Transpo - 2

Obligation of the Common Carrier in a contract of carriage of goods
A. Vigilance over the goods
1. Duty to exercise extraordinary diligence
Art. 1733
Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound 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.
Such extraordinary diligence in the vigilance over the goods is further expressed in Articles 1734, 1735, and 1745,
Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in Articles
1755 and 1756.
COMMENT:
Extraordinary Diligence
(a) The hazards of modern transportation demand an extraordinary diligence in the vigilance over the goods they carry.
(Philippine American General Insurance Co. v. PKS Shipping Co., GR 149038, Apr. 9, 2003).
A common carrier is invested with public interest. (Pangasinan Trans. Co. v. Pub. Serv. Com., 70 Phil. 221).
(b) The relationship between common carrier and shipper contains factors which make up the concept of trust. (Yu Con v. Ipil,
41 Phil. 770).
However, a common carrier should not be considered as an absolute insurer against all risks of travel. (Lasam v. Smith,
45 Phil. 657).
Zulueta v. Pan American World Airways, Inc. 43 SCRA 397
Passengers should be treated by the employees of an airplane carrier with kindness and courtesy and should be
protected against indignities, abuses, and injurious language from such employees. In case of breach of contract, the
airline company should be liable for damages. Be it noted further that the contract of common air carriage generates a
relation attended with a public duty.
Davila v. Phil. Air Lines 49 SCRA 497
If passengers of an air carrier are injured or killed, the air carrier is presumed to have been at fault or to have acted
negligently. To escape liability, the carrier must prove it observed extraordinary diligence as prescribed in Arts. 1733 and
1755, Civil Code.
Samar Mining Co. v. Nordeutecher Lloyd L-28873, Oct. 23, 1984
A vessel is liable as a common carrier only up to the point of destination. After that, in case of a tranship- ment, it is a
mere agent of the consignee and will not be liable for loss or damage in the absence of its own negligence or malice.
Eastern Shipping Lines, Inc. v. CA GR 94151, Apr. 30, 1991
FACTS: On Sept. 4, 1978, 13 coils of uncoated-wire stress relieved wire strand for prestressed concrete were shipped on
board a vessel owned by defendant Eastern Shipping, at Kobe, Japan, for delivery to Stressteck Inc. in Manila, insured by
First Nationwide Assurance Corpora- tion for P171,923. The carrying vessel arrived in Manila and discharged the cargo to
Razon’s custody from the consignee’s warehouse. A year later, Nationwide Assur- ance indemnified Stressteck in the
amount of P171,923 for damage and loss of the insured cargo, whereupon Nationwide was subrogated for Stressteck.
Nationwide now seeks to recover from Eastern Shipping what it has indemnified Stressteck, less P48,293, the salvage
value of the merchandise of P123,629. The trial court dismissed the complaint. The Court of Appeals set aside the deci-
sion of the trial court and ordered Eastern Shipping to pay Nationwide P123,629, with legal rate of interest.
HELD: The Supreme Court sustained the Court of Appeals and held that while the cargo was delivered to while the cargo
was delivered to the arrastre operator in apparent good order condition it is also undisputed that while en route from Kobe
to Mamla, the vessel encountered “very rough seas and stormy weather, the coils wrapped in burlap cloth and cardboard
paper were stored in the lower hatch of the steel which was flooded with water about one foot deep. The water entered
the hatch. A survey of bad order cargo conducted in the Pier in the presence of representatives of the consignee and the
arrastre operator showed that seven coils were rusty on one side. The survey conducted at the consignee’s warehouse
showed that the wetting of the cargo was caused by fresh water that entered the hatch when the vessel encountered
heavy rains en route to Manila. All thirteen coils were rusty and totally unsuitable for the intended purpose. The heavy
seas and rains referred to in the master’s report were not caso fortuito, but normal occurrences that an ocean-going
vessel, particularly in the month of September which, in our area, is a month of rains and heavy seas would encounter as
a matter of routine. They are not unforeseen nor unforeseeable. These are conditions that an ocean-going vessel would
encounter and provide for, in the ordinary course of a voyage. That rain water (not sea water) found its way into the
holds of the ship indicates that care and foresight did not attend the closing of the ship’s hatches so that rain water would
not find its way into the cargo holds of the ship. Since the carrier has failed to establish any caso fortuito, the presumption
by law of fault or negligence on the part of the carrier applies. The carrier must present evidence that it has observed the
extraordinary diligence required by Article 1733 of the Civil Code in order to escape liability for damage or destruction to
the goods that it had admittedly carried. No such evidence exists. Thus, the carrier cannot escape liability. The
presumption is that the cargo was in apparent good condition when it was delivered by the vessel to the arrastre operator
but the clean tally sheets has been overturned and traversed. The damage to the cargo was suffered while aboard the
shipowner’s vessel.
Belgian Overseas Chartering & Shipping N.V. and Jardine Davies Transport Services, Inc. v. Phil. First Insurance
Co., Inc.  GR 143133, Jun. 5, 2002
FACTS: On Jun. 13, 1990, CMC Trading A.G. shipped on board the M/V ‘Anangel Sky’ at Hamburg, Germany 242 coils of
various Prime Coiled Steel sheets for transportation to Manila consigned to the Philippine Steel Trading Corp. (PSTC). On
Jul. 28, 1990, M/V Anangel Sky arrived at the Port of Manila and, within the subsequent days, discharged the subject
cargo. Four coils were found to be in bad order. Finding the coils in their damaged state to be unfit for the intended
purpose, consignee PSTC delared the same as total loss.
Despite receipt of a formal demand, defendants-appellees refused to submit to consignee’s claim. Consequently, plaintiff-
appellant paid 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
preshipment damage, to the inherent nature, vice or defect of the goods, or to perils, danger and accidents of the sea, or
to sufficiency of packing thereof, or to the act or omission of the shipper of the goods or their representatives.
In addition thereto, defendants-appellees argued their liability, if there be any, should not exceed the limitations of liability
provided for in the bill of lading and other pertinent laws. Finally, defendants-appellees averred that, in any event, they
exercised due diligence and foresight required by law to prevent any damage/loss to said shipment.
ISSUE: Whether petitioners have overcome the presumption of negligence of a common carrier.
HELD: Proof of delivery of goods in good order to a common carrier and of their arrival in bad order at their destination
constitutes prima facie fault or negligence on the part of the carrier. If no adequate explanation is given as to how the loss,
destruction, or deterioration of the goods happened, the carrier shall be held liable therefor.
That petitioners failed to rebut the prima facie presumption of negligence is revealed by a review of the records and
moreso by evidence adduced by respondent. Thus:
1. As stated in the Bill of Lading, petitioners received the subject shipment in good order and condition in Hamburg,
Germany.
2. Prior to the unloading of the cargo, on Inspec- tion 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.
3. Bad Order Tally Sheet 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. (International Container Services, Inc. v. Prudential Guarantee & Assurance Co., Inc., 320 SCRA 244 [1999]).
4. 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.
5. Petitioners –– in a letter –– addressed to the Philippine Steel Coating Corp. and dated Oct. 12, 1990 –– admitted that
they were aware of the conditions of the four coils found in bad order and condition.
All these conclusively proved the fact of shipment in good order and condition and the consequent damage to the four
coils while in the possession of petitioner. (Tabuena Insurance Co. v. North Front Shipping Services, Inc., 272 SCRA 527
[1997]), who notably failed to explain why.
Code of Commerce
ARTICLE 361. [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 363. Outside of the cases mentioned in the second paragraph of Article 361, the carrier shall be obliged to
deliver the goods shipped in the same condition in which, according to the bill of lading, they were found at the time they
were received, without any damage or impairment, and failing to do so, to pay the value which those not delivered may
have at the point and at the time at which their delivery should have been made.
If those not delivered form part of the goods transported, the consignee may refuse to receive the latter, when he proves
that he cannot make use of them independently of the others.
ARTICLE 364. If the effect of the damage referred to in Article 361 is merely a diminution in the value of the goods, the
obligation of the carrier shall be reduced to the payment of the amount which, in the judgment of experts, constitutes such
difference in value.
ARTICLE 365. If, in consequence of the damage, the goods are rendered useless for sale and consumption for the
purposes for which they are properly destined, the consignee shall not be bound to receive them, and he may have them
in the hands of the carrier, demanding of the latter their value at the current price on that day.
If among the damaged goods there should be some pieces in good condition and without any defect, the foregoing
provision shall be applicable with respect to those damaged and the consignee shall receive those which are sound, this
segregation to be made by distinct and separate pieces and without dividing a single object, unless the consignee proves
the impossibility of conveniently making use of them in this form. The same rule shall be applied to merchandise in bales
or packages, separating those parcels which appear sound.
2. Presumption of negligence
Art 1735
Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, 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 that they observed extraordinary diligence as required in Article 1733.
COMMENT: 
(1) Presumption of Fault or Negligence
(a) General Rule  Carrier is presumed at fault. (Tan Lico v. American   President Lines, Ltd., 98 Phil. 203).  
(b) Exceptions (Nos. 1 to 5, Art. 1734)   Here, the carrier is NOT presumed to be at fault. (Gov’t. v. Ynchausti, 40 Phil.
219). But shipper may prove carrier’s fault, in which case the carrier will be liable. (NOTE: Here the onus probandi will be
on the shipper.) (G. Martini, Ltd. v. Macondray and Co., 39 Phil. 934).  
Philippine American General Insurance Co. v. PKS Shipping Co.  GR 149038, Apr. 9, 2003
Art. 1735 provides that in case of loss, destruction, or deterioration of goods, common carriers are presumed to have
been at fault or to have acted negligently and the burden of proving otherwise rests on them.
[NOTE: Carriers or depositaries sometimes require the presentation of claims within a short period of time after delivery
as a condition precedent to their liability for losses. Such a requirement is not empty formalism. It has a definite purpose,
i.e., to afford the carrier or depositary a reasonable opportunity as well as facilities to check the validity of the claims while
the facts are still fresh in the minds of the persons who took part in the transaction and documents are still available.
(Consunji, et al. v. Manila Port Service, et al., L-15551, Nov. 29, 1960).]
(2) Defense Under Art. 1735
The carrier must prove extraordinary diligence. If the employees were at fault, the carrier is necessarily at fault, in view of
the master and servant rule in culpa contractual; and here, due diligence by the carrier in the selection and supervision of
its employees would not be a complete and valid defense. (See MRR v. Compania Transatlantica, 38 Phil. 875). The
owner of a vessel who had caused the same to sail without licensed officers, is liable for the injuries caused by the
collision over and beyond the value of his vessel; hence, he cannot escape liability because of the sinking of the vessel.
(Manila Steamship Co. v. Insa Abdulhanan and Lim Hong To, L-9534, Sept. 29, 1956, 52 O.G. 7587).
3. Duration of liability
Art. 1736
Art. 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are uncondition-
ally placed in the possession of, and received by the carrier for transportation until the same are delivered,
actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them,
without prejudice to the provisions of Article 1738.
COMMENT:
(1) Reason for the Extraordinary Responsibility of the Common Carrier
The carrier is in POSSESSION, so it must be responsible. (Yu Con v. Ipil, 41 Phil. 770). The obligation of the carrier to
carry the goods includes the duty not to delay their transportation, so that if the goods are lost or damaged by reason of
an unjustified delay, the carrier is held liable therefor. (Tan Liao v. American President Lines, Ltd., 98 Phil. 203).
(2) When Liability may be Limited
If the property has been turned over to the customs authorities, it is permissible here to limit the liability of the carrier
although strictly speaking, the consignee has not yet received the goods. (Lu Do v. Binamira, 101 Phil. 120).
(3) Misdelivery
If a carrier delivers to the WRONG person, there is a misdelivery for which it can be held responsible. And this is true
even if the shipper has already attempted to recover from such WRONG person. (Tan Pho v. Dalamal, 67 Phil. 555).
Ang v. Compania Maritima L-30806, Dec. 26, 1984
An action for damages because of misdelivery of cargo by an ocean-going liner (a common carrier) prescribes in 10 years
from the time of the accrual of the cause of action (if the action is based on a written contract) or in 4 years if the suit is
based on a quasi-delict. Hence, if action is filed 3 years after accrual, no prescription has set in. In case of loss of cargo,
the period is only one (1) year.
Art. 1737. The common carrier’s duty to observe extraordinary diligence in the vigilance over the goods
remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper
or owner has made use of the right of stoppage in transitu.
COMMENT:  (1) Continuing Liability
Note that liability exists even if the goods are:
(a) temporarily unloaded, or  
(b) stored in transit.  
(2) Exception
Exception is when the right of stoppage in transitu has been exercised. Here, strictly speaking, there is no more contract
of carriage. And the carrier as depositary, will also be liable as such depositary, and not as carrier. (9 Am. Jur. 829).
Art. 1738. The extraordinary liability of the common carrier continues to be operative even during the time the
goods are stored in a warehouse of the carrier at the place of destination, until the consignee has been advised
of the arrival of the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose
of them.
COMMENT: 
Liability While in the Warehouse
Here, for the extraordinary liability to continue, the right of stoppage in transitu must not have been exercised.
4. Defenses of common carriers

Art. 1734
VIGILANCE OVER GOODS
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the
same is due to any of the following causes only:
(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.
COMMENT:  (1) When Common Carrier Is Not Liable
In the instances enumerated in this article, the common carrier is NOT responsible. However, if there be fault on the part
of the carrier, it will be LIABLE. (See Art. 1739).
Philippine American General Insurance Company v. PKS Shipping Company GR 149038, Apr. 9, 2003
FACTS: Davao Union Marketing Corp. (DUMC) contracted the services of respondent PKS Shipping Co. (PKS) for the
shipment to Tacloban City of 75,000 bags of cement worth P3,375,000. DUMC insured the goods for its full value with
petitioner Philippine American General Insurance Co. (Philamgen). The goods were loaded aboard the barge Limar I
belonging to PKS Shipping. On Dec. 22, 1993, about 9 p.m., while Limar I was being towed by respondent’s tugboat, MT
Iron Eagle, the barge sank a couple of miles off the coast of Dumagasa Point, in Zamboanga del Sur, bringing down with
it the entire cargo of 75,000 bags of cement. DUMC filed a formal claim with Philamgen for the full amount of the
insurance. Phimlangen promptly made payment; it then sought reimbursement from PKS Shipping of the sum paid to
DUMC but the shipping company refused to pay.
HELD: As gathered from testimonies and sworn marine protests of the respective vessel masters of Limar I and MT Iron
Eagle, there was no way by which the barge’s or the tug- boats crew could have prevented the sinking of Limar I. The
vessel was suddenly tossed by waves of extraordinary height of 6-8 ft. and buffeted by strong winds of 1.5 knots resulting
in the entry of water into the barge’s hatches. The official Certificate of Inspection of the barge issued by the Philippine
Coastguard and the Coastwise Load Line Certificate would attest to the seaworthiness of Limar I. All given then, PKS is
absolved from liability for the loss of the DUMC cargo.
(2) Burden of Proof
(a) The owner of a vessel is obliged to prove that the damage was caused by one of the excepted causes if it seeks
exemption from responsibility. (Martini Limited v. Macondray and Co., 39 Phil. 934).  
(b) If the parties agreed that the payment of the price of the copra sold was to be according to the “net landed weight”
upon arrival in New York, the vendor has the burden of proof to show that the shortage in weight upon arrival was due to
the risks of the voyage and not to the natural drying up of the copra while in transit. (General Foods Corporation v. Nat.
Coconut Corp., L-8717, Nov. 20, 1956, 53 O.G. 652).  
(3) Concept of ‘Public enemy’
This refers to the government with which the country of the carrier is at war; also to pirates, who are enemies of all
mankind. (See 9 Am. Jur., p. 860).
(4) Act or Omission
The “act or omission of the shipper or owner of the goods” may be willful or negligent. (See 9 Am. Jur., p. 865).
(5) Order or Act of Competent Public Authority
“Order or act of competent public authority”: may refer to destruction or seizure because the goods may be “prohibited
goods” or “dangerous to life and property” or “infected with disease.” Over and above contractual stipulations is POLICE
POWER. (See 9 Am. Jur., pp. 861-862).
a. Fortuitous event
Art. 1739
b. Public enemy
Art. 1739
Art. 1739. In order that the common carrier may be exempted from responsibility, the natural disaster must have
been the proximate and only cause of the loss. However, the common carrier must exercise due diligence to
prevent or minimize loss before, during and after the occurrence of flood, storm, or other natural disaster in
order that the common carrier may be exempted from liability for the loss, destruction, or deterioration of the
goods. The same duty is incumbent upon the common carrier in case of an act of the public enemy referred to in
Article 1734, No. 2.
COMMENT: 
Natural Disaster Being the Cause
If the proximate cause is a combination of both natural disaster and negligence, the carrier is also liable. (9 Am. Jur. 864).
In case of collision between two vessels imputable to their mutual fault, each vessel shall suffer her own damage and
both shall be solidarily liable for the damages occasioned to their cargoes. (Art. 827, Code of Commerce and Manila
Steamship Co. v. Insa Abdulhanan, L-9534, Sept. 29, 1956).
Philippine American General Insurance Co., Inc. v. MGG Marine Services, Inc. & Doroteo Gaerlan  GR 135645,
Mar. 8, 2002
FACTS: This petition for review seeks the reversal of a Court of Appeals (CA) decision which absolved private re-
spondents MCG Marine Services, Inc. and Doroteo Gaerlan of any liability regarding the loss of the cargo belonging to
San Miguel Corp. (SMC) due to the sinking of the M/V Peatheray Patrick-G (M/V PP-G) owned by Gaerlan with MCG
Marine Services, Inc. as agent. SMC insured beer bottle cases with an aggregate value of P5,836,222.80 with petitioner
Philippine American General Insurance Co. The cargo were loaded on board the M/V PP-G to be transported from
Mandaue City to Bislig, Surigao del Sur.
The weather was calm when the vessel started its voyage. But the following day, M/V PP-G listed and subsequently sunk
off Cawit Point, Cortes, Surigao del Sur. As a consequence thereof, the cargo belonging to SMC was lost. The latter, as a
subsequence, claimed the amount of its loss from petitioner. Upon investigation, it was found out that the proximate
cause of the listing and subsequent sinking of the vessel was the shifting of ballast water from starboard to portside, and
which allegedly affected the stability of M/V PP-G. Thereafter, petitioner paid SMC the full amount of P5,836,222.80
pursuant to the terms of their insurance contract. Petitioner as subrogee of SMC thereupon filed with the Makati RTC a
collection case against private respondents to recover the amount it paid to SMC for the loss of the latter’s cargo.
Meanwhile, the Board of Marine Inquiry (BMI) conducted its own investigation of the sinking of M/V PP-G. After 1/2 years,
the Board rendered its decision exonerating the captain and crew of the ill-fated vessel for any administrative liability. It
found that the cause of the vessel’s sinking was existence of strong winds and enormous waves in Surigao del Sur, a
fortuitous event that could not have been forseen at the time M/V PP-G left the port of Mandaue City, and further holding
that said fortuitous even was the proximate and only cause of the vessel’s sinking.
Accordingly, the Makati RTC promulgated its decision finding private respondents solidarily liable for the loss of SMC’s
cargo and ordering them to pay petitioner the full amount of the lost cargo plus legal interest, attorney’s fees, and costs of
suit. Private respondents appealed the trial court’s decision to the Court of Appeals (CA). The latter issued the assailed
decision, which reversed the RTC’s ruling. The CA held that private respondents could not be held liable for the loss of
SMC’s cargo because said loss occurred as a consequence of a fortuitous event, and that such fortuitous even was
proximate and only cause of the loss. Petitioner, thus, filed the present petition.
ISSUES: Whether the loss of the cargo was due to the occurrence of a natural disaster, and if so, whether such national
disaster was the sole and proximate cause of the loss or whether private respondents were partly to blame for failing to
exercise due diligence to prevent the loss of the cargo.
HELD: 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. (Art.
1733 [par. 1]). Owing to this high degree of diligence required of them, common carriers as a general rule, are presumed
to have seen at fault or negligent if the goods transported by them are lost, destroyed, or if the same deteriorated.
However, this presumption of fault or negligence does not arise in the case enumerated under Art. 1734. In order that a
common carrier may be absolved from liability where the loss, destruction, or deterioration of the goods is due to a natural
disaster or calamity, it must further be shown that such natural disaster or calamity was the proximate cause of the loss
(Art. 1739) there must be an entire exclusion of human agency from the cause of the injury or the loss.
Even in cases where a natural disaster is the proximate and only cause of the loss, a common carrier is still required to
exercise due diligence to prevent of minimize loss before, during, and after the occurrence of the natural disaster, for it
to be exempt from liability under the law for the loss of the goods. (Art. 1739). (Yobido v. CA, 281 SCRA 1 [1997]). If a
common carrier fails to exercise due diligence — or that ordinary care which the circumstances of the particular case
demand (See Compa- nia Maritima v. Insurance Co. of North America, 12 SCRA 213 [1964]) — to preserve and protect
the goods carried by it on the occasion of a natural disaster, it will be deemed to have been negligent, and the loss will
not be considered as having been due to a natural disaster under Art. 1734(1).
In the instant controversy, although the BMI ruled only on the administrative liability of the captain and crew of M/V PP-G,
it had to conduct a thorough investigation of the circumstances surrounding the sinking of the vessel and the loss of its
cargo in determining their responsibility, if any. The results of its investigation as embodied in its decision on the
administrative case clearly indicate that the loss of the cargo was due solely to the attendance of strong winds and huge
waves which caused the vessel to accumulate water, tilt to the port side, and to eventually keel over. There was, thus, no
error on the part of the CA in relying on the factual findings of the BMI, for such factual findings, being supported by
substantial evidence are persuasive, considering that said administrative body is an expert in matters concerning marine
casualties. (See Vasquez v. CA, 138 SCRA 553 [1985]).
Since the presence of strong winds and enormous waves at Cortes, Surigao del Sur shown to be the proximate and only
cause of the sinking of M/V PP-G and the loss of the cargo belonging to SMC, private respondents cannot be held liable
for the said loss. The assailed CA Decision is affirmed and the petition denied.
Art. 1740. If the common carrier negligently incurs in delay in transporting the goods, a natural disaster shall not
free such carrier from responsibility.
COMMENT: 
(1) Effect of Default Caused by Negligence
If the natural disaster occurs when the carrier is already in default (because of its negligence), the carrier can still be held
liable.
(2) BAR
Under what circumstances is the carrier liable for the losses and deterioration suffered by the goods transported by
reason of fortuitous events, force majeure, or the inherent nature and defects of the goods?
ANS.:
. (a) If the carrier is in default. (Art. 1740).  
. (b) If the carrier did not exercise due diligence to prevent or minimize the loss. (Arts. 1739 and 1742).  
c. Improper packing
Art. 1742
Art. 1742. Even if the loss, destruction, or deterioration of the goods should be caused by the character of the
goods, or the faulty nature of the packing or of the containers, the common carrier must exercise due diligence
to forestall or lessen the loss.
COMMENT:
If Cause Be the Character of the Goods or Faulty Pack- ing
This Article stresses the duty of the carrier to prevent or minimize the loss, even if it was not at fault.
d. Order of public authority
Art. 1743
Art. 1743. If through the order of public authority the goods are seized or destroyed, the common carrier is not
responsible, provided said public authority had power to issue the order.
COMMENT: 
Seizure or Destruction by Order of Public Authority
The public authority must have had the power, not merely apparent power.
5. Contributory negligence of the shipper

Art. 1741
Art. 1741. If the shipper or owner merely contributed to the loss, destruction, or deterioration of the goods, the
proximate cause thereof being the negligence of the common carrier, the latter shall be liable in damages,
which however, shall be equitably reduced.
COMMENT: 
Contributory Negligence of the Shipper or Owner
The contributory fault of the shipper or owner reduces the carrier’s liability. The carrier’s negligence must of course still be
the proximate cause.
6. Stipulation limiting liability of carrier

