acceptance under such
circumstances makes it a binding contract.
In the light of the series of events that transpired in the case at bar, there can be no
logical conclusion other than that the petitioner had full knowledge of, and actually consented
to, the terms and conditions of the bill of lading thereby making the same conclusive as to it,
and it cannot now be heard to deny having assented thereto.
81
82
an on board of bill of lading, as petitioner would have us believe, such an effect may be
achieved only as of the date of its issuance, that is, on July 19, 1980 and onwards
The fact remains, though, that on the crucial date of June 30, 1980 no on board bill of
lading was presented by petitioner in compliance with the terms of the letter of credit and this
default consequently negates its entitlement to the proceeds thereof. Said certification, if
allowed to operate retroactively, would render illusory the guaranty afforded by an on board bill
of lading, that is, reasonable certainty of shipping the loaded cargo aboard the vessel specified,
not to mention that it would indubitably be stretching the concept of substantial compliance too
far
In sum, petitioner had full knowledge that the bill issued to it contained terms and
conditions clearly violative of the requirements of the letter of credit. Nonetheless, perhaps in its
eagerness to conclude the transaction with its Japanese buyer and in a race to beat the expiry
date of the letter of credit, petitioner took the risk of accepting the bill of lading even if it did not
conform with the indicated specifications, possibly entertaining a glimmer of hope and imbued
with a touch of daring that such violations may be overlooked, if not disregarded, so long as the
cargo is delivered on time. Unfortunately, the risk did not pull through as hoped for. Any violation
of the terms and conditions of the letter of credit as would defeat its right to collect the proceeds
thereof was, therefore, entirely of the petitioner's making for which it must bear the
consequences
83
Mutya S. Alegre
Lorenzo Shipping Corp. vs. Chubb and Sons, Inc., Gearbulk Ltd. and Philippine
Transmarine Carriers, Inc
Case No. 45
Facts
On November 21, 1987, Mayer Steel Pipe loaded 581 bundles of black steel pipes worth
$137,912 on board the vessel M/V Lorcon owned by petitioner Lorenzo Shipping for shipment
to Davao City. Petitioner issued a clean bill of lading for the account of the consignee,
Sumitomo Corporation of San Francisco, California, USA, which in turn insured the goods with
respondent Chubb and Sons.
M/V Lorcon arrived in Davao City on December 2, 1987. Respondent Transmarine
Carriers received the subject shipment. It discovered seawater in the hatch of M/V Lorcon and
found the steel pipes submerged in it. The consignee Sumimoto hired surveyors to inspect the
shipment, and their report showed that said shipment was no longer in good condition as the
pipes were found with rust formation. It was also noted that the cargo hold was flooded with
seawater and the tank top was rusty, thinning, and with several holes at different places. The
rust condition was noted on the mate's receipts and the checker of M/V Lorcon signed his
conforme thereon.
Respondent Gearbulk then loaded the shipment on its vessel for carriage to the
United States. Sumimoto rejected the damaged steel pipes and declared them unfit for the
purpose they were intended. It filed a marine insurance claim with respondent Chubb and
Sons. Respondent Chubb and Sons filed a complaint for collection of money against Lorenzo
Shipping. Lorenzo Shipping filed its answer denying liability. The RTC ruled in favor of Chubb
and Sons. The CA affirmed. Hence, this petition.
Held:
We affirm the findings of the lower court that petitioner was negligent in its care and
custody of the consignee's goods.
The steel pipes were in good condition when they were loaded at the port of origin
(Manila) on board petitioner's M/V Lorcon en route to Davao City. Petitioner Lorenzo Shipping
issued clean bills of lading covering the subject shipment. A bill of lading, aside from being a
contract and a receipt, is also a symbol of the goods covered by it. A bill of lading which has no
notation of any defect or damage in the goods is called a clean bill of lading. A clean bill of
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lading constitutes prima facie evidence of the receipt by the carrier of the goods as therein
described.
The case law teaches us that mere proof of delivery of goods in good order to a carrier
and the subsequent arrival in damaged condition at the place of destination raises a prima
facie case against the carrier.
In view thereof, the petition is DENIED. The Decision of the Court of Appeals and its
Resolution are hereby AFFIRMED.
85
Facts:
Halla Trading Co., a company based in Korea, shipped to Manila secondhand cars and
other articles on board the vessel Hanjin Busan and the bill of lading covering the shipment
named respondent Shin Yang Brokerage Corp as the consignee and indicated that payment
was on a Freight Collect basis. After the shipment arrived in Manila and petitioner MOF
Company, Inc. (MOF), Hanjins exclusive general agent in the Philippines, repeatedly demanded
the payment of ocean freight, documentation fee and terminal handling charges from Shin Yang.
The latter, however, failed and refused to pay contending that it did not cause the importation of
the goods, that it is only the Consolidator of the said shipment, that the ultimate consignee did
not endorse in its favor the original bill of lading and that the bill of lading was prepared without
its consent. Thus, petitioner MOF filed a case for sum of money and the MeTC decided the case
in their favor. The decision was brought before the RTC but said court affirmed in toto the
decision of the MeTC. However, on appeal the CA dismissed MOFs complaint and refused to
award any form of damages or attorneys fees, on the ground of insufficiency of evidence.
