Transportation Laws (Midterms) 2nd batch

Case Digests
1. Everett Steamship Corporation vs. CA G.R. No.122494, October 8, 1998PARTIES:
Everett Steamship Corporation, petitioner vs. Court of Appeals and Hernandez Trading Co. Inc., respondents
BRIEF STATEMENT OF THE CASE:
Validity of the Bill of lading in a contract of carriage
BRIEF STATEMENT OF THE FACTS:
Private respondent imported 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 were
shipped from Nagoya, Japan to Manila on board "ADELFAEVERETTE," a vessel owned by petitioner's principal, Everett Orient Lines.
Upon arrival at the port of Manila, it was discovered that the crate marked MARCO C/No. 14 was missing. Private respondent claim
upon petitioner for the value of the lost cargo amounting to One Million Five Hundred Fifty Two Thousand Five Hundred (Y1,
552,500.00) Yen, the amount shown in an Invoice No. MTM-941, dated November 14, 1991. However, 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. Private respondent rejected the offer and thereafter instituted a suit for collection. The trial court
rendered a decision in favour of the private respondents and this was affirmed by the Court of Appeals. Thus, this instant petition.
ISSUES:
1. Is the petitioner liable for the actual value and not the maximum value recoverable under the bill of lading?
2. Is private respondent, as consignee, who is not a signatory to the bill of lading bound by the stipulations thereof?
ARGUMENTS:
1. The Petitioner is only liable for the maximum value recoverable under the bill of lading.
Clause 18 of the covering bill of lading:
18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the shipper's net invoice cost
plus freight and insurance premiums, if paid, and in no event shall the carrier be liable for any loss of possible profits or any
consequential loss. The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in an
amount exceeding One Hundred thousand Yen in Japanese Currency (Y100,000.00) or its equivalent in any other currency
per package or customary freight unit (whichever is least) unless the value of the goods higher than this amount is declared
in writing by the shipper before receipt of the goods by the carrier and inserted in the Bill of Lading and extra freight is paid
as required . (Emphasis supplied)
Pertinent provisions that is applicable as to this case:
Art. 1749. A stipulation that the common carrier's liability is limited to the value of the goods appearing in the bill of lading, unless
the shipper or owner declares a greater value, is binding.
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 the common carrier's liability for loss must be
"reasonable and just under the circumstances, 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 liability would only be up to One Hundred Thousand (Y100,000.00) Yen.
However, the shipper, Maruman Trading, had the option to declare a higher valuation if the value of its cargo was higher than the
limited liability of the carrier. Considering thatthe shipper did not declare a higher valuation, it had itself to blame for not complying
with the stipulations.
2. Private Respondents are still bound by the stipulations of the bill of lading
In Sea-Land Service, Inc. vs. Intermediate Appellate Court (supra), it was held that even if the consignee was not a signatory to the
contract of carriage between the shipper and the carrier, the consignee can still be bound by the contract.
RULING:
The decision of the Court of Appeals is hereby REVERSED and SET ASIDE. In fine, the liability of petitioner for the loss of the cargo is
limited to One Hundred Thousand (Y100,000.00) Yen, pursuant to Clause 18 of the bill of lading..
2. AGUSTINO B. ONG YIU, petitioner,
vs.
HONORABLE COURT OF APPEALS and PHILIPPINE AIR LINES, INC., respondents.
G.R. No. L-40597 June 29, 1979
FACTS: Ong Yiu was a businessman flying on a PAL flight from Cebu to Butuan City. He checked-in a blue maleta at the PAL Cebu
counter and was issued the corresponding claim stub. Upon arrival at Butuan Airport, he waited for his luggage but found out that it
was over-delivered to Manila. Upon his demands, the Butuan PAL representative relayed a message to the Cebu office which
confirmed the situation and notified Butuan PAL that the luggage would arrive on the first flight in from Manila. The message was
however, not received since it was relayed after office hours and the employees had gone home. Ong Yiu personally telegrammed
Cebu PAL at around 10PM, obviously with no one to receive it on the Cebu office. The next morning Ong Yiu went to the airport and
demanded from PAL his luggage, however, he did not wait for the arrival of the flight and left immediately. When the flight arrived the
baggage as inspected and opened by airport personnel and the taxi driver who drove for Ong Yiu and insisted on delivering it to him.