Art. 1744
Art. 1744. A stipulation between the common carrier and the shipper or owner limiting the liability of the former
for the loss, destruction, or deterioration of the goods to a degree less than extraordinary diligence shall be valid,
provided it be:
. (1) In writing, signed by the shipper or owner;  
. (2) Supported by a valuable consideration other than  
the service rendered by the common carrier; and
(3) Reasonable, just and not contrary to public policy.
COMMENT:   Diligence Less Than Extraordinary
(a) Note that the three requisites are necessary. Note also that if the stipulation is oral, said stipulation is VOID.
Moreover, the diligence, while less than extraordinary, should NOT be less than ordinary. (See Art. 1745, No. 4).
(b) If there be a reduction in the freight or rate, there is a sufficient “valuable consideration,” which can limit but not
exempt the carrier’s liability for negligence. (See 9 Am. Jur. 870; Art. 1758).
Art. 1748
Art. 1748. An agreement limiting the common carrier’s liability for delay on account of strikes or riots is valid.
COMMENT:   Effect of Strikes or Riots
The Article is self-explanatory. Whether the strikes are legal or illegal is immaterial.
Art. 1749. A stipulation that the common carrier’s liability is limited to the value of the goods appearing in the
bill of lading, unless the shipper or owner declares a greater value, is binding.
COMMENT:  (1) Stipulation Limiting Carrier’s Liability
This rule was enunciated in Heacock Co. v. Macondray and Co., 42 Phil. 205; Freixas and Co. v. Pac. Mail Steamship Co,
42 Phil. 198.
(2) Rule in Carriage of Goods by Sea Act
The provision in Sec. 4(5) of the Carriage of Goods by Sea Act stating that the carrier shall not be liable in an amount
exceeding $500 per package unless the value of the goods had been declared by the shipper and inserted in the bill of
lading is similar to Art. 1749 of the Civil Code. (See American President Lines, Ltd. v. Klepper, et al., L-15671, Nov. 29,
1960).
(3) Cases
Belgian Overseas Chartering & Shipping N.V. v. Phil. First Insurance Co.  GR 143133, Jun. 5, 2002
Under the COGSA, 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.
Failure to file a notice of claim within 3 days will not bar recovery if it is nonetheless filed within 1 year. This 1-year
prescriptive period also applies to the shipper, the consignee, the insurer of the goods or any legal holder of the bill of lad-
ing.
A stipulation in the bill of lading limiting to a certain sum of 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 (2) 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.
Wallem Philippines Shipping, Inc. & Seacoast Maritime Corp. v. Prudential Guarantee
& Assurance, Inc. and CA GR 152158, Feb. 7, 2003
FACTS: Private respondent Prudential Guarantee & As- surance, Inc. brought an action for damages and attorney’s fees
against Wallem Philippines Shipping Inc. and Seacoast Maritime Corp. Prudential sought the recovery of the sum of
P995,677, representing the amount it had paid to its insured, General Milling Corp. (GMC), for alleged shortage incurred
in the shipment of “Indian Toasted Soyabean Extraction Meal, Yellow,” with 6% legal interest thereon from the date of
filing of the complaint up to and until the same is fully paid, and 25% of the claim as attorney’s fees.
In its answer, Wallen denied liability for damage or loss to the shipment. It was alleged that:
1. the complaint did not state a cause of action against it;
2. Prudential, Wallen, and Seacoast were not the real parties-in-interest;
. the action had prescribed;  
. the damage or loss, if any, was due to the inher-  

ent vice or defect of the goods, or to perils, dangers, and accidents of the sea, for which Wallen was not liable;
5. the damage or loss to the shipment was due to an act or omission of Prudential or the owner of the goods or their
representative, or to pre-shipment damage for which Wallen was not liable;
6. the shipment was carried on a “shipper’s description of pages and content,” “said to weigh,” “in bulk,” and “free out”
basis;
7. based on the provisions of the bill of lading, Prudential had the burden of proving the actual quantity of cargo loaded at
the loading port;
8. Prudential had not contract with Wallen, which acted as a mere agent of a disclosed principal;
9. Wallen had observed the diligence required under the law in the care of the shipment;
10. the shipment was discharged in the same quantity as when it was loaded at the port of loading;
11. any loss incurred during and after discharge from the vessel was no longer the responsibility of the carrier;
12. Wallen could not be made liable for the loss or damage, if any, of the goods which happened whilst the same were
not on its possession and control;
13. Prudential’s claim was excessive and exagger- ated; and
14. Wallen’s liability, if any, should not exceed the invoice value of the alleged loss or to applicable package limitation,
whichever was lower, or the limit of liability set in the bill of lading.
Wallen filed a compulsory counterclaim against Pruden- tial as the complaint was allegedly a clearly unfounded civil
action. Wallen filed a cross-claim against its co-defendant seacoast, in the even that it was made liable by Prudential.
Upon motion of Prudential’s counsel, defendant Seacoast was declared in default. After termination of the pre-trial confer-
ence, this case was tried on the merits.
The trial court ruled that private respondent Prudential failed to prove by clear, convincing, and competent evidence that
there was a shortage in the shipment. The court said that Prudential failed to establish by competent evidence the
genuineness and due execution of the bill of lading, and, therefore, the true and exact weight of the shipment when it was
loaded unto the vessel. Hence, there was no way by which a shortage could be determined. The court further ruled that
the shortage, if any, could only have been incurred either before the loading of the shipment, or after the unloading of the
shipment from the vessel, the latter instances being admit ted. Accordingly, the trial court dismissed both the complaint
and the counterclaim.
On appeal, the Court of Appeals (CA) reversed and ruled that the bill of lading was prima facie evidence of the goods
therein described, both notations “said to contain” and “weight unknown” on the bill of lading being inapplicable to
shipments in bulk; that losses were incurred during the loading operations, and that these losses were the liability of the
carrier. The CA also ruled that the principle of indemnity is violated if the insured is paid a benefit more than the loss
incurred in light of the admission of a 20% mark-up on the indemnity paid to GMC. Petitioner Wallen moved for
reconsideration, but its motion was denied. Hence, this appeal.
HELD: The CA erred in finding that a shortage had taken place with Prudential claims processor’s testimony regarding the
contents of the documents considered hearsay, based as it is on the knowledge of another person not presented on the
witness stand. (See Benguet Exploration, Inc. v. CA, 351 SCRA 445 [2001]). Nor has the genuineness and due execution
of these documents been established.
In ruling that the contents of the bill of lading cannot be controverted by evidence to the contrary because it was “prima
facie evidence of the goods therein described,” the CA further erred. Wallem’s 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 because the hatches were closed. It was shown that, after the shipment was unloaded from the vessel, it was
weighed with the use of GMC’s weighing scale, which was later found to be defective.
The CA’s decision and resolution is reversed and the decision of RTC Makati Br. 134, dismissing the complaint and
counterclaim, is reinstated.
Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or
deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and
freely agreed upon.
a. Requisites
Art. 1744
Art. 1744. A stipulation between the common carrier and the shipper or owner limiting the liability of the former
for the loss, destruction, or deterioration of the goods to a degree less than extraordinary diligence shall be valid,
provided it be:
. (1) In writing, signed by the shipper or owner;  
. (2) Supported by a valuable consideration other than  
the service rendered by the common carrier; and
(3) Reasonable, just and not contrary to public policy.
COMMENT:  Diligence Less Than Extraordinary
(a) Note that the three requisites are necessary. Note also that if the stipulation is oral, said stipulation is VOID.
Moreover, the diligence, while less than extraordinary, should NOT be less than ordinary. (See Art. 1745, No. 4).
(b) If there be a reduction in the freight or rate, there is a sufficient “valuable consideration,” which can limit but not
exempt the carrier’s liability for negligence. (See 9 Am. Jur. 870; Art. 1758).
Art. 1751. The fact that the common carrier has no competitor along the line or route, or a part thereof, to which
the contract refers shall be taken into consideration on the question of whether or not a stipulation limiting the
common carrier’s liability is reasonable just and in conso- nance with public policy.
COMMENT:  Effect of Lack of Competition
Lack of competition may lead to undue influence.
b. Invalid stipulation
Art. 1745
Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to
public policy:
(1) That the goods are transported at the risk of the owner or shipper;
(2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods;
(3) That the common carrier need not observe any diligence in the custody of the goods;
(4) That the common carrier shall exercise a degree of diligence less than that of a good father of a family, or of a
man of ordinary prudence in the vigilance over the movables transported;
(5) That the common carrier shall not be responsible for the acts or omissions of his or its employees;
(6) That the common carrier’s liability for acts committed by thieves, or of robbers who do not act with grave or
irresistible threat, violence or force, is dispensed with or diminished;
(7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on account of
the defective condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage.
COMMENT:  Void Stipulations
. (a) The seven stipulations enumerated in the Article are void.  
. (b) Meaning of No. (1): Necessarily, goods are transported at the risk of the owner or shipper. Thus, when goods are lost
by a fortuitous event, the owner or shipper bears  
(c) the loss. What No. (1) of Art. 1745 means is simply that it is unreasonable, unjust and contrary to public policy to
stipulate that the owner or shipper bears the risk or loss in ALL cases.
Case:
Pedro de Guzman v. CA & Ernesto Cendaña L-47822, Dec. 22, 1988
FACTS: Armed men held up the second truck owned by private respondent which carried petitioner’s cargo. The record
shows that an information for robbery in band was filed in the CFI (now RTC) of Tarlac, Branch 2, in Criminal Case No.
198 entitled “People of the Phils. v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe.”
There, the accused were charged with wilfully and unlawfully taking and carrying away with them the second truck,
driven by Manuel Estrada and loaded with 600 cartons of Liberty filled milk destined for delivery at petitioner’s store in
Urdaneta, Pangasinan. The decision of the trial court shows that the accused acted with grave, if not irresistible, threat,
violence or force. Three (3) of the five (5) hold-uppers were armed with firearms. The robbers not only took away the truck
and its cargo but also kidnapped the driver and his helper, detaining them for several days and later releasing them in
another province (in Zambales). The hijacked truck was subsequently found by the police in Quezon City. The CFI (now
RTC) convicted all the accused of robbery, though not of robbery in band.
HELD: In these circumstances, the occurrence of the loss must reasonably be regarded as quite beyond the control of the
common carrier and properly regarded as a fortuitous event. It is necessary to recall that even common carriers are not
made absolute insurers against all risks of travel and of transport of goods, and are not held liable for acts or events
which cannot be foreseen or are inevitable, provided that they shall have complied with the rigorous standard of
extraordinary diligence. Accordingly, therefore, private respondent Cendana is not liable for the value of the undelivered
merchandise
c. Effect of delay
Art. 1747
Art. 1747. If the common carrier without just cause, delays the transportation of the goods or changes the
stipulated or usual route, the contract limiting the common carrier’s liability cannot be availed of in case of the
loss, destruction, or deterioration of the goods.
COMMENT:  Effect of Default or Change of Route
Limited liability, even if previously agreed upon, cannot be availed of in case of:
. (a) unjustified DEFAULT,  
. (b) or unjustified CHANGE OF ROUTE.  
d. Rule on presumption of negligence despite stipulation

Art. 1752
Art. 1752. Even when there ie an agreement limiting the liability of the common carrier in the vigilance over the
goods, the common carrier is disputably presumed to have been negligent in case of their loss, destruction or
deterioration.
COMMENT:
Presumption of Negligence Even if There Is Agreement on Limited Liability
Note that the presumption of negligence is present even here.
B. Other obligations
1. Duty to accept
a. Grounds for valid refusal to accept goods
2. Duty to deliver goods

a. Time of delivery
Art. 358
ARTICLE 358. If there is no period fixed for the delivery of the goods the carrier shall be bound to forward them in the
first shipment of the same or similar goods which he may make point where he must deliver them; and should he not do
so, the damages caused by the delay should be for his account.
b. Consequences of delay
Art. 1740
Art. 1740. If the common carrier negligently incurs in delay in transporting the goods, a natural disaster shall not
free such carrier from responsibility.
Art. 1747
Art. 1747. If the common carrier without just cause, delays the transportation of the goods or changes the
stipulated or usual route, the contract limiting the common carrier’s liability cannot be availed of in case of the
loss, destruction, or deterioration of the goods.
COMMENT:  Effect of Default or Change of Route
Limited liability, even if previously agreed upon, cannot be availed of in case of:
. (a) unjustified DEFAULT,  
. (b) or unjustified CHANGE OF ROUTE.  
Art. 370 – 374
ARTICLE 370. If a period has been fixed for the delivery of the goods, it must be made within such time, and, for failure
to do so, the carrier shall pay the indemnity stipulated in the bill of lading, neither the shipper nor the consignee being
entitled to anything else.
If no indemnity has been stipulated and the delay exceeds the time fixed in the bill of lading, the carrier shall be liable for
the damages which the delay may have caused.
ARTICLE 371. In case of delay through the fault of the carrier, referred to in the preceding articles, the consignee may
leave the goods transported in the hands of the former, advising him thereof in writing before their arrival at the point of
destination.
When this abandonment takes place, the carrier shall pay the full value of the goods as if they had been lost or mislaid.
If the abandonment is not made, the indemnification for losses and damages by reason of the delay cannot exceed the
current price which the goods transported would have had on the day and at the place in which they should have been
delivered; this same rule is to be observed in all other cases in which this indemnity may be due.
ARTICLE 372. The value of the goods which the carrier must pay in cases if loss or misplacement shall be determined
in accordance with that declared in the bill of lading, the shipper not being allowed to present proof that among the goods
declared therein there were articles of greater value and money.
Horses, vehicles, vessels, equipment and all other principal and accessory means of transportation shall be especially
bound in favor of the shipper, although with respect to railroads said liability shall be subordinated to the provisions of the
laws of concession with respect to the property, and to what this Code established as to the manner and form of effecting
seizures and attachments against said companies.
ARTICLE 373. The carrier who makes the delivery of the merchandise to the consignee by virtue of combined
agreements or services with other carriers shall assume the obligations of those who preceded him in the conveyance,
reserving his right to proceed against the latter if he was not the party directly responsible for the fault which gave rise to
the claim of the shipper or consignee.
The carrier who makes the delivery shall likewise acquire all the actions and rights of those who preceded him in the
conveyance.
The shipper and the consignee shall have an immediate right of action against the carrier who executed the
transportation contract, or against the other carriers who may have received the goods transported without reservation.
However, the reservation made by the latter shall not relieve them from the responsibilities, which they may have incurred
by their own acts.
ARTICLE 374. The consignees to whom the shipment was made may not defer the payment of the expenses and
transportation charges of the goods they receive after the lapse of twenty-four hours following their delivery; and in case
of delay in this payment, the carrier may demand the judicial sale of the goods transported in an amount necessary to
cover the cost of transportation and the expenses incurred.
c. Place of delivery
Art. 360
ARTICLE 360. The shipper, without changing the place where the delivery is to be made, may change the consignment
of the goods which he delivered to the carrier, provided that at the time of ordering the change of consignee the bill of
lading signed by the carrier, if one has been issued, be returned to him, in exchange for another wherein the novation of
the contract appears.
The expenses which this change of consignment occasions shall be for the account of the shipper.
d. To whom delivery shall be made
ARTICLE 368. The carrier must deliver to the consignee, without any delay or obstruction, the goods which he may
have received, by the mere fact of being named in the bill of lading to receive them; and if he does not do so, he shall be
liable for the damages which may be caused thereby.
ARTICLE 369. If the consignee cannot be found at the residence indicated in the bill of lading, or if he refuses to pay
the transportation charges and expenses, or if he refuses to receive the goods, the municipal judge, where there is none
of the first instance, shall provide for their deposit at the disposal of the shipper, this deposit producing all the effects of
delivery without prejudice to third parties with a better right.
Cases:
1. Delsan Transport Lines, Inc. vs. American Home Insurance GR No. 149019 August 15, 2006
DELSAN TRANSPORT LINES, INC., G.R. No. 149019

Petitioner,
Present:
PUNO, J., Chairperson,

- versus - SANDOVAL-GUTIERREZ,
CORONA,
AZCUNA, and
GARCIA, JJ.
AMERICAN HOME ASSURANCE
CORPORATION, Promulgated:
Respondent.
August 15, 2006
x------------------------------------------------------------------------------------x
DECISION
GARCIA, J.:
By this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Delsan Transport Lines, Inc. (Delsan
hereafter) assails and seeks to set aside the Decision,[1] dated July 16, 2001, of the Court of Appeals (CA) in CA-G.R. CV
No. 40951 affirming an earlier decision of the Regional Trial Court (RTC) of Manila, Branch IX, in two separate complaints
for damages docketed as Civil Case No. 85-29357 and Civil Case No. 85-30559.
The facts:
Delsan is a domestic corporation which owns and operates the vessel MT Larusan. On the other hand, respondent
American Home Assurance Corporation (AHAC for brevity) is a foreign insurance company duly licensed to do business
in the Philippines through its agent, the American-International Underwriters, Inc. (Phils.). It is engaged, among others, in
insuring cargoes for transportation within the Philippines.
On August 5, 1984, Delsan received on board MT Larusan a shipment consisting of 1,986.627 k/l Automotive Diesel Oil
(diesel oil) at the Bataan Refinery Corporation for transportation and delivery to the bulk depot in Bacolod City of Caltex
Phils., Inc. (Caltex), pursuant to a Contract of Afreightment. The shipment was insured by respondent AHAC against all
risks under Inland Floater Policy No. AH-IF64-1011549P and Marine Risk Note No. 34-5093-6.
On August 7, 1984, the shipment arrived in Bacolod City. Immediately thereafter, unloading operations commenced. The
discharging of the diesel oil started at about 1:30 PM of the same day. However, at about 10:30 PM, the discharging had
to be stopped on account of the discovery that the port bow mooring of the vessel was intentionally cut or stolen by
unknown persons. Because there was nothing holding it, the vessel drifted westward, dragged and stretched the flexible
rubber hose attached to the riser, broke the elbow into pieces, severed completely the rubber hose connected to the
tanker from the main delivery line at sea bed level and ultimately caused the diesel oil to spill into the sea. To avoid
further spillage, the vessels crew tried water flushing to clear the line of the diesel oil but to no avail. In the meantime, the
shore tender, who was waiting for the completion of the water flushing, was surprised when the tanker signaled a red light
which meant stop pumping. Unaware of what happened, the shore tender, thinking that the vessel would, at any time,
resume pumping, did not shut the storage tank gate valve. As all the gate valves remained open, the diesel oil that was
earlier discharged from the vessel into the shore tank backflowed. Due to non-availability of a pump boat, the vessel could
not send somebody ashore to inform the people at the depot about what happened. After almost an hour, a gauger and
an assistant surveyor from the Caltexs Bulk Depot Office boarded the vessel. It was only then that they found out what
had happened. Thereafter, the duo immediately went ashore to see to it that the shore tank gate valve was closed. The
loss of diesel oil due to spillage was placed at 113.788 k/l while some 435,081 k/l thereof backflowed from the shore tank.
As a result of spillage and backflow of diesel oil, Caltex sought recovery of the loss from Delsan, but the latter refused to
pay. As insurer, AHAC paid Caltex the sum of P479,262.57 for spillage, pursuant to Marine Risk Note No. 34-5093-6,
and P1,939,575.37 for backflow of the diesel oil pursuant to Inland Floater Policy No. AH-1F64-1011549P.
On February 19, 1985, AHAC, as Caltexs subrogee, instituted Civil Case No. 85-29357 against Delsan before the Manila
RTC, Branch 9, for loss caused by the spillage. It likewise prayed that it be indemnified for damages suffered in the
amount of P652,432.57 plus legal interest thereon.
Also, on May 5, 1985, in the Manila RTC, Branch 31, AHAC instituted Civil Case No. 85-30559 against Delsan for the
loss caused by the backflow. It likewise prayed that it be awarded the amount of P1,939,575.37 for damages and
reasonable attorneys fees. As counterclaim in both cases, AHAC prayed for attorneys fees in the amount of P200,000.00
and P500.00 for every court appearance.
Since the cause of action in both cases arose out of the same incident and involved the same issues, the two were
consolidated and assigned to Branch 9 of the court.
On August 31, 1989, the trial court rendered its decision[2] in favor of AHAC holding Delsan liable for the loss of the cargo
for its negligence in its duty as a common carrier. Dispositively, the decision reads:
WHEREFORE, judgment is hereby rendered:
A). In Civil Case No. 85-30559:
(1) Ordering the defendant (petitioner Delsan) to pay plaintiff (respondent AHAC) the sum of P1,939,575.37 with interest
thereon at the legal rate from November 21, 1984 until fully paid and satisfied; and
(2) Ordering defendant to pay plaintiff the sum of P10,000.00 as and for attorneys fees.
For lack of merit, the counterclaim is hereby dismissed.
B). In Civil Case No. 85-29357:
(1) Ordering defendant to pay plaintiff the sum of P479,262.57 with interest thereon at the legal rate from February 6,
1985 until fully paid and satisfied;
(2) Ordering defendant to pay plaintiff the sum of P5,000.00 as and for attorneys fees.
For lack of merit, the counterclaim is hereby dismissed.
Costs against the defendant.
SO ORDERED.
In time, Delsan appealed to the CA whereat its recourse was docketed as CA-G.R. CV No. 40951.
In the herein challenged decision,[3] the CA affirmed the findings of the trial court. In so ruling, the CA declared that
Delsan failed to exercise the extraordinary diligence of a good father of a family in the handling of its cargo. Applying
Article 1736[4] of the Civil Code, the CA ruled that since the discharging of the diesel oil into Caltex bulk depot had not
been completed at the time the losses occurred, there was no reason to imply that there was actual delivery of the cargo
to Caltex, the consignee. We quote the fallo of the CA decision:

WHEREFORE, premises considered, the appealed Decision of the Regional Trial Court of Manila, Branch 09 in
Civil Case Nos. 85-29357 and 85-30559 is hereby AFFIRMED with a modification that attorneys fees awarded in
Civil Case Nos. 85-29357 and 85-30559 are hereby DELETED.
SO ORDERED.
Delsan is now before the Court raising substantially the same issues proffered before the CA.
Principally, Delsan insists that the CA committed reversible error in ruling that Article 1734 of the Civil Code cannot
exculpate it from liability for the loss of the subject cargo and in not applying the rule on contributory negligence against
Caltex, the shipper-owner of the cargo, and in not taking into consideration the fact that the loss due to backflow occurred
when the diesel oil was already completely delivered to Caltex.
We are not persuaded.
In resolving this appeal, the Court reiterates the oft-stated doctrine that factual findings of the CA, affirmatory of
those of the trial court, are binding on the Court unless there is a clear showing that such findings are tainted with
arbitrariness, capriciousness or palpable error.[5]
Delsan would have the Court absolve it from liability for the loss of its cargo on two grounds. First, the loss
through spillage was partly due to the contributory negligence of Caltex; and Second, the loss through backflow should
not be borne by Delsan because it was already delivered to Caltexs shore tank.
Common carriers are bound to observe extraordinary diligence in the vigilance over the goods transported by
them. They are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or
deteriorated.[6] To overcome the presumption of negligence in case of loss, destruction or deterioration of the goods, the
common carrier must prove that it exercised extraordinary diligence. There are, however, exceptions to this rule. Article
1734 of the Civil Code enumerates the instances when the presumption of negligence does not attach:
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due
to any of the following causes only:
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.
Both the trial court and the CA uniformly ruled that Delsan failed to prove its claim that there was a contributory
negligence on the part of the owner of the goods Caltex. We see no reason to depart therefrom. As aptly pointed out by
the CA, it had been established that the proximate cause of the spillage and backflow of the diesel oil was due to the
severance of the port bow mooring line of the vessel and the failure of the shore tender to close the storage tank gate
valve even as a check on the drain cock showed that there was still a product on the pipeline. To the two courts below,
the actuation of the gauger and the escort surveyor, both personnel from the Caltex Bulk Depot, negates the
allegation that Caltex was remiss in its duties. As we see it, the crew of the vessel should have promptly informed the
shore tender that the port mooring line was cut off. However, Delsan did not do so on the lame excuse that there was no
available banca. As it is, Delsans personnel signaled a red light which was not a sufficient
warning because such signal only meant that the pumping of diesel oil had been finished. Neither did the blowing of
whistle suffice considering the distance of more than 2 kilometers between the vessel and the Caltex Bulk Depot, aside
from the fact that it was not the agreed signal. Had the gauger and the escort surveyor from Caltex Bulk Depot not gone
aboard the vessel to make inquiries, the shore tender would have not known what really happened. The crew of the
vessel should have exerted utmost effort to immediately inform the shore tender that the port bow mooring line was
severed.
To be sure, Delsan, as the owner of the vessel, was obliged to prove that the loss was caused by one of the excepted
causes if it were to seek exemption from responsibility. [7] Unfortunately, it miserably failed to discharge this burden by the
required quantum of proof.
Delsans argument that it should not be held liable for the loss of diesel oil due to backflow because the same had already
been actually and legallydelivered to Caltex at the time it entered the shore tank holds no water. It had been settled that
the subject cargo was still in the custody of Delsan because the discharging thereof has not yet been finished when the
backflow occurred. Since the discharging of the cargo into the depot has not yet been completed at the time of the
spillage when the backflow occurred, there is no reason to imply that there was actual delivery of the cargo to the
consignee. Delsan is straining the issue by insisting that when the diesel oil entered into the tank of Caltex on shore,
there was legally, at that moment, a complete delivery thereof to Caltex. To be sure, the extraordinary responsibility of
common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by, the carrier
for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to a
person who has the right to receive them.[8] The discharging of oil products
to Caltex Bulk Depot has not yet been finished, Delsan still has the duty to guard and to preserve the cargo. The carrier
still has in it the responsibility to guard and preserve the goods, a duty incident to its having the goods transported.
To recapitulate, common carriers, from the nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence in vigilance over the goods and for the safety of the passengers transported by them, according to
all the circumstances of each case.[9] The mere proof of delivery of goods in good order to the carrier, and their arrival in
the place of destination in bad order, make out a prima facie case against the carrier, so that if no explanation is given as
to how the injury occurred, the carrier must be held responsible. It is incumbent upon the carrier to prove that the loss was
due to accident or some other circumstances inconsistent with its liability. [10]
All told, Delsan, being a common carrier, should have exercised extraordinary diligence in the performance of its duties.
Consequently, it is obliged to prove that the damage to its cargo was caused by one of the excepted causes if it were to
seek exemption from responsibility.[11] Having failed to do so, Delsan must bear the consequences.
WHEREFORE, petition is DENIED and the assailed decision of the CA is AFFIRMED in toto.
2. Sarkies Tours Phils. Vs. CA, Oct 2, 1997
SARKIES TOURS PHILIPPINES, INC. petitioner vs. HONORABLE COURT OF APPEALS (TENTH DIVISION), DR. ELINO G.
FORTADES, MARISOL A. FORTADES and FATIMA A. FORTADES., respondent.
DECISION
ROMERO, J.:
This petition for review is seeking the reversal of the decision of the Court of Appeals in CA-G.R. CV No. 18979
promulgated on January 13, 1993, as well as its resolution of February 19, 1993, denying petitioners motion for
reconsideration for being a mere rehash of the arguments raised in the appellants brief.
The case arose from a damage suit filed by private respondents Elino, Marisol, and Fatima Minerva, all surnamed
Fortades, against petitioner for breach of contract of carriage allegedly attended by bad faith.
On August 31, 1984, Fatima boarded petitioners De Luxe Bus No. 5 in Manila on her way to Legazpi City. Her
brother Raul helped her load three pieces of luggage containing all of her optometry review books, materials and
equipment, trial lenses, trial contact lenses, passport and visa, as well as her mother Marisols U.S. immigration (green)
card, among other important documents and personal belongings. Her belongings was kept in the baggage compartment
of the bus, but during a stopover at Daet, it was discovered that all but one bag remained in the open compartment. The
others, including Fatimas things, were missing and could have dropped along the way. Some of the passengers
suggested retracing the route to try to recover the lost items, but the driver ignored them and proceeded to Legazpi City.
Fatima immediately reported the loss to her mother who, in turn, went to petitioners office in Legazpi City and later at
its head office in Manila. The latter, however, merely offered her P1,000.00 for each piece of luggage lost, which she
turned down. After returning to Bicol disappointed but not defeated, they asked assistance from the radio stations and
even from Philtranco bus drivers who plied the same route on August 31st. The effort paid off when one of Fatimas bags
was recovered. Marisol also reported the incident to the National Bureau of Investigations field office in Legazpi City, and
to the local police.
On September 20, 1984, respondents, through counsel, formally demanded satisfaction of their complaint from
petitioner. In a letter dated October 1, 1984, the latter apologized for the delay and said that (a) team has been sent out to
Bicol for the purpose of recovering or at least getting the full detail[1] of the incident.
After more than nine months of fruitless waiting, respondents decided to file the case below to recover the value of
the remaining lost items, as well as moral and exemplary damages, attorneys fees and expenses of litigation. They
claimed that the loss was due to petitioners failure to observe extraordinary diligence in the care of Fatimas luggage and
that petitioner dealt with them in bad faith from the start. Petitioner, on the other hand, disowned any liability for the loss
on the ground that Fatima allegedly did not declare any excess baggage upon boarding its bus.
On June 15, 1988, after trial on the merits, the court a quo adjudged the case in favor of herein respondents, viz:
PREMISES CONSIDERED, judgment is hereby rendered in favor of the plaintiffs (herein respondents) and against the
herein defendant Sarkies Tours Philippines, Inc., ordering the latter to pay to the former the following sums of money, to
wit:
1. The sum of P30,000.00 equivalent to the value of the personal belongings of plaintiff Fatima Minerva Fortades, etc.
less the value of one luggage recovered;
2. The sum of P90,000.00 for the transportation expenses, as well as moral damages;
3. The sum of P10,000.00 by way of exemplary damages;
4. The sum of P5,000.00 as attorneys fees; and
5. The sum of P5,000.00 as litigation expenses or a total of One Hundred Forty Thousand (P140,000.00) Pesos.
to be paid by herein defendant Sarkies Tours Philippines, Inc. to the herein plaintiffs within 30 days from receipt of this
Decision.
SO ORDERED.
On appeal, the appellate court affirmed the trial courts judgment, but deleted the award of moral and exemplary
damages. Thus,
WHEREFORE, premises considered, except as above modified, fixing the award for transportation expenses
at P30,000.00 and the deletion of the award for moral and exemplary damages, the decision appealed from is
AFFIRMED, with costs against defendant-appellant.
SO ORDERED."
Its motion for reconsideration having was likewise rejected by the Court of Appeals, so petitioner elevated its case to
this Court for a review.
After a careful scrutiny of the records of this case, we are convinced that the trial and appellate courts resolved the
issues judiciously based on the evidence at hand.
Petitioner claims that Fatima did not bring any piece of luggage with her, and even if she did, none was declared at
the start of the trip. The documentary and testimonial evidence presented at the trial, however, established that Fatima
indeed boarded petitioners De Luxe Bus No. 5 in the evening of August 31, 1984, and she brought three pieces of
luggage with her, as testified by her brother Raul, [2] who helped her pack her things and load them on said bus. One of
the bags was even recovered with the help of a Philtranco bus driver. In its letter dated October 1, 1984, petitioner tacitly
admitted its liability by apologizing to respondents and assuring them that efforts were being made to recover the lost
items.
The records also reveal that respondents went to great lengths just to salvage their loss. The incident was reported
to the police, the NBI, and the regional and head offices of petitioner. Marisol even sought the assistance of Philtranco
bus drivers and the radio stations. To expedite the replacement of her mothers lost U.S. immigration documents, Fatima
also had to execute an affidavit of loss.[3] Clearly, they would not have gone through all that trouble in pursuit of a fancied
loss.
Fatima was not the only one who lost her luggage. Other passengers suffered a similar fate: Dr. Lita Samarista
testified that petitioner offered her P1,000.00 for her lost baggage and she accepted it;[4] Carleen Carullo-Magno also lost
her chemical engineering review materials, while her brother lost abaca products he was transporting to Bicol.[5]
Petitioners receipt of Fatimas personal luggage having been thus established, it must now be determined if, as a
common carrier, it is responsible for their loss.Under the Civil Code, (c)ommon carriers, from the nature of their business
and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods x x x
transported by them,[6] and this liability lasts from the time the goods are unconditionally placed in the possession of, and
received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier for
transportation until the same are delivered, actually or constructively, by the carrier to x x x the person who has a right to
receive them,[7] unless the loss is due to any of the excepted causes under Article 1734 thereof. [8]
The cause of the loss in the case at bar was petitioners negligence in not ensuring that the doors of the baggage
compartment of its bus were securely fastened.As a result of this lack of care, almost all of the luggage was lost, to the
prejudice of the paying passengers. As the Court of Appeals correctly observed:
x x x. Where the common carrier accepted its passengers baggage for transportation and even had it placed in the
vehicle by its own employee, its failure to collect the freight charge is the common carriers own lookout. It is responsible
for the consequent loss of the baggage. In the instant case, defendant appellants employee even helped Fatima Minerva
Fortades and her brother load the luggages/baggages in the bus baggage compartment, without asking that they be
weighed, declared, receipted or paid for (TSN, August 4, 1986, pp. 29, 34, 54, 57, 70; December 23, 1987, p. 35). Neither
was this required of the other passengers (TSN, August 4, 1986, p. 104; February 5, 1988, p. 13).
Finally, petitioner questions the award of actual damages to respondents. On this point, we likewise agree with the
trial and appellate courts conclusions. There is no dispute that of the three pieces of luggage of Fatima, only one was
recovered. The other two contained optometry books, materials, equipment, as well as vital documents and personal
belongings. Respondents had to shuttle between Bicol and Manila in their efforts to be compensated for the loss. During
the trial, Fatima and Marisol had to travel from the United States just to be able to testify. Expenses were also incurred in
reconstituting their lost documents. Under these circumstances, the Court agrees with the Court of Appeals in
awarding P30,000.00 for the lost items and P30,000.00 for the transportation expenses, but disagrees with the deletion of
the award of moral and exemplary damages which, in view of the foregoing proven facts, with negligence and bad faith on
the fault of petitioner having been duly established, should be granted to respondents in the amount of P20,000.00
and P5,000.00, respectively.
WHEREFORE, the assailed decision of the Court of Appeals dated January 13, 1993, and its resolution dated
February 19, 1993, are hereby AFFIRMED with the MODIFICATION that petitioner is ordered to pay respondent an
additional P20,000.00 as moral damages and P5,000.00 as exemplary damages. Costs against petitioner.
SO ORDERED.
3. Tabacalera Insurance vs. North Front Shipping, May 16, 1997
TABACALERA INSURANCE CO., PRUDENTIAL GUARANTEE & ASSURANCE, INC., and NEW ZEALAND INSURANCE
CO., LTD., petitioners, vs. NORTH FRONT SHIPPING SERVICES, INC., and COURT OF APPEALS, respondents.
DECISION
BELLOSILLO, J.:
TABACALERA INSURANCE CO., Prudential Guarantee & Assurance, Inc., and New Zealand Insurance Co., Ltd., in
this petition for review on certiorari, assail the 22 December 1994 decision of the Court of Appeals and its Resolution of
16 February 1995 which affirmed the 1 June 1993 decision of the Regional Trial Court dismissing their complaint for
damages against North Front Shipping Services, Inc.
On 2 August 1990, 20,234 sacks of corn grains valued at P3,500,640.00 were shipped on board North Front 777, a
vessel owned by North Front ShippingServices, Inc. The cargo was consigned to Republic Flour Mills Corporation in
Manila under Bill of Lading No. 001[1] and insured with the herein mentioned insurance companies. The vessel was
inspected prior to actual loading by representatives of the shipper and was found fit to carry the merchandise. The cargo
was covered with tarpaulins and wooden boards. The hatches were sealed and could only be opened by representatives
of Republic Flour Mills Corporation.
The vessel left Cagayan de Oro City on 2 August 1990 and arrived Manila on 16 August 1990. Republic Flour Mills
Corporation was advised of its arrival but it did not immediately commence the unloading operations. There were days
when unloading had to be stopped due to variable weather conditions and sometimes for no apparent reason at all. When
the cargo was eventually unloaded there was a shortage of 26.333 metric tons. The remaining merchandise was already
moldy, rancid and deteriorating. The unloading operations were completed on 5 September 1990 or twenty (20) days after
the arrival of the barge at the wharf of Republic Flour Mills Corporation in Pasig City.
Precision Analytical Services, Inc., was hired to examine the corn grains and determine the cause of deterioration. A
Certificate of Analysis was issued indicating that the corn grains had 18.56% moisture content and the wetting was due to
contact with salt water. The mold growth was only incipient and not sufficient to make the corn grains toxic and unfit for
consumption. In fact the mold growth could still be arrested by drying.
Republic Flour Mills Corporation rejected the entire cargo and formally demanded from North Front Shipping
Services, Inc., payment for the damages suffered by it. The demands however were unheeded. The insurance companies
were perforce obliged to pay Republic Flour Mills Corporation P2,189,433.40.
By virtue of the payment made by the insurance companies they were subrogated to the rights of Republic Flour
Mills Corporation. Thusly, they lodged a complaint for damages against North Front Shipping Services, Inc., claiming that
the loss was exclusively attributable to the fault and negligence of the carrier. The Marine Cargo Adjusters hired by the
insurance companies conducted a survey and found cracks in the bodega of the barge and heavy concentration of molds
on the tarpaulins and wooden boards. They did not notice any seals in the hatches. The tarpaulins were not brand new as
there were patches on them, contrary to the claim of North Front Shipping Services, Inc., thus making it possible for water
to seep in. They also discovered that the bulkhead of the barge was rusty.
North Front Shipping Services, Inc., averred in refutation that it could not be made culpable for the loss and
deterioration of the cargo as it was never negligent.Captain Solomon Villanueva, master of the vessel, reiterated that the
barge was inspected prior to the actual loading and was found adequate and seaworthy. In addition, they were issued a
permit to sail by the Coast Guard. The tarpaulins were doubled and brand new and the hatches were properly
sealed. They did not encounter big waves hence it was not possible for water to seep in. He further averred that the corn
grains were farm wet and not properly dried when loaded.
The court below dismissed the complaint and ruled that the contract entered into between North Front Shipping
Services, Inc., and Republic Flour Mills Corporation was a charter-party agreement. As such, only ordinary diligence in
the care of goods was required of North Front Shipping Services, Inc. The inspection of the barge by the shipper and the
representatives of the shipping company before actual loading, coupled with the Permit to Sail issued by the Coast
Guard, sufficed to meet the degree of diligence required of the carrier.
On the other hand, the Court of Appeals ruled that as a common carrier required to observe a higher degree of
diligence North Front 777 satisfactorily complied with all the requirements hence was issued a Permit to Sail after proper
inspection. Consequently, the complaint was dismissed and the motion for reconsideration rejected.
The charter-party agreement between North Front Shipping Services, Inc., and Republic Flour Mills Corporation did
not in any way convert the common carrier into a private carrier. We have already resolved this issue with finality
in Planters Products, Inc. v. Court of Appeals[2] thus -
A 'charter-party' is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to
another person for a specified time or use; a contract of affreightment by which the owner of a ship or other vessel lets the
whole or a part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration
of the payment of freight x x x x Contract of affreightment may either be time charter, wherein the vessel is leased to the
charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the
charter-party provides for the hire of the vessel only, either for a determinate period of time or for a single or consecutive
voyage, the ship owner to supply the ship's store, pay for the wages of the master of the crew, and defray the expenses
for the maintenance of the ship.
Upon the other hand, the term 'common or public carrier' is defined in Art. 1732 of the Civil Code. The definition extends
to carriers either by land, air or water which holdthemselves out as ready to engage in carrying goods or transporting
passengers or both for compensation as a public employment and not as a casual occupation x x x x
It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a
vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage-
charter (underscoring supplied).
North Front Shipping Services, Inc., is a corporation engaged in the business of transporting cargo and offers its
services indiscriminately to the public. It is without doubt a common carrier. As such it is required to observe extraordinary
diligence in its vigilance over the goods it transports.[3]. When goods placed in its care are lost or damaged, the carrier is
presumed to have been at fault or to have acted negligently. [4] North Front Shipping Services, Inc., therefore has the
burden of proving that it observed extraordinary diligence in order to avoid responsibility for the lost cargo.
North Front Shipping Services, Inc., proved that the vessel was inspected prior to actual loading by representatives
of the shipper and was found fit to take a load of corn grains. They were also issued Permit to Sail by the Coast
Guard. The master of the vessel testified that the corn grains were farm wet when loaded.However, this testimony was
disproved by the clean bill of lading issued by North Front Shipping Services, Inc., which did not contain a notation that
the corn grains were wet and improperly dried. Having been in the service since 1968, the master of the vessel would
have known at the outset that corn grains that were farm wet and not properly dried would eventually deteriorate when
stored in sealed and hot compartments as in hatches of a ship. Equipped with this knowledge, the master of the vessel
and his crew should have undertaken precautionary measures to avoid or lessen the cargo's possible deterioration as
they were presumed knowledgeable about the nature of such cargo. But none of such measures was taken.
In Compania Maritima v. Court of Appeals[5] we ruled -
x x x x Mere proof of delivery of the goods in good order to a common carrier, and of their arrival at the place of
destination in bad order, makes out prima facie case against the common carrier, so that if no explanation is given as to
how the loss, deterioration or destruction of the goods occurred, the common carrier must be held responsible. Otherwise
stated, it is incumbent upon the common carrier to prove that the loss, deterioration or destruction was due to accident or
some other circumstances inconsistent with its liability x x x x
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 safe 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 characteristics of goods tendered for shipment, and to exercise due care in the
handling and stowage, including such methods as their nature requires' (underscoring supplied).
In fine, we find that the carrier failed to observe the required extraordinary diligence in the vigilance over the goods
placed in its care. The proofs presented byNorth Front Shipping Services, Inc., were insufficient to rebut the prima
facie presumption of private respondent's negligence, more so if we consider the evidence adduced by petitioners.
It is not denied by the insurance companies that the vessel was indeed inspected before actual loading and
that North Front 777 was issued a Permit to Sail.They proved the fact of shipment and its consequent loss or damage
while in the actual possession of the carrier. Notably, the carrier failed to volunteer any explanation why there was
spoilage and how it occurred. On the other hand, it was shown during the trial that the vessel had rusty bulkheads and the
wooden boards and tarpaulins bore heavy concentration of molds. The tarpaulins used were not new, contrary to the
claim of North Front Shipping Services, Inc., as there were already several patches on them, hence, making it highly
probable for water to enter.
Laboratory analysis revealed that the corn grains were contaminated with salt water. North Front Shipping Services,
Inc., failed to rebut all these arguments. It did not even endeavor to establish that the loss, destruction or deterioration of
the goods was due to the following: (a) flood, storm, earthquake, lightning, or other natural disaster or calamity; (b) act of
the public enemy in war, whether international or civil; (c) act or omission of the shipper or owner of the goods; (d) the
character of the goods or defects in the packing or in the containers; (e) order or act of competent public authority. [6] This
is a closed list. If the cause of destruction, loss or deterioration is other than the enumerated circumstances, then the
carrier is rightly liable therefor.
However, we cannot attribute the destruction, loss or deterioration of the cargo solely to the carrier. We find the
consignee Republic Flour Mills Corporation guiltyof contributory negligence. It was seasonably notified of the arrival of the
barge but did not immediately start the unloading operations. No explanation was proffered by the consignee as to why
there was a delay of six (6) days. Had the unloading been commenced immediately the loss could have been completely
avoided or at least minimized. As testified to by the chemist who analyzed the corn samples, the mold growth was only at
its incipient stage and could still be arrested by drying.The corn grains were not yet toxic or unfit for consumption. For its
contributory negligence, Republic Flour Mills Corporation should share at least 40% of the loss. [7]
WHEREFORE, the Decision of the Court of Appeals of 22 December 1994 and its Resolution of 16 February 1995
are REVERSED and SET ASIDE.Respondent North Front Shipping Services, Inc., is ordered to pay petitioners
Tabacalera Insurance Co., Prudential Guarantee & Assurance, Inc., and New Zealand Insurance Co. Ltd., P1,313,660.00
which is 60% of the amount paid by the insurance companies to Republic Flour Mills Corporation, plus interest at the rate
of 12% per annum from the time this judgment becomes final until full payment.
SO ORDERED.
4. Macam vs. CA, Aug. 25, 1999
BENITO MACAM doing business under the name and style BEN-MAC ENTERPRISES, petitioner, vs. COURT OF
APPEALS, CHINA OCEAN SHIPPING CO., and/or WALLEM PHILIPPINES SHIPPING, INC., respondents.
DECISION
BELLOSILLO, J.:
On 4 April 1989 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 valued at US$5,950.00
covered by Bill of Lading No. HKG 99012 and exported through Letter of Credit No. HK 1031/30 issued by National Bank
of Pakistan, Hongkong (hereinafter PAKISTAN BANK) and 1,611 boxes of fresh mangoes with a value of US$14,273.46
covered by Bill of Lading No. HKG 99013 and exported through Letter of Credit No. HK 1032/30 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."[1] 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 shipment of US$20,223.46.
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.
On 25 September 1991 petitioner sought collection of the value of the shipment of US$20,223.46 or its equivalent
of P546,033.42 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 telex dated 5 April
1989 conveying such request read -
AS PER SHPRS REQUEST KINDLY ARRANGE DELIVERY OF A/M SHIPT TO RESPECTIVE CNEES WITHOUT
PRESENTATION OF OB/L[2] and bank guarantee since for prepaid shipt ofrt charges already fully paid our end x x x x[3]
Respondents explained that it is a standard maritime practice, when immediate delivery is of the essence, for the
shipper to request or instruct the carrier to deliver the goods to the buyer upon arrival at the port of destination without
requiring presentation of the bill of lading as that usually takes time. As proof thereof, respondents apprised the trial court
that for the duration of their two-year business relationship with petitioner concerning similar shipments to GPC deliveries
were effected without presentation of the bills of lading. [4]Respondents advanced next that the refusal of PAKISTAN
BANK to pay the letters of credit to SOLIDBANK was due to the latter's failure to submit a Certificate of Quantity and
Quality. Respondents counterclaimed for attorneys fees and costs of suit.
On 14 May 1993 the trial court ordered respondents to pay, jointly and severally, the following
amounts: (1) P546,033.42 plus legal interest from 6 April 1989 until full payment; (2) P10,000.00 as attorney's fees; and,
(3) the costs. The counterclaims were dismissed for lack of merit.[5] 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 GPC at all since the instruction contained in the telex was to arrange
delivery to the respective consignees and not to any party. The trial court observed that the only role of GPC in the
transaction as notify party was precisely to be notified of the arrival of the cargoes in Hongkong so it could in turn duly
advise the consignee.
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. [6] 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,[7] and not to PAKISTAN BANK since the latter could very well present the bills of lading in its possession;
likewise, if it were the PAKISTAN BANK to which the cargoes were to be strictly delivered it would no longer be proper to
require a bank guarantee. Respondent court noted that besides, GPC was listed as a consignee in the telex. It observed
further that the demand letter of petitioner to respondents never complained of misdelivery of goods. Lastly, respondent
court found that petitioners claim of having reimbursed the amount involved to SOLIDBANK was unsubstantiated. Thus,
on 13 March 1996 respondent court set aside the decision of the trial court and dismissed the complaint together with the
counterclaims.[8] On 5 July 1996 reconsideration was denied.[9]
Petitioner submits that the fact that the shipment was not delivered to the consignee as stated in the bill of lading or
to a party designated or named by the consignee constitutes a misdelivery thereof. Moreover, petitioner argues that from
the text of the telex, assuming there was such an instruction, the delivery of the shipment without the required bill of
lading or bank guarantee should be made only to the designated consignee, referring to PAKISTAN BANK.
We are not persuaded. The submission of petitioner that the fact that the shipment was not delivered to the
consignee as stated in the Bill of Lading or to a party designated or named by the consignee constitutes a misdelivery
thereof is a deviation from his cause of action before the trial court. It is clear from the allegation in his complaint that it
does not deal with misdelivery of the cargoes but of delivery to GPC without the required bills of lading and bank
guarantee -
6. The goods arrived in Hongkong and were released by the defendant Wallem directly to the buyer/notify party, Great
Prospect Company and not to the consignee, the National Bank of Pakistan, Hongkong, without the required bills of
lading and bank guarantee for the release of the shipment issued by the consignee of the goods x x x x [10]
Even going back to an event that transpired prior to the filing of the present case or when petitioner wrote respondent
WALLEM demanding payment of the value of the cargoes, misdelivery of the cargoes did not come into the picture -
We are writing you on behalf of our client, Ben-Mac Enterprises who informed us that Bills of Lading No. 99012 and
99013 with a total value of US$20,223.46 were released to Great Prospect, Hongkong without the necessary bank
guarantee. We were further informed that the consignee of the goods, National Bank of Pakistan, Hongkong, did not
release or endorse the original bills of lading. As a result thereof, neither the consignee, National Bank of Pakistan,
Hongkong, nor the importer, Great Prospect Company, Hongkong, paid our client for the goods x x x x [11]
At any rate, we shall dwell on petitioners submission only as a prelude to our discussion on the imputed liability of
respondents concerning the shipped goods. Article 1736 of the Civil Code provides -
Art. 1736. The extraordinary responsibility of the common carriers lasts from the time the goods are unconditionally
placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the
provisions of article 1738.[12]
We emphasize that the extraordinary responsibility of the common carriers lasts until actual or constructive delivery
of the cargoes to the consignee or to the person who has a right to receive them. PAKISTAN BANK was indicated in the
bills of lading as consignee whereas GPC was the notify party. However, in the export invoices GPC was clearly named
as buyer/importer. Petitioner also referred to GPC as such in his demand letter to respondent WALLEM and in his
complaint before the trial court. This premise draws us to conclude that the delivery of the cargoes to GPC as
buyer/importer which, conformably with Art. 1736 had, other than the consignee, the right to receive them [13] was proper.
The real issue is whether respondents are liable to petitioner for releasing the goods to GPC without the bills of
lading or bank guarantee.
Respondents submitted in evidence a telex dated 5 April 1989 as basis for delivering the cargoes to GPC without the
bills of lading and bank guarantee. The telex instructed delivery of various shipments to the respective consignees without
need of presenting the bill of lading and bank guarantee per the respective shippers request since for prepaid shipt ofrt
charges already fully paid. Petitioner was named therein as shipper and GPC as consignee with respect to Bill of Lading
Nos. HKG 99012 and HKG 99013. Petitioner disputes the existence of such instruction and claims that this evidence is
self-serving.
From the testimony of petitioner, we gather that he has been transacting with GPC as buyer/importer for around two
(2) or three (3) years already. When mangoes and watermelons are in season, his shipment to GPC using the facilities of
respondents is twice or thrice a week. The goods are released to GPC. It has been the practice of petitioner to request
the shipping lines to immediately release perishable cargoes such as watermelons and fresh mangoes through telephone
calls by himself or his people. In transactions covered by a letter of credit, bank guarantee is normally required by the
shipping lines prior to releasing the goods. But for buyers using telegraphic transfers, petitioner dispenses with the bank
guarantee because the goods are already fully paid. In his several years of business relationship with GPC and
respondents, there was not a single instance when the bill of lading was first presented before the release of the
cargoes. He admitted the existence of the telex of 3 July 1989 containing his request to deliver the shipment to the
consignee without presentation of the bill of lading [14] but not the telex of 5 April 1989 because he could not remember
having made such request.
Consider pertinent portions of petitioners testimony -
Q: Are you aware of any document which would indicate or show that your request to the defendant Wallem for the immediate
release of your fresh fruits, perishable goods, to Great Prospect without the presentation of the original Bill of Lading?
A: Yes, by telegraphic transfer, which means that it is fully paid. And I requested the immediate release of the cargo because
there was immediate payment.
Q And you are referring, therefore, to this copy Telex release that you mentioned where your Companys name appears Ben-
Mac?
Atty. Hernandez: Just for the record, Your Honor, the witness is showing a Bill of Lading referring to SKG (sic) 93023 and
93026 with Great Prospect Company.
Atty. Ventura:
Q: Is that the telegraphic transfer?
A: Yes, actually, all the shippers partially request for the immediate release of the goods when they are perishable. I thought
Wallem Shipping Lines is not neophyte in the business. As far as LC is concerned, Bank guarantee is needed for the
immediate release of the goods x x x x[15]
Q: Mr. Witness, you testified that it is the practice of the shipper of the perishable goods to ask the shipping lines to release
immediately the shipment. Is that correct?
A: Yes, sir.
Q: Now, it is also the practice of the shipper to allow the shipping lines to release the perishable goods to the importer of
goods without a Bill of Lading or Bank guarantee?
A: No, it cannot be without the Bank Guarantee.
Atty. Hernandez:
Q: Can you tell us an instance when you will allow the release of the perishable goods by the shipping lines to the importer
without the Bank guarantee and without the Bill of Lading?
A: As far as telegraphic transfer is concerned.
Q: Can you explain (to) this Honorable Court what telegraphic transfer is?
A: Telegraphic transfer, it means advance payment that I am already fully paid x x x x
Q: Mr. Macam, with regard to Wallem and to Great Prospect, would you know and can you recall that any of your shipment
was released to Great Prospect by Wallem through telegraphic transfer?
A: I could not recall but there were so many instances sir.
Q: Mr. Witness, do you confirm before this Court that in previous shipments of your goods through Wallem, you requested
Wallem to release immediately your perishable goods to the buyer?
A: Yes, that is the request of the shippers of the perishable goods x x x x [16]
Q: Now, Mr. Macam, if you request the Shipping Lines for the release of your goods immediately even without the presentation
of OBL, how do you course it?
A: Usually, I call up the Shipping Lines, sir x x x x [17]
Q: You also testified you made this request through phone calls. Who of you talked whenever you made such phone call?
A: Mostly I let my people to call, sir. (sic)
Q: So everytime you made a shipment on perishable goods you let your people to call? (sic)
A: Not everytime, sir.
Q: You did not make this request in writing?
A: No, sir. I think I have no written request with Wallem x x x x[18]
Against petitioners claim of not remembering having made a request for delivery of subject cargoes to GPC without
presentation of the bills of lading and bank guarantee as reflected in the telex of 5 April 1989 are damaging disclosures in
his testimony. He declared that it was his practice to ask the shipping lines to immediately release shipment of perishable
goods through telephone calls by himself or his people. He no longer required presentation of a bill of lading nor of a bank
guarantee as a condition to releasing the goods in case he was already fully paid. Thus, taking into account that subject
shipment consisted of perishable goods and SOLIDBANK pre-paid the full amount of the value thereof, it is not hard to
believe the claim of respondent WALLEM that petitioner indeed requested the release of the goods to GPC without
presentation of the bills of lading and bank guarantee.
The instruction in the telex of 5 April 1989 was to deliver the shipment to respective consignees. And so petitioner
argues that, assuming there was such an instruction, the consignee referred to was PAKISTAN BANK. We find the
argument too simplistic. Respondent court analyzed the telex in its entirety and correctly arrived at the conclusion that the
consignee referred to was not PAKISTAN BANK but GPC -
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. After all, the cargoes consist of perishable
fresh fruits and immediate delivery thereof to the buyer/importer is essentially a factor to reckon with. Besides, GPC is
listed as one among the several consignees in the telex (Exhibit 5-B) and the instruction in the telex was to arrange
delivery of A/M shipment (not any party) to respective consignees without presentation of OB/L and bank guarantee x x x
x[19]
Apart from the foregoing obstacles to the success of petitioners cause, petitioner failed to substantiate his claim that
he returned to SOLIDBANK the full amount of the value of the cargoes. It is not far-fetched to entertain the notion, as did
respondent court, that he merely accommodated SOLIDBANK in order to recover the cost of the shipped cargoes from
respondents. We note that it was SOLIDBANK which initially demanded payment from respondents through five (5)
letters. SOLIDBANK must have realized the absence of privity of contract between itself and respondents. That is why
petitioner conveniently took the cudgels for the bank.
In view of petitioners utter failure to establish the liability of respondents over the cargoes, no reversible error was
committed by respondent court in ruling against him.
WHEREFORE, the petition is DENIED. The decision of respondent Court of Appeals of 13 March 1996 dismissing
the complaint of petitioner Benito Macam and the counterclaims of respondents China Ocean Shipping Co. and/or
Wallem Philippines Shipping, Inc., as well as its resolution of 5 July 1996 denying reconsideration, is AFFIRMED.
SO ORDERED.
5. Samar Mining Company vs. Nordeutscher Lloyd, Oct. 23, 1984
G.R. No. L-28673 October 23, 1984
SAMAR MINING COMPANY, INC., plaintiff-appellee,

