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1.

Extraordinary diligence


Eastern Shipping v. IAC

Facts:
This is a consolidation of three cases concerning the
same instance filed by respondents Nisshin Fire and
Marine Insurance, Dowa Fire and Marine Insurance and
Development Insurance and Surety Corp.
M/S ASIATICA, operated by petitioner Eastern Shipping
loaded several articles that were insured by private
respondents. Enroute from Japan to Manila, the vessel
caught fire and sank, resulting in the total loss of ship and
cargo. The respondent Insurers paid the corresponding
marine insurance values to the concerned consignees
and were thus subrogated unto the rights of the latter as
the insured.
Eastern denied liability on the principal grounds that the
fire which caused the sinking of the ship is an exempting
circumstance under COGSA.
Issues:
1. Which law should govern the Civil Code
provisions on common carriers or COGSA?

Held:
1. Applicable law the law of the country to which
the goods are to be transported governs the
liability of the common carriers in case of their
loss, destruction or deterioration. Hence, the Civil
Code of the Philippines must govern but in matters
not regulated by the said Code, the Code of
Commerce and COGSA (being a special law) is
suppletory to the provisions of the Code.
2. The civil code only exculpates a carrier if the loss
is due to a fortuitous event. Fire may not be
considered a natural disaster or calamity. It does
not fall within the category of an act of God unless
caused by lighting or by other natural disaster or
calamity. As the peril is not comprehended within
the exception, the common carrier shall be
presumed to have been at fault, unless it has
proved that extraordinary diligence has been
observed. On the other hand, COGSA considers
that the carriers are not liable for loss due to fire
unless the latter is at fault.
3. Both the TC and IAC found that there was
ACTUAL FAULT of the carrier as shown by LACK
OF DILIGENCE based on the fact that when the
smoke was noticed, the fire was already big and
must have been existing for 24 hrs and that the
no regular inspection was made as to the
condition of the cargoes.
4. Other matters:
a. Liability of carrier was decreased to the set
amount of COGSA to $500 per package
b. Attorneys fees were decreased from35k to
5k for Development Insurance

DELSAN TRANSPORT vs. CA

FACTS
Caltex engaged into a contract of affreightment
with the petitioner, Delsan Transport Lines, Inc.(Delsan),
for a period of one year whereby the said common carrier
agreed to transport Caltexs industrial fuel oil from the
Batangas-Bataan Refinery to different parts of the
country. Under the contract, petitioner took on board its
vessel, MT Maysun, 2,277.314 kiloliters of industrial fuel
oil of Caltex to be delivered to the Caltex Oil Terminal in
Zamboanga City. The shipment was insured with private
respondent, American Home Assurance Corporation
(American Home)

The vessel sank in the early morning of August 15, 1986
near Panay Gulf in the Visayas taking with it the entire
cargo of fuel oil.

Subsequently, American Home paid Caltex the sum of
Php 5,096,635.57 representing the insured value of the
cargo. Exercising its right to subrogation under Article
2207 of the New Civil Code, the American Home
demanded the Delsan the same amount it paid to Caltex.

Due to its failure to collect from Delsan despite prior
demand, American Home filed a complaint with the RTC
of Makati for collection of a sum of money.

The trial court dismissed the complaint against Delsan. It
ruled that the vessel, MT Maysun, was seaworthy and
that the incident was caused by unexpected inclement
weather condition or force majeure, thus exempting the
common carrier from liability for the loss of its cargo.

The CA reversed. It gave credence to the weather report
issued by PAGASA which stated that the waves were
only .7 to 2 meters in height in the vicinity of the Panay
Gulf at the day the ship sank, in contrast to the claim of
the crew of the ship that the waves were 20 feet high.

Delsan contends the following
1. Delsan theorized that when the American
Home paid Caltex the value of its lost cargo,
the act of American Home is equivalent to a
tacit recognition that the ill-fated vessel was
seaworthy; otherwise, American Home was not
legally liable to Caltex due to the latters breach
of implied warranty under the marine insurance
policy that the vessel was seaworthy.
2. Delsan avers that although chief officer had
merely a 2
nd
officers license, he was qualified
to act as the vessels chief officer. In fact, all
the crew and officers of MTT Maysun were
exonerated in the administrative investigation.


ISSUES

1. W/N the payment made by American Home to
Caltex for the insured value of the lost cargo
amounted to an admission that the vessel was
seaworthy, thus precluding any action for recovery
against the petitioner. NO
2. W/N the non-presentation of the marine insurance
policy bars the complaint for recovery of sum of
money for lack of cause of action. NO

RULING

First Issue:

The payment made by American Home for the insured
value of the lost cargo operates as waiver of its right to
enforce the term of the implied warranty against Caltex
under the marine insurance policy. However, the same
cannot be validly interpreted as an automatic admission
of the vessels seaworthiness by American Home as to
foreclose recourse against Delsan for any liability under
its contractual obligation as a common carrier. The fact of
payment grants American Home subrogatory right which
enables it to exercise legal remedies that would
otherwise be available to Caltex as owner of the lost
cargo against Delsan, the common carrier.

From the nature of their business and for reasons of
public policy, common carriers are bound to observe
extraordinary diligence in the vigilance over the goods
and for the safety of passengers transported by them,
according to all the circumstances of each case. In the
event of loss, destruction or deterioration of the insured
goods, common carriers shall be responsible unless the
same is brought about, among others, by flood, storm,
earthquake, lightning or other natural disaster or
calamity. In all other cases, if the goods are lost,
destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted
negligently, unless they prove they observed
extraordinary diligence.

In order to escape liability for the loss of its cargo of
industrial fuel oil belonging to Caltex, Delsan attributes
the sinking of MT Maysun to fortuitous event or force
majeure. Although the testimony of the captain and chief
mate that there were strong winds and waves 20 feet
high was effectively rebutted and belied by the weather
report of PAGASA. Thus, as the CA correctly ruled,
Delsans vessel, MT Maysun, sank with its entire cargo
for the reason that it was not seaworthy. There was no
squall or bad weather or extremely poor sea condition in
the vicinity where the said vessel sank.

Additionally, the exoneration of MT Maysuns officers and
crew merely concern their respective administrative
liabilities. It does not in any way operate to absolve
Delsan the common carrier from its civil liability arising
from its failure to observe extraordinary diligence in the
vigilance over the goods it was transporting and for the
negligent acts or omissions of its employees, the
determination of which properly belongs to the courts. In
the case at bar, Delsan is liable for the insured value of
the lost cargo of industrial fuel oil belonging to Caltex for
its failure to rebut the presumption of fault or negligence
as common carrier occasioned by the unexplained
sinking of its vessel, MT Maysun, while in transit.

Second Issue:

It is the view of the SC that the presentation in evidence
of the marine insurance policy is not indispensable in this
case before the insurer may recover from the common
carrier the insured value of the lost cargo in the exercise
of its subrogatory right. The subrogation receipt, by itself,
is sufficient to establish not only the relationship of
American Home as insurer and Caltex, as the assured
shipper of the lost cargo of industrial fuel oil, but also the
amount paid to settle the insurance claim. The right of
subrogation accrues simply upon payment by the
insurance company of the insurance claim.

Philippine Charter Insurance Corp. vs.
Unknown Owner
PHILIPPINE CHARTER INSURANCE
CORPORATION vs. UNKNOWN OWNER OF
THE VESSEL M/V NATIONAL HONOR,
NATIONAL SHIPPING CORPORATION OF
THE PHILIPPINES and INTERNATIONAL
CONTAINER SERVICES, INC.
[G.R. No. 161833. July 8, 2005]

FACTS:

Petitioner Philippine Charter Insurance Corporation
(PCIC) is the insurer of a shipment on board the vessel
M/V National Honor, represented in the Philippines by
its agent, National Shipping Corporation of the
Philippines (NSCP).

The M/V National Honor arrived at the Manila
International Container Terminal (MICT). The
International Container Terminal Services, Incorporated
(ICTSI) was furnished with a copy of the crate cargo list
and bill of lading, and it knew the contents of the crate.
The following day, the vessel started discharging its
cargoes using its winch crane. The crane was operated
by Olegario Balsa, a winch man from the ICTSI,
exclusive arrastre operator of MICT.

Denasto Dauz, Jr., the checker-inspector of the NSCP,
along with the crew and the surveyor of the ICTSI,
conducted an inspection of the cargo. They inspected the
hatches, checked the cargo and found it in apparent
good condition. Claudio Cansino, the stevedore of the
ICTSI, placed two sling cables on each end of Crate No.
1. No sling cable was fastened on the mid-portion of the
crate. In Dauzs experience, this was a normal
procedure. As the crate was being hoisted from the
vessels hatch, the mid-portion of the wooden flooring
suddenly snapped in the air, about five feet high from the
vessels twin deck, sending all its contents crashing down
hard, resulting in extensive damage to the shipment.

PCIC paid the damage, and as subrogee, filed a case
against M/V National Honor, NSCP and ICTSI. Both RTC
and CA dismissed the complaint.

ISSUE:
Whether or not the presumption of negligence is
applicable in the instant case.

HELD:

No. We agree with the contention of the petitioner that
common carriers, from the nature of their business and
for reasons of public policy, are mandated to observe
extraordinary diligence in the vigilance over the goods
and for the safety of the passengers transported by them,
according to all the circumstances of each case. he Court
has defined extraordinary diligence in the vigilance over
the goods as follows:

The extraordinary diligence in the vigilance over the
goods tendered for shipment requires the common
carrier to know and to follow the required precaution for
avoiding damage to, or destruction of the goods
entrusted to it for sale, carriage and delivery. It requires
common carriers to render service with the greatest skill
and foresight and to use all reasonable means to
ascertain the nature and characteristic of goods tendered
for shipment, and to exercise due care in the handling
and stowage, including such methods as their nature
requires.

The common carriers duty to observe the requisite
diligence in the shipment of goods lasts from the time the
articles are surrendered to or unconditionally placed in
the possession of, and received by, the carrier for
transportation until delivered to, or until the lapse of a
reasonable time for their acceptance, by the person
entitled to receive them. When the goods shipped are
either lost or arrive in damaged condition, a presumption
arises against the carrier of its failure to observe that
diligence, and there need not be an express finding of
negligence to hold it liable. To overcome the presumption
of negligence in the case of loss, destruction or
deterioration of the goods, the common carrier must
prove that it exercised extraordinary diligence.

However, under Article 1734 of the New Civil Code, the
presumption of negligence does not apply to any of the
following causes:

1. 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.

It bears stressing that the enumeration in Article 1734 of
the New Civil Code which exempts the common carrier
for the loss or damage to the cargo is a closed list. To
exculpate itself from liability for the loss/damage to the
cargo under any of the causes, the common carrier is
burdened to prove any of the a fore cited causes claimed
by it by a preponderance of evidence. If the carrier
succeeds, the burden of evidence is shifted to the
shipper to prove that the carrier is negligent.

Defect is the want or absence of something necessary
for completeness or perfection; a lack or absence of
something essential to completeness; a deficiency in
something essential to the proper use for the purpose for
which a thing is to be used. On the other hand, inferior
means of poor quality, mediocre, or second rate. A thing
may be of inferior quality but not necessarily defective. In
other words, defectiveness is not synonymous with
inferiority.

x x x

In the present case, the trial court declared that based on
the record, the loss of the shipment was caused by the
negligence of the petitioner as the shipper:

The same may be said with respect to defendant ICTSI.
The breakage and collapse of Crate No. 1 and the total
destruction of its contents were not imputable to any fault
or negligence on the part of said defendant in handling
the unloading of the cargoes from the carrying vessel, but
was due solely to the inherent defect and weakness of
the materials used in the fabrication of said crate.

The crate should have three solid and strong wooden
batten placed side by side underneath or on the flooring
of the crate to support the weight of its contents. x x x




Saludo Jr. v. CA
Facts:
Crispina Galdo Saludo, mother of the petitioners, died in
Chicago, Illinois. Pomierski and Son Funeral Home of
Chicago, made the necessary preparations and
arrangements for the shipment of the remains from
Chicago to the Philippines. Pomierski brought the
remains to Continental Mortuary Air Services (CMAS) at
the Chicago Airport which made the necessary
arrangements such as flights, transfers, etc. CMAS
booked the shipment with PAL thru the carriers agent Air
Care International. PAL Airway Bill Ordinary was issued
wherein the requested routing was from Chicago to San
Francisco on board Trans World Airline (TWA) and from
San Francisco to Manila on board PAL.
Salvacion (one of the petitioners), upon arrival at San
Francisco, went to the TWA to inquire about her mothers
remains. But she was told they did not know anything
about it. She then called Pomierski that her mothers
remains were not at the West Coast terminal. Pomierski
immediately called CMAS which informed that the
remains were on a plane to Mexico City, that there were
two bodies at the terminal, and somehow they were
switched. CMAS called and told Pomierski that they were
sending the remains back to California via Texas.
Petitioners filed a complaint against TWA and PAL fir the
misshipment and delay in the delay of the cargo
containing the remains of the late Crispina Saludo.
Petitioners alleged that private respondents received the
casketed remains of Crispina on October 26, 1976, as
evidenced by the issuance of PAL Airway Bill by Air Care
and from said date, private respondents were charged
with the responsibility to exercise extraordinary diligence
so much so that the alleged switching of the caskets on
October 27, 1976, or one day after the private
respondents received the cargo, the latter must
necessarily be liable.
Issues:
Whether or not there was delivery of the cargo upon
mere issuance of the airway bill
Whether or not the delay in the delivery of the casketed
remains of petitioners mother was due to the fault of
respondent airline companies
Held:
NO to both, but TWA was held to pay petitioners nominal
damages of P40,000 for its violation of the degree of
diligence required by law to be exercised by every
common carrier
Ordinarily, a receipt is not essential to a complete
delivery of goods to the carrier for transportation but,
when issued, is competent and prima facie, but not
conclusive, evidence of delivery to the carrier. A bill of
lading, when properly executed and delivered to a
shipper, is evidence that the carrier has received the
goods described therein for shipment. Except as modified
by statute, it is a general rule as to the parties to a
contract of carriage of goods in connection with which a
bill of lading is issued reciting that goods have been
received for transportation, that the recital being in
essence a receipt alone, is not conclusive, but may be
explained, varied or contradicted by parol or other
evidence.
In other words, on October 26, 1976 the cargo containing
the casketed remains of Crispina Saludo was booked for
PAL Flight Number PR-107 leaving San Francisco for
Manila on October 27, 1976, PAL Airway Bill No. 079-
01180454 was issued, not as evidence of receipt of
delivery of the cargo on October 26, 1976, but merely as
a confirmation of the booking thus made for the San
Francisco-Manila flight scheduled on October 27, 1976.
Actually, it was not until October 28, 1976 that PAL
received physical delivery of the body at San Francisco,
as duly evidenced by the Interline Freight Transfer
Manifest of the American Airline Freight System and
signed for by Virgilio Rosales at 1945H, or 7:45 P.M. on
said date.
Explicit is the rule under Article 1736 of the Civil Code
that the extraordinary responsibility of the common
carrier begins from the time the goods are delivered to
the carrier. This responsibility remains in full force and
effect even when they are temporarily unloaded or stored
in transit, unless the shipper or owner exercises the right
of stoppage in transitu, and terminates only after the
lapse of a reasonable time for the acceptance, of the
goods by the consignee or such other person entitled to
receive them. And, there is delivery to the carrier when
the goods are ready for and have been placed in the
exclusive possession, custody and control of the carrier
for the purpose of their immediate transportation and the
carrier has accepted them. Where such a delivery has
thus been accepted by the carrier, the liability of the
common carrier commences eo instanti.
Hence, while we agree with petitioners that the
extraordinary diligence statutorily required to be observed
by the carrier instantaneously commences upon delivery
of the goods thereto, for such duty to commence there
must in fact have been delivery of the cargo subject of
the contract of carriage. Only when such fact of delivery
has been unequivocally established can the liability for
loss, destruction or deterioration of goods in the custody
of the carrier, absent the excepting causes under Article
1734, attach and the presumption of fault of the carrier
under Article 1735 be invoked.
As already demonstrated, the facts in the case at bar
belie the averment that there was delivery of the cargo to
the carrier on October 26, 1976. Rather, as earlier
explained, the body intended to be shipped as agreed
upon was really placed in the possession and control of
PAL on October 28, 1976 and it was from that date that
private respondents became responsible for the agreed
cargo under their undertakings in PAL Airway Bill No.
079-01180454. Consequently, for the switching of
caskets prior thereto which was not caused by them, and
subsequent events caused thereby, private respondents
cannot be held liable.
The oft-repeated rule regarding a carrier's liability for
delay is that in the absence of a special contract, a
carrier is not an insurer against delay in transportation of
goods. When a common carrier undertakes to convey
goods, the law implies a contract that they shall be
delivered at destination within a reasonable time, in the
absence, of any agreement as to the time of delivery. But
where a carrier has made an express contract to
transport and deliver property within a specified time, it is
bound to fulfill its contract and is liable for any delay, no
matter from what cause it may have arisen. This result
logically follows from the well-settled rule that where the
law creates a duty or charge, and the party is disabled
from performing it without any default in himself, and has
no remedy over, then the law will excuse him, but where
the party by his own contract creates a duty or charge
upon himself, he is bound to make it good
notwithstanding any accident or delay by inevitable
necessity because he might have provided against it by
contract. Whether or not there has been such an
undertaking on the part of the carrier to be determined
from the circumstances surrounding the case and by
application of the ordinary rules for the interpretation of
contracts.
Echoing the findings of the trial court, the respondent
court correctly declared that
In a similar case of delayed delivery of air cargo under a
very similar stipulation contained in the airway bill which
reads: "The carrier does not obligate itself to carry the
goods by any specified aircraft or on a specified time.
Said carrier being hereby authorized to deviate from the
route of the shipment without any liability therefor", our
Supreme Court ruled that common carriers are not
obligated by law to carry and to deliver merchandise, and
persons are not vested with the right to prompt delivery,
unless such common carriers previously assume the
obligation. Said rights and obligations are created by a
specific contract entered into by the parties (Mendoza vs.
PAL, 90 Phil. 836).
There is no showing by plaintiffs that such a special or
specific contract had been entered into between them
and the defendant airline companies.
And this special contract for prompt delivery should call
the attention of the carrier to the circumstances
surrounding the case and the approximate amount of
damages to be suffered in case of delay (See Mendoza
vs. PAL, supra). There was no such contract entered into
in the instant case.
A common carrier undertaking to transport property has
the implicit duty to carry and deliver it within reasonable
time, absent any particular stipulation regarding time of
delivery, and to guard against delay. In case of any
unreasonable delay, the carrier shall be liable for
damages immediately and proximately resulting from
such neglect of duty. As found by the trial court, the delay
in the delivery of the remains of Crispina Saludo,
undeniable and regrettable as it was, cannot be attributed
to the fault, negligence or malice of private respondents,