Accordingly, for failure (of the petitioner MOF) to substantiate its claim by preponderance of
evidence, respondent has not established its case against petitioner. On appeal to SC,
petitioner maintain that as against Shin Yangs bare denials, the bill of lading is sufficient
preponderance of evidence required to prove MOFs claim and that Shin Yang was the one that
supplied all the details in the bill of lading and acquiesced to be named consignee of the
shipment on a Freight Collect basis. On the other hand, Shin Yang contends that the fact that
its name was mentioned as the consignee of the cargoes but did not make it automatically liable
for the freightage because it never benefited from the shipment and that they were not aware of
its designation as consignee and the original bill of lading was never endorsed to it.
.
Issue:
Whether as consignee, who is not a signatory to the bill of lading, is bound by
the stipulations thereof.
Whether petitioner MOF was able to meet the required quantum of proof by only
presenting the bill of lading.
Held:
YES. A consignee, who is not a signatory to the bill of lading, is bound by the stipulations
thereof. Accordingly, as consignee, although not a signatory to the contract of carriage between
the shipper and the carrier, becomes a party to the contract by reason of either a) the
relationship of agency between the consignee and the shipper/ consignor; b) the unequivocal
86
acceptance of the bill of lading delivered to the consignee, with full knowledge of its contents or
c) availment of the stipulation pour autrui, i.e., when the consignee, a third person, demands
before the carrier the fulfillment of the stipulation made by the consignor/shipper in the
consignees favor, specifically the delivery of the goods/cargoes shipped.
NO. MOF failed to meet the required quantum of proof. Other than presenting the bill of
lading, which, at most, proves that the carrier acknowledged receipt of the subject cargo from
the shipper and that the consignee named is to shoulder the freightage, MOF has not adduced
any other credible evidence to strengthen its cause of action. It did not even present any
witness in support of its allegation that it was Shin Yang which furnished all the details indicated
in the bill of lading and that Shin Yang consented to shoulder the shipment costs. There is also
nothing in the records which would indicate that Shin Yang was an agent of Halla Trading Co. or
that it exercised any act that would bind it as a named consignee.
87
Casipe, Rommel T.
Issue: Whether or not the Court of Appeals misconstrued the evidence and the law when it
reversed the decision of the lower court when it ordered respondent PAL to compensate plaintiff
the sum of P100.00 only.
88
Held:
There is no dispute that petitioner did not declare any higher value of his luggage, much
less did he pay any additional transportation charge. While it may be true that petitioner had not
signed the plane ticket, he is nevertheless bound by the provisions thereof. Such provisions
have been held to be a part of the contract of carriage, and valid and binding upon the
passenger regardless of the latters lack of knowledge or assent to the regulation. Considering,
therefore, that petitioner had failed to declare a higher value for his baggage, he cannot be
permitted a recovery in excess of P 100.00.
89
Issue:
Whether or not the quantity of the cargo reflected in the bill of lading is conclusive as to
90
the actual cargo of the consignee notwithstanding the fact that said cargo was shipped on a
said to weigh basis.
Wheter or not Wallem can be held liable.
Held:
Bill of Lading states that the subject shipment was carried with the qualification
Shippers weight, quantity and quality unknown, meaning that it was transported with the
carrier having been oblivious of the weight, quantity, and quality of the cargo. The bill of lading
shall not be deemed prima facie evidence against the carrier of the receipt of goods of the
weight so inserted in the bill of lading, and the accuracy thereof at the time of shipment shall not
be deemed to have been guaranteed by the shipper.
In the absence of clear, convincing, and competent evidence to prove that the shipment
indeed weighed 4,415.35 metric tons at the port of origin when it was loaded on the M/V Gao
Yang, it cannot be determined whether there was a shortage of the shipment upon its arrival in
Batangas. Wallems evidence casts doubt on the veracity of the documents upon which
Prudential bases its claim. There could have been no spillage while the shipment was on board
the vessel. It was shown that, after the shipment was unloaded from the vessel, it was weighed
with the use of GMCs weighing scale, which was later found to be defective.
It is likely that there was again spillage of the shipment when it was reweighed after its
unloading in the same manner that there was spillage when the shipment was unloaded from
the vessel. It should also be noted that the reweighing was conducted only on April 26, 1990,
five days after the shipment was put in the storage of the consignee.
Indeed, as the bill of lading indicated that the contract of carriage was under a said to
weigh clause, the shipper is solely responsible for the loading while the carrier is oblivious of
the contents of the shipment.
Even if the shortage can be definitively determined, Wallem still cannot be held liable
because of the failure of Prudential to present the contract of insurance or a copy thereof.
Prudential claims that it is subrogated to the rights of GMC pursuant to their insurance contract.
As GMCs subrogee, Prudential can exercise only those rights granted to GMC under the
insurance contract. The contract of insurance must be presented in evidence to indicate the
extent of its coverage.
Wallem cannot be held liable.
91
Chan, Richard P.
ACE NAVIGATION CO., INC. vs. FGU INSURANCE CORPORATION and PIONEER
INSURANCE AND SURETY CORPORATION
Case No. 49
FACTS:
On July 19, 1990, CARDIA shipped on board the vessel M/V Pakarti Tiga at Shanghai
Port China, 8,260 metric tons or 165,200 bags of Grey Portland Cement to be discharged at the
Port of Manila and delivered to its consignee, HEINDRICH. The subject shipment was insured
with respondents, FGU and PIONEER, against all risks for the amount of P18,048,421.00.