vs.
NORDEUTSCHER LLOYD and C.F. SHARP & COMPANY, INC., defendants-appellants.
CUEVAS, J.:ñé+.£ªwph!1
This is an appeal taken directly to Us on certiorari from the decision of the defunct Court of First Instance of Manila,
finding defendants carrier and agent, liable for the value of goods never delivered to plaintiff consignee. The issue raised
is a pure question of law, which is, the liability of the defendants, now appellants, under the bill of lading covering the
subject shipment.
The case arose from an importation made by plaintiff, now appellee, SAMAR MINING COMPANY, INC., of one (1) crate
Optima welded wedge wire sieves through the M/S SCHWABENSTEIN a vessel owned by defendant-appellant
NORDEUTSCHER LLOYD, (represented in the Philippines by its agent, C.F. SHARP & CO., INC.), which shipment is
covered by Bill of Lading No. 18 duly issued to consignee SAMAR MINING COMPANY, INC. Upon arrival of the aforesaid
vessel at the port of Manila, the aforementioned importation was unloaded and delivered in good order and condition to
the bonded warehouse of AMCYL. 1 The goods were however never delivered to, nor received by, the consignee at the
port of destination — Davao.
When the letters of complaint sent to defendants failed to elicit the desired response, consignee herein appellee, filed a
formal claim for P1,691.93, the equivalent of $424.00 at the prevailing rate of exchange at that time, against the former,
but neither paid. Hence, the filing of the instant suit to enforce payment. Defendants-appellants brought in AMCYL as
third party defendant.
The trial court rendered judgment in favor of plaintiff, ordering defendants to pay the amount of P1,691.93 plus attorney's
fees and costs. However, the Court stated that defendants may recoup whatever they may pay plaintiff by enforcing the
judgment against third party defendant AMCYL which had earlier been declared in default. Only the defendants appealed
from said decision.
The issue at hand demands a close scrutiny of Bill of Lading No. 18 and its various clauses and stipulations which should
be examined in the light of pertinent legal provisions and settled jurisprudence. This undertaking is not only proper but
necessary as well because of the nature of the bill of lading which operates both as a receipt for the goods; and more
importantly, as a contract to transport and deliver the same as stipulated therein. 2 Being a contract, it is the law between
the parties thereto 3 who are bound by its terms and conditions 4 provided that these are not contrary to law, morals, good
customs, public order and public policy. 5
Bill of Lading No. 18 sets forth in page 2 thereof 6 that one (1) crate of Optima welded wedge wire sieves was received by
the carrier NORDEUTSCHER LLOYD at the "port of loading" which is Bremen, Germany, while the freight had been
prepaid up to the port of destination or the "port of discharge of goods in this case, Davao, the carrier undertook to
transport the goods in its vessel, M/S SCHWABENSTEIN only up to the "port of discharge from ship-Manila. Thereafter,
the goods were to be transshipped by the carrier to the port of destination or "port of discharge of goods The stipulation is
plainly indicated on the face of the bill which contains the following phrase printed below the space provided for the port of
discharge from ship", thus: têñ.£îhqwâ£
if goods are to be transshipped at port of discharge, show destination under the column for "description of contents" 7
As instructed above, the following words appeared typewritten under the column for "description of
contents": têñ.£îhqwâ£
PORT OF DISCHARGE OF GOODS: DAVAO

FREIGHT PREPAID 8
It is clear, then, that in discharging the goods from the ship at the port of Manila, and delivering the same into the custody
of AMCYL, the bonded warehouse, appellants were acting in full accord with the contractual stipulations contained in Bill
of Lading No. 18. The delivery of the goods to AMCYL was part of appellants' duty to transship the goods from Manila to
their port of destination-Davao. The word "transship" means: têñ.£îhqwâ£
to transfer for further transportation from one ship or conveyance to another 9
The extent of appellant carrier's responsibility and/or liability in the transshipment of the goods in question are spelled out
and delineated under Section 1, paragraph 3 of Bill of Lading No. 18, to wit: têñ.£îhqwâ£
The carrier shall not be liable in any capacity whatsoever for any delay, loss or damage occurring before the goods enter
ship's tackle to be loaded or after the goods leave ship's tackle to be discharged, transshipped or forwarded ... (Emphasis
supplied)
and in Section 11 of the same Bill, which provides: têñ.£îhqwâ£
Whenever the carrier or m aster may deem it advisable or in any case where the goods are placed at carrier's disposal at
or consigned to a point where the ship does not expect to load or discharge, the carrier or master may, without notice,
forward the whole or any part of the goods before or after loading at the original port of shipment, ... This carrier, in
making arrangements for any transshipping or forwarding vessels or means of transportation not operated by this carrier
shall be considered solely the forwarding agent of the shipper and without any other responsibility whatsoever even
though the freight for the whole transport has been collected by him. ... Pending or during forwarding or transshipping the
carrier may store the goods ashore or afloat solely as agent of the shipper and at risk and expense of the goods and the
carrier shall not be liable for detention nor responsible for the acts, neglect, delay or failure to act of anyone to whom the
goods are entrusted or delivered for storage, handling or any service incidental thereto (Emphasis supplied) 10
Defendants-appellants now shirk liability for the loss of the subject goods by claiming that they have discharged the same
in full and good condition unto the custody of AMCYL at the port of discharge from ship — Manila, and therefore, pursuant
to the aforequoted stipulation (Sec. 11) in the bill of lading, their responsibility for the cargo had ceased. 11
We find merit in appellants' stand. The validity of stipulations in bills of lading exempting the carrier from liability for loss or
damage to the goods when the same are not in its actual custody has been upheld by Us in PHOENIX ASSURANCE
CO., LTD. vs. UNITED STATES LINES, 22 SCRA 674 (1968). Said case matches the present controversy not only as to
the material facts but more importantly, as to the stipulations contained in the bill of lading concerned. As if to underline
their awesome likeness, the goods in question in both cases were destined for Davao, but were discharged from ship in
Manila, in accordance with their respective bills of lading.
The stipulations in the bill of lading in the PHOENIX case which are substantially the same as the subject stipulations
before Us, provides: têñ.£îhqwâ£
The carrier shall not be liable in any capacity whatsoever for any loss or damage to the goods while the goods are not in
its actual custody. (Par. 2, last subpar.)
xxx xxx xxx

The carrier or master, in making arrangements with any person for or in connection with all transshipping or forwarding of
the goods or the use of any means of transportation or forwarding of goods not used or operated by the carrier, shall be
considered solely the agent of the shipper and consignee and without any other responsibility whatsoever or for the cost
thereof ... (Par. 16). 12
Finding the above stipulations not contrary to law, morals, good customs, public order or public policy, We sustained their
validity 13 Applying said stipulations as the law between the parties in the aforecited case, the Court concluded
that: têñ.£îhqwâ£
... The short form Bill of Lading ( ) states in no uncertain terms that the port of discharge of the cargo is Manila, but that
the same was to be transshipped beyond the port of discharge to Davao City. Pursuant to the terms of the long form Bill
of Lading ( ), appellee's responsibility as a common carrier ceased the moment the goods were unloaded in Manila and in
the matter of transshipment, appellee acted merely as an agent of the shipper and consignee. ... (Emphasis supplied) 14
Coming now to the case before Us, We hold, that by the authority of the above pronouncements, and in conformity with
the pertinent provisions of the New Civil Code, Section 11 of Bill of Lading No. 18 and the third paragraph of Section 1
thereof are valid stipulations between the parties insofar as they exempt the carrier from liability for loss or damage to the
goods while the same are not in the latter's actual custody.
The liability of the common carrier for the loss, destruction or deterioration of goods transported from a foreign country to
the Philippines is governed primarily by the New Civil Code. 15 In all matters not regulated by said Code, the rights and
obligations of common carriers shall be governed by the Code of Commerce and by special laws. 16 A careful perusal of
the provisions of the New Civil Code on common carriers (Section 4, Title VIII, Book IV) directs our attention to Article
1736 thereof, which reads: têñ.£îhqwâ£
Article 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally
placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the
provisions of article 1738.
Article 1738 referred to in the foregoing provision runs thus: têñ.£îhqwâ£
Article 1738. The extraordinary liability of the common carrier continues to be operative even during the time the goods
are stored in a warehouse of the carrier at the place of destination, until the consignee has been advised of the arrival of
the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of them.
There is no doubt that Art. 1738 finds no applicability to the instant case. The said article contemplates a situation where
the goods had already reached their place of destination and are stored in the warehouse of the carrier. The subject
goods were still awaiting transshipment to their port of destination, and were stored in the warehouse of a third party
when last seen and/or heard of. However, Article 1736 is applicable to the instant suit. Under said article, the carrier may
be relieved of the responsibility for loss or damage to the goods upon actual or constructive delivery of the same by the
carrier to the consignee, or to the person who has a right to receive them. In sales, actual delivery has been defined as
the ceding of corporeal possession by the seller, and the actual apprehension of corporeal possession by the buyer or by
some person authorized by him to receive the goods as his representative for the purpose of custody or disposal. 17 By
the same token, 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. 18 The court a
quo found that there was actual delivery to the consignee through its duly authorized agent, the carrier.
It becomes necessary at this point to dissect the complex relationship that had developed between appellant and
appellee in the course of the transactions that gave birth to the present suit. Two undertakings appeared embodied and/or
provided for in the Bill of Lading 19 in question. The first is FOR THE TRANSPORT OF GOODS from Bremen, Germany
to Manila. The second, THE TRANSSHIPMENT OF THE SAME GOODS from Manila to Davao, with appellant acting as
agent of the consignee. 20 At the hiatus between these two undertakings of appellant which is the moment when the
subject goods are discharged in Manila, its personality changes from that of carrier to that of agent of the consignee.
Thus, the character of appellant's possession also changes, from possession in its own name as carrier, into possession
in the name of consignee as the latter's agent. Such being the case, there was, in effect, actual delivery of the goods from
appellant as carrier to the same appellant as agent of the consignee. Upon such delivery, the appellant, as erstwhile
carrier, ceases to be responsible for any loss or damage that may befall the goods from that point onwards. This is the full
import of Article 1736, as applied to the case before Us.
But even as agent of the consignee, the appellant cannot be made answerable for the value of the missing goods, It is
true that the transshipment of the goods, which was the object of the agency, was not fully performed. However, appellant
had commenced said performance, the completion of which was aborted by circumstances beyond its control. An agent
who carries out the orders and instructions of the principal without being guilty of negligence, deceit or fraud, cannot be
held responsible for the failure of the principal to accomplish the object of the agency, 21This can be gleaned from the
following provisions of the New Civil Code on the obligations of the agent: têñ.£îhqwâ£
Article 1884. The agent is bound by his acceptance to carry out the agency, and is liable for the damages which, through
his non-performance, the principal may suffer.
xxx xxx xxx
Article 1889. The agent shall be liable for damages if, there being a conflict between his interests and those of the
principal, he should prefer his own.
Article 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but he shall be
responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power but without designating the person and the person appointed was notoriously
incompetent or insolvent.
xxx xxx xxx
Article 1909. The agent is responsible not only for fraud, but also for negligence which shall be judged with more or less
rigor by the courts, according to whether the agency was or was not for a compensation.
The records fail to reveal proof of negligence, deceit or fraud committed by appellant or by its representative in the
Philippines. Neither is there any showing of notorious incompetence or insolvency on the part of AMCYT, which acted as
appellant's substitute in storing the goods awaiting transshipment.
The actions of appellant carrier and of its representative in the Philippines being in full faith with the lawful stipulations of
Bill of Lading No. 18 and in conformity with the provisions of the New Civil Code on common carriers, agency and
contracts, they incur no liability for the loss of the goods in question.
WHEREFORE, the appealed decision is hereby REVERSED. Plaintiff-appellee's complaint is hereby DISMISSED.
No costs.
SO ORDERED.1äï1.ñët
6. Servando vs. Phil Steam Navigation, Oct 23, 1982
G.R. No. L-36481-2 October 23, 1982
AMPARO C. SERVANDO, CLARA UY BICO, plaintiffs-appellees,