a conclusion concurred in by respondent court and which
we are not inclined to disturb.

LORENZO SHIPPING vs. BJ MATHEL

FACTS

Petitioner Lorenzo Shipping Corporation is a domestic
corporation engaged in coastwise shipping. Respondent
BJ Marthel International, Inc. is an importer and
distributor of different brands of engines and spare parts.

Respondent supplied petitioner with spare parts for the
latter's marine engines. According to the quotation it sent,
deliveries of such items are within 2 months after receipt
of firm order. Petitioner thereafter issued to respondent
Purchase Order No. 13839 for the procurement of one
set of cylinder liner, valued at P477,000, to be used for
M/V Dadiangas Express. The purchase order was co-
signed by Jose Go, Jr., petitioner's vice-president, and
Henry Pajarillo, respondents sales manager.

Instead of paying the 25% down payment (indicated in
the purchase order) for the first cylinder liner, petitioner
issued in favor of respondent ten postdated checks. The
checks were supposed to represent the full payment of
the aforementioned cylinder liner.

Subsequently, petitioner issued Purchase Order No.
14011, for another unit of cylinder liner. This purchase
order stated the term of payment to be "25% upon
delivery, balance payable in 5 bi-monthly equal
installments." Like the first purchase order, the second
purchase order did not state the date of the cylinder
liner's delivery.

On 26 January 1990, respondent deposited petitioner's
check that was postdated 18 January 1990, however, the
same was dishonored by the drawee bank due to
insufficiency of funds. The remaining nine postdated
checks were eventually returned by respondent to
petitioner.

Petitioner claimed that it replaced said check with a good
one, the proceeds of which were applied to its other
obligation to respondent. For its part, respondent insisted
that it returned said postdated check to petitioner.

On 20 April 1990, Pajarillo delivered the two cylinder
liners at petitioner's warehouse in Manila. The sales
invoices evidencing the delivery of the cylinder liners both
contain the notation "subject to verification" under which
the signature of petitioner's warehouseman, appeared.

Respondent sent a Statement of Account and
respondent's vice-president sent a demand letter dated to
petitioner requiring the latter to pay. Petitioner sent the
former a letter offering to pay only P150,000 for the
cylinder liners. In said letter, petitioner claimed that as the
cylinder liners were delivered late and due to the
scrapping of the M/V Dadiangas Express, it (petitioner)
would have to sell the cylinder liners in Singapore and
pay the balance from the proceeds of said sale.

Respondent filed an action for sum of money and
damages before the RTC. Prior to the filing of a
responsive pleading, respondent filed an amended
complaint with preliminary attachment. The amendments
also pertained to the issuance by petitioner of the
postdated checks and the amounts of damages claimed.

The RTC granted respondent's prayer for the issuance of
a preliminary attachment. Petitioner filed an Urgent Ex-
Parte Motion to Discharge Writ of Attachment attaching
thereto a counter-bond which the RTC allowed.

Petitioner afterwards filed its Answer alleging therein that
time was of the essence in the delivery of the cylinder
liners and that the delivery on 20 April 1990 of said items
was late as respondent committed to deliver said items
"within two (2) months after receipt of firm order."

Respondent filed a Second Amended Complaint with
Preliminary Attachment which dealt solely with the
number of postdated checks issued by petitioner as full
payment for the first cylinder liner it ordered from
respondent. (In the first amended complaint, only nine
postdated checks were involved, in its second amended
complaint, there were ten postdated checks).

Petitioner filed a Motion alleging therein that the cylinder
liners run the risk of obsolescence and deterioration to
the prejudice of the parties to this case. Thus, petitioner
prayed that it be allowed to sell the cylinder liners at the
best possible price and to place the proceeds of said sale
in escrow. This motion was granted.
The RTC dismissed the complaint which ordered the
plaintiff to pay P50,000.00 to the defendant. It held
respondent bound to the quotation it submitted to
petitioner particularly with respect to the terms of
payment and delivery of the cylinder liners. It also
declared that respondent had agreed to the cancellation
of the contract of sale when it returned the postdated
checks issued by petitioner.
The CA reversed the decision of the RTC.

ISSUES
1. Whether or not respondent incurred delay in
performing its obligation under the contract of sale
- NO
2. Whether or not said contract was validly rescinded
by petitioner. NO

RULING

Petitioner maintains that its obligation to pay fully the
purchase price was extinguished because the adverted
contract was validly terminated due to respondent's
failure to deliver within the two-month period. The
threshold question, then, is: Was there late delivery of the
subjects of the contract of sale to justify petitioner to
disregard the terms of the contract considering that time
was of the essence thereof?

In determining whether time is of the essence in a
contract, the ultimate criterion is the actual or apparent
intention of the parties and before time may be so
regarded by a court, there must be a sufficient
manifestation, either in the contract itself or the
surrounding circumstances of that intention. Petitioner
insists that although its purchase orders did not specify
the dates when the cylinder liners were supposed to be
delivered, nevertheless, respondent should abide by the
term of delivery appearing on the quotation it submitted
to petitioner. Petitioner theorizes that the quotation
embodied the offer from respondent while the purchase
order represented its (petitioner's) acceptance of the
proposed terms of the contract of sale. Thus, petitioner is
of the view that these two documents "cannot be taken
separately as if there were two distinct contracts." We do
not agree.

While this Court recognizes the principle that contracts
are respected as the law between the contracting parties,
this principle is tempered by the rule that the intention of
the parties is primordial and "once the intention of the
parties has been ascertained, that element is deemed as
an integral part of the contract as though it has been
originally expressed in unequivocal terms."

In the present case, we cannot subscribe to the position
of petitioner that the documents, by themselves, embody
the terms of the sale of the cylinder liners. One can easily
glean the significant differences in the terms as stated in
the formal quotation and Purchase Order No. 13839 with
regard to the due date of the down payment for the first
cylinder liner and the date of its delivery as well as
Purchase Order No. 14011 with respect to the date of
delivery of the second cylinder liner. While the quotation
provided by respondent evidently stated that the cylinder
liners were supposed to be delivered within two months
from receipt of the firm order of petitioner and that the
25% down payment was due upon the cylinder liners'
delivery, the purchase orders prepared by petitioner
clearly omitted these significant items. The petitioner's
Purchase Order No. 13839 made no mention at all of the
due dates of delivery of the first cylinder liner and of the
payment of 25% down payment. Its Purchase Order No.
14011 likewise did not indicate the due date of delivery of
the second cylinder liner.

In the instant case, the formal quotation provided by
respondent represented the negotiation phase of the
subject contract of sale between the parties. As of that
time, the parties had not yet reached an agreement as
regards the terms and conditions of the contract of sale
of the cylinder liners. Petitioner could very well have
ignored the offer or tendered a counter-offer to
respondent while the latter could have, withdrawn or
modified the same. The parties were at liberty to discuss
the provisions of the contract of sale prior to its
perfection. In this connection, we turn to the testimonies
of Pajarillo and Kanaan, Jr., that the terms of the offer
were, indeed, renegotiated prior to the issuance of
Purchase Order No. 13839.

The law implies, however, that if no time is fixed, delivery
shall be made within a reasonable time, in the absence of
anything to show that an immediate delivery intended.

We also find significant the fact that while petitioner
alleges that the cylinder liners were to be used for dry
dock repair and maintenance of its M/V Dadiangas
Express between the later part of December 1989 to
early January 1990, the record is bereft of any indication
that respondent was aware of such fact. The failure of
petitioner to notify respondent of said date is fatal to its
claim that time was of the essence in the subject
contracts of sale.

Finally, the ten postdated checks issued in November
1989 by petitioner and received by the respondent as full
payment of the purchase price of the first cylinder liner
supposed to be delivered on 02 January 1990 fail to
impress. It is not an indication of failure to honor a
commitment on the part of the respondent. The earliest
maturity date of the checks was 18 January 1990. As
delivery of said checks could produce the effect of
payment only when they have been cashed, respondent's
obligation to deliver the first cylinder liner could not have
arisen as early as 02 January 1990 as claimed by
petitioner since by that time, petitioner had yet to fulfill its
undertaking to fully pay for the value of the first cylinder
liner. As explained by respondent, it proceeded with the
placement of the order for the cylinder liners with its
principal in Japan solely on the basis of its previously
harmonious business relationship with petitioner.

As an aside, let it be underscored that "[e]ven where time
is of the essence, a breach of the contract in that respect
by one of the parties may be waived by the other party's
subsequently treating the contract as still in force."
Petitioner's receipt of the cylinder liners when they were
delivered to its warehouse on 20 April 1990 clearly
indicates that it considered the contract of sale to be still
subsisting up to that time. Indeed, had the contract of
sale been cancelled already as claimed by petitioner, it
no longer had any business receiving the cylinder liners
even if said receipt was "subject to verification." By
accepting the cylinder liners when these were delivered
to its warehouse, petitioner indisputably waived the
claimed delay in the delivery of said items.

We, therefore, hold that in the subject contracts, time was
not of the essence. The delivery of the cylinder liners on
20 April 1990 was made within a reasonable period of
time considering that respondent had to place the order
for the cylinder liners with its principal in Japan and that
the latter was, at that time, beset by heavy volume of
work.

There having been no failure on the part of the
respondent to perform its obligation, the power to rescind
the contract is unavailing to the petitioner.

Here, there is no showing that petitioner notified
respondent of its intention to rescind the contract of sale
between them. Quite the contrary, respondent's act of
proceeding with the opening of an irrevocable letter of
credit on 23 February 1990 belies petitioner's claim that it
notified respondent of the cancellation of the contract of
sale. Truly, no prudent businessman would pursue such
action knowing that the contract of sale, for which the
letter of credit was opened, was already rescinded by the
other party.

Sealoader shipping vs grand cement
Doctrine:
Contributory Negligence is conduct on the part of the
injured party, contributing as a legal cause to the
harm he has suffered, which falls below the standard
to which he is required to conform for his own
protection

Facts:
Sealoader executed a Time Charter Party Aggrement
with Joyce Launch for the chartering of MT Viper in order
to tow its unpropelled barges for a minimum of 15 days.

Sealoder entered into a contract with Grand Cement for
the loading of cement clinkers and the delivery thereof to
Manila. On March 31, 1994, Sealoders barge arrived at
the wharf of Grand Cement tugged by MT Viper. It was
not immediately loaded as the employees of Grand
Cement were loaded another vessel.

On April 4, typhoon Bising struck Cebu area. The barge
was still docked at the wharf of Grand Cement. As it
became stronger, MT Viper tried to tow the barge away
but it was unsuccessful because the towing line
connecting the vessels snapped since the mooring lines
were not cast off, which is the ultimate cause. Hence, the
barge rammed the wharf causing significant damage.

Grand Cement filed a complaint for damages (P2.4M)
since Sealoader ignored its demands. They allege that
Sealoader was negligent when it ignored its employees
advice to move the vessels after it had received weather
updates. Sealoader filed a motion to dismiss on the
ground that Joyce Launch is the one liable since it was
the owner of MT Viper, whos employees were manning
the vessel. Sealoader filed a cross-claim against Joyce
Launch. Joyce maintains that the damages were due to
force majeure and faulted Grand Cements employees for
abandoning the wharf leaving them helpless and for not
warning them early on.

Upon testimonies, the RTC rendered judgment in favor of
Grand Cement holding the two companies liable since
there was complete disregard of the storm signal, the
captain of the vessel was not present and the vessel was
not equipped with a radio or any navigational facility,
which is mandatory. Joyce launch did not appeal.

On appeal, the CA affirmed the decision but on MR, it
partly reversed its decision finding Grand Cement to be
guilty of contributory negligence since it was found that it
was still loading the other vessel at the last minute just
before the storm hit, hence Sealodersvessel did not
move. Damages were reduced to 50%. Hence, petition
for review to SC.
Issue:
Who should be liable for damage sustained by the wharf
of Grand Cement?

Ruling:
Sealoader is liable for its negligence. First because it was
not equipped with a radio or a navigational facility and it
failed to monitor the prevailing weather conditions.
Second, it cannot pass the responsibility of casting off the
mooring lines because the people at the wharf could not
just cast off the mooring lines without any instructions
from the crew of the vessel. It should have taken the
initiative to cast off the mooring lines early on.

With regard to Grand Cements contributory negligence,
the court found that it was not guilty thereof. It had timely
informed the barge of the impending typhoon and
directed the vessels to move to a safer place. Sealoader
had the responsibility to inform itself of the prevailing
weather conditions in the areas where its vessel was to
sail. It cannot merely rely on other vessels for weather
updates and warnings on approaching storms. For to do
so would be to gamble with the safety of its own vessel,
putting the lives of its crew under the mercy of the sea,
as well as running the rick of causing damage to property
of third parties for which it would necessarily be liable.