The subject vessel is owned by PAKARTI which it chartered to SHINWA. Representing
itself as owner of the vessel, SHINWA entered into a charter party contract with SKY, an agent
of KEE YEH, which further chartered it to REGENCY. Thus, it was REGENCY that directly dealt
with consignee HEINDRICH, and accordingly, issued Clean Bill of Lading No. SM-1.
On July 23, 1990, the vessel arrived at the Port of Manila and the shipment was
discharged. However, upon inspection of HEINDRICH and petitioner ACENAV, agent of
CARDIA, it was found that out of the 165,200 bags of cement, 43,905 bags were in bad order
and condition. Unable to collect the sustained damages in the amount of P1,423,454.60 from
the shipper, CARDIA, and the charterer, REGENCY, the respondents, as co-insurers of the
cargo, each paid the consignee, HEINDRICH, the amounts of P427,036.40 and P284,690.94,
respectively, and consequently became subrogated to all the rights and causes of action
accruing to HEINDRICH.
On August 8, 1991, respondents filed a complaint for damages against ACENAV and
other defendants.
ACENAV claimed that, not being privy to the bill of lading, it was not a real party-ininterest from whom the respondents can demand compensation. It further denied being the local
ship agent of the vessel or REGENCY and claimed to be the agent of the shipper, CARDIA.
The RTC dismissed the complaint.
The CA found PAKARTI, SHINWA, KEE YEH and its agent, SKY, solidarily liable for 70%
of the respondents' claim plus interest at the rate of 6% from the date of the filing of the
complaint, with the remaining 30% to be shouldered solidarily by CARDIA and its agent,
ACENAV plus interest at the rate of 6% from the date of the filing of the complaint.
ISSUE: Whether or not ACENAV may be held liable to the respondents for 30% of their claim.
HELD:
A bill of lading is defined as "an instrument in writing, signed by a carrier or his agent,
describing the freight so as to identify it, stating the name of the consignor, the terms of the
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contract for carriage, and agreeing or directing that the freight to be delivered to the order or
assigns of a specified person at a specified place."
It operates both as a receipt and as a contract. As a receipt, it recites the date and place
of shipment, describes the goods as to quantity, weight, dimensions, identification marks and
condition, quality, and value. As a contract, it names the contracting parties, which include the
consignee, fixes the route, destination, and freight rates or charges, and stipulates the rights
and obligations assumed by the parties. As such, it shall only be binding upon the parties who
make them, their assigns and heirs.
In this case, the original parties to the bill of lading are: (a) the shipper CARDIA; (b) the
carrier PAKARTI; and (c) the consignee HEINDRICH. However, by virtue of their relationship
with PAKARTI under separate charter arrangements, SHINWA, KEE YEH and its agent SKY
likewise became parties to the bill of lading. In the same vein, ACENAV, as admitted agent of
CARDIA, also became a party to the said contract of carriage.
The respondents, however, maintain that ACENAV is a ship agent and not a mere agent
of CARDIA, as found by both the CA and the RTC.
The Court disagrees.
Article 586 of the Code of Commerce provides:
ART. 586. The shipowner and the ship agent shall be civilly liable for the acts of the
captain and for the obligations contracted by the latter to repair, equip, and provision the vessel,
provided the creditor proves that the amount claimed was invested therein.
By ship agent is understood the person entrusted with the provisioning of a vessel, or
who represents her in the port in which she may be found.
Records show that the obligation of ACENAV was limited to informing the consignee
HEINDRICH of the arrival of the vessel in order for the latter to immediately take possession of
the goods. No evidence was offered to establish that ACENAV had a hand in the provisioning of
the vessel or that it represented the carrier, its charterers, or the vessel at any time during the
unloading of the goods. Clearly, ACENAV's participation was simply to assume responsibility
over the cargo when they were unloaded from the vessel. Hence, no reversible error was
committed by the courts a quo in holding that ACENAV was not a ship agent within the meaning
and context of Article 586 of the Code of Commerce, but a mere agent of CARDIA, the shipper.
Accordingly, the Court finds that the CA erred in ordering ACENAV jointly and severally
liable with CARDIA to pay 30% of the respondents' claim.
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are hereby
REVERSED. The complaint against petitioner Ace Navigation Co., Inc. is hereby DISMISSED.
93
Cheng,Renlyn B.
ASIAN TERMINALS, INC., Petitioner, vs. SIMON ENTERPRISES, INC., Respondent.
Case No. 50
Facts:
Simon Enterprise Inc. entered into contract with Contiquincybunge Export Company. On
October 25, 1995, Contiquincybunge Export Company loaded 6,843.700 metric tons of U.S.
Soybean Meal in Bulk on board the vessel MN "Sea Dream" at the Port of Darrow, Louisiana,
U.S.A., for delivery to the Port of Manila to respondent Simon Enterprises, Inc., as consignee.
When the vessel arrived at the South Harbor in Manila, the shipment was discharged to the
receiving barges of petitioner Asian Terminals, Inc. (ATI), the arrastre operator. Respondent later
received the shipment but claimed having received only 6,825.144 metric tons of U.S. Soybean
Meal, or short by 18.556 metric tons, which is estimated to be worth US$7,100.16 or
P186,743.20.For the second shipment, Contiquincybunge made shipment, through M/V Tern, of
3,300.000 metric tons of U.S. Soybean Meal in Bulk for delivery to Simon at the Port of Manila.