ISSUE: Ong Yiu in claiming for damages bases his contention PALs breach of contract of transportation, bad faith, and negligence. He
also contests the validity of the P100.00 limited liability of the airlines with the regard to lost luggages.

HELD: The Supreme Court ruled that PAL employees were not in bad faith. In the first place, the message from Cebu was received by
Butuan after office hours. Secondly, Ong Yius message to PAL was sent and received past 10PM, where obviously no employee will be
able to receive it. There is no bad faith when the airline company exerted due diligence with its duty in locating a
passengers lost luggage. With regard the limited liability the SC ruled that the plane ticket was a valid contract of adhesion,
as such Ong Yiu was bound by it regardless of the latters lack of knowledge or assent to the regulation. Considering
that the Ong Yiu had failed to declare a higher value for his baggage, he cannot be permitted a recovery in excess of
the P100.00. Besides, passengers are advised not to place valuable items inside their baggage but to avail of our Vcargo service.
ISSUE: Whether or not PAL acted in bad faith
HELD: No. Bad faith means a breach of a known duty though some motive of interest or ill will. It was the duty of PAL to look for
petitioners luggage which had been miscarried. PAL exerted due diligence in complying with such duty. In the absence of a wrongful
act or omission or fraud or bad faith, petitioner is not entitled to moral damages. Petitioner is neither entitled to exemplary damages.
It can be granted if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner, which has not been
proven in this case.
Petitioner further contends that respondent court committed grave error when it limited PALs carriage liability to the amount of P100
as stipulated at the back of the ticket; and that there is nothing in the evidence to show that he actually entered into a contract with
PAL limiting the latters liability for the loss or delay of the baggage of its passengers.
While it may be true that petitioner had not signed the plane ticket, he is nevertheless bound by the provisions thereof. Such
provisions have been held to be part of the contract of carriage and valid and binding upon the passenger regardless of the latters
lack of knowledge or assent to the regulation. It is what is known as contract of adhesion wherein one party imposes a readymade
form of contract on the other. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his
consent.
3. PHILIPPINE CHARTER INSURANCE CORPORATION, petitioner,
vs.
NEPTUNE ORIENT LINES/OVERSEAS AGENCY SERVICES, INC., respondent.
G.R. No. 145044
June 12, 2008
FACTS
L.T. Garments Manufacturing Corp. Ltd. shipped from Hong Kong 3 sets of warp yarn on returnable beams aboard respondent Neptune
Orient Lines' vessel, M/V Baltimar Orion, for transport and delivery to Fukuyama Manufacturing Corporation (Fukuyama) in Manila.
The said cargoes were loaded in a container under a bill of lading. Fukuyama insured the shipment against all risks with petitioner
Philippine Charter Insurance Corporation (PCIC) under Marine Cargo Policy. During the course of the voyage, the container with the
cargoes fell overboard and was lost.
Thus, Fukuyama wrote a letter to respondent Overseas Agency Services, Inc, the agent of Neptune Orient, and claimed for the value
of the lost cargoes. However, Overseas Agency ignored the claim. Hence, Fukuyama sought payment from its insurer, PCIC, for the
insured value which claim was fully satisfied by PCIC. PCIC then demanded from respondents reimbursement of the entire amount it
paid to Fukuyama, but respondents refused payment. Hence, PCIC filed a complaint for damages against respondents.
Respondents denied liability and alleged that during the voyage, the vessel encountered strong winds and heavy seas making the
vessel pitch and roll, which caused the subject container with the cargoes to fall overboard. They claim that the occurrence was a
fortuitous event which exempted them from any liability, and that their liability, if any, should not exceed US$500 or the limit of
liability in the bill of lading, whichever is lower.