2.Presumption of negligence

DELSAN TRANSPORT LINES, INC. vs. AMERICAN
HOME ASSURANCE CORPORATIONG.R. No. 149019
August 15, 2006GARCIA, J
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. 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. The shipment
arrived in Bacolod City and immediately thereafter,
unloading operations commenced. However, 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, which
caused the diesel oil to spill into the sea.As a result of
spillage and backflow of diesel oil, Caltex sought
recovery of the loss from Delsan, but the latter refused to
pay. Asinsurer, AHAC paid Caltex the sum of P

479,262.57 for spillage, pursuant to Marine Risk
Note, and P1,939,575.37 for backflow of the diesel oil
pursuant to Inland Floater Policy. AHAC, as Caltexs
subrogee, instituted Civil Case No. 85-29357
against Delsan for loss caused by the spillage.

Issue: May Delsan be held liable for loss caused by the
spillage of the diesel oil?

Held: Yes. The court declared that Delsan, being
a common carrier, should have exercised extraordinary
diligence in the performance of its duties. 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. 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 subject to exceptions under Art.
1734.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. 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


MAERSK LINES vs. CA

FACTS

Petitioner Maersk Line is engaged in the transportation of
goods by sea, doing business in the Philippines through
its general agent Compania de Tabacos de Filipinas,
while private respondent Efren Castillo is the proprietor of
Ethegal Laboratories, a firm engaged in the manufacture
of pharmaceutical products.

On Nov. 12, 1976, Castillo ordered from Eli Lilly, Inc. of
Puerto Rico 600,000 empty gelatin capsules for the
manufacture of his pharmaceutical products. The
capsules were placed in 6 drums of 100,000 capsules
each valued at US$1,668.71. Shipper Eli Liily,Inc.
advised Castillo through a Memorandum of Shipment
that the products were already shipped on board MV
Anders Maesrkline and date of arrival to be April 3,
1977.

However, for unknown reasons, said cargoes of capsules
were diverted to Richmond, VA and then transported
back to Oakland, CA and with the goods finally arriving in
the PI on June 10, 1977. Consignee Castillo refused to
take delivery of the goods on account of its failure to
arrive on time, and filed an action for rescission of
contract with damages against Maersk and Eli Lilly
alleging gross negligence and undue delay.

Maersk contends that it is liable only in case of loss,
destruction or deterioration of goods under Art 1734 NCC
while Eli Lilly in its cross claim argued that the delay was
due solely to the negligence of Maersk Line. Trial Court
dismissed the complaint against Eli Lilly and the latter
withdrew cross claim but TC still held Maersk liable and
CA affirmed with modifications.


ISSUES

1. W/N a cause of action exists against Maersk Line
given that there was a dismissal of the complaint
against Eli Lilly? Yes, but not under the cross
claim rather because Maersk was an original
party.
2. W/N Castillo is entitled to damages resulting from
delay in the delivery of the shipment in the
absence in the bill of lading of a stipulation on the
delivery of goods? Yes.

RULING

The complaint was filed originally against Eli Lilly, Inc. as
shipper-supplier and petitioner as carrier. Petitioner
Maersk Line being an original party defendant upon
whom the delayed shipment is imputed cannot claim that
the dismissal of the complaint against Eli Liily inured to its
benefit.

Petitioner contends as well that it cannot be held liable
because there was no special contract under which the
carrier undertook to deliver the shipment on or before a
specific date and that the Bill of Lading provides that The
Carrier does not undertake that the Goods shall arrive at
port of discharge or the place of delivery at any particular
time. However, although the SC stated that a bill of
lading being a contract of adhesion will not be voided on
that basis alone, it did declare that the questioned
provision to be void because it has the effect of
practically leaving the date of arrival of the subject
shipment on the sole determination and will of the carrier.
It is established that without any stipulated date, the
delivery of shipment or cargo should be made within a
reasonable time. In the case at hand, the SC declared
that a delay in the delivery of the goods spanning a
period of 2 months and 7 days falls way beyond the
realm of reasonableness.

FGU INSURANCE vs. CA

FACTS

Anco Enterprises Company (ANCO), a partnership
between Ang Gui and Co To, was engaged in the
shipping business. It owned the M/T ANCO tugboat and
the D/B Lucio barge which were operated as common
carriers. Since the D/B Lucio had no engine of its own, it
could not maneuver by itself and had to be towed by a
tugboat for it to move from one place to another.

The D/B Lucio was towed by the M/T ANCO all the way
from Mandaue City to San Jose, Antique. The vessels
arrived at San Jose, Antique, at about one oclock in the
afternoon of 30 September 1979. The tugboat M/T
ANCO left the barge immediately after reaching San
Jose, Antique.

When the barge and tugboat arrived at San Jose,
Antique, in the afternoon of 30 September 1979, the
clouds over the area were dark and the waves were
already big. The arrastre workers unloading the cargoes
of SMC on board the D/B Lucio began to complain about
their difficulty in unloading the cargoes. SMCs District
Sales Supervisor, Fernando Macabuag, requested
ANCOs representative to transfer the barge to a safer
place because the vessel might not be able to withstand
the big waves.

ANCOs representative did not heed the request
because he was confident that the barge could withstand
the waves. This, notwithstanding the fact that at that
time, only the M/T ANCO was left at the wharf of San
Jose, Antique, as all other vessels already left the wharf
to seek shelter. With the waves growing bigger and
bigger, only Ten Thousand Seven Hundred Ninety
(10,790) cases of beer were discharged into the custody
of the arrastre operator.

At about ten to eleven oclock in the evening of 01
October 1979, the crew of D/B Lucio abandoned the
vessel because the barges rope attached to the wharf
was cut off by the big waves. At around midnight, the
barge run aground and was broken and the cargoes of
beer in the barge were swept away.

As a result, ANCO failed to deliver to SMCs consignee
Twenty-Nine Thousand Two Hundred Ten (29,210)
cases of Pale Pilsen and Five Hundred Fifty (550) cases
of Cerveza Negra. The value per case of Pale Pilsen
was Forty-Five Pesos and Twenty Centavos (P45.20).
The value of a case of Cerveza Negra was Forty-Seven
Pesos and Ten Centavos (P47.10), hence, SMCs claim
against ANCO amounted to One Million Three Hundred
Forty-Six Thousand One Hundred Ninety-Seven Pesos
(P1,346,197.00).
As a consequence of the incident, SMC filed a complaint
for Breach of Contract of Carriage and Damages against
ANCO for the amount of One Million Three Hundred
Forty-Six Thousand One Hundred Ninety-Seven Pesos
(P1,346,197.00) plus interest, litigation expenses and
Twenty-Five Percent (25%) of the total claim as
attorneys fees.

ISSUE

ANCO raised the defense that the breach was caused by
a fortuitous event, thus it is exempted from liability. Is this
contention correct?

RULING

No. In order for fortuitous event to be a valid defense for
a common carrier, the event must be:
1. Unforeseeable , or if foreseeable it must be
inevitable.
2. It must be the proximate and the only cause of the
loss.
3. The common carrier must exercise due diligence
to prevent or minimize the loss (before, during
after the occurrence of the event).

Caso fortuito or force majeure (which in law are identical
insofar as they exempt an obligor from liability)[19] by
definition, are extraordinary events not foreseeable or
avoidable, events that could not be foreseen, or which
though foreseen, were inevitable. It is therefore not
enough that the event should not have been foreseen or
anticipated, as is commonly believed but it must be one
impossible to foresee or to avoid.

In this case, the calamity which caused the loss of the
cargoes was not unforeseen nor was it unavoidable. In
fact, the other vessels in the port of San Jose, Antique,
managed to transfer to another place, a circumstance
which prompted SMCs District Sales Supervisor to
request that the D/B Lucio be likewise transferred, but to
no avail. The D/B Lucio had no engine and could not
maneuver by itself. Even if ANCOs representatives
wanted to transfer it, they no longer had any means to do
so as the tugboat M/T ANCO had already departed,
leaving the barge to its own devices. The captain of the
tugboat should have had the foresight not to leave the
barge alone considering the pending storm.

While the loss of the cargoes was admittedly caused by
the typhoon Sisang, a natural disaster, ANCO could not
escape liability to respondent SMC. The records clearly
show the failure of petitioners representatives to exercise
the extraordinary degree of diligence mandated by law.
To be exempted from responsibility, the natural disaster
should have been the proximate and only cause of the
loss. There must have been no contributory negligence
on the part of the common carrier. As held in the case of
Limpangco Sons v. Yangco Steamship Co.:

. . . To be exempt from liability because of an act
of God, the tug must be free from any previous
negligence or misconduct by which that loss or damage
may have been occasioned. For, although the immediate
or proximate cause of the loss in any given instance may
have been what is termed an act of God, yet, if the tug
unnecessarily exposed the two to such accident by any
culpable act or omission of its own, it is not excused.

Therefore, as correctly pointed out by the appellate court,
there was blatant negligence on the part of M/T ANCOs
crewmembers, first in leaving the engine-less barge D/B
Lucio at the mercy of the storm without the assistance of
the tugboat, and again in failing to heed the request of
SMCs representatives to have the barge transferred to a
safer place, as was done by the other vessels in the port;
thus, making said blatant negligence the proximate cause
of the loss of the cargoes.

DSR-SENATOR vs. FEDERAL


FACTS
Berde Plants delivered 632 units of artificial trees
to C.F. Sharp, the General Ship Agent of DSR-Senator
Lines, a foreign shipping corporation, for transportation
and delivery to the consignee, Al-Mohr International
Group, in Riyadh, Saudi Arabia.

C.F. Sharp issued International Bill of Lading for the
cargo the port of discharge for the cargo was at the
Khor Fakkan port and the port of delivery was Riyadh,
Saudi Arabia, via Port Dammam. The cargo was loaded
in M/S Arabian Senator.

Federal Phoenix Assurance insured the cargo against all
risks.

On June 7, 1993, M/S Arabian Senator left the Manila
South Harbor for Saudi Arabia with the cargo on
board. When the vessel arrived in Khor Fakkan Port, the
cargo was reloaded on board DSR-Senator Lines feeder
vessel, M/V Kapitan Sakharov, bound for Port
Dammam, Saudi Arabia.

However, while in transit, the vessel and all its cargo
caught fire.

On July 5, 1993, DSR-Senator Lines informed Berde
Plants that M/V Kapitan Sakharov with its cargo was
gutted by fire and sank on or about July 4, 1993. On
December 16, 1993, C.F. Sharp issued a certification to
that effect

Consequently, Federal Phoenix Assurance paid Berde
Plants P941,429.61 corresponding to the amount of
insurance for the cargo. In turn Berde Plants executed in
its favor a Subrogation Receipt dated January 17, 1994.

On February 8, 1994, Federal Phoenix Assurance sent a
letter to C.F. Sharp demanding payment of P941,429.61
on the basis of the Subrogation Receipt. C.F. Sharp
denied any liability on the ground that such liability was
extinguished when the vessel carrying the cargo was
gutted by fire.
On March 11, 1994, Federal Phoenix Assurance filed
with the RTC, Branch 16, Manila a complaint for
damages against DSR-Senator Lines and C.F. Sharp,
praying that the latter be ordered to pay actual damages
of P941,429.61, compensatory damages of P100,000.00
and costs.
ISSUE

W/N DSR-Senator is liable YES

RULING

Under Article 1734, Fire is not one of those enumerated
under the above provision which exempts a carrier from
liability for loss or destruction of the cargo. Since the
peril of fire is not comprehended within the exceptions in
Article 1734, then 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.

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.

When the goods shipped either are lost or arrive in
damaged condition, a presumption arises against the
carrier of its failure to observe that diligence, and there
need not be an express finding of negligence to hold it
liable.

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.

Respondent Federal Phoenix Assurance raised the
presumption of negligence against petitioners. However,
they failed to overcome it by sufficient proof of
extraordinary diligence.

PHILAMGEN vs. SWEET LINES

FACTS
A total 7,000 bags of low density polyethylene
(600 bags of polyethylene 641 and 6,400 bags of
polyethylene 647) were shipped from Baton Rouge, LA to
Manila on board SS Vishva Yash, a vessel belonging to
the Shipping Corporation of India (SCI). From Manila, the
cargoes were shipped to Davao on board MV Sweet
Love, a vessel owned by Sweet Lines. The consignee
was Far East Bank with arrival notice to Tagum Plastics,
Inc., Tagum, Davao City. The cargoes were insured by
Far East Bank with the Philippine American General
Insurance Co (Philamgen) and were covered by bills of
lading which contained the following stipulation in
paragraph 5:

Claims for shortage, damage, must be
made at the time of delivery to consignee or
agent, if container shows exterior signs of
damage or shortage. Claims for non-
delivery, misdelivery, loss or damage must
be filed within 30 days from accrual. Suits
arising from shortage, damage or loss, non-
delivery or misdelivery shall be instituted
within 60 days from date of accrual of right
of action. Failure to file claims or institute
judicial proceedings as herein provided
constitutes waiver of claim or right of action.
In no case shall carrier be liable for any
delay, non-delivery, misdelivery, loss of
damage to cargo while cargo is not in
actual custody of carrier.

On May 15, 1977, the shipment(s) were discharged from
the interisland carrier into the custody of the consignee. A
survey conducted on July 8, 1977 showed that of the
shipment totalling 7,000 bags, originally contained in 175
pallets, only a total of 5,820 bags were delivered to the
consignee in good order condition, leaving a balance of
1,080 bags. Some of the 1,080 bags were either
MISSING OR DAMAGED beyond the point of being
useful for the intended purpose.

FEBTC and Tagum Plastics sued the international
carrier, SCI, the inter-island carriers, Sweet Lines, the
arrastre company, Davao Arrastre and FE Zuellig (which
I assume is the shipper). Before trial, a compromise
agreement was entered into between the complainants
and SCI and F.E. Zuellig, thus, only Sweet Lines and
Davao Arrastre remained as defendants.
The trial court ruled in favour of Philamgen and Tagum
Plastics. The CA reversed on the ground of prescription
and denied the motion for reconsideration.

ISSUES
(1) Was there a prescriptive period?
(2) If yes, was the prescriptive period valid and legal?
(3) If it was valid and legal, did Philamgen act within
the prescriptive period?

RULING
(1) Yes. There was a prescriptive period. When the
complaint was filed, prescription as an affirmative
defense was seasonably raised by Sweet Lines in its
answer. Though the bills of lading were not presented in
evidence, the SC said that: As petitioners are suing
upon SLI's contractual obligation under the contract of
carriage as contained in the bills of lading, such bills of
lading can be categorized as actionable documents
which under the Rules must be properly pleaded either
as causes of action or defenses, and the genuineness
and due execution of which are deemed admitted unless
specifically denied under oath by the adverse party. The
rules on actionable documents cover and apply to both a
cause of action or defense based on said documents. In
their answer, Sweet Lines included the prescriptive
period under paragraph 5 of the bills of lading. Philamgen
did not deny the existence of the bill of lading under oath.
Instead, in its reply to the answer, Philamgen asserted
that the bills of lading were contracts of adhesion and
that such provisions were contrary to law and public
policy and thus, Sweet Lines cannot avail of such
prescriptive period as a valid defense. The SC said that
Philamgens failure to deny under oath the existence of
the bills of lading was tantamount to an admission of its
existence, together with paragraph 5 containing the
prescriptive period. Thus, the existence of the
prescriptive period was duly proved even if the bills of
lading were not presented in court.