The shipment was received by ATI again for delivery to Simon. However, the shipped cargos
were found lacking 199.863 metric tons. For the Third Shipment, On January 25, 1996, the
carrier docked at the inner Anchorage, South Harbor, Manila. The subject shipment was
discharged to the receiving barges of petitioner ATI and received by respondent which, however,
reported receiving only 3,100.137 metric tons instead of the manifested 3,300.000 metric tons of
shipment. Respondent filed against petitioner ATI and the carrier a claim for the shortage of
199.863 metric tons, estimated to be worth US$79,848.86 or P2,100,025.00, but its claim was
denied.
Simon Enterprise filed an action for damages against the unknown owner of the vessels
M/V Sea Dream and M/V Tern, its local agent Inter-Asia Marine Transport, Inc., and petitioner
ATI alleging that it suffered the losses through the fault or negligence of the said defendants.
The case of the unknown owner of the vessel M/V Sea Dream has been settled in release and
quitclaim and therefore has been stricken out of the case, leaving M/V Tern, its local agent InterAsia Marine Transport, Inc., and petitioner ATIs case remaining. The unknown owner of the
vessel M/V "Tern" and its local agent Inter-Asia Marine Transport, Inc., prayed for the dismissal
of the complaint essentially alleging lack of cause of action and prescription. They alleged that
the cause of action had already prescribed or laches had set in;that the draft survey report
indicates that the cargo discharged was more than the figures appearing in the bill of lading; that
because the bill of lading states that the goods are carried on a "shippers weight, quantity and
quality unknown" terms and on "all terms, conditions and exceptions as per charter party dated
October 15, 1995," the vessel had no way of knowing the actual weight, quantity, and quality of
the bulk cargo when loaded at the port of origin and the vessel had to rely on the shipper for
such information; that the subject shipment was discharged in Manila in the same condition and
quantity as when loaded at the port of loading.The RTC of Manila rendered a Decision holding
petitioner ATI and its co-defendants solidarily liable to respondent for damages arising from the
shortage. The CA affirmed the decision of the RTC.
Issues:
1.Whether or not the weight of the shipment as indicated in the bill of lading is conclusive as to
the actual weight of the goods?
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2.)Wheter or not ATI should be held solidarily liable for for the losses incurred in the shipment of
goods?
Ruling:
1.) No.As the bill of lading indicated that the contract of carriage was under a "said to
weigh" clause, the shipper is solely responsible for the loading while the carrier is oblivious of
the contents of the shipment. The recital of the bill of lading for goods thus transported ordinarily
would declare "Said to Contain", "Shippers Load and Count", "Full Container Load", and the
amount or quantity of goods in the container in a particular package is only prima facie evidence
of the amount or quantity.A shipment under this arrangement is not inspected or inventoried by
the carrier whose duty is only to transport and deliver the containers in the same condition as
when the carrier received and accepted the containers for transport.The weight of the shipment
as indicated in the bill of lading is not conclusive as to the actual weight of the goods.
Consequently, the respondent must still prove the actual weight of the subject shipment at the
time it was loaded at the port of origin so that a conclusion may be made as to whether there
was indeed a shortage for which petitioner must be liable.
2.) No. Though it is true that common carriers are presumed to have been at fault or to
have acted negligently if the goods transported by them are lost, destroyed, or deteriorated, and
that the common carrier must prove that it exercised extraordinary diligence in order to
overcome the presumption, the plaintiff must still, before the burden is shifted to the defendant,
prove that the subject shipment suffered actual shortage. In this case, respondent failed to
prove that the subject shipment suffered shortage, for it was not able to establish that the
subject shipment was weighed at the port of origin at Darrow, Louisiana, U.S.A. and that the
actual weight of the said shipment was 3,300 metric tons.
Second, as correctly asserted by petitioner ATI, the shortage, if any, may have been due
to the inherent nature of the subject shipment or its packaging since the subject cargo was
shipped in bulk and had a moisture content of 12.5%.
Third, SC agreed with the petitioner ATI that respondent has not proven any negligence
on the part of the former.
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97
Eagle Express, asserts that it cannot be held liable for the damage to the merchandise
as it acted merely as a freight forwarders agent in the transaction. It allegedly facilitated the
transshipment of the cargo from Manila to Cebu but represented the interest of the cargo owner,
and not the carriers.
Aboitiz Shipping Corporation (Aboitiz), on the other hand, points out, that it obviously
cannot be held liable for the damage to the cargo which, by UCPBs admission, was incurred
not during transshipment to Cebu on board one of Aboitizs vessels, but was already existent at
the time of unloading in Manila. Aboitiz also argues that Art. 366 of the Code of Commerce is
applicable and serves as a condition precedent to the accrual of UCPBs cause of action against
it.
The Memorandum filed by Pimentel Customs Brokerage Co. (Pimentel Customs), is also
a reiteration of the applicability of Art. 366 of the Code of Commerce.
Eagle Express averred in its Answer to Amended Complaint that the amended complaint
states no cause of action under the provisions of the Code of Commerce and the terms of the
bill of lading; consignee made no claim against herein defendant within twenty four (24) hours
following the receipt of the alleged cargo regarding the condition in which said cargo was
delivered; however, assuming arguendo that the damage or loss, if any, could not be
ascertained from the outside part of the shipment, consignee never made any claim against
herein defendant at the time of receipt of said cargo; herein defendant learned of the alleged
claim only upon receipt of the complaint.
Aboitiz also raised the defense that UCPB did not file a claim with it and that
the complaint states no cause of action.
ISSUE: Whether or not UCPB can claim damages against the respondents under Article 366 of
the Code of Commerce.