The RTC held that respondents, as common carrier, failed to prove that they observed the required extraordinary diligence to prevent
loss of the subject cargoes and ordered them to pay the plaintiff the amount claimed. The CA on the other hand found respondents
liability to be only US$1,500 or US$500 per package under the limited liability provision of the Carriage of Goods by Sea Act (COGSA).
Hence, the instant appeal.
Petitioners Contention: The vessel committed a "quasi deviation" which is a breach of the contract of carriage when it intentionally
threw overboard the container for its own benefit. Such breach of contract resulted in the abrogation of respondents' rights under the
contract and COGSA including the US$500 per package limitation.
ISSUE
W/N the liability of the respondents is only US$1,500 or US$500 per package as provided in the COGSA - Yes
RULING
The facts as found by the RTC do not support the new allegation regarding the intentional throwing overboard of the subject cargoes
and quasi deviation. The Court notes that the petitioner's Complaint and the survey report provide that the shipment were lost/fell
overboard. The records show that the subject cargoes fell overboard the ship and petitioner should not vary the facts of the case on
appeal.
Since the subject cargoes were lost while being transported by respondent common carrier from Hong Kong to the RP - Philippine law
applies pursuant to the Civil Code. The rights and obligations of respondent common carrier are thus governed by the provisions of
the Civil Code, and the COGSA, which is a special law applying suppletorily.
The pertinent provisions of the Civil Code applicable to this case are as follows:
Art. 1749. A stipulation that the common carrier's liability is limited to the value of the goods appearing in the bill of lading, unless the
shipper or owner declares a greater value, is binding.

Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the
goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon.
In addition, Sec. 4, paragraph (5) of the COGSA, which is applicable to all contracts for the carriage of goods by sea to and from
Philippine ports in foreign trade, provides: Neither the carrier nor the ship shall in any event be or become liable for any loss or
damage to or in connection with the transportation of goods in an amount exceeding $500 per package lawful money of the United
States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency,
unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. This
declaration, if embodied in the bill of lading shall be prima facie evidence, but shall be conclusive on the carrier.
In this case, Bill of Lading stipulates: Neither the Carrier nor the vessel shall in any event become liable for any loss of or damage to
or in connection with the transportation of Goods in an amount exceeding US$500 (which is the package or shipping unit limitation
under U.S. COGSA) unless the nature and value of such Goods have been declared by the Shipper before shipment and inserted in
this Bill of Lading and the Shipper has paid additional charges on such declared value. . . .
The bill of lading submitted in evidence by petitioner did not show that the shipper in Hong Kong declared the actual value of the
goods as insured by Fukuyama before shipment and that the said value was inserted in the Bill of Lading, and so no additional
charges were paid. Hence, the stipulation in the bill of lading that the carrier's liability shall not exceed US$500 per package applies.
A stipulation in the bill of lading limiting the common carrier's liability for loss or destruction of a cargo to a certain sum, unless the
shipper or owner declares a greater value, is sanctioned and allowed by law. It seems clear that even if said section 4 (5) of the
Carriage of Goods by Sea Act did not exist, the validity and binding effect of the liability limitation clause in the bill of lading here are
nevertheless fully sustainable on the basis alone of the cited Civil Code Provisions.
4. VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY INC., petitioner,
vs.
COURT OF APPEALS AND SEVEN BROTHERS SHIPPING CORPORATION, respondents.
G.R. No. 102316 June 30, 1997
FACTS: On January 16, 1984 plaintiff Valenzuela Hardwood and Industrial Supply Inc. entered into an agreement with the defendant
Seven Brothers whereby the latter undertook to load on board its vessel the formers lavan round logs. On January 20, 1984 plaintiff
insured the loss and/or damages with defendant South Sea Surety and insured company for 2 million pesos on January 24, 1984,
plaintiff gave the check in payment of the premium on the insurance policy. In the meantime, the said vessel sank on January 25,
1984 resulting in the loss of the plaintiffs insured logs. Plaintiff demanded payment of the proceeds and lost claim for the value of the
lost logs to insurance company and Seven Brothers Shipping Corporation respectively to which both of them denied liability.