(2) Yes. The prescriptive periods were valid and legal.
Philamgen insists that the bills of lading were contracts of
adhesion and that the prescriptive periods stated therein
were void for being contrary to law and public policy. The
SC, citing Ong Yu vs CA, said that contracts of adhesion
are 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. Philamgen, thus, gave its consent
to the contracts the bills of lading including consent to
the prescriptive periods therein. The SC also agreed with
the CA that parties can stipulate a shorter prescriptive
period for the filing of suits. The SC quoted the CA, It
must be noted, at this juncture, that the aforestated time
limitation (paragraph 5) in the presentation of claim for
loss or damage, is but a restatement of the rule
prescribed under Art. 366 of the Code of Commerce...
The SC said that, ... the validity of a contractual
limitation of time for filing the suit itself against a carrier
shorter than the statutory period therefor has generally
been upheld as such stipulation merely affects the
shipper's remedy and does not affect the liability of the
carrier. In the absence of any statutory limitation and
subject only to the requirement on the reasonableness of
the stipulated limitation period, the parties to a contract of
carriage may fix by agreement a shorter time for the
bringing of suit on a claim for the loss of or damage to the
shipment than that provided by the statute of limitations.
Such limitation is not contrary to public policy for it does
not in any way defeat the complete vestiture of the right
to recover, but merely requires the assertion of that right
by action at an earlier period than would be necessary to
defeat it through the operation of the ordinary statute of
limitations. The SC also said that, ..., the shortened
period for filing suit is not unreasonable and has in fact
been generally recognized to be a valid business practice
in the shipping industry. This is in recognition of the
inherent dangers of carriage by sea.

(3) No. Philamgen did not act within the prescriptive
period. The shipment was discharged into the custody of
the consignee on May 15, 1977, and it was from this date
that petitioners' cause of action accrued, with thirty (30)
days therefrom within which to file a claim with the carrier
for any loss or damage which may have been suffered by
the cargo and thereby perfect their right of action. Claim
was filed only on April 28, 1978, way beyond the period
provided in the bills of lading and violative of the
contractual provision, the inevitable consequence of
which is the loss of petitioners' remedy or right to sue.
The SC said, Even the filing of the complaint on May 12,
1978 is of no remedial or practical consequence, since
the time limits for the filing thereof, whether viewed as a
condition precedent or as a prescriptive period, would in
this case be productive of the same result, that is, that
petitioners had no right of action to begin with or, at any
rate, their claim was time-barred.



Other things discussed by the SC:
1. ...where the contract of shipment contains a
reasonable requirement of giving notice of loss of or
injury to the goods, the giving of such notice is a
condition precedent to the action for loss or injury or the
right to enforce the carrier's liability. Such requirement is
not an empty formalism. The fundamental reason or
purpose of such a stipulation is not to relieve the carrier
from just liability, but reasonably to inform it that the
shipment has been damaged and that it is charged with
liability therefor, and to give it an opportunity to examine
the nature and extent of the injury. This protects the
carrier by affording it an opportunity to make an
investigation of a claim while the matter is fresh and
easily investigated so as to safeguard itself from false
and fraudulent claims.

2. Philamgen also asserted that since the purpose of the
notice of claim or loss was to charge Sweet Lines with
actual knowledge of the loss and damage involved, then
the issuance of Sweet Lines of a Report on Losses and
Damage dated May 15, 1977, would obviate the need
for or render superfluous the filing of a claim within the
stipulated period. The SC said, The report on losses
and damages is not the claim referred to and required by
the bills of lading for it does not fix responsibility for the
loss or damage, but merely states the condition of the
goods shipped. The claim contemplated herein, in
whatever form, must be something more than a notice
that the goods have been lost or damaged; it must
contain a claim for compensation or indicate an intent to
claim. Furthermore, the report bears an annotation at its
lower part that says this Copy should be submitted
together with your claim invoice or receipt within 30 days
from date of issue otherwise your claim will not be
honored."

4. The claim against the carrier, Sweet Lines, has
prescribed but what about the claim against Davao
Arrastre. The SC said that there was not enough
proof to pinpoint the party responsible for the lost
and damaged bags. (What I found surprising was
that the SC also said, Unlike a common carrier,
an arrastre operator does not labor under a
presumption of negligence in case of loss,
destruction or deterioration of goods discharged
into its custody. In other words, to hold an arrastre
operator liable for loss of and/or damage to goods
entrusted to it there must be preponderant
evidence that it did not exercise due diligence in
the handling and care of the goods.

BELGIAN OVERSEAS CHARTERING AND
SHIPPING N.V. and JARDINE DAVIES
TRANSPORT SERVICES, INC., petitioners, vs.
PHILIPPINE FIRST INSURANCE CO., INC.,
respondent.

PANGANIBAN, J .:

Facts:
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, Phil. First insurance
refused to submit to the consignees claim.
Consequently, Belgian Overseas paid the consignee
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.

Issue: Whether or not petitioners have overcome the
presumption of negligence of a common carrier

Held:No.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. Thus, common carriers are
required to render service with the greatest skill and
foresight and to use all reasonable means to ascertain
the nature and characteristics of the goods tendered for
shipment, and to exercise due care in the handling and
stowage, including such methods as their nature
requires. The extraordinary responsibility lasts from the
time the goods are unconditionally placed in the
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.
Owing to this high degree of diligence required of them,
common carriers, as a general rule, are presumed to
have been at fault or negligent if the goods they
transported deteriorated or got lost or destroyed. That is,
unless they prove that they exercised extraordinary
diligence in transporting the goods. In order to avoid
responsibility for any loss or damage, therefore, they
have the burden of proving that they observed such
diligence.
However, the presumption of fault or negligence will not
arise if the loss is due to any of the following causes: (1)
flood, storm, earthquake, lightning, or other natural
disaster or calamity; (2) an act of the public enemy in
war, whether international or civil; (3) an act or omission
of the shipper or owner of the goods; (4) the character of
the goods or defects in the packing or the container; or
(5) an order or act of competent public authority. This is a
closed list. If the cause of destruction, loss or
deterioration is other than the enumerated
circumstances, then the carrier is liable therefor.
Corollary to the foregoing, mere proof of delivery of the
goods in good order to a common carrier and of their
arrival in bad order at their destination constitutes a prima
facie case of fault or negligence against the carrier. If no
adequate explanation is given as to how the
deterioration, the loss or the destruction of the goods
happened, the transporter shall be held responsible.
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


EDGAR COKALIONG SHIPPING LINES, INC. VS
UCPB
Facts:
- Nestor Angelia and Zosimo Mercado both delivered to
petitioner cargo, valued on its face 6,500 and 14,000
pesos respectively
- The Bills of Lading contain the stipulation that in case
of claim for loss or for damage to the shipped
merchandise or property, the liability of the common
carrier shall not exceed the value of the goods
appearing in the Bill of Lading
- Nestor was both the shipper and consignee of the
cargo
- Feliciana Legaspi insured the cargo of the 2 bills of
lading for the amount of 50, 000 and 100,000 pesos
against all risks
- Fire ensured in the engine room and destroyed the
entire vessel and all the cargo therin
- Feliciana filed a claim for the value of the cargo, it
was approved for the amount of 49,500 and 99,000
pesos for both bills of lading
- Respondent filed a complaint in the RTC for the
collection of 148,500 pesos, the total principal amount
it paid to Feliciana Legaspi
- Petitioners argued that after settling his claim, Nestor
Angelia executed the Release and Quitclaim hence it
was absolved of any liability for the loss of the cargo
and even if it was, its liability should not exceed the
value of the cargo as stated in the Bills of Lading
- CA held that petitioner is not bound by the valuation
of the cargo under the Bills of Lading, nor is the value
of the cargo under said Bills of Lading conclusive on
the respondentthe goods were insured with the
respondent for the total amount of 150,000 pesos,
which amount may be considered as the face value of
the goods

Issue:
Amount of liability of petitioner: WON it is that which was
stated in the Bills of Lading, or the extent of the amount
paid by the insurance company

Held: That which is stated in the Bills of Lading

Ratio:
- A stipulation that limits liability is valid as long as it is
not against public policy
- 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 [1749, 1750]
- The present stipulation is not against public policy, it
is just and reasonable; 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
- In fact, they even committed fraud in deliberately
undervaluing the goods
- Purpose of the limiting stipulation is to protect the
common carrierto notify it of the amount it may be
liable for and be able to take appropriate measures to
cover or protect itself i.e. getting insurance
- For assuming a higher risk, the insurance company
was paid the correct higher premium while the
petitioner was paid a fee lower for transporting the
goods that had been deliberately undervalued
- Between the two of them, the insurer should bear the
loss in excess of the value declared in the bill of
lading, this is a just and equitable solution

Sarkies Tours Philippines, Inc. v. CA, Elino
Fortades, Marisol Fortades and FatimaMinerva
Fortades
G.R. No. 108897 October 2, 1997

Romero, J.

FACTS:

Fatima boarded Sarkies Tours bus in Manila on
her way to Legazpi City. She had her 3pieces of
luggage containing all of her optometry review books,
materials and equipment,trial lenses, trial contact
lenses, passport and visa, as wel l as her mother
Mari sol s
U.S.immigration (green) card, among other
important documents and personal belongings
loaded in the bus luggage compartment. During a
stopover at Daet, it was discovered thatonly one bag
remained in the open compartment. The others, including
Fatimas things, were missing and might have dropped along
the way.

Fatima filed an action against Sarkies Tours, claiming
that the loss was due to its failure toobserve
extraordinary di li gence in the care of her luggage
and that Sarkies Tours dealtwith them in bad
faith from the start

ISSUE:
WON Sarkies Tours is liable

HELD:
Yes. Common carri ers, from the nature of their
business and for reasons of
publicpol i cy, ar e bound t o obser ve ext r aor di n
ar y di l i gence i n t he vi gi l ance over t he goodst
ransported by them, and this liability lasts from
the time the goods are unconditional l y 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 person who has a
right to receive them, unless the loss is due to any of the
excepted causes under Art. 1734. The cause of the
loss was Sarkies Tours negli gence in not
ensuring that the doors of the baggage
compartment of its bus were securel y fastened. As
a result of this lack of care, almost all of the luggage
was lost, to the prejudice of the paying passengers.




Valenzuela Hardwood vs. CA
(GR 102316, 30 June 1997)

FACTS:
Valenzuela Hardwood and Industrial Supply, Inc. (VHIS)
entered into an agreement with the Seven Brothers
whereby the latter undertook to load on board its vessel
M/V Seven Ambassador the formers lauan round logs
numbering 940 at the port of Maconacon, Isabela for
shipment to Manila. VHIS insured the logs against loss
and/or damage with South Sea Surety and Insurance Co.

The said vessel sank resulting in the loss of VHIS
insured logs. VHIS demanded from South Sea Surety the
payment of the proceeds of the policy but the latter
denied liability under the policy for non-payment of
premium. VHIS likewise filed a formal claim with Seven
Brothers for the value of the lost logs but the latter denied
the claim.
The RTC ruled in favor of the petitioner.Both Seven
Brothers and South Sea Surety appealed. The Court of
Appeals affirmed the judgment except as to the liability of
Seven Brothers.South Sea Surety and VHIS filed
separate petitions for review before the Supreme Court.
In a Resolution dated 2 June 1995, the Supreme Court
denied the petition of South Sea Surety. The present
decision concerns itself to the petition for review filed by
THIS.
ISSUE:
Is a stipulation in a charter party that the (o)wners shall
not be responsible for loss, split, short-landing,
breakages and any kind of damages to the cargo valid?

HELD: Yes, It is undisputed that private respondent had
acted as a private carrier in transporting petitioners lauan
logs. Thus, Article 1745 and other Civil Code provisions
on common carriers which were cited by petitioner may
not be applied unless expressly stipulated by the parties
in their charter party.

In a contract of private carriage, the parties may validly
stipulate that responsibility for the cargo rests solely on
the charterer, exempting the ship owner from liability for
loss of or damage to the cargo caused even by the
negligence of the ship captain. Pursuant to Article 1306
of the Civil Code, such stipulation is valid because it is
freely entered into by the parties and the same is not
contrary to law, morals, good customs, public order, or
public policy. Indeed, their contract of private carriage is
not even a contract of adhesion. We stress that in a
contract of private carriage, the parties may freely
stipulate their duties and obligations which perforce
would be binding on them. Unlike in a contract involving a
common carrier, private carriage does not involve the
general public. Hence, the stringent provisions of the Civil
Code on common carriers protecting the general public
cannot justifiably be applied to a ship transporting
commercial goods as a private carrier. Consequently, the
public policy embodied therein is not contravened by
stipulations in a charter party that lessen or remove the
protection given by law in contracts involving common
carriers.

The general public enters into a contract of transportation
with common carriers without a hand or a voice in the
preparation thereof. The riding public merely adheres to
the contract; even if the public wants to, it cannot submit
its own stipulations for the approval of the common
carrier. Thus, the law on common carriers extends its
protective mantle against one-sided stipulations inserted
in tickets, invoices or other documents over which the
riding public has no understanding or, worse, no choice.
Compared to the general public, a charterer in a contract
of private carriage is not similarly situated. It can -- and in
fact it usually does -- enter into a free and voluntary
agreement. In practice, the parties in a contract of private
carriage can stipulate the carriers obligations and
liabilities over the shipment, which in turn, determine the
price or consideration of the charter. Thus, a charterer, in
exchange for convenience and economy, may opt to set
aside the protection of the law on common carriers.
When the charterer decides to exercise this option, he
takes a normal business risk


lberta Yobido and Cresencio Yobido v. CA,
Leny Tumboy, Ardee Tumboy and Jasmin
Tumboy

Romero, J.
FACTS:

Spouses Tito and Leny Tumboy and their minor children
named Ardee and Jasmin, boardeda Yobi do Li ner
bus bound f or Davao Ci t y. Al ong t he t r i p, t he
l ef t f r ont t i r e of t he bus exploded. The bus fell
into a ravine around 3 ft. from the road and struck
a tree. The incident resulted in the death of Tito and
physical injuries to other passengers.

Factual backdrop based on testimony of Leny: the
winding road the bus traversed was not cemented and
was wet due to the rain; it was rough with crushed
rocks. The bus whi ch was full of passengers had
cargoes on top. Since it was running fast, (at a
speed of 50-60kph based on another witness
testimony) she cautioned the driver to slow down but he
merely stared at her through the mirror.

A complaint for breach of contract of carriage was filed by
Leny and her children against Alberta Yobido, the owner
of the bus, and Cresencio Yobido, its driver; Yobidos
raised the
af f i r mat i ve def ense of caso f or t ui t o; t hey al s
o f i l ed a t hi r d par t y compl ai nt agai nst
Philippine Phoenix Surety and Insurance, Inc.

Upon a finding that the third party defendant was not
liable under the insurance contract, the lower
court dismissed the third party complaint.

ISSUE:
WON the tire blowout was a caso fortuito as to exempt
Yobidos from liability


HELD:
No.
tire blowout
- mechanical defect of the conveyance or a fault in
its equipment which was easi l y di scoverable if the
bus had been subjected to a more thorough or
ri gid check-up before it took to the road

when a passenger boards a common carrier, he takes
the risks incidental to the mode of travel he has taken.
After all, a carrier is not an insurer of the safety of its
passengers and is not bound absolutely and at all events
to carry them safely and without injury. However, when a
passenger is injured or dies while travelling, the law
presumes that the common carrier is negligent. (see Art.
1756)

Art. 1755 provides that a common carrier is bound
to carry the passengers safely as far
ashuman car e and f or esi ght can pr ovi de, usi n
g t he ut most di l i gence of ver y caut i ousper so
ns, wi t h a due r egar d f or al l t he ci r cumst anc
es. I n cul pa cont r act ual , once apassenger dies
or is injured, the carrier is presumed to have been at fault
or to have acted negli gentl y.
This disputable presumption may
only be overcome by evidence that the carrier had
observed extraordinary diligence as prescribed by Arts.
1733, 1755 and 1756 or that the death or injury of the
passenger was due to a fortuitous event.