HELD: No. The law clearly requires that the claim for damage or average must be made within
24 hours from receipt of the merchandise if, as in this case, damage cannot be ascertained
merely from the outside packaging of the cargo.
The requirement to give notice of loss or damage to the goods is not an empty
formalism. The fundamental reason or purpose of such a stipulation is not to relieve the carrier
from just liability, but reasonably to inform it that the shipment has been damaged and that it is
charged with liability therefor, and to give it an opportunity to examine the nature and extent of
the injury. This protects the carrier by affording it an opportunity to make an investigation of a
claim while the matter is still fresh and easily investigated so as to safeguard itself from false
and fraudulent claims.
We have construed the 24-hour claim requirement as a condition precedent to the
accrual of a right of action against a carrier for loss of, or damage to, the goods. The shipper or
consignee must allege and prove the fulfillment of the condition. Otherwise, no right of action
against the carrier can accrue in favor of the former.
The shipment in this case was received by SMC on August 2, 1991. However, as found
by the Court of Appeals, the claims were dated October 30, 1991, more than three (3) months
from receipt of the shipment and, at that, even after the extent of the loss had already been
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determined by SMCs surveyor. The claim was, therefore, clearly filed beyond the 24-hour time
frame prescribed by Art. 366 of the Code of Commerce.
But what of the damage already discovered in the presence of Eagle Expresss
representative at the time the shipment was discharged in Manila? The Request for Bad Order
Survey and Turn Over Survey of Bad Order Cargoes, respectively dated June 17, 1999 and
June 28, 1991, evince the fact that the damage to the cargo was already made known to Eagle
Express and, possibly, SMC, as of those dates.
Sec. 3(6) of the COGSA provides a similar claim mechanism as the Code of Commerce
but prescribes a period of three (3) days within which notice of claim must be given if the loss or
damage is not apparent. It states:
Sec. 3(6). Unless notice of loss or damage and the general nature of
such loss or damage be given in writing to the carrier or his agent at the
port of discharge or at the time of the removal of the goods into the
custody of the person entitled to delivery thereof under the contract of
carriage, such removal shall be prima facie evidence of the delivery by
the carrier of the goods as descibed in the bill of lading. If the loss or
damage is not apparent, the notice must be given within three days of
the delivery.
Said notice of loss or damage may be endorsed upon the receipt of
the goods given by the person taking delivery thereof.
The notice in writing need not be given if the state of the goods has
at the time of their receipt been the subject of joint survey or inspection.
UCPB seizes upon the last paragraph which dispenses with the written notice if the state
of the goods has been the subject of a joint survey which, in this case, was the opening of the
shipment in the presence of an Eagle Express representative. It should be noted at this point
that the applicability of the above-quoted provision of the COGSA was not raised as an issue by
UCPB before the trial court and was only cited by UCPB in its Memorandum in this case.
UCPB, however, is ambivalent as to which party Eagle Express represented in the
transaction. By its own manifestation, East Asiatic, and not Eagle Express, acted as the agent
through which summons and court notices may be served on DAMCO. It would be unjust to
hold that Eagle Expresss knowledge of the damage to the cargo is such that it served to
preclude or dispense with the 24-hour notice to the carrier required by Art. 366 of the Code of
Commerce. Neither did the inspection of the cargo in which Eagle Expresss representative had
participated lead to the waiver of the written notice under the Sec. 3(6) of the COGSA. Eagle
Express, after all, had acted as the agent of the freight consolidator, not that of the carrier to
whom the notice should have been made.
At any rate, the notion that the request for bad order survey and turn over survey of bad
cargoes signed by Eagle Expresss representative is construable as compliant with the notice
requirement under Art. 366 of the Code of Commerce was foreclosed by the dismissal of the
complaint against DAMCOs representative, East Asiatic.
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Cusay, Jerman F.
101
Issue: (i) Whether or not the notice of claim was filed within the required period. If the answer is
in the affirmative.
(ii) Whether or not the damage to the cargo was due to the fault or negligence of the
respondent.
Ruling
The notice of claim was not filed within the required period.
Article 366 of the Code of Commerce is applicable to this case. As to the first issue, the
petitioner contended that the notice of contamination was given by Alfredo Chan, an employee
of PGP, to Ms. Encarnacion Abastillas, Vice President for Administration and Operations of the
respondent, at the time of the delivery of the cargo, and therefore, within the required period.
This was done by telephone.
The respondent, however, claims that the supposed notice given by PGP over the
telephone was denied by Ms. Abastillas. Between the testimonies of Alfredo Chan and
Encarnacion Abastillas, the latters testimony is purportedly more credible because it would be
quite unbelievable and contrary to business practice for Alfredo Chan to merely make a verbal
notice of claim that involves millions of pesos.
The court ruled that telephone call made to defendant-company could constitute
substantial compliance with the requirement of notice considering that the notice was given to a
responsible official, the Vice-President, who promptly replied that she will look into the matter.
However, it must be pointed out that compliance with the period for filing notice is an essential
part of the requirement, i.e. immediately if the damage is apparent, or otherwise within twentyfour hours from receipt of the goods, the clear import being that prompt examination of the
goods must be made to ascertain damage if this is not immediately apparent. The court have
examined the evidence and are unable to find any proof of compliance with the required period,
which is fatal to the accrual of the right of action against the carrier.