After due hearing, the RTC rendered judgment in favor of plaintiff. Both defendants appealed. The CA affirmed in part the RTC
judgment by sustaining liability of South Sea Surety but modified it by holding that the Seven Brothers was not liable for the lost of
the cargo. The CA held that the stipulation in the character party that the ship owner would be exempted from liability in case of loss
or even for negligence of its agent is valid.
ISSUE: Whether or not patrimonial rights may be waived.
HELD: As a general rule, patrimonial rights may be waived. In the case at bar, the waiver of petitioner per contractual stipulation and
that it is solely responsible for any damage to the cargo, thereby exempting the private carrier from any responsibility for loss or
damage thereto. The Supreme Court cited Article 6 of the Civil Code which states that rights may be waived unless the waiver is
contrary to law, public order, public policy, morals or good customs or prejudicial to a person of a right recognized by law.
5. BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES TRANSPORT SERVICES, INC., petitioners,
vs.
PHILIPPINE FIRST INSURANCE CO., INC., respondents. G.R. No. 14313 June 5, 2002
DOCTRINE: Proof of the delivery of goods in good order to a common carrier and of their arrival in bad order at their destination
constitutes prima facie fault or negligence on the part of the carrier. If no adequate explanation is given as to how the loss, the
destruction or the deterioration of the goods happened, the carrier shall be held liable therefore.
FACTS: Shipper: CMC Trading A.G.
Carrier: BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V.
Subject: coils of various Prime Cold Rolled Steel sheets
Consignee: Philippine Steel Trading Corporation
Insurer: PHILIPPINE FIRST INSURANCE CO., INC.
Goods found to be in bad order. Belgian refused to pay. Thus, Phil First did. 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.
RTC dismissed. CA ruled that Belgian liable. Failed to overcome presumption of negligence. Belgian inadequately proven petitioners'
claim that the loss or the deterioration of the goods was due to pre-shipment damage.
ISSUES: Whether petitioners have overcome the presumption of negligence of a common carrier
RULING: No. A review of the records and more so by the evidence shows

First , as stated in the Bill of Lading, petitioners received the subject shipment in good order and condition in Hamburg,
Germany

Second , prior to the unloading of the cargo, an Inspection Report prepared and signed by representatives of both parties
showed the steel bands broken, the metal envelopes rust-stained and heavily buckled, and the contents thereof exposed and
rusty.
Third , Bad Order Tally Sheet No. 154979 issued by Jardine Davies Transport Services, Inc., stated that the four coils were in
bad order and condition. Normally, a request for a bad order survey is made in case there is an apparent or a presumed loss
or damage.
Fourth, the Certificate of Analysis stated that, based on the sample submitted and tested, the steel sheets found in bad
order were wet with fresh water.
Fifth, petitioners -- in a letter addressed to the Philippine Steel Coating Corporation and dated October 12, 1990 -- admitted
that they were aware of the condition of the four coils found in bad order and condition.

Further, petitioners failed to prove that they observed the extraordinary diligence and precaution which the law requires a common
carrier to know and to follow to avoid damage to or destruction of the goods entrusted to it for safe carriage and delivery.
True, the words "metal envelopes rust stained and slightly dented" were noted on the Bill of Lading; however, there is no showing that
petitioners exercised due diligence to forestall or lessen the loss. The master of the vessel should have known at the outset that
metal envelopes in the said state would eventually deteriorate when not properly stored while in transit. The master of the vessel and
his crew should have undertaken precautionary measures to avoid possible deterioration of the cargo. But none of these measures
was taken.
In their attempt to escape liability, petitioners further contend that they are exempted from liability under Article 1734(4) of the Civil
Code. They cite the notation "metal envelopes rust stained and slightly dented" printed on the Bill of Lading as evidence that the
character of the goods or defect in the packing or the containers was the proximate cause of the damage.