vs.
PHILIPPINE STEAM NAVIGATION CO., defendant-appellant.
Zoilo de la Cruz, Jr. & Associate for plaintiff-appellee Amparo Servando.
Benedicto, Sumbingco & Associate for appellee Clara Uy Bico.
Ross, Salcedo, del Rosario, Bito & Misa for defendant-appellant.
ESCOLIN, J.:
This appeal, originally brought to the Court of Appeals, seeks to set aside the decision of the Court of First Instance of
Negros Occidental in Civil Cases Nos. 7354 and 7428, declaring appellant Philippine Steam Navigation liable for
damages for the loss of the appellees' cargoes as a result of a fire which gutted the Bureau of Customs' warehouse in
Pulupandan, Negros Occidental.
The Court of Appeals certified the case to Us because only pure questions of law are raised therein.
The facts culled from the pleadings and the stipulations submitted by the parties are as follows:
On November 6, 1963, appellees Clara Uy Bico and Amparo Servando loaded on board the appellant's vessel, FS-176,
for carriage from Manila to Pulupandan, Negros Occidental, the following cargoes, to wit:
Clara Uy Bico —
1,528 cavans of rice valued
at P40,907.50;
Amparo Servando —
44 cartons of colored paper,
toys and general merchandise valued at P1,070.50;
1
as evidenced by the corresponding bills of lading issued by the appellant.
Upon arrival of the vessel at Pulupandan, in the morning of November 18, 1963, the cargoes were discharged, complete
and in good order, unto the warehouse of the Bureau of Customs. At about 2:00 in the afternoon of the same day, said
warehouse was razed by a fire of unknown origin, destroying appellees' cargoes. Before the fire, however, appellee Uy
Bico was able to take delivery of 907 cavans of rice 2 Appellees' claims for the value of said goods were rejected by the
appellant.
On the bases of the foregoing facts, the lower court rendered a decision, the decretal portion of which reads as follows:
WHEREFORE, judgment is rendered as follows:
1. In case No. 7354, the defendant is hereby ordered to pay the plaintiff Amparo C. Servando the aggregate sum of
P1,070.50 with legal interest thereon from the date of the filing of the complaint until fully paid, and to pay the costs.
2. In case No. 7428, the defendant is hereby ordered to pay to plaintiff Clara Uy Bico the aggregate sum of P16,625.00
with legal interest thereon from the date of the filing of the complaint until fully paid, and to pay the costs.
Article 1736 of the Civil Code imposes upon common carriers the duty to observe extraordinary diligence from the
moment the goods are unconditionally placed in their possession "until the same are delivered, actually or constructively,
by the carrier to the consignee or to the person who has a right to receive them, without prejudice to the provisions of
Article 1738. "
The court a quo held that the delivery of the shipment in question to the warehouse of the Bureau of Customs is not the
delivery contemplated by Article 1736; and since the burning of the warehouse occurred before actual or constructive
delivery of the goods to the appellees, the loss is chargeable against the appellant.
It should be pointed out, however, that in the bills of lading issued for the cargoes in question, the parties agreed to limit
the responsibility of the carrier for the loss or damage that may be caused to the shipment by inserting therein the
following stipulation:
Clause 14. Carrier shall not be responsible for loss or damage to shipments billed 'owner's risk' unless such loss or
damage is due to negligence of carrier. Nor shall carrier be responsible for loss or damage caused by force majeure,
dangers or accidents of the sea or other waters; war; public enemies; . . . fire . ...
We sustain the validity of the above stipulation; there is nothing therein that is contrary to law, morals or public policy.
Appellees would contend that the above stipulation does not bind them because it was printed in fine letters on the back-
of the bills of lading; and that they did not sign the same. This argument overlooks the pronouncement of this Court in
Ong Yiu vs. Court of Appeals, promulgated June 29, 1979, 3 where the same issue was resolved in this wise:
While it may be true that petitioner had not signed the plane ticket (Exh. '12'), 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 latter's lack of knowledge or assent to the regulation'. It is what is known as a contract of
'adhesion', in regards which it has been said that contracts of adhesion wherein one party imposes a ready made form of
contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to
the contract is in reality free to reject it entirely; if he adheres, he gives his consent." (Tolentino, Civil Code, Vol. IV, 1962
Ed., p. 462, citing Mr. Justice J.B.L. Reyes, Lawyer's Journal, Jan. 31, 1951, p. 49).
Besides, the agreement contained in the above quoted Clause 14 is a mere iteration of the basic principle of law written in
Article 1 1 7 4 of the Civil Code:
Article 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the
nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not
be foreseen, or which, though foreseen, were inevitable.
Thus, where fortuitous event or force majeure is the immediate and proximate cause of the loss, the obligor is exempt
from liability for non-performance. The Partidas, 4 the antecedent of Article 1174 of the Civil Code, defines 'caso fortuito'
as 'an event that takes place by accident and could not have been foreseen. Examples of this are destruction of houses,
unexpected fire, shipwreck, violence of robbers.'
In its dissertation of the phrase 'caso fortuito' the Enciclopedia Juridicada Espanola 5 says: "In a legal sense and,
consequently, also in relation to contracts, a 'caso fortuito' presents the following essential characteristics: (1) the cause
of the unforeseen and unexpected occurrence, or of the failure of the debtor to comply with his obligation, must be
independent of the human will; (2) it must be impossible to foresee the event which constitutes the 'caso fortuito', or if it
can be foreseen, it must be impossible to avoid; (3) the occurrence must be such as to render it impossible for the debtor
to fulfill his obligation in a normal manner; and (4) the obligor must be free from any participation in the aggravation of the
injury resulting to the creditor." In the case at bar, the burning of the customs warehouse was an extraordinary event
which happened independently of the will of the appellant. The latter could not have foreseen the event.
There is nothing in the record to show that appellant carrier ,incurred in delay in the performance of its obligation. It
appears that appellant had not only notified appellees of the arrival of their shipment, but had demanded that the same be
withdrawn. In fact, pursuant to such demand, appellee Uy Bico had taken delivery of 907 cavans of rice before the
burning of the warehouse.
Nor can the appellant or its employees be charged with negligence. The storage of the goods in the Customs warehouse
pending withdrawal thereof by the appellees was undoubtedly made with their knowledge and consent. Since the
warehouse belonged to and was maintained by the government, it would be unfair to impute negligence to the appellant,
the latter having no control whatsoever over the same.
The lower court in its decision relied on the ruling laid down in Yu Biao Sontua vs. Ossorio 6, where this Court held the
defendant liable for damages arising from a fire caused by the negligence of the defendant's employees while loading
cases of gasoline and petroleon products. But unlike in the said case, there is not a shred of proof in the present case
that the cause of the fire that broke out in the Custom's warehouse was in any way attributable to the negligence of the
appellant or its employees. Under the circumstances, the appellant is plainly not responsible.
WHEREFORE, the judgment appealed from is hereby set aside. No costs.
SO ORDERED.
Makasiar (Chairman), Concepcion, Jr., Guerrero, Abad Santos and De Castro, JJ., concur.
7. Edgar Cokaling Shipping Lines vs. UCPB General Insurance Company June 25, 2003
EDGAR COKALIONG SHIPPING LINES, INC., petitioner, vs. UCPB GENERAL INSURANCE COMPANY,
INC., respondent.
DECISION
PANGANIBAN, J.:
The liability of a common carrier for the loss of goods may, by stipulation in the bill of lading, be limited to the value
declared by the shipper. On the other hand, the liability of the insurer is determined by the actual value covered by the
insurance policy and the insurance premiums paid therefor, and not necessarily by the value declared in the bill of lading.
The Case
Before the Court is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to set aside the August 31, 2000
Decision[2] and the November 17, 2000 Resolution [3] of the Court of Appeals[4] (CA) in CA-GR SP No. 62751. The
dispositive part of the Decision reads:
IN THE LIGHT OF THE FOREGOING, the appeal is GRANTED. The Decision appealed from is REVERSED. [Petitioner]
is hereby condemned to pay to [respondent] the total amount of P148,500.00, with interest thereon, at the rate of 6% per
annum, from date of this Decision of the Court. [Respondents] claim for attorneys fees [is] DISMISSED.[Petitioners]
counterclaims are DISMISSED.[5]
The assailed Resolution denied petitioners Motion for Reconsideration.
On the other hand, the disposition of the Regional Trial Courts [6] Decision,[7] which was later reversed by the CA, states:
WHEREFORE, premises considered, the case is hereby DISMISSED for lack of merit.
No cost.[8]
The Facts
The facts of the case are summarized by the appellate court in this wise:
Sometime on December 11, 1991, Nestor Angelia delivered to the Edgar Cokaliong Shipping Lines, Inc. (now Cokaliong
Shipping Lines), [petitioner] for brevity, cargo consisting of one (1) carton of Christmas dcor and two (2) sacks of plastic
toys, to be transported on board the M/V Tandag on its Voyage No. T-189 scheduled to depart from Cebu City, on
December 12, 1991, for Tandag, Surigao del Sur. [Petitioner] issued Bill of Lading No. 58, freight prepaid, covering the
cargo. Nestor Angelia was both the shipper and consignee of the cargo valued, on the face thereof, in the amount
of P6,500.00. Zosimo Mercado likewise delivered cargo to [petitioner], consisting of two (2) cartons of plastic toys and
Christmas decor, one (1) roll of floor mat and one (1) bundle of various or assorted goods for transportation thereof from
Cebu City to Tandag, Surigao del Sur, on board the said vessel, and said voyage. [Petitioner] issued Bill of Lading No.
59 covering the cargo which, on the face thereof, was valued in the amount of P14,000.00. Under the Bill of Lading,
Zosimo Mercado was both the shipper and consignee of the cargo.
On December 12, 1991, Feliciana Legaspi insured the cargo, covered by Bill of Lading No. 59, with the UCPB General
Insurance Co., Inc., [respondent] for brevity, for the amount of P100,000.00 against all risks under Open Policy No.
002/91/254 for which she was issued, by [respondent], Marine Risk Note No. 18409 on said date. She also insured the
cargo covered by Bill of Lading No. 58, with [respondent], for the amount of P50,000.00, under Open Policy No.
002/91/254 on the basis of which [respondent] issued Marine Risk Note No. 18410 on said date.
When the vessel left port, it had thirty-four (34) passengers and assorted cargo on board, including the goods of
Legaspi. After the vessel had passed by the Mandaue-Mactan Bridge, fire ensued in the engine room, and, despite
earnest efforts of the officers and crew of the vessel, the fire engulfed and destroyed the entire vessel resulting in the loss
of the vessel and the cargoes therein. The Captain filed the required Marine Protest.
Shortly thereafter, Feliciana Legaspi filed a claim, with [respondent], for the value of the cargo insured under Marine Risk
Note No. 18409 and covered by Bill of Lading No. 59.She submitted, in support of her claim, a Receipt, dated
December 11, 1991, purportedly signed by Zosimo Mercado, and Order Slips purportedly signed by him for the goods he
received from Feliciana Legaspi valued in the amount of P110,056.00. [Respondent] approved the claim of Feliciana
Legaspi and drew and issued UCPB Check No. 612939, dated March 9, 1992, in the net amount of P99,000.00, in
settlement of her claim after which she executed a Subrogation Receipt/Deed, for said amount, in favor of [respondent].
She also filed a claim for the value of the cargo covered by Bill of Lading No. 58. She submitted to [respondent]
a Receipt, dated December 11, 1991 and Order Slips, purportedly signed by Nestor Angelia for the goods he received
from Feliciana Legaspi valued at P60,338.00. [Respondent] approved her claim and remitted to Feliciana Legaspi the net
amount of P49,500.00, after which she signed a Subrogation Receipt/Deed, dated March 9, 1992, in favor of
[respondent].
On July 14, 1992, [respondent], as subrogee of Feliciana Legaspi, filed a complaint anchored on torts against [petitioner],
with the Regional Trial Court of Makati City, for the collection of the total principal amount of P148,500.00, which it paid to
Feliciana Legaspi for the loss of the cargo, praying that judgment be rendered in its favor and against the [petitioner] as
follows:
WHEREFORE, it is respectfully prayed of this Honorable Court that after due hearing, judgment be rendered ordering
[petitioner] to pay [respondent] the following.
1. Actual damages in the amount of P148,500.00 plus interest thereon at the legal rate from the time of filing of this
complaint until fully paid;
2. Attorneys fees in the amount of P10,000.00; and
3. Cost of suit.
[Respondent] further prays for such other reliefs and remedies as this Honorable Court may deem just and equitable
under the premises.
[Respondent] alleged, inter alia, in its complaint, that the cargo subject of its complaint was delivered to, and received by,
[petitioner] for transportation to Tandag, Surigao del Sur under Bill of Ladings, Annexes A and B of the complaint; that
the loss of the cargo was due to the negligence of the [petitioner]; and that Feliciana Legaspi had executed Subrogation
Receipts/Deeds in favor of [respondent] after paying to her the value of the cargo on account of the Marine Risk Notes it
issued in her favor covering the cargo.
In its Answer to the complaint, [petitioner] alleged that: (a) [petitioner] was cleared by the Board of Marine Inquiry of any
negligence in the burning of the vessel; (b) the complaint stated no cause of action against [petitioner]; and (c) 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, the Vice-President and Chief Operating Officer of [petitioner], and a resident of Cebu City, and of Noel
Tanyu, an officer of the Equitable Banking Corporation, in Cebu City, and a resident of Cebu City, to be given before the
Presiding Judge of Branch 106 of the Regional Trial Court of Cebu City. Chester Cokaliong and Noel Tanyu did testify, by
way of deposition, before the Court and declared inter alia, that: [petitioner] is a family corporation like the Chester
Marketing, Inc.; Nestor Angelia had been doing business with [petitioner] and Chester Marketing, Inc., for years, and
incurred an account with Chester Marketing, Inc. for his purchases from said corporation; [petitioner] did issue Bills of
Lading Nos. 58 and 59 for the cargo described therein with Zosimo Mercado and Nestor Angelia as
shippers/consignees, respectively; the engine room of the M/V Tandag caught fire after it passed the Mandaue/Mactan
Bridge resulting in the total loss of the vessel and its cargo; an investigation was conducted by the Board of Marine
Inquiry of the Philippine Coast Guard which rendered a Report, dated February 13, 1992 absolving [petitioner] of any
responsibility on account of the fire, which Report of the Board was approved by the District Commander of the Philippine
Coast Guard; a few days after the sinking of the vessel, a representative of the Legaspi Marketing filed claims for the
values of the goods under Bills of Lading Nos. 58 and 59 in behalf of the shippers/consignees, Nestor Angelia and
Zosimo Mercado; [petitioner] was able to ascertain, from the shippers/consignees and the representative of the Legaspi
Marketing that the cargo covered by Bill of Lading No. 59 was owned by Legaspi Marketing and consigned to Zosimo
Mercado while that covered by Bill of Lading No. 58 was purchased by Nestor Angelia from the Legaspi Marketing; that
[petitioner] approved the claim of Legaspi Marketing for the value of the cargo under Bill of Lading No. 59 and remitted
to Legaspi Marketing the said amount under Equitable Banking Corporation Check No. 20230486 dated August 12, 1992,
in the amount of P14,000.00 for which the representative of the Legaspi Marketing signed Voucher No. 4379, dated
August 12, 1992, for the said amount of P14,000.00 in full payment of claims under Bill of Lading No. 59; that [petitioner]
approved the claim of Nestor Angelia in the amount of P6,500.00 but that 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.; [petitioner] lost/[misplaced] the original of the check after it was received by Legaspi
Marketing, hence, the production of the microfilm copy by Noel Tanyu of the Equitable Banking Corporation;
[petitioner] never knew, before settling with Legaspi Marketing and Nestor Angelia that the cargo under both Bills of
Lading were insured with [respondent], or that Feliciana Legaspi filed claims for the value of the cargo with [respondent]
and that the latter approved the claims of Feliciana Legaspi and paid the total amount of P148,500.00 to her;
[petitioner] came to know, for the first time, of the payments by [respondent] of the claims of Feliciana Legaspi when it
was served with the summons and complaint, on October 8, 1992; after settling his claim, Nestor Angelia x x x executed
the Release and Quitclaim, dated July 2, 1993, and Affidavit, dated July 2, 1993 in favor of [respondent]; hence,
[petitioner] was absolved of any liability for the loss of the cargo covered by Bills of Lading Nos. 58 and 59; and even if it
was, its liability should not exceed the value of the cargo as stated in the Bills of Lading.
[Petitioner] did not anymore present any other witnesses on its evidence-in-chief. x x x[9] (Citations omitted)
Ruling of the Court of Appeals
The CA 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. [10]
Petitioner had paid P14,000 to Legaspi Marketing for the cargo covered by Bill of Lading No. 59. The CA, however, held
that the payment did not extinguish petitioners obligation to respondent, because there was no evidence that Feliciana
Legaspi (the insured) was the owner/proprietor of Legaspi Marketing. The CA also pointed out the impropriety of treating
the claim under Bill of Lading No. 58 -- covering cargo valued therein at P6,500 -- as a setoff against Nestor Angelias
account with Chester Enterprises, Inc.
Finally, it ruled that respondent is not bound by the valuation of the cargo under the Bills of Lading, x x x nor is the value
of the cargo under said Bills of Lading conclusive on the [respondent]. This is so because, in the first place, the goods
were insured with the [respondent] for the total amount of P150,000.00, which amount may be considered as the face
value of the goods.[11]
Hence this Petition.[12]
Issues
Petitioner raises for our consideration the following alleged errors of the CA:
I
The Honorable Court of Appeals erred, granting arguendo that petitioner is liable, in holding that petitioners liability should
be based on the actual insured value of the goods and not from actual valuation declared by the shipper/consignee in the
bill of lading.
II
The Court of Appeals erred in not affirming the findings of the Philippine Coast Guard, as sustained by the trial court a
quo, holding that the cause of loss of the aforesaid cargoes under Bill of Lading Nos. 58 and 59 was due to force majeure
and due diligence was [exercised] by petitioner prior to, during and immediately after the fire on [petitioners] vessel.
III
The Court of Appeals erred in not holding that respondent UCPB General Insurance has no cause of action against the
petitioner.[13]
In sum, the issues are: (1) Is petitioner liable for the loss of the goods? (2) If it is liable, what is the extent of its liability?
This Courts Ruling
The Petition is partly meritorious.
First Issue:
Liability for Loss
Petitioner argues that the cause of the loss of the goods, subject of this case, was force majeure. It adds that its exercise
of due diligence was adequately proven by the findings of the Philippine Coast Guard.
We are not convinced. The uncontroverted findings of the Philippine Coast Guard show that the M/V Tandag sank due to
a fire, which resulted from a crack in the auxiliary engine fuel oil service tank. Fuel spurted out of the crack and dripped to
the heating exhaust manifold, causing the ship to burst into flames. The crack was located on the side of the fuel oil tank,
which had a mere two-inch gap from the engine room walling, thus precluding constant inspection and care by the crew.
Having originated from an unchecked crack in the fuel oil service tank, the fire could not have been caused by force
majeure. 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.[14] Hence, fire is not considered a natural disaster or calamity. In Eastern
Shipping Lines, Inc. v. Intermediate Appellate Court,[15] we explained:
x x x. This must be so as it arises almost invariably from some act of man or by human means. It does not fall within the
category of an act of God unless caused by lighting or by other natural disaster or calamity. It may even be caused by the
actual fault or privity of the carrier.
Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event refers to leases or rural lands
where a reduction of the rent is allowed when more than one-half of the fruits have been lost due to such event,
considering that the law adopts a protective policy towards agriculture.
As the peril of fire is not comprehended within the exceptions in Article 1734, supra, Article 1735 of the Civil Code
provides that in all cases other than those mentioned in Article 1734, the common carrier shall be presumed to have been
at fault or to have acted negligently, unless it proves that it has observed the extraordinary diligence required by law.
Where loss of cargo results from the failure of the officers of a vessel to inspect their ship frequently so as to discover the
existence of cracked parts, that loss cannot be attributed to force majeure, but to the negligence of those officials.[16]
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 dry-docked 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.
Second Issue:
Extent of Liability
Respondent contends that petitioners liability should be based on the actual insured value of the goods, subject of this
case. On the other hand, petitioner claims that its liability should be limited to the value declared by the shipper/consignee
in the Bill of Lading.
The records[18] show that the Bills of Lading covering the lost goods contain the stipulation that in case of claim for loss or
for damage to the shipped merchandise or property, [t]he liability of the common carrier x x x shall not exceed the value of
the goods as appearing in the bill of lading.[19] The attempt by respondent to make light of this stipulation is
unconvincing. As it had the consignees copies of the Bills of Lading, [20] it could have easily produced those copies,
instead of relying on mere allegations and suppositions. However, it presented mere photocopies thereof to disprove
petitioners evidence showing the existence of the above stipulation.
A stipulation that limits liability is valid[21] as long as it is not against public policy. In Everett Steamship Corporation v.
Court of Appeals,[22] the Court stated:
A stipulation in the bill of lading limiting the common carriers liability for loss or destruction of a cargo to a certain sum,
unless the shipper or owner declares a greater value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil
Code which provides:
Art. 1749. A stipulation that the common carriers liability is limited to the value of the goods appearing in the bill of lading,
unless the shipper or owner declares a greater value, is binding.
Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or
deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been freely and fairly
agreed upon.
Such limited-liability clause has also been consistently upheld by this Court in a number of cases. Thus, in Sea-Land
Service, Inc. vs. Intermediate Appellate Court, we ruled:
It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not exist, the validity and binding
effect of the liability limitation clause in the bill of lading here are nevertheless fully sustainable on the basis alone of the
cited Civil Code Provisions. That said stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750
itself in providing a limit to liability only if a greater value is not declared for the shipment in the bill of lading. To hold
otherwise would amount to questioning the justness and fairness of the law itself, and this the private respondent does
not pretend to do. But over and above that consideration, the just and reasonable character of such stipulation is implicit
in it giving the shipper or owner the option of avoiding accrual of liability limitation by the simple and surely far from
onerous expedient of declaring the nature and value of the shipment in the bill of lading.
Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the common carriers liability for
loss must be reasonable and just under the circumstances, and has been freely and fairly agreed upon.
The bill of lading subject of the present controversy specifically provides, among others:
18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the shippers net invoice cost
plus freight and insurance premiums, if paid, and in no event shall the carrier be liable for any loss of possible profits or
any consequential loss.
The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in an amount exceeding
One Hundred Thousand Yen in Japanese Currency (100,000.00) or its equivalent in any other currency per package or
customary freight unit (whichever is least) unless the value of the goods higher than this amount is declared in writing by
the shipper before receipt of the goods by the carrier and inserted in the Bill of Lading and extra freight is paid as
required.
The above stipulations are, to our mind, reasonable and just. In the bill of lading, the carrier made it clear that its liability
would only be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman Trading, had the option
to declare a higher valuation if the value of its cargo was higher than the limited liability of the carrier. Considering that the
shipper did not declare a higher valuation, it had itself to blame for not complying with the stipulations. (Italics supplied)
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 shippers/consignees may recover the full value of the goods by the simple expedient
of declaring the true value of the shipment in the Bill of Lading. Other than the payment of a higher freight, there was
nothing to stop them from placing the actual value of the goods therein. In fact, they committed fraud against the common
carrier by deliberately undervaluing the goods in their Bill of Lading, thus depriving the carrier of its proper and just
transport fare.
Concededly, 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.
Indeed, Zosimo Mercado and Nestor Angelia misled petitioner by undervaluing the goods in their respective Bills of
Lading. Hence, petitioner was exposed to a risk that was deliberately hidden from it, and from which it could not protect
itself.
It is well to point out that, for assuming a higher risk (the alleged actual value of the goods) the insurance company was
paid the correct higher premium by Feliciana Legaspi; while petitioner was paid a fee lower than what it was entitled to for
transporting the goods that had been deliberately undervalued by the shippers in the Bill of Lading. Between the two of
them, the insurer should bear the loss in excess of the value declared in the Bills of Lading. This is the just and equitable
solution.
In Aboitiz Shipping Corporation v. Court of Appeals,[23] the description of the nature and the value of the goods shipped
were declared and reflected in the bill of lading, like in the present case. The Court therein considered this declaration as
the basis of the carriers liability and ordered payment based on such amount.Following this ruling, petitioner should not be
held liable for more than what was declared by the shippers/consignees as the value of the goods in the bills of lading.
We find no cogent reason to disturb the CAs finding that Feliciana Legaspi was the owner of the goods covered by Bills of
Lading Nos. 58 and 59. Undoubtedly, the goods were merely consigned to Nestor Angelia and Zosimo Mercado,
respectively; thus, Feliciana Legaspi or her subrogee (respondent) was entitled to the goods or, in case of loss, to
compensation therefor. There is no evidence showing that petitioner paid her for the loss of those goods. It does not even
claim to have paid her.
On the other hand, Legaspi Marketing filed with petitioner a claim for the lost goods under Bill of Lading No. 59, for which
the latter subsequently paid P14,000. But nothing in the records convincingly shows that the former was the owner of the
goods. 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.
With regard to the claim for the goods that were covered by Bill of Lading No. 58 and valued at P6,500, the parties have
not convinced us to disturb the findings of the CA that compensation could not validly take place. Thus, we uphold the
appellate courts ruling on this point.
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.
SO ORDERED.
8. Eastern Shipping Lines vs. IAC, 150 SCRA 469
G.R. No. L-69044 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner,

vs.
INTERMEDIATE APPELLATE COURT and DEVELOPMENT INSURANCE & SURETY CORPORATION, respondents.
No. 71478 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner,