The filing of a claim with the carrier within the time limitation therefore actually
constitutes a condition precedent to the accrual of a right of action against a carrier for loss of,
or damage to, the goods. The shipper or consignee must allege and prove the fulfillment of the
condition. If it fails to do so, no right of action against the carrier can accrue in favor of the
former. The aforementioned requirement is a reasonable condition precedent; it does not
constitute a limitation of action.
The second paragraph of Article 366 of the Code of Commerce provides that it is not
only when the period to make a claim has elapsed that no claim whatsoever shall be admitted,
as no claim may similarly be admitted after the transportation charges have been paid. In this
case, there is no question that the transportation charges have been paid, as admitted by the
petitioner, and the corresponding official receipt duly issued. To conclude, there is no evidence
to confirm that the notice of claim was filed within the period provided for under Article 366 of the
Code of Commerce. There is no need to discuss the second issue because the filing of claim
against respondent is already prescribed.
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ISSUE: Whether or not Sumitomo, Chubbs predecessor-in-interest, validly made a claim for
damages against Lorenzo Shipping within the period prescribed by the Code of Commerce.
HELD:
Yes, the claim for damages has not yet prescribed at the time it was made.
Article 366 of the Code of Commerce states:
Within the twenty-four-hours following the receipt of the merchandise, the claim against the
carrier for damage or average, which may be found therein upon the opening of the packages,
may be made, provided that the indications of the damage or average which gives rise to the
claim cannot be ascertained from the outside part of such package, in which case the claim
shall be admitted only at the time of the receipt.
After the periods mentioned have elapsed, or transportation charges have been paid, no claim
shall be admitted against the carrier with regards to the condition in which the goods transported
were delivered.
A somewhat similar provision is embodied in the Bill of Lading No. T-3 which reads:
NOTE: No claim for damage or loss shall be honored twenty-four hours after delivery.
The twenty-four-hour period prescribed by Art. 366 of the Code of Commerce within
which claims must be presented does not begin to run until the consignee has received such
possession of the merchandise that he may exercise over it the ordinary control pertinent to
ownership. In other words, there must be delivery of the cargo by the carrier to the consignee at
the place of destination.
In the case at bar, consignee Sumitomo has not received possession of the cargo, and
has not physically inspected the same at the time the shipment was discharged from M/V
Lorcon IV in Davao City. Petitioner Lorenzo Shipping failed to establish that an authorized agent
of the consignee Sumitomo received the cargo at Sasa Wharf in Davao City. Respondent
Transmarine Carriers as agent of respondent Gearbulk, Ltd., which carried the goods from
Davao City to the United States, and the principal, respondent Gearbulk, Ltd. itself, are not the
authorized agents as contemplated by law. What is clear from the evidence is that the
consignee received and took possession of the entire shipment only when the latter reached the
United States shore. Only then was delivery made and completed. And only then did the 24hour prescriptive period start to run.
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Cheng,Renlyn B.
PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC. and TAGUM PLASTICS, INC.,
vs. SWEET LINES, INC.,
Case No. 54
Facts:
In or about March 1977, the vessel SS "VISHVA YASH" belonging to or operated by the
foreign common carrier, took on board at Baton Rouge, LA, two (2) consignments of cargoes for
shipment to Manila and later for transhipment to Davao City, consisting of 600 bags Low Density
Polyethylene 631 and another 6,400 bags Low Density Polyethylene 647, both consigned to the
order of Far East Bank and Trust Company of Manila, with arrival notice to Tagum Plastics, Inc.,
Madaum, Tagum, Davao City. In the course of time, the said vessel arrived at Manila and
discharged its cargoes in the Port of Manila for transhipment to Davao City. For this purpose,
the foreign carrier awaited and made use of the services of the vessel called M/V "Sweet Love"
owned and operated by defendant inter island carrier.Subject cargoes were loaded in Holds
Nos. 2 and 3 of the interisland carrier. These were commingled with similar cargoes belonging
to Evergreen Plantation and also Standfilco. On May 15, 1977, the shipment(s) were discharged
from the interisland carrier into the custody of the consignee. The survey shows shortages,
damages and losses, of said shipment totalling 7,000 bags, originally contained in 175 pallets,
only a total of 5,820 bags were delivered to the consignee in good order condition, leaving a
balance of 1,080 bags. Some bags were either shortlanded or were missing, and some of the
1,080 bags were torn, the contents thereof partly spilled or were fully/partially emptied, but,
worse, the contents thereof contaminated with foreign matters and therefore could no longer
serve their intended purpose.
A maritime suit was commenced on May 12, 1978 by herein Petitioner Philippine
American General Insurance Co., Inc. (Philamgen) and Tagum Plastics, Inc. (TPI) against
private respondents Sweet Lines, Inc. (SLI) and Davao Veterans Arrastre and Port Services,
Inc. (DVAPSI), along with S.C.I. Line (The Shipping Corporation of India Limited) and F.E.
Zuellig, Inc., seeking recovery of the cost of lost or damaged shipment.
Issues:
1.) Whether or not notice of claim is neccessary to enforce the carrier's liability?
2.) Whether or not paragraph 5 of the bills of lading which unequivocally prescribes a time frame
of thirty (30) days for filing a claim with the carrier in case of loss of or damage to the cargo and
sixty (60) days from accrual of the right of action for instituting an action in court is valid?