Char act er i st i cs of f or t ui t ous event : a) t he ca
use of t he unf or eseen and unexpect edo c c u r r
e n c e , o r t h e f a i l u r e o f t h e d e b t o r t o c o m
p l y wi t h h i s o b l i g a t i o n s , mu s t b e independen
t of human will; b) it must be impossible to foresee the
event which constitutesthe caso fortuito, or if it can be
foreseen, it must be impossible to avoid; c) the
occurrencemust be such as to render it impossible for the
debtor to fulfill his obligation in a normalmanner; and d)
the obligor must be free from any participation in the
aggravation of theinjury resulting to the creditor

Ar t 1174: no per son shal l be r esponsi bl e f or
a f or t ui t ous event whi ch coul d not beforeseen,
or which, though foreseen, was inevitable

the explosion of the new tire may not be considered a
fortuitous event; there are humanfactors i nvol ved in
the situation; the fact that the ti re was new did not
impl y that it wasentirely free from manufacturing
defects or that it was properly mounted on the vehicle.



3. Defenses and condition


CENTRAL SHIPPING COMPANY, INC.,
petitioner, vs. INSURANCE COMPANY OF
NORTH AMERICA, respondent.
Doctrine of Limited Liability does not apply to
situations in which the loss or the injury is due to the
concurrent negligence of the shipowner and the
captain.

Facts:

1. On July 25, 1990 at Puerto Princesa, Palawan, the
petitioner received on board its vessel, the M/V Central
Bohol, 376 pieces of Philippine Apitong Round Logs and
undertook to transport said shipment to Manila for
delivery to Alaska Lumber Co., Inc.

2. During the voyage the degree of the position of the
ship would change due to the shifting of the logs inside.
Eventually at about 15 degrees the captain ordered for
everyone to abandon the ship.

3. Respondent alleged that the total loss of the
shipment was caused by the fault and negligence of the
petitioner and its captain. Petitioner while admitting the
sinking of the vessel, interposed the defense that the
vessel was fully manned, fully equipped and in all
respects seaworthy; that all the logs were properly
loaded and secured; that the vessels master exercised
due diligence to prevent or minimize the loss before,
during and after the occurrence of the storm.

4. It raised as its main defense that the proximate and
only cause of the sinking of its vessel and the loss of its
cargo was a natural disaster, a tropical storm which
neither [petitioner] nor the captain of its vessel could
have foreseen.

5. The RTC was unconvinced that the sinking of M/V
Central Bohol had been caused by the weather or any
other caso fortuito. It noted that monsoons, which were
common occurrences during the months of July to
December, could have been foreseen and provided for
by an ocean-going vessel. Applying the rule of
presumptive fault or negligence against the carrier, the
trial court held petitioner liable for the loss of the cargo.

6. The CA affirmed the trial courts finding that the
southwestern monsoon encountered by the vessel was
not unforeseeable. Given the season of rains and
monsoons, the ship captain and his crew should have
anticipated the perils of the sea. Citing Arada v. CA,7 it
said that findings of the BMI were limited to the
administrative liability of the owner/operator, officers and
crew of the vessel. However, the determination of
whether the carrier observed extraordinary diligence in
protecting the cargo it was transporting was a function of
the courts, not of the BMI.
Issue:
Whether or not the Doctrine of Limited Liability applies.

Held:
No it does not.

Common carriers are bound to observe extraordinary
diligence over the goods they transport, according to all
the circumstances of each case; In all other cases not
specified under Article 1734 of the Civil Code, common
carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed
extraordinary diligence. From the nature of their business
and for reasons of public policy, common carriers are
bound to observe extraordinary diligence over the goods
they transport, according to all the circumstances of each
case. In the event of loss, destruction or deterioration of
the insured goods, common carriers are responsible; that
is, unless they can prove that such loss, destruction or
deterioration was brought aboutamong othersby
flood, storm, earthquake, lightning or other natural
disaster or calamity. In all other cases not specified
under Article 1734 of the Civil Code, common carriers are
presumed to have been at fault or to have acted
negligently, unless they prove that they observed
extraordinary diligence.
The doctrine of limited liability under Article 587 of the
Code of Commerce is not applicable to the present case.
This rule does not apply to situations in which the loss or
the injury is due to the concurrent negligence of the ship-
owner and the captain. It has already been established
that the sinking of M/V Central Bohol had been caused
by the fault or negligence of the ship captain and the
crew, as shown by the improper stowage of the cargo of
logs. Closer supervision on the part of the shipowner
could have prevented this fatal miscalculation. As such,
the shipowner was equally negligent. It cannot escape
liability by virtue of the limited liability rule.


Everett Steamship Corporation vs. CAG.R.
No.122494, October 8, 1998

FACTS:
Pri vate respondent i mported 3 crates of bus spare
parts marked as MARCO C/No. 12,MARCO C/No.
13 and MARCO C/No. 14, from its supplier,
Maruman Trading Company,Ltd. (Maruman Trading),
a foreign corporation based in Inazawa, Aichi, Japan.
The crates wer e shi pped f r om
Nagoya, Japan t o Mani l a
i n boar d " ADELFAEVERETTE, " a vessel
owned by petitioner's principal, Everett Orient Lines.
Upon arrival at the port of
Manila,i t wa s d i s c o v e r e d t h a t t h e c r a t e ma
r k e d MARCO C/ No . 1 4 wa s mi s s i n g . Pr i v
a t e r espondent cl ai m upon pet i t i oner f or t he
val ue of t he l ost car go amount i ng t o One
Mi l l i on Fi ve Hundr ed Fi f t y Two Thousand Fi v
e Hundr ed ( Y1, 552, 500. 00) Yen, t hea mo u n t
s h o wn i n a n I n v o i c e No . MT M9 4 1 , d a t e d
No v e mb e r 1 4 , 1 9 9 1 . Ho we v e r , petitioner
offered to pay only One Hundred Thousand
(Y100,000.00) Yen, the maximum amount stipulated
under Clause 18 of the covering bill of lading which limits
the liability of petitioner. Pri vate respondent
rejected the offer and thereafter instituted a suit
for collection. The trial court rendered a decision
in favor of the pri vate respondents and this was
affirmed by the Court of Appeals. Thus, this instant
petition.


ISSUES:
1 . I s t h e p e t i t i o n e r l i a b l e f o r t h e a c t u
a l v a l u e a n d n o t t h e m a x i m u m v a l u e
recoverable under the bill of lading?

2. Is p ri vate respondent, as consi gnee, who
is not a si gnatory to the bill of lading bound by the
stipulations thereof?

ARGUMENTS:

1.The Petitioner is onl y liable for the maximum
value recoverable under the bi ll of lading. Clause 18
of the covering bill of lading:18. Al l cl ai ms f or
whi ch t he car r i er may be l i abl e shal l be
adj ust ed and set t l ed on t he basi s of t he
shi pper ' s net i nvoi ce cost pl us f r ei ght 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 i n Japanese Cur r ency
( Y100, 000. 00) or i t s equi val ent i n any ot her
currency per package or customary freight unit
(whichever is least) un less 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

. (Emphasis supplied)Pertinent provisions that is
applicable as to this case: Art. 1749. A stipulation
that the common carrier' s l iabil ity is limited to the
value of the goods appearing in the bil l 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. Pursuant to
the afore-quoted provisions of law, it is required that the
stipulation limiting
t h e c o mmo n c a r r i e r ' s l i a b i l i t y f o r l o s s m
u s t b e " r e a s o n a b l e a n d j u s t u n d e r t h e circ
umstances, and has been freely and fairly agreed
upon." The above stipulations are reasonable and just. In
the bill of lading, the carrier made it clear that its
liabi lity would onl y be up to One Hundred
Thousand (Y100,000.00) Yen.

Cruz vs son holidays case digest

SOUTHERN LINES INC vs CA and CITY OF
ILOILO
DOCTRINE:If the fact of improper packing is known to
the carrier or his servants, or apparent upon ordinary
observation, but it accepts the goods notwithstanding
such condition, it is not relieved of liability for loss or
injury resulting therefrom.


FACTS:

- The City of Iloilo requisitioned for rice from the
National Rice and Corn Corporation (NARIC).
- NARIC shipped 1,726 sacks of rice consigned to the
City of Iloilo on board of SS General Wright belong to
Southern Lines.
- The City of Iloilo received the shipment and paid the
amount stated in the bill of lading (around Php 63K).
- However, at the bottom of the bill of lading, it was
noted that City of Iloilo received the merchandise in the
same condition as when shipped, except that it received
only 1,685 sacks.
- Upon actual weighing, it was discovered that the
shortage was equal to 41 sacks of rice.
- Thus, the City of Iloilo filed a complaint against NARIC
and Southern Lines for the recovery of the value of the
shortage of the shipment of rice (Php 6,486.35).
- The lower court absolved NARIC but sentenced
Southern Lines to pay the amount.
- CA affirmed.
- Hence, this petition for review.
- Southern Lines claims exemption from liability by
contending that the shortage in the shipment of rice was
due to such factors as shrinkage, leakage or spillage of
the rice on account of the bad condition of the sacks at
the time it received the same and negligence of the
agents of City of Iloilo in receiving the shipment.

ISSUES:

- Whether Southern Lines is liable for the loss or
shortage of the rice shipped. YES
- Whether the City of Iloilo is precluded from filing an
action for damages on account of its failure to present a
claim within 24 hours from receipt of the shipment as
stated in the bill of lading. NO

HELD:

- YES. The SC held that the contention of Southern
Lines with respect to the improper packing is
untenable.Under Art. 361 of the Code of Commerce, the
carrier, in order to free itself from liability, was only
obliged to prove that the damages suffered by the goods
were by virtue of the nature or defect of the articles.
Under Art. 362, the plaintiff, in order to hold the
defendant liable, was obliged to prove that the damages
to the goods is by virtue of their nature, occurred on
account of its negligence or because the defendant did
not take the precaution adopted by careful persons.It
held that if the fact of improper packing is known to the
carrier or his servants, or apparent upon ordinary
observation, but it accepts the goods notwithstanding
such condition, it is not relieved of liability for loss or
injury resulting therefrom.

- NO. The SC noted that Southern Lines failed to plead
this defense in its answer to City of Iloilos complaint and,
therefore, the same is deemed waived and cannot be
raised for the first time.The SC also cited the finding of
the CA that City of Iloilo filed the action within a
reasonable time; that the action is one for the refund of
the amount paid in excess, and not for damages or the
recovery of shortage; the bill of lading does not at all limit
the time for the filing of action for the refund of money
paid in excess.



4. Duration of Responsibility


MITSUI VS. CA, 287 SCRA 366
MENDOZA,J.:


Facts:

Petitioner Mitsui O.S.K. Lines Ltd. is a foreign corporation
represented in the Philippines by its agent, Magsaysay
Agencies. It entered into a contract of carriage through
Meister transport, Inc., an international freight forwarder,
with private respondent Larine Loungewear
Manufacturing corporation to transport goods of the latter
from Manila to Le Havre, France. Petitioner undertook&
to deliver the goods to France '( days from initial loading.
On) july 24, 2009, petitioner-s "vessel loaded private
respondent-s container van for carriage at the said port of
origin.
However, in Kaoshiung, Taiwan the goods were not
transshipped immediately, with the result that the
shipment arrived in Le Havre only on November 14,
1991. The consignee allegedly paid only half the value of
the said goods on the ground that they did not arrive in
France until the off season in that country. The
remaining half was allegedly charged to the account of
private respondent which in turn demanded payment
from petitioner through its agent.

Issue: Whether or not private respondent-s action is for
loss or damage to goods shipped, within the meaning of
the carriage of 1oods by Sea Act 2(COGSA)

Ruling: No. the suit is not for loss or damage to goods
contemplated in 3(6), the question of prescription of
action is governed not by the COGSA but by Art.1144 of
the Civil Code which provides for a prescriptive period of
ten years. As defined in the Civil Code and as applied to
Section 3(6), paragraph 4 of the carriage of goods by
Sea Act, loss contemplates merely a situation where no
delivery at all was made by the shipper of the goods
because the same had perished, gone out of commerce,
or disappeared in such a !ay that their existence is
unknown or they cannot be recovered. There would be
some merit in appellant-s insistence that the damages
suffered by hi$ as a result of the delay in the shipment of
his cargo are not covered by the prescriptive provision of
the carriage of 1oods by Sea Act above referred to, if
such damages were due, not to the deterioration and
decay of the goods while in transit, but to other causes
independent of the condition of the cargo upon arrival,
like a drop in their market value



SULPICIO V. CA
FACTS:
Sulpicio Lines and ALC entered into a Contract of
Carriage for the transport of latters timber from
Surigao del Sur.
On a late date, Sulpicio sent its tugboat MT
Edmund and barge Solid VI to pick up ALCs
timber but no loading could be made because of
the heavy downpour.
The next morning, several stevedores of CBL, who
were hired by ALC, boarded Solid VI and opened
its storeroom despite being warned by the
employees of Sulpicio of the gas and heat
generated by the copra stored in the holds of the
ship.
Leonicio Pamalaran was one of those who entered
the ship. He lost consciousness and eventually
died of gas poisoning.
Pamalarans heirs filed a Civil Case for damages
against Sulpicio, CBL, ALC and its manager, Ernie
Santiago.

ISSUE:
Whether Sulpicio Lines, Inc. is liable as a common
carrier despite the fact that Pamalaran was never a
passenger.

HELD: YES. ALC had a contract of carriage with
petitioner. The presence of the stevedores sent by ALC
on board the barge of Sulpicio was called for by the
contract of carriage.
Petitioner knew of the presence and role of the
stevedores, as those who place the timbers on board the
ship, and thus, consented to their presence. Hence,
petitioner was responsible for their safety while on board
the barge.
Moreover, Sulpicios claim that its employees even
warned the stevedores and tried to prevent their entry
into the storeroom does not have merit. It failed to prove
that its employees were actually trained or given specific
instructions to see to it that the barge is fit and safe not
only in transporting goods but also for people who would
be loading the cargo into the bodega of the barge. Thus,
it failed to exercise due diligence in the selection and
supervision of its employees.

Coastwise Lighterage Corporation v. CA
Facts:

Pag-asa Sales Inc. entered into a contract to transport
molasses from the province of Negros to Manila with
Coastwise Lighterage Corporation (Coastwise for
brevity), using the latter's dumb barges. The barges were
towed in tandem by the tugboat MT Marica, which is
likewise owned by Coastwise. Upon reaching Manila
Bay, one of the barges, "Coastwise 9", struck an
unknown sunken object. The forward buoyancy
compartment was damaged, and water gushed in
through a hole "two inches wide and twenty-two inches
long". As a consequence, the molasses at the cargo
tanks were contaminated. Pag-asa filed a claim against
Philippine General Insurance Company, the insurer of its
cargo. Philgen paid P700,000 for the value of the
molasses lost.

Philgen then filed an action against Coastwise to recover
the money it paid, claiming to be subrogated to the
claims which the consignee may have against the carrier.
Both the trial court and the Court of Appeals ruled against
Coastwise.




Issues:

(1) Whether Coastwise was transformed into a private
carrier by virtue of the contract it entered into with Pag-
asa, and whether it exercised the required degree of
diligence

(2) Whether Philgen was subrogated into the rights of the
consignee against the carrier

Held:

(1) Pag-asa Sales, Inc. only leased three of petitioner's
vessels, in order to carry cargo from one point to another,
but the possession, command mid navigation of the
vessels remained with petitioner Coastwise Lighterage.
Coastwise Lighterage, by the contract of affreightment,
was not converted into a private carrier, but remained a
common carrier and was still liable as such. The law and
jurisprudence on common carriers both hold that the
mere proof of delivery of goods in good order to a carrier
and the subsequent arrival of the same goods at the
place of destination in bad order makes for a prima facie
case against the carrier. It follows then that the
presumption of negligence that attaches to common
carriers, once the goods it is sports are lost, destroyed or
deteriorated, applies to the petitioner. This presumption,
which is overcome only by proof of the exercise of
extraordinary diligence, remained unrebutted in this case.
Jesus R. Constantino, the patron of the vessel
"Coastwise 9" admitted that he was not licensed.
Coastwise Lighterage cannot safely claim to have
exercised extraordinary diligence, by placing a person
whose navigational skills are questionable, at the helm of
the vessel which eventually met the fateful accident. It
may also logically, follow that a person without license to
navigate, lacks not just the skill to do so, but also the
utmost familiarity with the usual and safe routes taken by
seasoned and legally authorized ones. Had the patron
been licensed he could be presumed to have both the
skill and the knowledge that would have prevented the
vessel's hitting the sunken derelict ship that lay on their
way to Pier 18. As a common carrier, petitioner is liable
for breach of the contract of carriage, having failed to
overcome the presumption of negligence with the loss
and destruction of goods it transported, by proof of its
exercise of extraordinary diligence.