vs.
THE NISSHIN FIRE AND MARINE INSURANCE CO., and DOWA FIRE & MARINE INSURANCE CO.,
LTD., respondents.
MELENCIO-HERRERA, J.:
These two cases, both for the recovery of the value of cargo insurance, arose from the same incident, the sinking of the
M/S ASIATICA when it caught fire, resulting in the total loss of ship and cargo.
The basic facts are not in controversy:
In G.R. No. 69044, sometime in or prior to June, 1977, the M/S ASIATICA, a vessel operated by petitioner Eastern
Shipping Lines, Inc., (referred to hereinafter as Petitioner Carrier) loaded at Kobe, Japan for transportation to Manila,
5,000 pieces of calorized lance pipes in 28 packages valued at P256,039.00 consigned to Philippine Blooming Mills Co.,
Inc., and 7 cases of spare parts valued at P92,361.75, consigned to Central Textile Mills, Inc. Both sets of goods were
insured against marine risk for their stated value with respondent Development Insurance and Surety Corporation.
In G.R. No. 71478, during the same period, the same vessel took on board 128 cartons of garment fabrics and
accessories, in two (2) containers, consigned to Mariveles Apparel Corporation, and two cases of surveying instruments
consigned to Aman Enterprises and General Merchandise. The 128 cartons were insured for their stated value by
respondent Nisshin Fire & Marine Insurance Co., for US $46,583.00, and the 2 cases by respondent Dowa Fire & Marine
Insurance Co., Ltd., for US $11,385.00.
Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the total loss of ship and cargo. The
respective respondent Insurers paid the corresponding marine insurance values to the consignees concerned and were
thus subrogated unto the rights of the latter as the insured.
G.R. NO. 69044
On May 11, 1978, respondent Development Insurance & Surety Corporation (Development Insurance, for short), having
been subrogated unto the rights of the two insured companies, filed suit against petitioner Carrier for the recovery of the
amounts it had paid to the insured before the then Court of First instance of Manila, Branch XXX (Civil Case No. 6087).
Petitioner-Carrier denied liability mainly on the ground that the loss was due to an extraordinary fortuitous event, hence, it
is not liable under the law.
On August 31, 1979, the Trial Court rendered judgment in favor of Development Insurance in the amounts of
P256,039.00 and P92,361.75, respectively, with legal interest, plus P35,000.00 as attorney's fees and costs. Petitioner
Carrier took an appeal to the then Court of Appeals which, on August 14, 1984, affirmed.
Petitioner Carrier is now before us on a Petition for Review on Certiorari.
G.R. NO. 71478
On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co. NISSHIN for short), and Dowa Fire & Marine
Insurance Co., Ltd. (DOWA, for brevity), as subrogees of the insured, filed suit against Petitioner Carrier for the recovery
of the insured value of the cargo lost with the then Court of First Instance of Manila, Branch 11 (Civil Case No. 116151),
imputing unseaworthiness of the ship and non-observance of extraordinary diligence by petitioner Carrier.
Petitioner Carrier denied liability on the principal grounds that the fire which caused the sinking of the ship is an
exempting circumstance under Section 4(2) (b) of the Carriage of Goods by Sea Act (COGSA); and that when the loss of
fire is established, the burden of proving negligence of the vessel is shifted to the cargo shipper.
On September 15, 1980, the Trial Court rendered judgment in favor of NISSHIN and DOWA in the amounts of US
$46,583.00 and US $11,385.00, respectively, with legal interest, plus attorney's fees of P5,000.00 and costs. On appeal
by petitioner, the then Court of Appeals on September 10, 1984, affirmed with modification the Trial Court's judgment by
decreasing the amount recoverable by DOWA to US $1,000.00 because of $500 per package limitation of liability under
the COGSA.
Hence, this Petition for Review on certiorari by Petitioner Carrier.
Both Petitions were initially denied for lack of merit. G.R. No. 69044 on January 16, 1985 by the First Division, and G. R.
No. 71478 on September 25, 1985 by the Second Division. Upon Petitioner Carrier's Motion for Reconsideration,
however, G.R. No. 69044 was given due course on March 25, 1985, and the parties were required to submit their
respective Memoranda, which they have done.
On the other hand, in G.R. No. 71478, Petitioner Carrier sought reconsideration of the Resolution denying the Petition for
Review and moved for its consolidation with G.R. No. 69044, the lower-numbered case, which was then pending
resolution with the First Division. The same was granted; the Resolution of the Second Division of September 25, 1985
was set aside and the Petition was given due course.
At the outset, we reject Petitioner Carrier's claim that it is not the operator of the M/S Asiatica but merely a charterer
thereof. We note that in G.R. No. 69044, Petitioner Carrier stated in its Petition:
There are about 22 cases of the "ASIATICA" pending in various courts where various plaintiffs are represented by various
counsel representing various consignees or insurance companies. The common defendant in these cases is petitioner
herein, being the operator of said vessel. ... 1
Petitioner Carrier should be held bound to said admission. As a general rule, the facts alleged in a party's pleading are
deemed admissions of that party and binding upon it. 2 And an admission in one pleading in one action may be received
in evidence against the pleader or his successor-in-interest on the trial of another action to which he is a party, in favor of
a party to the latter action. 3
The threshold issues in both cases are: (1) which law should govern — the Civil Code provisions on Common carriers or
the Carriage of Goods by Sea Act? and (2) who has the burden of proof to show negligence of the carrier?
On the Law Applicable
The law of the country to which the goods are to be transported governs the liability of the common carrier in case of their
loss, destruction or deterioration. 4 As the cargoes in question were transported from Japan to the Philippines, the liability
of Petitioner Carrier is governed primarily by the Civil Code. 5 However, in all matters not regulated by said Code, the
rights and obligations of common carrier shall be governed by the Code of Commerce and by special laws. 6 Thus, the
Carriage of Goods by Sea Act, a special law, is suppletory to the provisions of the Civil Code. 7
On the Burden of Proof
Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over goods, according to all the circumstances of each case. 8Common
carriers are responsible for the loss, destruction, or deterioration of the goods unless the same is due to any of the
following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;
xxx xxx xxx 9
Petitioner Carrier claims that the loss of the vessel by fire exempts it from liability under the phrase "natural disaster or
calamity. " However, we are of the opinion that fire may not be considered a natural disaster or calamity. This must be so
as it arises almost invariably from some act of man or by human means. 10 It does not fall within the category of an act of
God unless caused by lightning 11 or by other natural disaster or calamity. 12 It may even be caused by the actual fault or
privity of the carrier. 13
Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event refers to leases of rural lands
where a reduction of the rent is allowed when more than one-half of the fruits have been lost due to such event,
considering that the law adopts a protection policy towards agriculture. 14
As the peril of the fire is not comprehended within the exception in Article 1734, supra, Article 1735 of the Civil Code
provides that all cases than those mention in Article 1734, the common carrier shall be presumed to have been at fault or
to have acted negligently, unless it proves that it has observed the extraordinary deligence required by law.
In this case, the respective Insurers. as subrogees of the cargo shippers, have proven that the transported goods have
been lost. Petitioner Carrier has also proved that the loss was caused by fire. The burden then is upon Petitioner Carrier
to proved that it has exercised the extraordinary diligence required by law. In this regard, the Trial Court, concurred in by
the Appellate Court, made the following Finding of fact:
The cargoes in question were, according to the witnesses defendant placed in hatches No, 2 and 3 cf the vessel,
Boatswain Ernesto Pastrana noticed that smoke was coming out from hatch No. 2 and hatch No. 3; that where the smoke
was noticed, the fire was already big; that the fire must have started twenty-four 24) our the same was noticed; that
carbon dioxide was ordered released and the crew was ordered to open the hatch covers of No, 2 tor commencement of
fire fighting by sea water: that all of these effort were not enough to control the fire.
Pursuant to Article 1733, common carriers are bound to extraordinary diligence in the vigilance over the goods. The
evidence of the defendant did not show that extraordinary vigilance was observed by the vessel to prevent the occurrence
of fire at hatches numbers 2 and 3. Defendant's evidence did not likewise show he amount of diligence made by the crew,
on orders, in the care of the cargoes. What appears is that after the cargoes were stored in the hatches, no regular
inspection was made as to their condition during the voyage. Consequently, the crew could not have even explain what
could have caused the fire. The defendant, in the Court's mind, failed to satisfactorily show that extraordinary vigilance
and care had been made by the crew to prevent the occurrence of the fire. The defendant, as a common carrier, is liable
to the consignees for said lack of deligence required of it under Article 1733 of the Civil Code. 15
Having failed to discharge the burden of proving that it had exercised the extraordinary diligence required by law,
Petitioner Carrier cannot escape liability for the loss of the cargo.
And even if fire were to be considered a "natural disaster" within the meaning of Article 1734 of the Civil Code, it is
required under Article 1739 of the same Code that the "natural disaster" must have been the "proximate and only cause
of the loss," and that the carrier has "exercised due diligence to prevent or minimize the loss before, during or after the
occurrence of the disaster. " This Petitioner Carrier has also failed to establish satisfactorily.
Nor may Petitioner Carrier seek refuge from liability under the Carriage of Goods by Sea Act, It is provided therein that:
Sec. 4(2). Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from
(b) Fire, unless caused by the actual fault or privity of the carrier.
xxx xxx xxx
In this case, both the Trial Court and the Appellate Court, in effect, found, as a fact, that there was "actual fault" of the
carrier shown by "lack of diligence" in that "when the smoke was noticed, the fire was already big; that the fire must have
started twenty-four (24) hours before the same was noticed; " and that "after the cargoes were stored in the hatches, no
regular inspection was made as to their condition during the voyage." The foregoing suffices to show that the
circumstances under which the fire originated and spread are such as to show that Petitioner Carrier or its servants were
negligent in connection therewith. Consequently, the complete defense afforded by the COGSA when loss results from
fire is unavailing to Petitioner Carrier.
On the US $500 Per Package Limitation:
Petitioner Carrier avers that its liability if any, should not exceed US $500 per package as provided in section 4(5) of the
COGSA, which reads:
(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with
the transportation of goods in an amount exceeding $500 per package lawful money of the United States, or in case of
goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the
nature and value of such goods have been declared by the shipper before shipment and inserted in bill of lading. This
declaration if embodied in the bill of lading shall be prima facie evidence, but all be conclusive on the carrier.
By agreement between the carrier, master or agent of the carrier, and the shipper another maximum amount than that
mentioned in this paragraph may be fixed: Provided, That such maximum shall not be less than the figure above named.
In no event shall the carrier be Liable for more than the amount of damage actually sustained.
xxx xxx xxx
Article 1749 of the New Civil Code also allows the limitations of liability in this wise:
Art. 1749. A stipulation that the common carrier's liability as limited to the value of the goods appearing in the bill of
lading, unless the shipper or owner declares a greater value, is binding.
It is to be noted that the Civil Code does not of itself limit the liability of the common carrier to a fixed amount per package
although the Code expressly permits a stipulation limiting such liability. Thus, the COGSA which is suppletory to the
provisions of the Civil Code, steps in and supplements the Code by establishing a statutory provision limiting the carrier's
liability in the absence of a declaration of a higher value of the goods by the shipper in the bill of lading. The provisions of
the Carriage of Goods by.Sea Act on limited liability are as much a part of a bill of lading as though physically in it and as
much a part thereof as though placed therein by agreement of the parties. 16
In G.R. No. 69044, there is no stipulation in the respective Bills of Lading (Exhibits "C-2" and "I-3") 1 7 limiting the carrier's
liability for the loss or destruction of the goods. Nor is there a declaration of a higher value of the goods. Hence, Petitioner
Carrier's liability should not exceed US $500 per package, or its peso equivalent, at the time of payment of the value of
the goods lost, but in no case "more than the amount of damage actually sustained."
The actual total loss for the 5,000 pieces of calorized lance pipes was P256,039 (Exhibit "C"), which was exactly the
amount of the insurance coverage by Development Insurance (Exhibit "A"), and the amount affirmed to be paid by
respondent Court. The goods were shipped in 28 packages (Exhibit "C-2") Multiplying 28 packages by $500 would result
in a product of $14,000 which, at the current exchange rate of P20.44 to US $1, would be P286,160, or "more than the
amount of damage actually sustained." Consequently, the aforestated amount of P256,039 should be upheld.
With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their actual value was P92,361.75 (Exhibit "I"), which is
likewise the insured value of the cargo (Exhibit "H") and amount was affirmed to be paid by respondent Court. however,
multiplying seven (7) cases by $500 per package at the present prevailing rate of P20.44 to US $1 (US $3,500 x P20.44)
would yield P71,540 only, which is the amount that should be paid by Petitioner Carrier for those spare parts, and not
P92,361.75.
In G.R. No. 71478, in so far as the two (2) cases of surveying instruments are concerned, the amount awarded to DOWA
which was already reduced to $1,000 by the Appellate Court following the statutory $500 liability per package, is in order.
In respect of the shipment of 128 cartons of garment fabrics in two (2) containers and insured with NISSHIN, the
Appellate Court also limited Petitioner Carrier's liability to $500 per package and affirmed the award of $46,583 to
NISSHIN. it multiplied 128 cartons (considered as COGSA packages) by $500 to arrive at the figure of $64,000, and
explained that "since this amount is more than the insured value of the goods, that is $46,583, the Trial Court was correct
in awarding said amount only for the 128 cartons, which amount is less than the maximum limitation of the carrier's
liability."
We find no reversible error. The 128 cartons and not the two (2) containers should be considered as the shipping unit.
In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 (1981), the consignees of tin ingots and the shipper of
floor covering brought action against the vessel owner and operator to recover for loss of ingots and floor covering, which
had been shipped in vessel — supplied containers. The U.S. District Court for the Southern District of New York rendered
judgment for the plaintiffs, and the defendant appealed. The United States Court of Appeals, Second Division, modified
and affirmed holding that:
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 liability limitation provision of Carriage of Goods by Sea Act. Carriage of Goods by Sea Act, 4(5), 46
U.S.C.A.& 1304(5).
Even if language and purposes of Carriage of Goods by Sea Act left doubt as to whether carrier-furnished containers
whose contents are disclosed should be treated as packages, the interest in securing international uniformity would
suggest that they should not be so treated. Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A. 1304(5).
... After quoting the statement in Leather's Best, supra, 451 F 2d at 815, that treating a container as a package is
inconsistent with the congressional purpose of establishing a reasonable minimum level of liability, Judge Beeks wrote,
414 F. Supp. at 907 (footnotes omitted):
Although this approach has not completely escaped criticism, there is, nonetheless, much to commend it. It gives needed
recognition to the responsibility of the courts to construe and apply the statute as enacted, however great might be the
temptation to "modernize" or reconstitute it by artful judicial gloss. If COGSA's package limitation scheme suffers from
internal illness, Congress alone must undertake the surgery. There is, in this regard, obvious wisdom in the Ninth Circuit's
conclusion in Hartford that technological advancements, whether or not forseeable by the COGSA promulgators, do not
warrant a distortion or artificial construction of the statutory term "package." A ruling that these large reusable metal
pieces of transport equipment qualify as COGSA packages — at least where, as here, they were carrier owned and
supplied — would amount to just such a distortion.
Certainly, if the individual crates or cartons prepared by the shipper and containing his goods can rightly be considered
"packages" standing by themselves, they do not suddenly lose that character upon being stowed in a carrier's container. I
would liken these containers to detachable stowage compartments of the ship. They simply serve to divide the ship's
overall cargo stowage space into smaller, more serviceable loci. Shippers' packages are quite literally "stowed" in the
containers utilizing stevedoring practices and materials analogous to those employed in traditional on board stowage.
In Yeramex International v. S.S. Tando,, 1977 A.M.C. 1807 (E.D. Va.) rev'd on other grounds, 595 F 2nd 943 (4 Cir.
1979), another district with many maritime cases followed Judge Beeks' reasoning in Matsushita and similarly rejected the
functional economics test. Judge Kellam held that when rolls of polyester goods are packed into cardboard cartons which
are then placed in containers, the cartons and not the containers are the packages.
xxx xxx xxx
The case of Smithgreyhound v. M/V Eurygenes, 18 followed the Mitsui test:
Eurygenes concerned a shipment of stereo equipment packaged by the shipper into cartons which were then placed by
the shipper into a carrier- furnished container. The number of cartons was disclosed to the carrier in the bill of lading.
Eurygenes followed the Mitsui test and treated the cartons, not the container, as the COGSA packages. However,
Eurygenes indicated that a carrier could limit its liability to $500 per container if the bill of lading failed to disclose the
number of cartons or units within the container, or if the parties indicated, in clear and unambiguous language, an
agreement to treat the container as the package.
(Admiralty Litigation in Perpetuum: The Continuing Saga of Package Limitations and Third World Delivery Problems by
Chester D. Hooper & Keith L. Flicker, published in Fordham International Law Journal, Vol. 6, 1982-83, Number 1)
(Emphasis supplied)
In this case, the Bill of Lading (Exhibit "A") disclosed the following data:
2 Containers
(128) Cartons)
Men's Garments Fabrics and Accessories Freight Prepaid
Say: Two (2) Containers Only.
Considering, therefore, that the Bill of Lading clearly disclosed the contents of the containers, the number of cartons or
units, as well as the nature of the goods, and applying the ruling in the Mitsui and Eurygenes cases it is clear that the 128
cartons, not the two (2) containers should be considered as the shipping unit subject to the $500 limitation of liability.
True, the evidence does not disclose whether the containers involved herein were carrier-furnished or not. Usually,
however, containers are provided by the carrier. 19 In this case, the probability is that they were so furnished for
Petitioner Carrier was at liberty to pack and carry the goods in containers if they were not so packed. Thus, at the dorsal
side of the Bill of Lading (Exhibit "A") appears the following stipulation in fine print:
11. (Use of Container) Where the goods receipt of which is acknowledged on the face of this Bill of Lading are not already
packed into container(s) at the time of receipt, the Carrier shall be at liberty to pack and carry them in any type of
container(s).
The foregoing would explain the use of the estimate "Say: Two (2) Containers Only" in the Bill of Lading, meaning that the
goods could probably fit in two (2) containers only. It cannot mean that the shipper had furnished the containers for if so,
"Two (2) Containers" appearing as the first entry would have sufficed. and if there is any ambiguity in the Bill of Lading, it
is a cardinal principle in the construction of contracts that the interpretation of obscure words or stipulations in a contract
shall not favor the party who caused the obscurity. 20 This applies with even greater force in a contract of adhesion where
a contract is already prepared and the other party merely adheres to it, like the Bill of Lading in this case, which is draw.
up by the carrier. 21
On Alleged Denial of Opportunity to Present Deposition of Its Witnesses: (in G.R. No. 69044 only)
Petitioner Carrier claims that the Trial Court did not give it sufficient time to take the depositions of its witnesses in Japan
by written interrogatories.
We do not agree. petitioner Carrier was given- full opportunity to present its evidence but it failed to do so. On this point,
the Trial Court found:
xxx xxx xxx
Indeed, since after November 6, 1978, to August 27, 1979, not to mention the time from June 27, 1978, when its answer
was prepared and filed in Court, until September 26, 1978, when the pre-trial conference was conducted for the last time,
the defendant had more than nine months to prepare its evidence. Its belated notice to take deposition on written
interrogatories of its witnesses in Japan, served upon the plaintiff on August 25th, just two days before the hearing set for
August 27th, knowing fully well that it was its undertaking on July 11 the that the deposition of the witnesses would be
dispensed with if by next time it had not yet been obtained, only proves the lack of merit of the defendant's motion for
postponement, for which reason it deserves no sympathy from the Court in that regard. The defendant has told the Court
since February 16, 1979, that it was going to take the deposition of its witnesses in Japan. Why did it take until August 25,
1979, or more than six months, to prepare its written interrogatories. Only the defendant itself is to blame for its failure to
adduce evidence in support of its defenses.
xxx xxx xxx 22
Petitioner Carrier was afforded ample time to present its side of the case. 23 It cannot complain now that it was denied due
process when the Trial Court rendered its Decision on the basis of the evidence adduced. What due process abhors is
absolute lack of opportunity to be heard. 24
On the Award of Attorney's Fees:
Petitioner Carrier questions the award of attorney's fees. In both cases, respondent Court affirmed the award by the Trial
Court of attorney's fees of P35,000.00 in favor of Development Insurance in G.R. No. 69044, and P5,000.00 in favor of
NISSHIN and DOWA in G.R. No. 71478.
Courts being vested with discretion in fixing the amount of attorney's fees, it is believed that the amount of P5,000.00
would be more reasonable in G.R. No. 69044. The award of P5,000.00 in G.R. No. 71478 is affirmed.
WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that petitioner Eastern Shipping Lines shall pay the
Development Insurance and Surety Corporation the amount of P256,039 for the twenty-eight (28) packages of calorized
lance pipes, and P71,540 for the seven (7) cases of spare parts, with interest at the legal rate from the date of the filing of
the complaint on June 13, 1978, plus P5,000 as attorney's fees, and the costs.
2) In G.R.No.71478,the judgment is hereby affirmed.

SO ORDERED.
9. Bascos vs. CA, April 7, 1993
ESTRELLITA M. BASCOS, petitioners,

vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.
Modesto S. Bascos for petitioner.
Pelaez, Adriano & Gregorio for private respondent.
SYLLABUS
1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON CARRIER. — Article 1732 of the
Civil Code defines a common carrier as "(a) person, corporation or firm, or association 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." The test to determine a common carrier is "whether the given undertaking is a part of the business engaged in by
the carrier which he has held out to the general public as his occupation rather than the quantity or extent of the business
transacted." . . . The holding of the Court in De Guzman vs. Court of Appeals is instructive. In referring to Article 1732 of
the Civil Code, it held thus: "The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a
"sideline"). 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 distinguished 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. We think that Article 1732 deliberately refrained from making such distinctions."
2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED; WHEN PRESUMPTION OF
NEGLIGENCE ARISES; HOW PRESUMPTION OVERCAME; WHEN PRESUMPTION MADE ABSOLUTE. — Common
carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them. Accordingly,
they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated.
There are very few instances 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.
3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; HOW CARRIER ABSOLVED FROM
LIABILITY. — In De Guzman vs. Court of Appeals, the Court held that hijacking, not being included in the provisions of
Article 1734, must be dealt with under the provisions of Article 1735 and thus, the common carrier is presumed to have
been at fault or negligent. To exculpate the carrier from liability arising from hijacking, he must prove that the robbers or
the hijackers acted with grave or irresistible threat, violence, or force. This is in accordance with Article 1745 of the Civil
Code which provides: "Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and
contrary to public policy . . . (6) That the common carrier's liability for acts committed by thieves, or of robbers who do not
act with grave or irresistible threat, violences or force, is dispensed with or diminished"; In the same case, the Supreme
Court also held that: "Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to
divest or to diminish such responsibility — even for acts of strangers like thieves or robbers, except where such thieves or
robbers in fact acted "with grave of irresistible threat, violence of force," We believe and so hold that the limits of the duty
of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost as a result of a
robbery which is attended by "grave or irresistible threat, violence or force."
4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE. — In this case, petitioner herself has made the
admission that she was in the trucking business, offering her trucks to those with cargo to move. Judicial admissions are
conclusive and no evidence is required to prove the same.
5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A FACT. — Petitioner presented no other proof
of the existence of the contract of lease. He who alleges a fact has the burden of proving it.
6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF AFFIANTS AVAILABLE AS WITNESSES. — While
the affidavit of Juanito Morden, the truck helper in the hijacked truck, was presented as evidence in court, he himself was
a witness as could be gleaned from the contents of the petition. Affidavits are not considered the best evidence if the
affiants are available as witnesses.
7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT LAW DEFINES IT TO BE. — Granting that the
said evidence were not self-serving, the same were not sufficient to prove that the contract was one of lease. It must be
understood that a contract is what the law defines it to be and not what it is called by the contracting parties.
DECISION
CAMPOS, JR., J p:
This is a petition for review on certiorari of the decision ** of the Court of Appeals in "RODOLFO A. CIPRIANO, doing
business under the name CIPRIANO TRADING ENTERPRISES plaintiff-appellee, vs. ESTRELLITA M. BASCOS, doing
business under the name of BASCOS TRUCKING, defendant-appellant," C.A.-G.R. CV No. 25216, the dispositive portion
of which is quoted hereunder:
"PREMISES considered, We find no reversible error in the decision appealed from, which is hereby affirmed in toto. Costs
against appellant." 1
The facts, as gathered by this Court, are as follows:
Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered into a hauling contract 2 with
Jibfair Shipping Agency Corporation whereby the former bound itself to haul the latter's 2,000 m/tons of soya bean meal
from Magallanes Drive, Del Pan, Manila to the warehouse of Purefoods Corporation in Calamba, Laguna. To carry out its
obligation, CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita Bascos (petitioner) to transport and to
deliver 400 sacks of soya bean meal worth P156,404.00 from the Manila Port Area to Calamba, Laguna at the rate of
P50.00 per metric ton. Petitioner failed to deliver the said cargo. As a consequence of that failure, Cipriano paid Jibfair
Shipping Agency the amount of the lost goods in accordance with the contract which stated that:
"1. CIPTRADE shall be held liable and answerable for any loss in bags due to theft, hijacking and non-delivery or
damages to the cargo during transport at market value, . . ." 3
Cipriano demanded reimbursement from petitioner but the latter refused to pay. Eventually, Cipriano filed a complaint for
a sum of money and damages with writ of preliminary attachment 4 for breach of a contract of carriage. The prayer for a
Writ of Preliminary Attachment was supported by an affidavit 5 which contained the following allegations:
"4. That this action is one of those specifically mentioned in Sec. 1, Rule 57 the Rules of Court, whereby a writ of
preliminary attachment may lawfully issue, namely:
"(e) in an action against a party who has removed or disposed of his property, or is about to do so, with intent to defraud
his creditors;"
5. That there is no sufficient security for the claim sought to be enforced by the present action;
6. That the amount due to the plaintiff in the above-entitled case is above all legal counterclaims;"
The trial court granted the writ of preliminary attachment on February 17, 1987.
In her answer, petitioner interposed the following defenses: that there was no contract of carriage since CIPTRADE
leased her cargo truck to load the cargo from Manila Port Area to Laguna; that CIPTRADE was liable to petitioner in the
amount of P11,000.00 for loading the cargo; that the truck carrying the cargo was hijacked along Canonigo St., Paco,
Manila on the night of October 21, 1988; that the hijacking was immediately reported to CIPTRADE and that petitioner
and the police exerted all efforts to locate the hijacked properties; that after preliminary investigation, an information for
robbery and carnapping were filed against Jose Opriano, et al.; and that hijacking, being a force majeure, exculpated
petitioner from any liability to CIPTRADE.
After trial, the trial court rendered a decision *** the dispositive portion of which reads as follows:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant ordering the latter to pay the
former:
1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED FOUR PESOS (P156,404.00) as an (sic)
for actual damages with legal interest of 12% per cent per annum to be counted from December 4, 1986 until fully paid;
2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's fees; and
3. The costs of the suit.