From the evidence on record, it cannot be reasonably concluded that the damage to the four coils was due to the condition noted on
the Bill of Lading. Theafore cited exception refers to cases when goods are lost or damaged while in transit as a result of the natural
decay of perishable goods or the fermentation or evaporation of substances liable therefore, the necessary and natural wear of goods
in transport, defects in packages in which they are shipped, or the natural propensities of animals. None of these is present in the
instant case.
Further, even if the fact of improper packing was known to the carrier or its crew or was apparent upon ordinary observation, it is not
relieved of liability for loss or injury resulting therefrom, once it accepts the goods notwithstanding such condition.
May 2nd at 3rd issue pa pero di ko na sinama. Notice of loss. Dapat within 3 days daw siya nag file, 1 yr prescription if there was an
inspection. Limited liability. No stipulation in the bill of lading, Letter of credit attached to the bill of lading does not count.
6. MAGELLAN MANUFACTURING MARKETING CORPORATION, * petitioner,
vs.
COURT OF APPEALS, ORIENT OVERSEAS CONTAINER LINES and F.E. ZUELLIG, INC. respondents.
FACTS:
Magellan Manufacturers Marketing Corp. (MMMC) entered into a contract with Choju Co. of Yokohama, Japan to export 136,000
Anahaw fans in consideration of $23k. As payment thereof, a letter of credit was issued to plaintiff MMMC by the buyer. Through its
president, James Cu, MMMC then contracted F.E. Zuellig, a shipping agent, to ship the anahaw fans through the other appellee, Orient
Overseas Container Lines, Inc., (OOCL) specifying that he needed an on-board bill of lading and that transshipment is not allowed
under the letter of credit.
Thereafter appellant MMMC paid F.E. Zuellig the freight charges and secured a copy of the bill of lading which was presented to Allied
Bank. The bank then credited the amount of US$23k covered by the letter of credit to MMMCs account. However, when MMMCs
president James Cu, went back to the bank later, he was informed that the payment was refused by the buyer allegedly because
there was no on-board bill of lading, and there was a transshipment of goods. As a result of the refusal of the buyer to accept, upon
appellant's request, the anahaw fans were shipped back to Manila by appellees, for which the latter demanded from appellant
payment of P246,043.43. MMMC abandoned the whole cargo and asked appellees for damages.
TC: MMMMC cannot seek damages as it agreed to a transshipment of the goods and is liable for demurrages amounting to P298k
incurred in Japan and Manila.
CA: MMMMC cannot seek damages as it agreed to a transshipment of the goods and is liable for demurrages amounting to P52k
incurred in Japan. While the goods arrived in Manila in October 1980, appellant was notified of said arrival only in March 1981. No
explanation was given for the delay in notifying appellant.
Issue: WON MMMMC should be liable for P52k when it exercised its option of Abandonment?
HELD: No. Private respondents belatedly informed petitioner of the arrival of its goods in Manila and that if it wished to take delivery
of the cargo it would have to pay P52k, but with the last paragraph thereof stating as follows:
Please can you advise within 15 days of receipt of this letter whether you intend to take delivery of this shipment, as
alternatively we will have to take legal proceedings in order to have the cargo auctioned to recover the costs involved, as
well as free the container which are (sic) urgently required for export cargoes.
Clearly, therefore, private respondents offered petitioner the options:
1. paying the shipping and demurrage charges in order to take delivery of the goods;
2. Abandoning the same so that private respondents could sell them at public auction and thereafter apply the proceeds in payment
of the shipping and other charges.
It will be remembered that in overland transportation, an unreasonable delay in the delivery of transported goods is sufficient ground
for the abandonment of goods. By analogy, this can also apply to maritime transportation. Further, with much more reason can

petitioner in the instant case properly abandon the goods, not only because of the unreasonable delay in its delivery but because of
the option which was categorically granted to and exercised by it as a means of settling its liability for the cost and expenses of
reshipment. And, said choice having been duly communicated, the same is binding upon the parties on legal and equitable
considerations of estoppels.
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