(2) Article 2207 of the Civil Code is founded on the well-
settled principle of subrogation. If the insured property is
destroyed or damaged through the fault or negligence of
a party other than the assured, then the insurer, upon
payment to the assured will be subrogated to the rights of
the assured to recover from the wrongdoer to the extent
that the insurer has been obligated to pay. Payment by
the insurer to the assured operated as an equitable
assignment to the former of all remedies which the latter
may have against the third party whose negligence or
wrongful act caused the loss. The right of subrogation is
not dependent upon, nor does it grow out of, any private
of contract or upon written assignment of, claim. It
accrues simply upon payment of the insurance claim by
the insurer.


phil first insurance vs wallem first
shipping case digest


Samar Mining Co., Inc. V. Nordeutcher Lloyd,
Et. Al.(1984)
Lessons Applicable: Bill of Lading (Transportation)
Laws Applicable: Article 1736, Article 1738,Article
1884,Article 1889,Article 1892,Article 1909

FACTS:
Samar Mining Company, Inc. imported1 crate
of welded wedge wire sieves shipped
through Nordeutscher Lloyd
Bill of Lading No. 18:
transshipped at port of discharge: davao
Section 1, paragraph 3 of Bill of Lading No. 18
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 ...
Section 11:
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
When the goods arrived in the port of Davao, it
was delivered in good order and condition to the
bonded warehouse of AMCYL but it was not delivered
and received by Samar Mining Company, Inc.
Samar filed a claim against Nordeutscher and C.F.
Sharp who brought in AMCYL as third
party defendant
RTC: favored Samar
Nordeutscher and C.F. Sharp laible but may enforce
judgment against AMCYL

ISSUE: W/N the 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 is valid

HELD: YES. Reversed
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. - applicable
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. - no applicable
since article contemplates a situation where the
goods had already reached their place of destination
and are stored in the warehouse of the carrier
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.
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
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

Ganzon V. CA (1988)
FACTS: Gelacio > Ganzon (via Capt. Niza) > Lighter
Batman (common carrier) (loaded half)

November 28, 1956: Gelacio Tumambing (Gelacio)
contracted the services of of Mauro B. Ganzon to haul
305 tons of scrap iron from Mariveles, Bataan, to the
port of Manila on board the light LCT Batman
December 1, 1956: Gelacio delivered the scrap iron
to Filomeno Niza, captain of the lighter, for loading
which was actually begun on the same date by the
crew of the lighter under the captains supervisor.
When about half of the scrap iron was already loaded,
Mayor Jose Advincula of Mariveles, Bataan arrived
and demanded P5000 from Gelacio
Upon resisting, the Mayor fired at Gelacio so he had
to be taken to the hospital
Loading of the scrap iron was resumed
December 4, 1956: Acting Mayor Basilio Rub (Rub),
accompanied by 3 policemen, ordered captain
Filomeno Niza and his crew to dump the scrap iron
where the lighter was docked
Later on Rub had taken custody of the scrap iron
RTC: in favor of Gelacio and against Ganzon

ISSUE: W/N Ganzon should be held liable under the
contract of carriage

HELD: YES. Petition is DENIED.
Ganzon thru his employees, actually received the
scraps is freely admitted.
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.
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.
failed to show that the loss of the scraps was due to
any of the following causes enumerated in Article
1734 of the Civil Code, namely:

(1) Flood, storm, earthquake, lightning, or other natural
disaster or calamity;
(2) Act of the public enemy in war, whether international
or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing
or in the containers;
(5) Order or act of competent public authority.
Hence, the petitioner is presumed to have been at fault or
to have acted negligently.
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.
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.
We cannot sustain the theory of caso fortuito - "order
or act of competent public authority"(Art. 1174 of the
Civil Code)
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.
Ganzon was not duty bound to obey the illegal order
to dump into the sea the scrap iron.
Moreover, there is absence of sufficient proof that the
issuance of the same order was attended with such
force or intimidation as to completely overpower the
will of the petitioner's employees. The mere difficulty
in the fulfillment of the obligation is not
considered force majeure.

Saludo Jr. v. CA
Facts:
Crispina Galdo Saludo, mother of the petitioners, died in
Chicago, Illinois. Pomierski and Son Funeral Home of
Chicago, made the necessary preparations and
arrangements for the shipment of the remains from
Chicago to the Philippines. Pomierski brought the
remains to Continental Mortuary Air Services (CMAS) at
the Chicago Airport which made the necessary
arrangements such as flights, transfers, etc. CMAS
booked the shipment with PAL thru the carriers agent Air
Care International. PAL Airway Bill Ordinary was issued
wherein the requested routing was from Chicago to San
Francisco on board Trans World Airline (TWA) and from
San Francisco to Manila on board PAL.
Salvacion (one of the petitioners), upon arrival at San
Francisco, went to the TWA to inquire about her mothers
remains. But she was told they did not know anything
about it. She then called Pomierski that her mothers
remains were not at the West Coast terminal. Pomierski
immediately called CMAS which informed that the
remains were on a plane to Mexico City, that there were
two bodies at the terminal, and somehow they were
switched. CMAS called and told Pomierski that they were
sending the remains back to California via Texas.
Petitioners filed a complaint against TWA and PAL fir the
misshipment and delay in the delay of the cargo
containing the remains of the late Crispina Saludo.
Petitioners alleged that private respondents received the
casketed remains of Crispina on October 26, 1976, as
evidenced by the issuance of PAL Airway Bill by Air Care
and from said date, private respondents were charged
with the responsibility to exercise extraordinary diligence
so much so that the alleged switching of the caskets on
October 27, 1976, or one day after the private
respondents received the cargo, the latter must
necessarily be liable.
Issues:
Whether or not there was delivery of the cargo upon
mere issuance of the airway bill
Whether or not the delay in the delivery of the casketed
remains of petitioners mother was due to the fault of
respondent airline companies
Held:
NO to both, but TWA was held to pay petitioners nominal
damages of P40,000 for its violation of the degree of
diligence required by law to be exercised by every
common carrier
Ordinarily, a receipt is not essential to a complete
delivery of goods to the carrier for transportation but,
when issued, is competent and prima facie, but not
conclusive, evidence of delivery to the carrier. A bill of
lading, when properly executed and delivered to a
shipper, is evidence that the carrier has received the
goods described therein for shipment. Except as modified
by statute, it is a general rule as to the parties to a
contract of carriage of goods in connection with which a
bill of lading is issued reciting that goods have been
received for transportation, that the recital being in
essence a receipt alone, is not conclusive, but may be
explained, varied or contradicted by parol or other
evidence.
In other words, on October 26, 1976 the cargo containing
the casketed remains of Crispina Saludo was booked for
PAL Flight Number PR-107 leaving San Francisco for
Manila on October 27, 1976, PAL Airway Bill No. 079-
01180454 was issued, not as evidence of receipt of
delivery of the cargo on October 26, 1976, but merely as
a confirmation of the booking thus made for the San
Francisco-Manila flight scheduled on October 27, 1976.
Actually, it was not until October 28, 1976 that PAL
received physical delivery of the body at San Francisco,
as duly evidenced by the Interline Freight Transfer
Manifest of the American Airline Freight System and
signed for by Virgilio Rosales at 1945H, or 7:45 P.M. on
said date.
Explicit is the rule under Article 1736 of the Civil Code
that the extraordinary responsibility of the common
carrier begins from the time the goods are delivered to
the carrier. This responsibility remains in full force and
effect even when they are temporarily unloaded or stored
in transit, unless the shipper or owner exercises the right
of stoppage in transitu, and terminates only after the
lapse of a reasonable time for the acceptance, of the
goods by the consignee or such other person entitled to
receive them. And, there is delivery to the carrier when
the goods are ready for and have been placed in the
exclusive possession, custody and control of the carrier
for the purpose of their immediate transportation and the
carrier has accepted them. Where such a delivery has
thus been accepted by the carrier, the liability of the
common carrier commences eo instanti.
Hence, while we agree with petitioners that the
extraordinary diligence statutorily required to be observed
by the carrier instantaneously commences upon delivery
of the goods thereto, for such duty to commence there
must in fact have been delivery of the cargo subject of
the contract of carriage. Only when such fact of delivery
has been unequivocally established can the liability for
loss, destruction or deterioration of goods in the custody
of the carrier, absent the excepting causes under Article
1734, attach and the presumption of fault of the carrier
under Article 1735 be invoked.
As already demonstrated, the facts in the case at bar
belie the averment that there was delivery of the cargo to
the carrier on October 26, 1976. Rather, as earlier
explained, the body intended to be shipped as agreed
upon was really placed in the possession and control of
PAL on October 28, 1976 and it was from that date that
private respondents became responsible for the agreed
cargo under their undertakings in PAL Airway Bill No.
079-01180454. Consequently, for the switching of
caskets prior thereto which was not caused by them, and
subsequent events caused thereby, private respondents
cannot be held liable.
The oft-repeated rule regarding a carrier's liability for
delay is that in the absence of a special contract, a
carrier is not an insurer against delay in transportation of
goods. When a common carrier undertakes to convey
goods, the law implies a contract that they shall be
delivered at destination within a reasonable time, in the
absence, of any agreement as to the time of delivery. But
where a carrier has made an express contract to
transport and deliver property within a specified time, it is
bound to fulfill its contract and is liable for any delay, no
matter from what cause it may have arisen. This result
logically follows from the well-settled rule that where the
law creates a duty or charge, and the party is disabled
from performing it without any default in himself, and has
no remedy over, then the law will excuse him, but where
the party by his own contract creates a duty or charge
upon himself, he is bound to make it good
notwithstanding any accident or delay by inevitable
necessity because he might have provided against it by
contract. Whether or not there has been such an
undertaking on the part of the carrier to be determined
from the circumstances surrounding the case and by
application of the ordinary rules for the interpretation of
contracts.
Echoing the findings of the trial court, the respondent
court correctly declared that
In a similar case of delayed delivery of air cargo
under a very similar stipulation contained in the
airway bill which reads: "The carrier does not
obligate itself to carry the goods by any specified
aircraft or on a specified time. Said carrier being
hereby authorized to deviate from the route of the
shipment without any liability therefor", our
Supreme Court ruled that common carriers are not
obligated by law to carry and to deliver
merchandise, and persons are not vested with the
right to prompt delivery, unless such common
carriers previously assume the obligation. Said
rights and obligations are created by a specific
contract entered into by the parties (Mendoza vs.
PAL, 90 Phil. 836).
There is no showing by plaintiffs that such a
special or specific contract had been entered into
between them and the defendant airline
companies.
And this special contract for prompt delivery
should call the attention of the carrier to the
circumstances surrounding the case and the
approximate amount of damages to be suffered in
case of delay (See Mendoza vs. PAL, supra).
There was no such contract entered into in the
instant case.
A common carrier undertaking to transport property has
the implicit duty to carry and deliver it within reasonable
time, absent any particular stipulation regarding time of
delivery, and to guard against delay. In case of any
unreasonable delay, the carrier shall be liable for
damages immediately and proximately resulting from
such neglect of duty. As found by the trial court, the delay
in the delivery of the remains of Crispina Saludo,
undeniable and regrettable as it was, cannot be attributed
to the fault, negligence or malice of private respondents,

a conclusion concurred in by respondent court and which
we are not inclined to disturb.


MACAM vs. COURT OF APPEALS GR No. 125524;
August 25, 1999

Facts:
Benito Macam, doing business under name Ben-Mac
Enterprises, shipped on board vessel Nen-Jiang, owned
and operatedby respondent China Ocean Shipping Co.
through local agent Wallem Philippines Shipping Inc.,
3,500 boxes of watermelon covered by Bill of Lading No.
HKG 99012, and 1,611 boxes of fresh mangoes covered
byBill of Lading No. HKG 99013. The shipment was
bound for Hongkongwith PAKISTAN BANK as consignee
and Great Prospect Company of Rowloon (GPC) as
notify party.
Upon arrival in Hongkong, 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 possessionof original bill of lading, refused to pay
petitioner thru SOLIDBANK. Since SOLIDBANK already
pre-paid the value of shipment, it demanded payment
from respondent WALLEM but was refused. MACAM
constrained to return the amount paid by SOLIDBANK
and demanded payment from WALLEM but to no avail.

WALLEM 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. MACAM, however, argued that, assuming there
was such an instruction, the consignee referred to was
PAKISTAN BANK and not GPC.
The RTC ruled for MACAM and ordered value of
shipment. CA reversed RTCs decision.

Issue: Are the respondents liable to the petitioner for
releasing the goods to GPC without the bills of lading or
bank guarantee?
Held: It is a standard maritime practice when immediate
delivery is of the essence, for 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 bill of lading as that usually takes time.
Thus, taking into account that subject shipment consisted
of perishable goods and SOLIDBANK pre-paid the full
amount of 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.

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 the
buyer/importer is essentially a factor to reckon with.

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 was proper.

5. Stipulation Limiting Carriers
Liability

PAL vs. CA

FACTS
Isidro Co, accompanied by his wife and son, arrived at
the Manila International Airport aboard PAL airline's
Flight from San Francisco. Soon after his embarking, Co
proceeded to the baggage retrieval area to claim his
checks in his possession. He found 8 of his luggage, but
despite diligent search, he failed to locate his 9
th
luggage.

Co then immediately notified PAL through its employee,
Willy Guevarra, who was then in charge of the PAL claim
counter at the airport. Willy filled up the printed form
known as a Property Irregularity Report, acknowledging
the luggage to be missing, and signed it.

The incontestable evidence further shows that plaintiff
lost luggage was a Samsonite suitcase worth about
US$200 and containing various personal effects
purchased by plaintiff and his wife during their stay in the
US and similar other items sent by their friends abroad to
be given as presents to relatives in the Philippines worth
around $1,800.

Co on several occasions unrelentingly called PALs office
in order to pursue his complaint about his missing
luggage but no avail was given. Thus, Co wrote a
demand letter to PAL, through its manager of the Central
Baggage Services. PAL replied acknowledging that they
have been unable to locate the baggage despite careful
search and extended their sincere apologies for the
inconvenience. PAL never found the missing luggage or
paid its corresponding value. Co then filed his present
complaint against PAL for damages.

The RTC found PAL liable and ordered said company to
pay damages. The CA affirmed in toto the trial court's
award.

PAL Contends: The Lower Courts were in error in not
applying the limit of liability under the Warsaw
Convention which limits the liability of an air carrier of
loss, delay or damage to checked-in baggage to
US$20.00 based on weight; and

ISSUE

W/N the Lower Courts should apply the limit of liability
under the Warsaw Convention? NO



RULING

In Alitalia vs. IAC, the Warsaw Convention limiting the
carrier's liability was applied because of a simple loss of
baggage without any improper conduct on the part of the
officials or employees of the airline, or other special injury
sustained by the passengers. The petitioner therein did
not declare a higher value for his luggage, much less did
he pay an additional transportation charge.

PAL contends that under the Warsaw Convention, its
liability, if any, cannot exceed US $20.00 based on
weight as private respondent Co did not declare the
contents of his baggage nor pay traditional charges
before the flight.

We find no merit in that contention. In Samar Mining
Company, Inc. vs. Nordeutscher Lloyd, this Court ruled:

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. 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.