Ruling:
1.) Yes. where the contract of shipment contains a reasonable requirement of giving
notice of loss of or injury to the goods, the giving of such notice is a condition precedent to the
action for loss or injury or the right to enforce the carrier's liability. Such requirement is not an
empty formalism. The fundamental reason or purpose of such a stipulation is not to relieve the
105
carrier from just liability, but reasonably to inform it that the shipment has been damaged and
that it is charged with liability therefor, and to give it an opportunity to examine the nature and
extent of the injury. This protects the carrier by affording it an opportunity to make an
investigation of a claim while the matter is fresh and easily investigated so as to safeguard itself
from false and fraudulent claims. Stipulations in bills of lading or other contracts of shipment
which require notice of claim for loss of or damage to goods shipped in order to impose liability
on the carrier operate to prevent the enforcement of the contract when not complied with, that
is, notice is a condition precedent and the carrier is not liable if notice is not given in accordance
with the stipulation, as the failure to comply with such a stipulation in a contract of carriage with
respect to notice of loss or claim for damage bars recovery for the loss or damage suffered.
In the case at bar, there is neither any showing of compliance by petitioners with the
requirement for the filing of a notice of claim within the prescribed period nor any allegation to
that effect. It may then be said that while petitioners may possibly have a cause of action, for
failure to comply with the above condition precedent they lost whatever right of action they may
have in their favor or, token in another sense, that remedial right or right to relief had prescribed.
2.) Yes. The validity of a contractual limitation of time for filing the suit itself against a
carrier shorter than the statutory period therefor has generally been upheld as such stipulation
merely affects the shipper's remedy and does not affect the liability of the carrier. In the absence
of any statutory limitation and subject only to the requirement on the reasonableness of the
stipulated limitation period, the parties to a contract of carriage may fix by agreement a shorter
time for the bringing of suit on a claim for the loss of or damage to the shipment than that
provided by the statute of limitations. Such limitation is not contrary to public policy for it does
not in any way defeat the complete vestiture of the right to recover, but merely requires the
assertion of that right by action at an earlier period than would be necessary to defeat it through
the operation of the ordinary statute of limitations.
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Chan, Richard P.
FACTS:
On June 13, 1990, CMC Trading A.G. shipped on board the M/V 'Anangel Sky' at
Hamburg, Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation to
Manila consigned to the Philippine Steel Trading Corporation. On July 28, 1990, M/V Anangel
Sky arrived at the port of Manila and, within the subsequent days, discharged the subject cargo.
4 coils were found to be in bad order. Finding the 4 coils in their damaged state to be unfit for
the intended purpose, the consignee Philippine Steel Trading Corporation declared the same as
total loss.
Plaintiff-appellant paid the consignee P506,086.50, and was subrogated to the latter's
rights and causes of action against defendants-appellees. Subsequently, plaintiff-appellant
instituted this complaint for recovery of the amount paid by them, to the consignee as insured.
Petitioners claim that pursuant to Section 3, paragraph 6 of the Carriage of Goods by
Sea Act (COGSA), respondent should have filed its Notice of Loss within three days from
delivery. They assert that the cargo was discharged on July 31, 1990, but that respondent filed
its Notice of Claim only on September 18, 1990.
ISSUE: Whether the notice of loss was timely filed.
HELD:
First, the above-cited provision of COGSA provides that the notice of claim need not be
given if the state of the goods, at the time of their receipt, has been the subject of a joint
inspection or survey. As stated earlier, prior to unloading the cargo, an Inspection Report as to
the condition of the goods was prepared and signed by representatives of both parties.
Second, as stated in the same provision, a failure to file a notice of claim within three
days will not bar recovery if it is nonetheless filed within one year. This one-year prescriptive
period also applies to the shipper, the consignee, the insurer of the goods or any legal holder of
the bill of lading.
In Loadstar Shipping Co., Inc, v. Court of Appeals, we ruled that a claim is not barred by
prescription as long as the one-year period has not lapsed. Thus, in the words of the ponente,
Chief Justice Hilario G. Davide Jr.:
"Inasmuch as the neither the Civil Code nor the Code of Commerce states a specific
prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA)--which provides
for a one-year period of limitation on claims for loss of, or damage to, cargoes sustained during
transit--may be applied suppletorily to the case at bar."
107
In the present case, the cargo was discharged on July 31, 1990, while the Complaint was filed
by respondent on July 25, 1991, within the one-year prescriptive period.
108
Issue:
Whether or not M/V Cherokee was a private carrier so as to exempt it from the provisions
covering common carrier.
Whether or not Loadstar exercised the degree of diligence requires under the
circumstances
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Held:
Loadstar is a common carrier. The Court held that Loadstar is a common carrier. It is not
necessary that the carrier be issued a certificate of public convenience, and this public character
is not altered by the fact that the carriage of the goods in question was periodic, occasional,
episodic or unscheduled.
Further, the bare fact that the vessel was carrying a particular type of cargo for one
shipper, which appears to be purely co-incidental; it is no reason enough to convert the vessel
from a common to a private carrier, especially where, as in this case, it was shown that the
vessel was also carrying passengers.
The Civil Code defines common carriers in the following terms: Article 1732. Common
carriers are persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air for compensation, offering their
services to the public.
Article 1732 also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a
carrier offering its services to the "general public," i.e., the general community or population, and
one who offers services or solicits business only from a narrow segment of the general
population.
The doctrine of limited liability does not apply where there was negligence on the part of
the vessel owner or agent. Loadstar was at fault or negligent in not maintaining a seaworthy
vessel and in having allowed its vessel to sail despite knowledge of an approaching typhoon. In
any event, it did not sink because of any storm that may be deemed as force majeure, inasmuch
as the wind condition in the area where it sank was determined to be moderate. Since it was
remiss in the performance of its duties, Loadstar cannot hide behind the "limited liability"
doctrine to escape responsibility for the loss of the vessel and its cargo.