The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March 10, 1987 filed by defendant is DENIED for
being moot and academic.
SO ORDERED." 6
Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial court's judgment.
Consequently, petitioner filed this petition where she makes the following assignment of errors; to wit:
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL RELATIONSHIP BETWEEN
PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF GOODS AND NOT LEASE OF CARGO TRUCK.
II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE RESPONDENT COURT THAT THE
CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF
GOODS IS CORRECT, NEVERTHELESS, IT ERRED IN FINDING PETITIONER LIABLE THEREUNDER BECAUSE
THE LOSS OF THE CARGO WAS DUE TO FORCE MAJEURE, NAMELY, HIJACKING.
III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF THE TRIAL COURT THAT PETITIONER'S
MOTION TO DISSOLVE/LIFT THE WRIT OF PRELIMINARY ATTACHMENT HAS BEEN RENDERED MOOT AND
ACADEMIC BY THE DECISION OF THE MERITS OF THE CASE." 7
The petition presents the following issues for resolution: (1) was petitioner a common carrier?; and (2) was the hijacking
referred to a force majeure?
The Court of Appeals, in holding that petitioner was a common carrier, found that she admitted in her answer that she did
business under the name A.M. Bascos Trucking and that said admission dispensed with the presentation by private
respondent, Rodolfo Cipriano, of proofs that petitioner was a common carrier. The respondent Court also adopted in toto
the trial court's decision that petitioner was a common carrier, Moreover, both courts appreciated the following pieces of
evidence as indicators that petitioner was a common carrier: the fact that the truck driver of petitioner, Maximo Sanglay,
received the cargo consisting of 400 bags of soya bean meal as evidenced by a cargo receipt signed by Maximo Sanglay;
the fact that the truck helper, Juanito Morden, was also an employee of petitioner; and the fact that control of the cargo
was placed in petitioner's care.
In disputing the conclusion of the trial and appellate courts that petitioner was a common carrier, she alleged in this
petition that the contract between her and Rodolfo A. Cipriano, representing CIPTRADE, was lease of the truck. She cited
as evidence certain affidavits which referred to the contract as "lease". These affidavits were made by Jesus Bascos 8
and by petitioner herself. 9 She further averred that Jesus Bascos confirmed in his testimony his statement that the
contract was a lease contract. 10 She also stated that: she was not catering to the general public. Thus, in her answer to
the amended complaint, she said that she does business under the same style of A.M. Bascos Trucking, offering her
trucks for lease to those who have cargo to move, not to the general public but to a few customers only in view of the fact
that it is only a small business. 11
We agree with the respondent Court in its finding that petitioner is a common carrier.
Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or association 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." The test to determine a common carrier is "whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent
of the business transacted." 12 In this case, petitioner herself has made the admission that she was in the trucking
business, offering her trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is required
to prove the same. 13
But petitioner argues that there was only a contract of lease because they offer their services only to a select group of
people and because the private respondents, plaintiffs in the lower court, did not object to the presentation of affidavits b y
petitioner where the transaction was referred to as a lease contract.
Regarding the first contention, the holding of the Court in De Guzman vs. Court of Appeals 14 is instructive. In referring to
Article 1732 of the Civil Code, it held thus:
"The above article makes no distinction between one whose principal business activity is the carrying of persons or goods
or both, and one who does such carrying only as an ancillary activity (in local idiom, as a "sideline"). 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. We think that
Article 1732 deliberately refrained from making such distinctions."
Regarding the affidavits presented by petitioner to the court, both the trial and appellate courts have dismissed them as
self-serving and petitioner contests the conclusion. We are bound by the appellate court's factual conclusions. Yet,
granting that the said evidence were not self-serving, the same were not sufficient to prove that the contract was one of
lease. It must be understood that a contract is what the law defines it to be and not what it is called by the contracting
parties. 15 Furthermore, petitioner presented no other proof of the existence of the contract of lease. He who alleges a
fact has the burden of proving it. 16
Likewise, We affirm the holding of the respondent court that the loss of the goods was not due to force majeure.
Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them. 17
Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or
deteriorated. 18 There are very few instances when the presumption of negligence does not attach and these instances
are enumerated in Article 1734. 19 In those cases where the presumption is applied, the common carrier must prove that
it exercised extraordinary diligence in order to overcome the presumption.
In this case, petitioner alleged that hijacking constituted force majeure which exculpated her from liability for the loss of
the cargo. In De Guzman vs. Court of Appeals, 20 the Court held that hijacking, not being included in the provisions of
Article 1734, must be dealt with under the provisions of Article 1735 and thus, the common carrier is presumed to have
been at fault or negligent. To exculpate the carrier from liability arising from hijacking, he must prove that the robbers or
the hijackers acted with grave or irresistible threat, violence, or force. This is in accordance with Article 1745 of the Civil
Code which provides:
"Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public
policy;
xxx xxx xxx
(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible
threat, violences or force, is dispensed with or diminished;"
In the same case, 21 the Supreme Court also held that:
"Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to divest or to diminish
such responsibility — even for acts of strangers like thieves or robbers except where such thieves or robbers in fact acted
with grave or irresistible threat, violence or force. We believe and so hold that the limits of the duty of extraordinary
diligence in the vigilance over the goods carried are reached where the goods are lost as a result of a robbery which is
attended by "grave or irresistible threat, violence or force."
To establish grave and irresistible force, petitioner presented her accusatory affidavit, 22 Jesus Bascos' affidavit, 23 and
Juanito Morden's 24 "Salaysay". However, both the trial court and the Court of Appeals have concluded that these
affidavits were not enough to overcome the presumption. Petitioner's affidavit about the hijacking was based on what had
been told her by Juanito Morden. It was not a first-hand account. While it had been admitted in court for lack of objection
on the part of private respondent, the respondent Court had discretion in assigning weight to such evidence. We are
bound by the conclusion of the appellate court. In a petition for review on certiorari, We are not to determine the probative
value of evidence but to resolve questions of law. Secondly, the affidavit of Jesus Bascos did not dwell on how the
hijacking took place. Thirdly, while the affidavit of Juanito Morden, the truck helper in the hijacked truck, was presented as
evidence in court, he himself was a witness as could be gleaned from the contents of the petition. Affidavits are not
considered the best evidence if the affiants are available as witnesses. 25 The subsequent filing of the information for
carnapping and robbery against the accused named in said affidavits did not necessarily mean that the contents of the
affidavits were true because they were yet to be determined in the trial of the criminal cases.
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.
Having affirmed the findings of the respondent Court on the substantial issues involved, We find no reason to disturb the
conclusion that the motion to lift/dissolve the writ of preliminary attachment has been rendered moot and academic by the
decision on the merits.
In the light of the foregoing analysis, it is Our opinion that the petitioner's claim cannot be sustained. The petition is
DISMISSED and the decision of the Court of Appeals is hereby AFFIRMED.
10. Ganzon vs. CA, May 30, 1988
G.R. No. L-48757 May 30, 1988

MAURO GANZON, petitioner,
vs.
COURT OF APPEALS and GELACIO E. TUMAMBING, respondents.
Antonio B. Abinoja for petitioner.
Quijano, Arroyo & Padilla Law Office for respondents.
SARMIENTO, J.:
The private respondent instituted in the Court of First Instance of Manila 1 an action against the petitioner for damages
based on culpa contractual. The antecedent facts, as found by the respondent Court, 2 are undisputed:
On November 28, 1956, Gelacio Tumambing contracted the services of Mauro B. Ganzon to haul 305 tons of scrap iron
from Mariveles, Bataan, to the port of Manila on board the lighter LCT "Batman" (Exhibit 1, Stipulation of Facts, Amended
Record on Appeal, p. 38). Pursuant to that agreement, Mauro B. Ganzon sent his lighter "Batman" to Mariveles where it
docked in three feet of water (t.s.n., September 28, 1972, p. 31). On December 1, 1956, Gelacio Tumambing delivered
the scrap iron to defendant Filomeno Niza, captain of the lighter, for loading which was actually begun on the same date
by the crew of the lighter under the captain's supervision. When about half of the scrap iron was already loaded (t.s.n.,
December 14, 1972, p. 20), Mayor Jose Advincula of Mariveles, Bataan, arrived and demanded P5,000.00 from Gelacio
Tumambing. The latter resisted the shakedown and after a heated argument between them, Mayor Jose Advincula drew
his gun and fired at Gelacio Tumambing (t.s.n., March 19, 1971, p. 9; September 28, 1972, pp. 6-7).<äre||anº•1àw> The
gunshot was not fatal but Tumambing had to be taken to a hospital in Balanga, Bataan, for treatment (t.s.n., March 19,
1971, p. 13; September 28, 1972, p. 15).
After sometime, the loading of the scrap iron was resumed. But on December 4, 1956, Acting Mayor Basilio Rub,
accompanied by three policemen, ordered captain Filomeno Niza and his crew to dump the scrap iron (t.s.n., June 16,
1972, pp. 8-9) where the lighter was docked (t.s.n., September 28, 1972, p. 31). The rest was brought to the compound of
NASSCO (Record on Appeal, pp. 20-22). Later on Acting Mayor Rub issued a receipt stating that the Municipality of
Mariveles had taken custody of the scrap iron (Stipulation of Facts, Record on Appeal, p. 40; t.s.n., September 28, 1972,
p. 10.)
On the basis of the above findings, the respondent Court rendered a decision, the dispositive portion of which states:
WHEREFORE, the decision appealed from is hereby reversed and set aside and a new one entered ordering defendant-
appellee Mauro Ganzon to pay plaintiff-appellant Gelacio E. Tumambimg the sum of P5,895.00 as actual damages, the
sum of P5,000.00 as exemplary damages, and the amount of P2,000.00 as attorney's fees. Costs against defendant-
appellee Ganzon. 3
In this petition for review on certiorari, the alleged errors in the decision of the Court of Appeals are:
THE COURT OF APPEALS FINDING THE HEREIN PETITIONER GUILTY OF BREACH OF THE CONTRACT OF
TRANSPORTATION AND IN IMPOSING A LIABILITY AGAINST HIM COMMENCING FROM THE TIME THE SCRAP
WAS PLACED IN HIS CUSTODY AND CONTROL HAVE NO BASIS IN FACT AND IN LAW.
II
THE APPELLATE COURT ERRED IN CONDEMNING THE PETITIONER FOR THE ACTS OF HIS EMPLOYEES IN
DUMPING THE SCRAP INTO THE SEA DESPITE THAT IT WAS ORDERED BY THE LOCAL GOVERNMENT
OFFICIAL WITHOUT HIS PARTICIPATION.
III
THE APPELLATE COURT FAILED TO CONSIDER THAT THE LOSS OF THE SCRAP WAS DUE TO A FORTUITOUS
EVENT AND THE PETITIONER IS THEREFORE NOT LIABLE FOR LOSSES AS A CONSEQUENCE THEREOF. 4
The petitioner, in his first assignment of error, insists that the scrap iron had not been unconditionally placed under his
custody and control to make him liable. However, he completely agrees with the respondent Court's finding that on
December 1, 1956, the private respondent delivered the scraps to Captain Filomeno Niza for loading in the lighter
"Batman," That the petitioner, thru his employees, actually received the scraps is freely admitted. Significantly, there is not
the slightest allegation or showing of any condition, qualification, or restriction accompanying the delivery by the private
respondent-shipper of the scraps, or the receipt of the same by the petitioner. On the contrary, soon after the scraps were
delivered to, and received by the petitioner-common carrier, loading was commenced.
By the said act of delivery, the scraps were unconditionally placed in the possession and control of the common carrier,
and upon their receipt by the carrier for transportation, the contract of carriage was deemed perfected. Consequently, the
petitioner-carrier's extraordinary responsibility for the loss, destruction or deterioration of the goods commenced. Pursuant
to Art. 1736, such extraordinary responsibility would cease only upon the delivery, actual or constructive, by the carrier to
the consignee, or to the person who has a right to receive them. 5 The fact that part of the shipment had not been loaded
on board the lighter did not impair the said contract of transportation as the goods remained in the custody and control of
the carrier, albeit still unloaded.
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;
(4) The character of the goods or defects in the packing or in the containers;
Hence, the petitioner is presumed to have been at fault or to have acted negligently. 6 By reason of this presumption, the
court is not even required to make an express finding of fault or negligence before it could hold the petitioner answerable
for the breach of the contract of carriage. Still, 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.
It is in the second and third assignments of error where the petitioner maintains that he is exempt from any liability
because the loss of the scraps was due mainly to the intervention of the municipal officials of Mariveles which constitutes
a caso fortuito as defined in Article 1174 of the Civil Code. 7
We cannot sustain the theory of caso fortuito. In the courts below, the petitioner's defense was that the loss of the scraps
was due to an "order or act of competent public authority," and this contention was correctly passed upon by the Court of
Appeals which ruled that:
... In the second place, before the appellee Ganzon could be absolved from responsibility on the ground that he was
ordered by competent public authority to unload the scrap iron, it must be shown that Acting Mayor Basilio Rub had the
power to issue the disputed order, or that it was lawful, or that it was issued under legal process of authority. The appellee
failed to establish this. Indeed, no authority or power of the acting mayor to issue such an order was given in evidence.
Neither has it been shown that the cargo of scrap iron belonged to the Municipality of Mariveles. What we have in the
record is the stipulation of the parties that the cargo of scrap iron was accilmillated by the appellant through separate
purchases here and there from private individuals (Record on Appeal, pp. 38-39). The fact remains that the order given by
the acting mayor to dump the scrap iron into the sea was part of the pressure applied by Mayor Jose Advincula to
shakedown the appellant for P5,000.00. The order of the acting mayor did not constitute valid authority for appellee
Mauro Ganzon and his representatives to carry out.
Now the petitioner is changing his theory to caso fortuito. Such a change of theory on appeal we cannot, however, allow.
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 fullfilment
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.
There is no incompatibility between the Civil Code provisions on common carriers and Articles 361 8 and 362 9 of the
Code of Commerce which were the basis for this Court's ruling in Government of the Philippine Islands vs. Ynchausti &
Co.10 and which the petitioner invokes in tills petition. For Art. 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. Be that as it may, insofar as Art. 362 appears to require of the carrier only ordinary
diligence, the same is .deemed to have been modified by Art. 1733 of the Civil Code.
Finding the award of actual and exemplary damages to be proper, the same will not be disturbed by us. Besides, these
were not sufficiently controverted by the petitioner.
WHEREFORE, the petition is DENIED; the assailed decision of the Court of Appeals is hereby AFFIRMED. Costs against
the petitioner.
This decision is IMMEDIATELY EXECUTORY.
11. Philamgen vs. MCG Marine Services, March 8, 2002
THE PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC., petitioner, vs. MGG MARINE SERVICES, INC. and
DOROTEO GAERLAN, respondents.
DECISION
KAPUNAN, J.:
This petition for review seeks the reversal of the Decision, dated September 23, 1998, of the Court of Appeals in CA-
G.R. CV No. 43915,[1] which absolved private respondents MCG Marine Services, Inc. and Doroteo Gaerlan of any
liability regarding the loss of the cargo belonging to San Miguel Corporation due to the sinking of the M/V Peatheray
Patrick-G owned by Gaerlan with MCG Marine Services, Inc. as agent.
On March 1, 1987, San Miguel Corporation insured several beer bottle cases with an aggregate value of
P5,836,222.80 with petitioner Philippine American General Insurance Company. [2] The cargo were loaded on board the
M/V Peatheray Patrick-G to be transported from Mandaue City to Bislig, Surigao del Sur.
After having been cleared by the Coast Guard Station in Cebu the previous day, the vessel left the port of Mandaue
City for Bislig, Surigao del Sur on March 2, 1987. The weather was calm when the vessel started its voyage.
The following day, March 3, 1987, M/V Peatheray Patrick-G listed and subsequently sunk off Cawit Point, Cortes,
Surigao del Sur. As a consequence thereof, the cargo belonging to San Miguel Corporation was lost.
Subsequently, San Miguel Corporation claimed the amount of its loss from petitioner.
Upon petitioners request, on March 18, 1987, Mr. Eduardo Sayo, a surveyor from the Manila Adjusters and
Surveyors Co., went to Taganauan Island, Cortes, Surigao del Sur where the vessel was cast ashore, to investigate the
circumstances surrounding the loss of the cargo. In his report, Mr. Sayo stated that the vessel was structurally sound and
that he did not see any damage or crack thereon. He concluded that the proximate cause of the listing and subsequent
sinking of the vessel was the shifting of ballast water from starboard to portside. The said shifting of ballast water
allegedly affected the stability of the M/V Peatheray Patrick-G.
Thereafter, petitioner paid San Miguel Corporation the full amount of P5,836,222.80 pursuant to the terms of their
insurance contract.
On November 3, 1987, petitioner as subrogee of San Miguel Corporation filed with the Regional Trial Court (RTC)
of Makati City a case for collection against private respondents to recover the amount it paid to San Miguel Corporation
for the loss of the latters cargo.
Meanwhile, the Board of Marine Inquiry conducted its own investigation of the sinking of the M/V Peatheray Patrick-
G to determine whether or not the captain and crew of the vessel should be held responsible for the incident.[3] On May
11, 1989, the Board rendered its decision exonerating the captain and crew of the ill-fated vessel for any administrative
liability. It found that the cause of the sinking of the vessel was the existence of strong winds and enormous waves in
Surigao del Sur, a fortuitous event that could not have been forseen at the time the M/V Peatheray Patrick-G left the port
of Mandaue City. It was further held by the Board that said fortuitous event was the proximate and only cause of the
vessels sinking.
On April 15, 1993, the RTC of Makati City, Branch 134, promulgated its Decision finding private respondents
solidarily liable for the loss of San Miguel Corporations cargo and ordering them to pay petitioner the full amount of the
lost cargo plus legal interest, attorneys fees and costs of suit. [4]
Private respondents appealed the trial courts decision to the Court of Appeals. On September 23, 1998, the
appellate court issued the assailed Decision, which reversed the ruling of the RTC. It held that private respondents could
not be held liable for the loss of San Miguel Corporations cargo because said loss occurred as a consequence of a
fortuitous event, and that such fortuitous event was the proximate and only cause of the loss. [5]
Petitioner thus filed the present petition, contending that:
(A)
IN REVERSING AND SETTING ASIDE THE DECISION OF RTC BR. 134 OF MAKATI CITY ON THE BASIS OF THE
FINDINGS OF THE BOARD OF MARINE INQUIRY, APPELLATE COURT DECIDED THE CASE AT BAR NOT IN
ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF THE HONORABLE COURT;
(B)
IN REVERSING THE TRIAL COURTS DECISION, THE APPELLATE COURT GRAVELY ERRED IN CONTRADICTING
AND IN DISTURBING THE FINDINGS OF THE FORMER;
(C)
THE APPELLATE COURT GRAVELY ERRED IN REVERSING THE DECISION OF THE TRIAL COURT AND IN
DISMISSING THE COMPLAINT.[6]
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. [7] 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 transported by them are lost, destroyed or if the same deteriorated. [8]
However, this presumption of fault or negligence does not arise in the cases enumerated under Article 1734 of the
Civil Code:
Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of
the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(4) The character of the goods or defects in the packing or in the containers;
In order that a common carrier may be absolved from liability where the loss, destruction or deterioration of the
goods is due to a natural disaster or calamity, it must further be shown that the such natural disaster or calamity was the
proximate and only cause of the loss;[9] there must be an entire exclusion of human agency from the cause of the injury of
the loss.[10]
Moreover, even in cases where a natural disaster is the proximate and only cause of the loss, a common carrier is
still required to exercise due diligence to prevent or minimize loss before, during and after the occurrence of the natural
disaster, for it to be exempt from liability under the law for the loss of the goods. [11] If a common carrier fails to exercise
due diligence--or that ordinary care which the circumstances of the particular case demand [12] --to preserve and protect
the goods carried by it on the occasion of a natural disaster, it will be deemed to have been negligent, and the loss will
not be considered as having been due to a natural disaster under Article 1734 (1).
In the case at bar, the issues may be narrowed down to whether the loss of the cargo was due to the occurrence of a
natural disaster, and if so, whether such natural disaster was the sole and proximate cause of the loss or whether private
respondents were partly to blame for failing to exercise due diligence to prevent the loss of the cargo.
The parties do not dispute that on the day the M/V Peatheray Patrick-G sunk, said vessel encountered strong winds
and huge waves ranging from six to ten feet in height. The vessel listed at the port side and eventually sunk at Cawit
Point, Cortes, Surigao del Sur.
The Court of Appeals, citing the decision of the Board of Marine Inquiry in the administrative case against the
vessels crew (BMI--646-87), found that the loss of the cargo was due solely to the existence of a fortuitous event,
particularly the presence of strong winds and huge waves at Cortes, Surigao del Sur on March 3, 1987:
xxx
III. WHAT WAS THE PROXIMATE CAUSE OF SINKING?
Evidence shows that when "LCT Peatheray Patrick-G" left the port of Mandawe, Cebu for Bislig, Surigao del Sur on
March 2, 1987 the Captain had observed the fair atmospheric condition of the area of the pier and confirmed this good
weather condition with the Coast Guard Detachment of Mandawe City. However, on March 3, 1987 at about 10:00 o'clock
in the evening, when the vessel had already passed Surigao Strait. the vessel started to experience waves as high as 6
to 7 feet and that the Northeasterly wind was blowing at about five (5) knot velocity. At about 11:00 o'clock P.M. when the
vessel was already about 4.5 miles off Cawit Point, Cortes, Surigao del Sur, the vessel was discovered to be listing 15
degrees to port side and that the strength of the wind had increased to 15 knots and the waves were about ten (10) feet
high [Ramilo TSN 10-27-87 p. 32). Immediately thereafter, emergency measures were taken by the crew. The officers
had suspected that a leak or crack might had developed at the bottom hull particularly below one or two of the empty wing
tanks at port side serving as buoyancy tanks resulting in ingress of sea water in the tanks was confirmed when the
Captain ordered to use the cargo pump. The suction valves to the said tanks of port side were opened in order to suck or
draw out any amount of water that entered into the tanks. The suction pressure of the pump had drawn out sea water in
large quantity indicating therefore, that a leak or crack had developed in the hull as the vessel was continuously batted
and pounded by the huge waves. Bailing out of the water through the pump was done continuously in an effort of the
crew to prevent the vessel from sinking. but then efforts were in vain. The vessel still continued to list even more despite
the continuous pumping and discharging of sea water from the wing tanks indicating that the amount of the ingress of sea
water was greater in volume that that was being discharged by the pump. Considering therefore, the location of the
suspected source of the ingress of sea water which was a crack or hole at the bottom hull below the buoyancy tank's port
side which was not acessible (sic) for the crew to check or control the flow of sea water into the said tank. The
accumulation of sea water aggravated by the continuous pounding, rolling and pitching of the vessel against huge waves
and strong northeasterly wind, the Captain then had no other recourse except to order abandonship to save their lives. [13]
The presence of a crack in the ill-fated vessel through which water seeped in was confirmed by the Greutzman
Divers who were commissioned by the private respondents to conduct an underwater survey and inspection of the vessel
to determine the cause and circumstances of its sinking. In its report, Greutzman Divers stated that along the port side
platings, a small hole and two separate cracks were found at about midship.[14]
The findings of the Board of Marine Inquiry indicate that the attendance of strong winds and huge waves while the
M/V Peatheray Patrick-G was sailing through Cortes, Surigao del Norte on March 3, 1987 was indeed fortuitous. A
fortuitous event has been defined as one which could not be foreseen, or which though foreseen, is inevitable. [15] An
event is considered fortuitous if the following elements concur:
xxx (a) the cause of the unforeseen and unexpected occurrence, or the failure of the debtor to comply with his obligations,
must be independent of human will; (b) it must be impossible to foresee the event which constitutes the caso fortuito, or if
it can be foreseen, it must be impossible to avoid; (c) the occurrence must be such as to render it impossible for the
debtor to fulfill his obligation in a normal manner; and (d) the obligor must be free from any participation in the aggravation
of the injury resulting to the creditor. xxx [16]
In the case at bar, it was adequately shown that before the M/V Peatheray Patrick-G left the port of Mandaue City,
the Captain confirmed with the Coast Guard that the weather condition would permit the safe travel of the vessel to Bislig,
Surigao del Sur. Thus, he could not be expected to have foreseen the unfavorable weather condition that awaited the
vessel in Cortes, Surigao del Sur. It was the presence of the strong winds and enormous waves which caused the vessel
to list, keel over, and consequently lose the cargo contained therein. The appellate court likewise found that there was no
negligence on the part of the crew of the M/V Peatheray Patrick-G, citing the following portion of the decision of the Board
of Marine Inquiry:
I. WAS LCT PEATHERAY PATRICK-G SEAWORTHY WHEN SHE LEFT THE PORT OF MANDAWE, CEBU AND AT
THE TIME OF SINKING?
Evidence clearly shows that the vessel was propelled with three (3) diesel engines of 250 BHP each or a total of 750
BHP. It had three (3) propellers which were operating satisfactorily from the time the vessel left the port of Mandawe up to
the time when the hull on the double bottom tank was heavily floaded (sic) by uncontrollable entry of sea water resulting
in the stoppage of engines. The vessel was also equipped with operating generator pumps for emergency cases. This
equipment was also operating satisfactorily up to the time when the engine room was heavily floaded (sic) with sea
water. Further, the vessel had undergone emergency drydocking and repair before the accident occurred (sic) on
November 9, 1986 at Trigon Shipyard, San Fernando, Cebu as shown by the billing for the Drydocking and Repair and
certificate of Inspection No. 2588-86 issued by the Philippine coast Guard on December 5, 1986 which expired on
November 8, 1987.
LCT Peatheray Patrick-G was skippered by Mr. Manuel P. Ramilo, competent and experienced licensed Major Patron
who had been in command of the vessel for more than three (3) years from July 1984 up to the time of sinking March 3,
1987. His Chief Mate Mr. Mariano Alalin also a licensed Major Patron had been the Chief Mate of " LCT Peatheray
Patrick-G" for one year and three months at the time of the accident. Further Chief Mate Alalin had commanded a tanker
vessel named M/T Mercedes of MGM Corporation for almost two (2) years from 1983-1985 (Alalin TSN-4-13-88 pp. 32-
33).
That the vessel was granted SOLAS clearance by the Philippine Coast Guard on March 1, 1987 to depart from Mandawe
City for Bislig, Surigao del Sur as evidenced by a certification issued to D.C. Gaerlan Oil Products by Coast Guard Station
Cebu dated December 23, 1987.
Based on the foregoing circumstances, "LCT Peatheray Patrick-G" should be considered seaworthy vessel at the time
she undertook that fateful voyage on March 2, 1987.
To be seaworthy, a vessel must not only be staunch and fit in the hull for the voyage to be undertaken but also must be
properly equipped and for that purpose there is a duty upon the owner to provide a competent master and a crew
adequate in number and competent for their duty and equals in disposition and seamanship to the ordinary in that calling.
(Ralph 299 F-52, 1924 AMC 942). American President 2td v. Ren Fen Fed 629. AMC 1723 LCA 9 CAL 1924). [17]
Overloading was also eliminated as a possible cause of the sinking of the vessel, as the evidence showed that its
freeboard clearance was substantially greater than the authorized freeboard clearance. [18]
Although the Board of Marine Inquiry ruled only on the administrative liability of the captain and crew of the M/V
Peatheray Patrick-G, it had to conduct a thorough investigation of the circumstances surrounding the sinking of the vessel
and the loss of its cargo in order to determine their responsibility, if any. The results of its investigation as embodied in its
decision on the administrative case clearly indicate that the loss of the cargo was due solely to the attendance of strong
winds and huge waves which caused the vessel accumulate water, tilt to the port side and to eventually keel over. There
was thus no error on the part of the Court of Appeals in relying on the factual findings of the Board of Marine Inquiry, for
such factual findings, being supported by substantial evidence are persuasive, considering that said administrative body
is an expert in matters concerning marine casualties.[19]
Since the presence of strong winds and enormous waves at Cortes, Surigao del Sur on March 3, 1987 was shown to
be the proximate and only cause of the sinking of the M/V Peatheray Patrick-G and the loss of the cargo belonging to San
Miguel Corporation, private respondents cannot be held liable for the said loss.
WHEREFORE, the assailed Decision of the Court of Appeals is hereby AFFIRMED and the petition is hereby
DENIED.
SO ORDERED.
12. Calvo vs. UCPB General Insurance 379 SCRA 510
VIRGINES CALVO doing business under the name and style TRANSORIENT CONTAINER TERMINAL SERVICES, INC.,
petitioner, vs. UCPB GENERAL INSURANCE CO., INC. (formerly Allied Guarantee Ins. Co., Inc.) respondent.
DECISION
MENDOZA, J.:
This is a petition for review of the decision,[1] dated May 31, 2001, of the Court of Appeals, affirming the decision [2] of
the Regional Trial Court, Makati City, Branch 148, which ordered petitioner to pay respondent, as subrogee, the amount
of P93,112.00 with legal interest, representing the value of damaged cargo handled by petitioner, 25% thereof as
attorneys fees, and the cost of the suit.
The facts are as follows:
Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI), a sole proprietorship
customs broker. At the time material to this case,petitioner entered into a contract with San Miguel Corporation (SMC) for
the transfer of 114 reels of semi-chemical fluting paper and 124 reels of kraft liner board from the Port Area in Manila to
SMCs warehouse at the Tabacalera Compound, Romualdez St., Ermita, Manila. The cargo was insured by respondent
UCPB General Insurance Co., Inc.
On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in Manila on board M/V Hayakawa
Maru and, after 24 hours, were unloaded from the vessel to the custody of the arrastre operator, Manila Port Services,
Inc. From July 23 to July 25, 1990, petitioner, pursuant to her contract with SMC, withdrew the cargo from the arrastre
operator and delivered it to SMCs warehouse in Ermita, Manila. On July 25, 1990, the goods were inspected by Marine
Cargo Surveyors, who found that 15 reels of the semi-chemical fluting paper were wet/stained/torn and 3 reels of kraft
liner board were likewise torn. The damage was placed at P93,112.00.
SMC collected payment from respondent UCPB under its insurance contract for the aforementioned amount. In turn,
respondent, as subrogee of SMC, brought suit against petitioner in the Regional Trial Court, Branch 148, Makati City,
which, on December 20, 1995, rendered judgment finding petitioner liable to respondent for the damage to the shipment.
The trial court held:
It cannot be denied . . . that the subject cargoes sustained damage while in the custody of defendants. Evidence such as
the Warehouse Entry Slip (Exh. E); the Damage Report (Exh. F) with entries appearing therein, classified as TED and
TSN, which the claims processor, Ms. Agrifina De Luna, claimed to be tearrage at the end and tearrage at the middle of
the subject damaged cargoes respectively, coupled with the Marine Cargo Survey Report (Exh. H - H-4-A) confirms the
fact of the damaged condition of the subject cargoes. The surveyor[s] report (Exh. H-4-A) in particular, which provides
among others that:
. . . we opine that damages sustained by shipment is attributable to improper handling in transit presumably whilst in the
custody of the broker . . . .
is a finding which cannot be traversed and overturned.
The evidence adduced by the defendants is not enough to sustain [her] defense that [she is] are not liable. Defendant by
reason of the nature of [her] business should have devised ways and means in order to prevent the damage to the
cargoes which it is under obligation to take custody of and to forthwith deliver to the consignee. Defendant did not present
any evidence on what precaution [she] performed to prevent [the] said incident, hence the presumption is that the
moment the defendant accepts the cargo [she] shall perform such extraordinary diligence because of the nature of the
cargo.
....
Generally speaking under Article 1735 of the Civil Code, if the goods are proved to have been lost, destroyed or
deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that
they have observed the extraordinary diligence required by law. The burden of the plaintiff, therefore, is to prove merely
that the goods he transported have been lost, destroyed or deteriorated. Thereafter, the burden is shifted to the carrier to
prove that he has exercised the extraordinary diligence required by law. Thus, it has been held that the mere proof of
delivery of goods in good order to a carrier, and of their arrival at the place of destination in bad order, makes out a prima
facie case against the carrier, so that if no explanation is given as to how the injury occurred, the carrier must be held
responsible. It is incumbent upon the carrier to prove that the loss was due to accident or some other circumstances
inconsistent with its liability. (cited in Commercial Laws of the Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.)
Defendant, being a customs brother, warehouseman and at the same time a common carrier is supposed [to] exercise
[the] extraordinary diligence required by law, hence the extraordinary responsibility lasts from the time the goods are
unconditionally placed in the possession of and received by the carrier for transportation until the same are delivered
actually or constructively by the carrier to the consignee or to the person who has the right to receive the same.[3]
Accordingly, the trial court ordered petitioner to pay the following amounts
1. The sum of P93,112.00 plus interest;
2. 25% thereof as lawyers fee;
3. Costs of suit.[4]
The decision was affirmed by the Court of Appeals on appeal. Hence this petition for review on certiorari.
Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR [IN] DECIDING THE CASE NOT
ON THE EVIDENCE PRESENTED BUT ON PURE SURMISES, SPECULATIONS AND MANIFESTLY MISTAKEN
INFERENCE.
II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN CLASSIFYING THE
PETITIONER AS A COMMON CARRIER AND NOT AS PRIVATE OR SPECIAL CARRIER WHO DID NOT HOLD
ITS SERVICES TO THE PUBLIC.[5]
It will be convenient to deal with these contentions in the inverse order, for if petitioner is not a common carrier,
although both the trial court and the Court of Appeals held otherwise, then she is indeed not liable beyond what ordinary
diligence in the vigilance over the goods transported by her, would require.[6] Consequently, any damage to the cargo she
agrees to transport cannot be presumed to have been due to her fault or negligence.
Petitioner contends that contrary to the findings of the trial court and the Court of Appeals, she is not a common
carrier but a private carrier because, as a customs broker and warehouseman, she does not indiscriminately hold her
services out to the public but only offers the same to select parties with whom she may contract in the conduct of her
business.
The contention has no merit. In De Guzman v. Court of Appeals,[7] the Court dismissed a similar contention and held
the party to be a common carrier, thus
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.
The above article makes no distinction between one whose principal business activity is the carrying of persons or goods
or both, and one who does such carrying only as anancillary activity . . . 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. We think that Article 1732 deliberately refrained
from making such distinctions.
So understood, the concept of common carrier under Article 1732 may be seen to coincide neatly with the notion of public
service, under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements
the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, public
service includes:
x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight
or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of any
class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal,
irrigation system, gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire or
wireless communications systems, wire or wireless broadcasting stations and other similar public services. x x x [8]
There is greater reason for holding petitioner to be a common carrier because the transportation of goods is an
integral part of her business. To uphold petitioners contention would be to deprive those with whom she contracts the
protection which the law affords them notwithstanding the fact that the obligation to carry goods for her customers, as
already noted, is part and parcel of petitioners business.
Now, as to petitioners liability, Art. 1733 of the Civil Code provides:
Common carriers, from the nature of their business and for reasons of public policy, are bound 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. . . .
In Compania Maritima v. Court of Appeals,[9] the meaning of extraordinary diligence in the vigilance over goods was
explained thus:
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.
In the case at bar, petitioner denies liability for the damage to the cargo. She claims that the spoilage or wettage took
place while the goods were in the custody of either the carrying vessel M/V Hayakawa Maru, which transported the cargo
to Manila, or the arrastre operator, to whom the goods were unloaded and who allegedly kept them in open air for nine
days from July 14 to July 23, 1998 notwithstanding the fact that some of the containers were deformed, cracked, or
otherwise damaged, as noted in the Marine Survey Report (Exh. H), to wit:
MAXU-2062880 - rain gutter deformed/cracked
ICSU-363461-3 - left side rubber gasket on door distorted/partly loose
PERU-204209-4 - with pinholes on roof panel right portion
TOLU-213674-3 - wood flooring we[t] and/or with signs of water soaked
MAXU-201406-0 - with dent/crack on roof panel
ICSU-412105-0 - rubber gasket on left side/door panel partly detached loosened. [10]
In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino testified that he has no personal
knowledge on whether the container vans were first stored in petitioners warehouse prior to their delivery to the
consignee. She likewise claims that after withdrawing the container vans from the arrastre operator, her driver, Ricardo
Nazarro, immediately delivered the cargo to SMCs warehouse in Ermita, Manila, which is a mere thirty-minute drive from
the Port Area where the cargo came from. Thus, the damage to the cargo could not have taken place while these were in
her custody.[11]
Contrary to petitioners assertion, the Survey Report (Exh. H) of the Marine Cargo Surveyors indicates that when the
shipper transferred the cargo in question to the arrastre operator, these were covered by clean Equipment Interchange
Report (EIR) and, when petitioners employees withdrew the cargo from the arrastre operator, they did so without
exception or protest either with regard to the condition of container vans or their contents. The Survey Report pertinently
reads
Details of Discharge:
Shipment, provided with our protective supervision was noted discharged ex vessel to dock of Pier #13 South Harbor,
Manila on 14 July 1990, containerized onto 30 x 20 secure metal vans, covered by clean EIRs. Except for slight dents and
paint scratches on side and roof panels, these containers were deemed to have [been] received in good condition.
....
Transfer/Delivery:
On July 23, 1990, shipment housed onto 30 x 20 cargo containers was [withdrawn] by Transorient Container Services,
Inc. . . . without exception.
[The cargo] was finally delivered to the consignees storage warehouse located at Tabacalera Compound, Romualdez
Street, Ermita, Manila from July 23/25, 1990.[12]
As found by the Court of Appeals:
From the [Survey Report], it [is] clear that the shipment was discharged from the vessel to the arrastre, Marina Port
Services Inc., in good order and condition as evidenced by clean Equipment Interchange Reports (EIRs). Had there been
any damage to the shipment, there would have been a report to that effect made by the arrastre operator. The cargoes
were withdrawn by the defendant-appellant from the arrastre still in good order and condition as the same were received
by the former without exception, that is, without any report of damage or loss. Surely, if the container vans were
deformed, cracked, distorted or dented, the defendant-appellant would report it immediately to the consignee or make an
exception on the delivery receipt or note the same in the Warehouse Entry Slip (WES). None of these took place. To put it
simply, the defendant-appellant received the shipment in good order and condition and delivered the same to the
consignee damaged. We can only conclude that the damages to the cargo occurred while it was in the possession of the
defendant-appellant. Whenever the thing is lost (or damaged) in the possession of the debtor (or obligor), it shall be
presumed that the loss (or damage) was due to his fault, unless there is proof to the contrary. No proof was proffered to
rebut this legal presumption and the presumption of negligence attached to a common carrier in case of loss or damage
to the goods.[13]
Anent petitioners insistence that the cargo could not have been damaged while in her custody as she immediately
delivered the containers to SMCs compound, suffice it to say that to prove the exercise of extraordinary diligence,
petitioner must do more than merely show the possibility that some other party could be responsible for the damage. It
must prove that it used all reasonable means to ascertain the nature and characteristic of goods tendered for [transport]
and that [it] exercise[d] due care in the handling [thereof]. Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability under Art. 1734(4), which provides
Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of
the following causes only:
....
(4) The character of the goods or defects in the packing or in the containers.
....
For this provision to apply, the rule is that if the improper packing or, in this case, the defect/s in the container, is/are
known to the carrier or his employees or apparent upon ordinary observation, but he nevertheless accepts the same
without protest or exception notwithstanding such condition, he is not relieved of liability for damage
resulting therefrom.[14] In this case, petitioner accepted the cargo without exception despite the apparent defects in some
of the container vans. Hence, for failure of petitioner to prove that she exercised extraordinary diligence in the carriage of
goods in this case or that she is exempt from liability, the presumption of negligence as provided under Art. 1735 [15] holds.
WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is AFFIRMED.
SO ORDERED.
13. Belgian Overseas Chartering vs. Phil First Insurance Co. 383 SCRA 23
BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES TRANSPORT SERVICES,
INC., petitioners, vs. PHILIPPINE FIRST INSURANCE CO., INC., respondent.
DECISION
PANGANIBAN, J.:
Proof of the delivery of goods in good order to a common carrier and of their arrival in bad order at their destination
constitutes prima facie fault or negligence on the part of the carrier. If no adequate explanation is given as to how the
loss, the destruction or the deterioration of the goods happened, the carrier shall be held liable therefor.
Statement of the Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the July 15, 1998 Decision [1] and the
May 2, 2000 Resolution[2] of the Court of Appeals[3](CA) in CA-GR CV No. 53571. The decretal portion of the Decision
reads as follows:
WHEREFORE, in the light of the foregoing disquisition, the decision appealed from is hereby REVERSED and SET
ASIDE. Defendants-appellees are ORDERED to jointly and severally pay plaintiffs-appellants the following:
1) FOUR Hundred Fifty One Thousand Twenty-Seven Pesos and 32/100 (P451,027.32) as actual damages, representing
the value of the damaged cargo, plus interest at the legal rate from the time of filing of the complaint on July 25, 1991,
until fully paid;
2) Attorneys fees amounting to 20% of the claim; and
3) Costs of suit.[4]
The assailed Resolution denied petitioners Motion for Reconsideration.