Cathay Pacific v. CA

FACTS:
Respondent Alcantara was a first class passenger of a
Cathay Pacific flight to Jakarta to attend a business
conference with the Director General of Trade of
Indonesia. Upon his arrival in Jakarta, he discovered that
his luggage was missing. He was informed that his
luggage was left behind in Hongkong and was offered
$20.00 as "inconvenience money" to buy his immediate
personal needs. He had to seek postponement of his pre-
arranged conference. And when his luggage finally
reached Jakarta after a day, it was required to be picked
up by an official of the Philippine Embassy.

The trial court ordered Cathay to pay. The CA affirmed
but increased the award of damages. SC affirmed but
modified the award of damages.

Cathay argues that the one-day delay was not made in
bad faith because it had a mechanical trouble wherein all
pieces of luggage on board the first aircraft bound for
Jakarta were unloaded and transferred to the second
aircraft which departed an hour and a half later. Cathay
also argues that he was not treated rudely and arrogantly
by its employees. Also, that the CA erred in failing to
apply the Warsaw Convention on the liability of a carrier
to its passengers.

ISSUE: W/N Cathay breached its contract of carriage
with Alcantara and acted in bad faith?

YES. Cathay failed to deliver his luggage at the
designated place and time, it being the obligation of a
common carrier to carry its passengers and their luggage
safely to their destination, which includes the duty not to
delay their transportation. It was not even aware that the
luggage was left behind until its attention was called by
the Hongkong Customs authorities. It also refused to
deliver the luggage at his hotel and required him to pick it
up with an official of the Philippine Embassy
The Cathay employees were also discourteous, rude,
and insulting. He was simply advised to buy anything he
wanted with only $20.00 which was certainly not enough
to purchase comfortable clothing appropriate for an
executive conference. Cathays agents only replied,
"What can we do, the baggage is missing. I cannot do
anything . . . Anyhow, you can buy anything you need,
charged to Cathay Pacific."

Moral and exemplary damages are proper where in
breaching the contract of carriage bad faith or fraud is
shown. In the absence of fraud or bad faith, liability is
limited to the natural and probable consequences of the
breach of obligation which the parties had foreseen or
could have reasonably foreseen.

Further, Cathay contends that the extent of its liability
should be limited absolutely to that set forth in the
Warsaw Convention. The said treaty does not operate as
an exclusive enumeration of the instances for declaring a
carrier liable for breach of contract of carriage or as an
absolute limit of the extent of that liability. The Warsaw
Convention declares the carrier liable for damages in the
enumerated cases and under certain limitations.
However, it must not be construed to preclude the
operation of the Civil Code and other pertinent laws. It
does not regulate, much less exempt, the carrier from
liability for damages for violating the rights of its
passengers under the contract of carriage, especially if
wilfull misconduct on the part of the carrier's employees
is found or established, as in this case.



Trans-Asia Shipping Lines vs. CA
(GR 118126, 4 March 1996)

FACTS:

Respondent Atty. Renato Arroyo, a public attorney,
bought a ticket from herein petitioner for the voyage of
M/V Asia Thailand vessel to Cagayan de Oro City from
Cebu City on November 12, 1991.

At around 5:30 in the evening of November 12, 1991,
respondent boarded the M/V Asia Thailand vessel during
which he noticed that some repairs were being
undertaken on the engine of the vessel. The vessel
departed at around 11:00 in the evening with only one (1)
engine running.

After an hour of slow voyage, the vessel stopped near
Kawit Island and dropped its anchor thereat. After half an
hour of stillness, some passengers demanded that they
should be allowed to return to Cebu City for they were no
longer willing to continue their voyage to Cagayan de Oro
City. The captain acceded to their request and thus the
vessel headed back to Cebu City.

In Cebu City, plaintiff together with the other passengers
who requested to be brought back to Cebu City, were
allowed to disembark. Thereafter, the vessel proceeded
to Cagayan de Oro City. Petitioner, the next day, boarded
the M/V Asia Japan for its voyage to Cagayan de Oro
City, likewise a vessel of defendant.

On account of this failure of defendant to transport him to
the place of destination on November 12, 1991,
respondent Arroyo filed before the trial court an action
for damage arising from bad faith, breach of contract and
from tort, against petitioner. The trial court ruled only for
breach of contract. The CA reversed and set aside said
decision on appeal.


ISSUE:
Whether or not the petitioner Trans-Asia was negligent?

HELD:
Yes. Before commencing the contracted voyage, the
petitioner undertook some repairs on the cylinder head of
one of the vessels engines. But even before it could
finish these repairs, it allowed the vessel to leave the port
of origin on only one functioning engine, instead of two.
Moreover, even the lone functioning engine was not in
perfect condition as sometime after it had run its course,
it conked out. This caused the vessel to stop and remain
adrift at sea, thus in order to prevent the ship from
capsizing, it had to drop anchor. Plainly, the vessel was
unseaworthy even before the voyage began. For a vessel
to be seaworthy, it must be adequately equipped for the
voyage and manned with a sufficient number of
competent officers and crew.[21] The failure of a
common carrier to maintain in seaworthy condition its
vessel involved in a contract of carriage is a clear breach
of is duty prescribed in Article 1755 of the Civil Code.



Sweet Lines, Inc. v. Teves,
83 SCRA 361 (1978)
FACTS: Private respondents Atty. Leovigildo Tandog and
Rogelio Tiro, a contractor by professions, bought tickets
Nos. 0011736 and 011737 for Voyage 90 on December
31, 1971 at the branch office of petitioner, a shipping
company transporting inter-island passengers and
cargoes, at Cagayan de Oro City. Respondents were to
board petitioner's vessel, M/S "Sweet Hope" bound for
Tagbilaran City via the port of Cebu. Upon learning that
the vessel was not proceeding to Bohol, since many
passengers were bound for Surigao, private respondents
per advice, went to the branch office for proper relocation
to M/S "Sweet Town". Because the said vessel was
already filled to capacity, they were forced to agree "to
hide at the cargo section to avoid inspection of the
officers of the Philippine Coastguard." Private
respondents alleged that they were, during the trip,"
"exposed to the scorching heat of the sun and the dust
coming from the ship's cargo of corn grits," and that the
tickets they bought at Cagayan de Oro City for
Tagbilaran were not honored and they were constrained
to pay for other tickets. In view thereof, private
respondents sued petitioner for damages and for breach
of contract of carriage in the alleged sum of P10,000.00
before respondents Court of First Instance of Misamis
Oriental.
Petitioner moved to dismiss the complaint on the ground
of improper venue. This motion was premised on the
condition printed at the back of the tickets, i.e., Condition
No. 14, which reads: It is hereby agreed and understood
that any and all actions arising out of the conditions and
provisions of this ticket, irrespective of where it is issued,
shall be filed in the competent courts in the City of Cebu.
ISSUE: WON the stipulation any action arising out of
the conditions and provisions can be filed only in
competent court of cebu city in the ticket valid and
enforceable.
RULING: There is no question that there was a valid
contract of carriage entered into by petitioner and private
respondents and that the passage tickets, upon which
the latter based their complaint, are the best evidence
thereof. All the essential elements of a valid contract, i.e.,
consent, cause or consideration and object, are present.
To the same effect and import, and, in recognition of the
character of contracts of this kind, the protection of the
disadvantaged is expressly enjoined by the New Civil
Code In all contractual property or other relations,
when one of the parties is at a disadvantage on account
of his moral dependence, ignorance indigence, mental
weakness, tender age and other handicap, the courts
must be vigilant for his
protection.
Considered in the light Of the foregoing norms and in the
context Of circumstances Prevailing in the inter-island
ship. ping industry in the country today, We find and hold
that Condition No. 14 printed at the back of the passage
tickets should be held as void and unenforceable for the
following reasons first, under circumstances obligation in
the inter-island ship. ping industry, it is not just and fair to
bind passengers to the terms of the conditions printed at
the back of the passage tickets, on which Condition No.
14 is Printed in fine letters, and second, Condition No. 14
subverts the public policy on transfer of venue of
proceedings of this nature, since the same will prejudice
rights and interests of innumerable passengers in
different s of the country who, under Condition No. 14,
will have to file suits against petitioner only in the City of
Cebu.
1. It is a matter of public knowledge, of which we can
take judicial notice, that there is a dearth of and acute
shortage in inter- island vessels plying between the
country's several islands, and the facilities they offer
leave much to be desired. Thus, even under ordinary
circumstances, the piers are congested with passengers
and their cargo waiting to be transported. The conditions
are even worse at peak and/or the rainy seasons, when
Passengers literally scramble to whatever
accommodations may be availed of, even though
circuitous routes, and/or at the risk of their safety their
immediate concern, for the moment, being to be able to
board vessels with the hope of reaching their
destinations. The schedules are as often as not if not
more so delayed or altered. This was precisely the
experience of private respondents when they were
relocated to M/S "Sweet Town" from M/S "Sweet Hope"
and then any to the scorching heat of the sun and the
dust coming from the ship's cargo of corn grits, " because
even the latter was filed to capacity.
Under these circumstances, it is hardly just and proper to
expect the passengers to examine their tickets received
from crowded/congested counters, more often than not
during rush hours, for conditions that may be printed
much charge them with having consented to the
conditions, so printed, especially if there are a number of
such conditions m fine print, as in this case.
Again, it should be noted that Condition No. 14 was
prepared solely at the ms of the petitioner; respondents
had no say in its preparation. Neither did the latter have
the opportunity to take into account prior to the purpose
chase of their tickets. For, unlike the small print
provisions of contracts the common example of
contracts of adherence which are entered into by the
insured in his awareness of said conditions, since the
insured is afforded the op to and co the same,
passengers of inter-island v do not have the same
chance, since their alleged adhesion is presumed only
from the fact that they purpose chased the tickets.
It should also be stressed that slapping companies are
franchise holders of certificates of public convenience
and therefore, possess a virtual monopoly over the
business of transporting passengers between the ports
covered by their franchise. This being so, shipping
companies, like petitioner, engaged in inter-island
shipping, have a virtual monopoly of the business of
transporting passengers and may thus dictate their terms
of passage, leaving passengers with no choice but to buy
their tickets and avail of their vessels and facilities.
Finally, judicial notice may be taken of the fact that the
bulk of those who board these inter-island vessel come
from the low-income groups and are less literate, and
who have little or no choice but to avail of petitioner's
vessels.
2. Condition No. 14 is subversive of public policy on
transfers of venue of actions. For, although venue may
be changed or transferred from one province to another
by agreement of the parties in writing t to Rule 4, Section
3, of the Rules of Court, such an agreement will not be
held valid where it practically negates the action of the
claimants, such as the private respondents herein. The
philosophy underlying the provisions on transfer of venue
of actions is the convenience of the plaintiffs as well as
his witnesses and to promote the ends of justice.
Considering the expense and trouble a passenger
residing outside of Cebu City would incur to prosecute a
claim in the City of Cebu, he would most probably decide
not to file the action at all. The condition will thus defeat,
instead of enhance, the ends of justice. Upon the other
hand, petitioner has branches or offices in the respective
ports of call of its vessels and can afford to litigate in any
of these places. Hence, the filing of the suit in the CFI of
Misamis Oriental, as was done in the instant case, will
not cause inconvenience to, much less prejudice,
petitioner.
Public policy is ". . . that principle of the law which holds
that no subject or citizen can lawfully do that which has a
tendency to be injurious to the public or against the public
good ... Under this principle" ... freedom of contract or
private dealing is restricted by law for the good of the
public. Clearly, Condition No. 14, if enforced, will be
subversive of the public good or interest, since it will
frustrate in meritorious cases, actions of passenger cants
outside of Cebu City, thus placing petitioner company at
a decided advantage over said persons, who may have
perfectly legitimate claims against it. The said condition
should, therefore, be declared void and unenforceable,
as contrary to public policy to make the courts
accessible to all who may have need of their services.
WHEREFORE, the petition for prohibition is DISMISS.
ED. The restraining order issued on November 20, 1973,
is hereby LIFTED and SET ASIDE. Costs against
petitioner.

6. AMOUNT OF LIABILITY

Ysmael v. Barreto

Facts:
On 25 October 1922, Juan Ysmael & Co. (JY&Co.)
supposedly delivered 164 cases of its merchandise to the
steamer Andres, which is owned by Gabino Barretto &
Co. (GB&Co.), to be shipped to Surigao. GB&Co.
claims that they only received 160 cases of JY&Co.s
merchandise. They also alleged that, under provision 12
of the bill of lading, they are not liable in excess of three
hundred pesos for any package of silk unless the value
and contents of such packages are correctly declared in
the bill of lading at the time of the shipment.

JY&Co. instituted suit to recover P9,940.95, the alleged
value of the missing four cases.

Issues: Whether the provision in the bill of lading limiting
the liability of the carrier (GB&Co.) not to exceed three
hundred pesos is valid?

Held: No. A common carrier cannot lawfully stipulate for
exemption from liability, unless such exemption is just
and reasonable and the contract is freely and fairly made.
The evidence shows that 164 cases were shipped and
that the value of each case was very near P2,500. In this
case, the limit of GB&Co.s liability for each case of silk
for loss or damage from any cause or for any reason
would put it in the power of GB&Co. to have taken the
whole cargo of 164 cases of silk at a valuation of P300
for each case, or less than one-eighth of its actual value.

If this is sustained, no silk would ever be shipped from
one island to another in the Philippines. Such a limitation
of value is unconscionable and void as against public
policy. As the contract of the carrier is to carry and deliver
the goods, and a contract that undertakes to relieve the
carrier from any liability or loss or damage accruing or
arising from its own negligence would in legal effect
nullify the contract. The natural effect of a limitation of
liability against negligence is to induce want of care on
the part of the carrier in the performance of its duty. By
the weight of modern authority, the carrier cannot limit its
liability for injury to or loss of goods shipped where such
injury or loss was caused by its own negligence.



Shewaram v. Pal

FACTS:
Parmanand Shewaram was a paying passenger on a
PAL flight from Zamboanga City bound for Manila. PAL is
a common carrier engaged in air line transportation in the
Philippines, offering its services to the public to carry and
transport passengers and cargoes from and to different
points in the Philippines. Shawaram checked in three (3)
pieces of baggages, one of which is a suitcase. When
Shewaram arrived in Manila his suitcase did not arrive
with his flight because it was mistakenly sent to Iligan.
When the suitcase finally arrived in Manila the Transistor
Radio 7 and the Rollflex Camera were missing.

Shewaram instituted an action to recover damages
suffered by him due to PALs failure to observe
extraordinary vigilance and carriage of his luggage.

The trial court undoubtebly found that the suitcase was
tampered, and the transistor radio and the camera
contained therein were lost, and that the loss of those
articles was due to the negligence of the employees of
PAL. The evidence shows that the transistor radio cost
P197.00 and the camera cost P176.00, so the total value
of the two articles was P373.00.

ISSUE:

Whether the liability of PAL should be to the amount
stated in the conditions of carriage printed at the back of
the plane ticket stub.


HELD: NO. PAL should pay the value of the lost items

Article 1750 of the New Civil Code provides that the
pecuniary liability of a common carrier may, by contract,
be limited to a fixed amount. It is required, however, that
the contract must be "reasonable and just under the
circumstances and has been fairly and freely agreed
upon."

In this case before us the SC believed that the
requirements of said article have not been met. It cannot
be said that the Shewaram had actually entered into a
contract with the appellant, embodying the conditions as
printed at the back of the ticket stub that was issued by
the appellant to the appellee. The fact that those
conditions are printed at the back of the ticket stub in
letters so small that they are hard to read would not
warrant the presumption that the appellee was aware of
those conditions such that he had "fairly and freely
agreed" to those conditions. The trial court has
categorically stated in its decision that the "PAL admits
that passengers do not sign the ticket, much less did
Shewaram sign his ticket when he made the flight.
Therefore, Shewaram is not, and can not be, bound by
the conditions of carriage found at the back of the ticket
stub issued to him when he made the flight.