The claim in this case was not barred by prescription. MICs cause of action had not yet
prescribed at the time it was concerned. Inasmuch as neither the Civil Code nor the Code of
Commerce states a specific prescriptive period on the matter, the Carriage of Goods by Sea Act
(COGSA) which provides for a one-year period of limitation on claims for loss of, or damage
to, cargoes sustained during transit may be applied suppletorily to the case at bar. This oneyear prescriptive period also applies to the insurer of the good. In this case, the period for filing
the action for recovery has not yet elapsed. Moreover, a stipulation reducing the one-year period
is null and void; it must, accordingly, be struck down.
The petition is denied.
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Casipe, Rommel T.
Issue: Whether Cuas claim for payment of damages against the respondent has prescribed.
Held:
Cuas claim for payment of damages against respondent has not prescribed.
Respondents admitted the agreement extending the period to file the claim. The COGSA is the
applicable law for all the contracts for carriage of goods by sea to and from Philippine ports in
foreign trade; it is thus the law that the Court shall consider in the present case since the cargo
was transported from Brazil to the Philippines. Under section 3(6) of the COGSA, the carrier is
discharged from liability for loss or damage to the cargo unless the suit is brought within one
year after the delivery of the goods or the date when the goods should have been delivered.
Jurisprudence, however, recognized the validity of an agreement between the carrier and the
shipper/consignee extending the one-year period to file a claim. Although the complaint was
clearly filed beyond the one-year period, Cua additionally alleged in his complaint that the
defendants agreed to extend the time for filing of the action up to November 12, 1990. The
allegation of an agreement extending the period to file an action in Cuas complaint is a material
averment that, under Section 11, Rule 8 of the Rules of Court, must be specifically denied by
the respondent; otherwise, the allegation is deemed admitted. A review of the pleadings
111
submitted by the respondents discloses that they failed to specifically deny Cuas llegation of an
agreement extending the period to file an action to November 12, 1990.
112
Commonwealth Act (CA) No. 65. Motion for reconsideration was also denied. On appeal to the
SC, petitioner contends that the one-year limitation period for bringing a suit in court under the
COGSA is not applicable to the case, because the prescriptive period applies only to the carrier
and the ship and that they are not carrier.
Issue:
Whether the one-year prescriptive period for filing a suit under the COGSA applies to
this action for damages against respondent arrastre operator.
Held:
No. Paragraph (e), Section 1, Title I of CA No. 65 provides that: (e) the term "carriage of
goods" covers the period from the time when the goods are loaded to the time when they are
discharged from the ship. The term carriage of goods covers the period from the time when
the goods are loaded to the time when they are discharged from the ship; thus, it can be
inferred that the period of time when the goods have been discharged from the ship and given
to the custody of the arrastre operator is not covered by the COGSA. The prescriptive period
for filing an action for the loss or damage of the goods under the COGSA is also found in
paragraph (6), Section 3, which provide: xxx In any event the carrier and the ship shall be
discharged from all liability in respect of loss or damage unless suit is brought within one year
after delivery of the goods or the date when the goods should have been delivered xxx.
However, said COGSA provision does not mention that an arrastre operator may invoke the
prescriptive period of one year; hence, it does not cover the arrastre operator.
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Alegre, Mutya S.
The RTC dismissed the case holding that the action is upon a quasi-delict and as such
must be commenced within four years from the day they may be brought, which is the day the
quasi-delict occurred. The tort complained in the case occurred on 20 December 1987. The
action arising therefrom would prescribe on 20 December 1991. When the case was filed
against defendants on 5 March 1992, the action had already prescribed.
The CA reversed and held Vector and Soriano jointly and severally liable, absolving
Sulpicio Lines. It said that the claim is anchored on a breach of contract of affreightment and
under Article 1144 of the Civil Code, actions based on written contract must be brought within
10 years from the time the right of action accrued.
Issue: Whether the action of respondent was already barred by prescription for bringing it only
on March 5, 1992
Held:
We concur with the CA's ruling that respondent's action did not yet prescribe. The legal
provision governing this case is Article 1144 of the Civil Code, which states:
Article 1144. The following actions must be brought within ten years from the
the cause of action accrues:
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time
115
9. Teja Marketing vs. Intermediate Appellate Court, G.R. No. 65510, March 9, 1987
Cusay, Jerman F.
Issue: Whether or not respondent court erred in applying the doctrine of pari delicto.
Ruling
No. Supreme Court ruled that IAC did not err in applying the doctrine of pari delicto. The
parties herein operated under an arrangement, commonly known as the kabit system whereby a
person who has been granted a certificate of public convenience allows another person who
owns motor vehicles to operate under such franchise for a fee. A certificate of public
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convenience is a special privilege conferred by the government. Abuse of this privilege by the
grantees thereof cannot be countenanced. The kabit system has been identified as one of the
root causes of the prevalence of graft and corruption in the government transportation offices.
Although the motorcycle was allegedly purchased from the petitioner, the same
remained to be registered in the name of the petitioner and was operated under the latters
franchise pursuant to kabit system without prior approval of the appropriate government agency.
The court ruled that it will not aid either party to enforce illegal contract. It is in consonance of
the time-honored maxim that no action arises out of illicit bargain.
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