The CA reversed the Decision of the Regional Trial Court (RTC) of Makati City (Branch 134), which had disposed as
follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered, dismissing the complaint, as well as defendants
counterclaim.[5]
The Facts
The factual antecedents of the case are summarized by the Court of Appeals in this wise:
On June 13, 1990, CMC Trading A.G. shipped on board the MN 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, MN Anangel Sky arrived at the port of Manila and, within the subsequent days, discharged the subject
cargo. Four (4) coils were found to be in bad order B.O. Tally sheet No. 154974. Finding the four (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.
Despite receipt of a formal demand, defendants-appellees refused to submit to the consignees claim. Consequently,
plaintiff-appellant paid the consignee five hundred six thousand eighty six & 50/100 pesos (P506,086.50), and was
subrogated to the latters 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. In addition
thereto, 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. Finally, defendants-appellees averred that, in any event, they
exercised due diligence and foresight required by law to prevent any damage/loss to said shipment. [6]
Ruling of the Trial Court
The RTC dismissed the Complaint because respondent had failed to prove its claims with the quantum of proof
required by law.[7]
It likewise debunked petitioners counterclaim, because respondents suit was not manifestly frivolous or primarily
intended to harass them.[8]
Ruling of the Court of Appeals
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.[9] It likewise opined that the notation metal envelopes rust stained and slightly dented placed on
the Bill of Lading had not been the proximate cause of the damage to the four (4) coils. [10]
As to the extent of petitioners liability, 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. The CA, however, affirmed the award of attorneys fees.
Hence, this Petition.[11]
Issues
In their Memorandum, petitioners raise the following issues for the Courts consideration:
I
Whether or not plaintiff by presenting only one witness who has never seen the subject shipment and whose testimony is
purely hearsay is sufficient to pave the way for the applicability of Article 1735 of the Civil Code;
II
Whether or not the consignee/plaintiff filed the required notice of loss within the time required by law;
III
Whether or not a notation in the bill of lading at the time of loading is sufficient to show pre-shipment damage and to
exempt herein defendants from liability;
IV
Whether or not the PACKAGE LIMITATION of liability under Section 4 (5) of COGSA is applicable to the case at bar. [12]
In sum, the issues boil down to three:

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
This Courts Ruling
The Petition is partly meritorious.
First Issue:
Proof of Negligence
Petitioners contend that the presumption of fault imposed on common carriers should not be applied on the basis of
the lone testimony offered by private respondent. The contention is untenable.
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.[13] Thus, common carriers are required to render service with the greatest skill and foresight and to use all
reason[a]ble 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. [14] The extraordinary responsibility
lasts from the time the goods are unconditionally placed in the 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. [15]
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. [16] Even if it wants to, it cannot submit its own
stipulations for their approval.[17] 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. [18] That is, unless they prove
that they exercised extraordinary diligence in transporting the goods. [19] In order to avoid responsibility for any loss or
damage, therefore, they have the burden of proving that they observed such diligence. [20]
However, the presumption of fault or negligence will not arise[21] 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. [22] 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. [23]
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.[24]
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.[25]
First, as stated in the Bill of Lading, petitioners received the subject shipment in good order and condition in
Hamburg, Germany.[26]
Second, prior to the unloading of the cargo, an Inspection Report [27] 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. 154979[28] 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.[29]
Fourth, the Certificate of Analysis[30] 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[31] 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.
These facts were confirmed by Ruperto Esmerio, head checker of BM Santos Checkers Agency. Pertinent portions
of his testimony are reproduce hereunder:
Q. Mr. Esmerio, you mentioned that you are a Head Checker. Will you inform the Honorable Court with what company you are
connected?
A. BM Santos Checkers Agency, sir.
Q. How is BM Santos Checkers Agency related or connected with defendant Jardine Davies Transport Services?
A. It is the company who contracts the checkers, sir.
Q. You mentioned that you are a Head Checker, will you inform this Honorable Court your duties and responsibilities?
A. I am the representative of BM Santos on board the vessel, sir, to supervise the discharge of cargoes.
xxxxxxxxx
Q. On or about August 1, 1990, were you still connected or employed with BM Santos as a Head Checker?
A. Yes, sir.
Q. And, on or about that date, do you recall having attended the discharging and inspection of cold steel sheets in coil on
board the MV/AN ANGEL SKY?
A. Yes, sir, I was there.
xxxxxxxxx
Q. Based on your inspection since you were also present at that time, will you inform this Honorable Court the condition or the
appearance of the bad order cargoes that were unloaded from the MV/ANANGEL SKY?
ATTY. MACAMAY:
Objection, Your Honor, I think the document itself reflects the condition of the cold steel sheets and the best evidence is
the document itself, Your Honor that shows the condition of the steel sheets.
COURT:
Let the witness answer.
A. The scrap of the cargoes is broken already and the rope is loosen and the cargoes are dent on the sides. [32]
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. [39]
In their attempt to escape liability, petitioners further contend that they are exempted from liability under Article
1734(4) of the Civil Code. They cite the notation metal envelopes rust stained and slightly dented printed on the Bill of
Lading as evidence that the character of the goods or defect in the packing or the containers was the proximate cause of
the damage. We are not convinced.
From the evidence on record, it cannot be reasonably concluded that the damage to the four coils was due to the
condition noted on the Bill of Lading.[40] The aforecited exception refers to cases when goods are lost or damaged while in
transit as a result of the natural decay of perishable goods or the fermentation or evaporation of substances liable
therefor, the necessary and natural wear of goods in transport, defects in packages in which they are shipped, or the
natural propensities of animals.[41] None of these is present in the instant case.
Further, even if the fact of improper packing was known to the carrier or its crew or was apparent upon ordinary
observation, it is not relieved of liability for loss or injury resulting therefrom, once it accepts the goods notwithstanding
such condition.[42] Thus, petitioners have not successfully proven the application of any of the aforecited exceptions in the
present case.[43]
Second Issue:
Notice of Loss
Petitioners claim that pursuant to Section 3, paragraph 6 of the Carriage of Goods by Sea Act[44] (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. [45]
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[46] as to the condition of the goods was prepared and signed by
representatives of both parties.[47]
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.[48] 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.[49]
In Loadstar Shipping Co., Inc. v. Court of Appeals,[50] 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.
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.
Third Issue:
Package Limitation
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.[54]
A bill of lading serves two functions. First, it is a receipt for the goods shipped.[55] Second, it is a contract by which
three parties -- namely, the shipper, the carrier, and the consignee -- undertake specific responsibilities and assume
stipulated obligations.[56] 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. [57]
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 [58] -- is sanctioned by law.[59] 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.[60] The rationale for, this rule is to bind the shippers by their agreement to the value
(maximum valuation) of their goods.[61]
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.[62] 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. [63] Thus, the COGSA, which is suppletory to the provisions of the
Civil Code, supplements the latter by establishing a statutory provision limiting the carriers liability in the absence of a
shippers declaration of a higher value in the bill of lading. [64]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. [65]
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. 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 petitioners obligation to private respondent arising from the contract of
transportation.[70]
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] InEastern Shipping Lines, Inc. v. Intermediate Appellate Court[72] we
explained the meaning of package:
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 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.

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Obligation of the Common Carrier in a contract of carriage of goods

A. Vigilance over the goods

1. Duty to exercise extraordinary diligence

Zulueta v. Pan American World Airways, Inc. 43 SCRA 397

Davila v. Phil. Air Lines 49 SCRA 497

Samar Mining Co. v. Nordeutecher Lloyd L-28873, Oct. 23, 1984

Eastern Shipping Lines, Inc. v. CA GR 94151, Apr. 30, 1991

(1) Presumption of Fault or Negligence

(2) Defense Under Art. 1735

(1) Reason for the Extraordinary Responsibility of the Common Carrier

(2) When Liability may be Limited

Ang v. Compania Maritima L-30806, Dec. 26, 1984

COMMENT: (1) Continuing Liability

Note that liability exists even if the goods are:

(a) temporarily unloaded, or

(b) stored in transit.

Liability While in the Warehouse

4. Defenses of common carriers

VIGILANCE OVER GOODS

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(3) Act or omission of the shipper or owner of the goods;

(5) Order or act of competent public authority.

COMMENT: (1) When Common Carrier Is Not Liable

(2) Burden of Proof

(3) Concept of ‘Public enemy’

(4) Act or Omission

(5) Order or Act of Competent Public Authority

Natural Disaster Being the Cause

(1) Effect of Default Caused by Negligence

. (a) If the carrier is in default. (Art. 1740).

If Cause Be the Character of the Goods or Faulty Pack- ing

Seizure or Destruction by Order of Public Authority

5. Contributory negligence of the shipper

Contributory Negligence of the Shipper or Owner

6. Stipulation limiting liability of carrier

. (1) In writing, signed by the shipper or owner;

. (2) Supported by a valuable consideration other than

the service rendered by the common carrier; and

(3) Reasonable, just and not contrary to public policy.

COMMENT: Diligence Less Than Extraordinary

COMMENT: Effect of Strikes or Riots

COMMENT: (1) Stipulation Limiting Carrier’s Liability

(2) Rule in Carriage of Goods by Sea Act

& Assurance, Inc. and CA GR 152158, Feb. 7, 2003

1. the complaint did not state a cause of action against it;

2. Prudential, Wallen, and Seacoast were not the real parties-in-interest;

. the action had prescribed;

. the damage or loss, if any, was due to the inher-

13. Prudential’s claim was excessive and exagger- ated; and

. (1) In writing, signed by the shipper or owner;

. (2) Supported by a valuable consideration other than

the service rendered by the common carrier; and

(3) Reasonable, just and not contrary to public policy.

COMMENT: Diligence Less Than Extraordinary

COMMENT: Effect of Lack of Competition

Lack of competition may lead to undue influence.

COMMENT: Void Stipulations

. (a) The seven stipulations enumerated in the Article are void.

COMMENT: Effect of Default or Change of Route

. (a) unjustified DEFAULT,

. (b) or unjustified CHANGE OF ROUTE.

d. Rule on presumption of negligence despite stipulation

Presumption of Negligence Even if There Is Agreement on Limited Liability

Note that the presumption of negligence is present even here.

COMMENT:  (1) Continuing Liability

(a) temporarily unloaded, or  

(b) stored in transit.  

COMMENT:  (1) When Common Carrier Is Not Liable

. (a) If the carrier is in default. (Art. 1740).  

. (1) In writing, signed by the shipper or owner;  

. (2) Supported by a valuable consideration other than  

COMMENT:   Diligence Less Than Extraordinary

COMMENT:   Effect of Strikes or Riots

COMMENT:  (1) Stipulation Limiting Carrier’s Liability

. the action had prescribed;  

. the damage or loss, if any, was due to the inher-  

. (1) In writing, signed by the shipper or owner;  

. (2) Supported by a valuable consideration other than  

COMMENT:  Diligence Less Than Extraordinary

COMMENT:  Effect of Lack of Competition

COMMENT:  Void Stipulations

. (a) The seven stipulations enumerated in the Article are void.  

COMMENT:  Effect of Default or Change of Route

. (a) unjustified DEFAULT,  

. (b) or unjustified CHANGE OF ROUTE.  

COMMENT:  Effect of Default or Change of Route

. (a) unjustified DEFAULT,  

. (b) or unjustified CHANGE OF ROUTE.  