The liability of the appellant in the present case should be
governed by the provisions of Articles 1734 and 1735 of
the New Civil Code, which provides:

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, 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.

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.

It having been clearly found by the trial court that the
transistor radio and the camera of the appellee were lost
as a result of the negligence of the appellant as a
common carrier, the liability of the appellant is clear it
must pay the appellee the value of those two articles.

Augusto Ong Yiu v. Court of Appeals
91 SCRA 223

Facts:
Petitioner was paying passenger of respondent
Philippine Airlines on board flight No. 946-R from Mactan
Cebu bound for Butuan City. He was scheduled to
attend the trial in the Court of First instance , Br. II
thereat. As a passenger, he checked in one piece of
luggage, a bull maleta. The plane left Mactan Airport,
Cebu City at about 1pm and arrived at Bacasi Airport,
Butuan City at past 2pm of the same day. Upon arrival,
petitioner claimed his luggage but it could not be
found. According to petitioner, it was only after reacting
indignantly to the loss that the matter was attended by
the porter clerk which however, the later denied. When
the luggage was delivered to the petitioner with the
information that the lock was open, he found out that the
folder containing documents and transcripts were
missing, aside from the two gift items for his parents-in-
law. Petitioner refused to accept the luggage.



Issue:
Whether or not PAL acted with gross negligence
so as to entitle petitioner to an award of moral and
exemplary damages.

Held:
PAL did not act in bad faith. It was the duty of
PAL to look for petitioners luggage which had been
miscarried. PAL exerted diligent efforts to locate the
plaintiffs baggage. Petitioner is neither entitled to
exemplary damages. Exemplary damages can only be
granted if the defendant asked in a wanton, fraudulent,
reckless, oppressive or malevolent manner, which loss,
in accordance with the stipulation written at the back of
the ticket is limited to P100 per luggage plaintiff not
having declared a greater value and not having called the
attention of the defendant on its value ad paid the tariff
thereon. Wherefore, for lack of merit, the instant petition
is hereby denied, and judgment sought to be reviewed is
hereby affirmed.

Sea-Land Service, Inc. v. Intermediate
Appellate Court
153 SCRA 552

Facts:
Sea-Land, a foreign shipping and forwarding
company licensed to do business in the Philippines,
received from Sea-borne Trading Company in California,
a shipment consigned to Sen Hiap Hing, the business
name used by Cue. The shipper not having declared the
value of the shipment , no value was indicated in the bill
of lading. The shipment was discharged in Manila, and
while awaiting transshipment to Cebu, the cargo was
stolen and never recovered.
The trial court sentenced Sea-Land to pay Cue
P186,048 representing the Philippine currency value of
the lost cargo, P55, 814 for unrealized profit and P25,000
for attorneys fees. CA affirmed the trial courts decision.

Issue:
Whether or not Sea-Land is liable to pay Cue.

Held:
There is no question of the right of a consignee in
a bill of lading to recover from the carrier or shipper for
loss of, or damage to, goods being transported under
said bill, although that document may have been drawn
up only by the consignor and the carrier without the
intervention of the consignee.
Since the liability of a common carrier for loss of or
damage to goods transported by it under a contract of
carriage os governed by the laws of the country of
destination and the goods in question were shipped from
the United States to the Philippines, the liability of Sea-
Land has Cue is governed primarily by the Civil Code,
and as ordained by the said Code, supplementary, in all
matters not cluttered thereby, by the Code of Commerce
and special laws. One of these supplementary special
laws is the Carriage of goods by Sea Act (COGSA),
made applicable to all contracts for the carriage by sea to
and from the Philippines Ports in Foreign Trade by
Comm. Act. 65.
Even if Section 4(5) of COGSA did not list the
validity and binding effect of the liability limitation clause
in the bill of lading here are fully substantial on the basis
alone of Article 1749 and 1750 of the Civil Code. The
justices of such stipulation is implicit in its giving the
owner or shipper the option of avoiding accrual of liability
limitation by the simple expedient of declaring the value
of the shipment in the bill of lading.
The stipulation in the bill of lading limiting the
liability of Sea-Land for loss or damages to the shipment
covered by said rule to US$500 per package unless the
shipper declares the value of the shipment and pays
additional charges is valid and binding on Cue.

Citadel Lines v. CA

Facts:
o Manila Wine Merchants (consignee) is the
importer of Dunhill Cigarettes from England.
Petitioner Citadel Lines (carrier) is the general
agent of the vessel Cardigan Bay/Strait
Enterprise.
o On or about March 17, 1979, the vessel "Cardigan
Bay/Strait Enterprise" loaded on board at
Southampton, England, for carriage to Manila, 180
Filbrite cartons of mixed British manufactured
cigarettes called "Dunhill International Filter" and
"Dunhill International Menthol. The shipment
arrived at the Port of Manila Pier 13, on April 18,
1979
o Due to lack of space at the Special Cargo Coral,
the aforesaid cigarettes were placed in two
containers with two pallets in the original
container, and four pallets in the other container,
with both containers duly padlocked and sealed by
the representative of the CARRIER.
o In the morning of May 1, 1979, the CARRIER'S
headchecker discovered that one of the container
vans had a different padlock and the seal was
tampered with. The matter was reported to Jose
G. Sibucao, Pier Superintendent, Pier 13, and
upon verification, it was found that 90 cases of
imported British manufactured cigarettes were
missing.
o Per investigation conducted by the ARRASTRE, it
was revealed that the cargo in question was not
formally turned over to it by the CARRIER but was
kept the inside container van which was padlocked
and sealed by the representatives of the
CARRIER without any participation of the
ARRASTRE.
o When the CONSIGNEE learned that 90 cases
were missing, it filed a formal claim with the
CARRIER, demanding the payment of
P315,000.00 representing the market value of the
missing cargoes.
o The CARRIER, in its reply letter. admitted the loss
but alleged that the same occurred at Pier 13, an
area absolutely under the control of the
ARRASTRE. In view thereof, the CONSIGNEE
filed a formal claim with the ARRASTRE,
demanding payment of the value of the goods but
said claim was denied.
o After trial, the lower court rendered a decision
exonerating the ARRASTRE of any liability on the
ground that the subject container van was not
formally turned over to its custody.


ISSUES:

1. Whether the loss occurred while the cargo in question
was in the custody of E. Razon, Inc. or of Citadel Lines,
Inc; and
2. Whether the stipulation limiting the liability of the
carrier contained in the bill of lading is binding on the
consignee.

HELD:
1. The first issue is factual in nature. On the basis
of the evidence presented, the subject cargo
which was placed in a container van,
padlocked and sealed by the representative of
the CARRIER was still in its possession and
control when the loss occurred, there having
been no formal turnover of the cargo to the
ARRASTRE.

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. 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 extra
ordinary diligence as required in Article 1733 of
the Civil Code. The duty of the consignee is to
prove merely that the goods were lost.
Thereafter, the burden is shifted to the carrier
to prove that it has exercised the extraordinary
diligence required by law. And, its
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 them.

Considering, therefore, that the subject
shipment was lost while it was still in the
custody of the CARRIER, and considering
further that it failed to prove that the loss was
occasioned by an excepted cause, the
inescapable conclusion is that the CARRIER
was negligent and should be held liable.

2. The CONSIGNEE itself admits in its
memorandum that the value of the goods
shipped does not appear in the bills of
lading.
16
Hence, the stipulation on the carrier's
limited liability applies. There is no question
that the stipulation is just and reasonable under
the circumstances and have been fairly and
freely agreed upon.
The bill of lading shows that 120 cartons
weigh 2,978 kilos or 24.82 kilos per carton.
Since 90 cartons were lost and the weight of
said cartons is 2,233.80 kilos, at $2.00 per kilo
the CARRIER's liability amounts to only
US$4,467.60.

British Airways v. Court of Appeals
G.R. No. 121824

Facts:
On April 6, 1989, Mahtani decided to visit his
relative in Bombay, India. In anticipation of his visit, he
obtained the services of a certain Mr. Gemar to prepare
his travel plan. Since british Airways had no ticket flights
from Manila to Bombay, Maktani had to take a
connecting flight to Bombay on board British
Airways. Prior to his departure, Maktani checked in the
PAL counter in Manila his two pieces of luggage
containing his clothing and personal effects, confident
that upon reaching Hong Kong, the same would be
transferred to the BA flight bound for Bombay,
Unfortunately, when Maktani arrived in Bombay, he
discovered that his luggage was missing and that upon
inquiry from the BA representatives, he was told that the
same might have been diverted to London. After plaintiff
waiting for his luggage for one week, BA finally advised
him to file a claim accomplishing the property.

Issue:
Whether or not defendant BA is liable for
compulsory damages and attorneys fee, as well
as the dismissal of its third party complaint against
PAL

Held:
The contract of transportation was exclusively
between Maktani and BA. The latter merely endorsing
the Manila to Hong Kong log of the formers journey to
PAL, as its subcontractor or agent. Conditions of
contacts was one of continuous air transportation from
Manila to Bombay. The Court of Appeals should have
been cognizant of the well-settled rule that an agent is
also responsible for any negligence in the performance of
its function and is liable for damages which the principal
may suffer by reason of its negligent act. Since the
instant petition was based on breach of contract of
carriage, Maktani can only sue BA and not PAL, since
the latter was not a party in the contract.



Loadstar Shipping Co. Inc. v. Court of
Appelas
G.R. No. 131621

Facts:
On November 19, 1984 herein petitioner shipping
company carried, a shipment of (3) three bulk items on
board its M/V Cherokee, which amounted to
P6,067,178.00, the same being insured by the Manila
Insurance Co. (MIC). The vessel in turn was insured by
Prudential Guarantee and Assurance, Inc. of P4 million.
Unfortunately the ship sank in the are of Limasawa.
MIC settled the insurance with the consignee and
asked for the subrogation receipt, then MIC filed a claim
against Loadstar. PGAI alleging the sinking was due to
the fault and negligence of Loadstar. In their defense,
Loadstar set up the argument of force majuere. PGAI
was dropped from the case afer proving MIC had no
locus standi against them. Inter alia all other defenses,
Loadstar argues that it cannot be considered a common
carrier because it was issued a certificate of public
convenience and that it carried a particular type of cargo
for a particular shipper.

Issues:
1. Whether or not Loadstars Cherokee is a common
carrier;
2. Wheter or not, considering the type of carriage the
M/V is, the required amount of diligence was
observed;

Held:
1. The court rules the affirmative that the M/V
Cherokee is a common carrier. It is not necessary
that the carrier be issued a certificate of public
convenience and their public character is not
altered by the fact that the carriage of the goods in
question was periodic, occasional, episodic, or
unscheduled. Additionally, the second argument of
Loadstar must fail; that the M/V Cherokee was
carrying a particular type of cargo for one shipper
which appears to be purely coincidental is not
reason enough to convert a vessel that is a
common carrier to a private one, especially where,
as in the case, it was shown that the vessel was
also carrying passengers.
2. The court rules the negative. Loadstar should
have exercised extraordinary diligence since it is a
common carrier; and the fact that it still allowed
the voyage despite the knowledge of a typhoon
present counters their exercise of extra ordinary
diligence required.




7. PASSENGERS BAGGAGES

Quisumbing Sr. vs. Court of Appeals
189 SCRA 605

Facts:
Norberto Quisumbing and Gunther Loeffler were
passengers of PALs Fokker Friendship plane flying
from Macatan City bound to Manila. A senior NBI agent,
Florencio O. Villarin, a senior NBI agent and also one of
the passengers of the said plane, saw a certain Zaldy
boarded on the same flight. Zaldy was a suspect for the
killing of a Judge Valdez. Villarin sent a note to the
Captain of the plane requesting that they contact the NBI
director to send agents on their point of destination
because of the presence of Zaldy. However, Captain
Luis Bonnevie came out of the cockpit and informed
Villarin the he could not send the message because it
would be heard by all ground aircraft stations. Villarin
advised the Captain of the danger having Zaldy and his
companions onboard. Consequently, gunshots ensued
between Zaldys group and Villarin. Zaldy announced a
hold-up and obtained the belongings of the passengers.
Zaldy and his companions successfully escaped upon
landing in Manila. Petitioners now demand from PAL
indemnity for their lost belongings. The petitioners
contended that PAL is liable for breach of contract of
carriage, for not transporting them and their belongings at
the point of destination without loss or damage. As a
defense, PAL interposed that the incident was force
majeure.

Issue:
Whether PAL can be held liable for the loss of
petitioners belongings due to the hi-jacking?

Held:
The Supreme Court held that PAL cannot be held
liable for the loss of property. Where the defendants has
faithfully complied with the requirements of government
agencies and adhered to the established procedures and
precautions of the airline industry and particular time, its
failure to take certain steps that a passenger in hindsight
believes should have been done is not the negligence or
misconduct which mingles with force majeure as an
active and cooperative cause. It was proven that PAL
cannot be faulted with negligence. Hence, there was no
breach of contract of carriage because there was no
clear evidence that PAL acted in bad faith in their
obligation to transport the passengers and their
properties at the point of destination. The mandatory use
of the most sophisticated electronic devices may have
minimized hijackings but all these have proved ineffective
against truly determined highjackers. Such incident which
occurred was indeed force majeure.



PAN AMERICAN WORLD AIRWAYS V.
RAPADAS

FACTS:
Private respondent Jose Rapadas was standing in line to
board the flight at the Guam airport when he was ordered
by Pan Ams employee to check-in his Samsonite attach
case. Rapadas protested. He stepped out of the line only
to get back again at the end of it to try if he can get
through without having to register his attach case.
However, the same man in charge of handcarry control
did not fail to notice him and ordered him again to
register his baggage.

For fear that he would miss the flight if he insisted, he
acceded to checking it in. He then gave his attach case
to his brother who happened to be around but without
declaring its contents or the value of its contents.
Rapadas was given a baggage claim tag.

Upon arriving in Manila, Rapadas discovered that his
attach case was missing. Pan Am exerted efforts to
locate the missing luggage, but to no avail. Pan Am
offered Mr. Rapadas the sum of one hundred sixty dollars
($160.00) representing the petitioners alleged limit of
liability for loss or damage to a passengers personal
property under the contract of carriage between Rapadas
and Pan Am.

Rapadas refused the settlement. He filed an action for
damages. The RTC decided in favor of Mr. Rapadas and
rejected Pan Ams contention limiting its liability to $160.
The Court of Appeals affirmed.

ISSUE:
Whether a passenger is bound by the terms of a
passenger ticket declaring that the limitations of liability
set forth in the Warsaw Convention shall apply in case of
loss, damage or destruction to a registered luggage of a
passenger?

HELD: Yes.The Notice and paragraph 2 of the
Conditions of Contract (which provides that carriage is
subject to rules and limitations established by the
Warsaw Convention) should be sufficient notice showing
the applicability of the Warsaw limitation. It is not required
under the Warsaw Convention that there be a detailed
notice of baggage liability limitation in the passenger
ticket.

Contracts of adhesion, such as the one involved here,
are not entirely prohibited, unless there are facts and
circumstances showing its one-sided nature. This does
not obtain here.

Passengers are expected to be vigilant insofar as his
luggage is concerned. If the passenger fails to adduce
evidence to overcome the stipulations, he cannot avoid
the application of the liability limitations.

Had Mr. Rapadas not wavered in his decision to register
his luggage, he could have had enough time to disclose
the true worth of the articles in it and pay the extra
charges or remove them from the checked-in-luggage.

Unless the contents are declared, it will always be the
word of a passenger against that of the airline. If the loss
of life or property is caused by the gross negligence or
arbitrary acts of the airline or the contents of the lost
luggage are proved by satisfactory evidence other than
the self-serving declarations of one party, the Court will
not hesitate to disregard the fine print in a contract of
adhesion. Otherwise, the contract would have to be
enforced, as it is the only reasonable basis to arrive at a
just award.