CIVIL CODE DEFINITION OF A COMMON CARRIER; TESTS
ISSUES: Was petitioner a common carrier? - YES
DE GUZMAN vs. CA
FACTS: Respondent Ernesto Cendana was a junk dealer. He buys scrap materials
and brings those that he gathered to Manila for resale using 2 six-wheeler trucks.
On the return trip to Pangasinan, respondent would load his vehicle with cargo
which various merchants wanted delivered, charging fee lower than the
commercial rates. Sometime in November 1970, petitioner Pedro de Guzman
contracted with respondent for the delivery of 750 cartons of Liberty Milk. On
December 1, 1970, respondent loaded the cargo. Only 150 boxes were
delivered to petitioner because the truck carrying the boxes was hijacked along
the way. Petitioner commenced an action claiming the value of the lost
merchandise. Petitioner argues that respondent, being a common carrier, is
bound to exercise extraordinary diligence, which it failed to do. Private
respondent denied that he was a common carrier, and so he could not be held
liable for force majeure. The trial court ruled against the respondent, but such
was reversed by the Court of Appeals.
ISSUE: Whether or not private respondent is a common carrier - YES
HELD: Article 1732 makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity. Article 1732 also carefully avoids making
any distinction between a person or enterprise offering transportation service on
a regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguish between a
carrier offering its services to the "general public," i.e., the general community
or population, and one who offers services or solicits business only from a narrow
segment of the general population. It appears to the Court that private
respondent is properly characterized as a common carrier even though he
merely "back-hauled" goods for other merchants from Manila to Pangasinan,
although such backhauling was done on a periodic or occasional rather than
regular or scheduled manner, and even though private respondent's principal
occupation was not the carriage of goods for others. There is no dispute that
private respondent charged his customers a fee for hauling their goods; that fee
frequently fell below commercial freight rates is not relevant here. A certificate of
public convenience is not a requisite for the incurring of liability under the Civil
Code provisions governing common carriers.
BASCOS vs. CA
FACTS: Rodolfo Cipriano, representing CIPTRADE, entered into a hauling contract
with Jibfair Shipping Agency Corporation whereby the former bound itself to haul
the latter’s 2000m/tons of soya bean meal from Manila to Calamba. CIPTRADE
subcontracted with petitioner Estrellita Bascos to transport and deliver the 400
sacks of soya beans. Petitioner failed to deliver the cargo, and as a consequence,
Cipriano paid Jibfair the amount of goods lost in accordance with their contract.
Cipriano demanded reimbursement from petitioner but the latter refused to pay.
Cipriano filed a complaint for breach of contract of carriage. Petitioner denied
that there was no contract of carriage since CIPTRADE leased her cargo truck,
and that the hijacking was a force majeure. The trial court ruled against
petitioner.
HELD: Article 1732 of the Civil Code defines a common carrier as "(a) person,
corporation or firm, or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water or air, for
compensation, offering their services to the public." The test to determine a
common carrier is "whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public as his
occupation rather than the quantity or extent of the business transacted." In this
case, petitioner herself has made the admission that she was in the trucking
business, offering her trucks to those with cargo to move. Judicial admissions
are conclusive and no evidence is required to prove the same.
NATIONAL STEEL CORPORATION v. COURT OF APPEALS
FACTS: Plaintiff National Steel Corporation (NSC) as Charterer and defendant
Vlasons Shipping, Inc. (VSI) as Owner, entered into a Contract of Voyage Charter
Hire whereby NSC hired VSI’s vessel, the MV Vlasons I to make one voyage to
load steel products at Iligan City and discharge them at North Harbor, Manila.
The handling, loading and unloading of the cargoes were the responsibility of
the Charterer.
The skids of tinplates and hot rolled sheets shipped were allegedly found to be
wet and rusty. Plaintiff, alleging negligence, filed a claim for damages against the
defendant who denied liability claiming that the MV Vlasons I was seaworthy in
all respects for the carriage of plaintiff’s cargo; that said vessel was not a
“common carrier” inasmuch as she was under voyage charter contract with the
plaintiff as charterer under the charter party; that in the course its voyage, the
vessel encountered very rough seas.
ISSUE:
Whether or not the provisions of the Civil Code on common carriers pursuant to
which there exists a presumption of negligence against the common carrier in
case of loss or damage to the cargo are applicable to a private carrier.
HELD: No. 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.
It has been held that the true test of a common carrier is the carriage of
passengers or goods, provided it has space, for all who opt to avail themselves
of its transportation service for a fee [Mendoza vs. Philippine Airlines, Inc., 90
Phil. 836, 842-843 (1952)]. A carrier which does not qualify under the above
test is deemed a private carrier. “Generally, private carriage is undertaken by
special agreement and the carrier does not hold himself out to carry goods for
the general public.
Because the MV Vlasons was a private carrier, the ship owner’s obligations are
governed by the foregoing provisions of the Code of Commerce and not by the
Civil Code which, as a general rule, places the prima facie presumption of
negligence on a common carrier.
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FIRST PHILIPPINE INDUSTRIAL CORP. vs. CA
FACTS: Petitioner is a grantee of a pipeline concession under Republic Act No.
387. Sometime in January 1995, petitioner applied for mayor’s permit in
Batangas. However, the Treasurer required petitioner to pay a local tax based
on gross receipts amounting to P956,076.04. In order not to hamper its
operations, petitioner paid the taxes for the first quarter of 1993 amounting to
P239,019.01 under protest. On January 20, 1994, petitioner filed a letter-
protest to the City Treasurer, claiming that it is exempt from local tax since it is
engaged in transportation business. The respondent City Treasurer denied the
protest, thus, petitioner filed a complaint before the Regional Trial Court of
Batangas for tax refund. Respondents assert that pipelines are not included in
the term “common carrier” which refers solely to ordinary carriers or motor
vehicles. The trial court dismissed the complaint, and such was affirmed by the
Court of Appeals.
ISSUE: Whether a pipeline business is included in the term “common carrier”? -
YES
HELD: Article 1732 of the Civil Code defines a "common carrier" as "any person,
corporation, firm or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods is:
(1) He must be engaged in the business of carrying goods for others as a public
employment, and must hold himself out as ready to engage in the transportation
of goods for person generally as a business and not as a casual occupation;
(2) He must undertake to carry goods of the kind to which his business is
confined;
(3) He must undertake to carry by the method by which his business is
conducted and over his established roads; and
(4) The transportation must be for hire.
Based on the above definitions and requirements, there is no doubt that
petitioner is a common carrier. It is engaged in the business of transporting or
carrying goods, i.e. petroleum products, for hire as a public employment. It
undertakes to carry for all persons indifferently, that is, to all persons who
choose to employ its services, and transports the goods by land and for
compensation. The fact that petitioner has a limited clientele does not exclude it
from the definition of a common carrier.
CALVO v. UCPB GENERAL INSURANCE
FACTS: Petitioner Virgines Calvo, owner of Transorient Container Terminal
Services, Inc. (TCTSI), and a custom broker, entered into a contract with San
Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting
paper and 124 reels of kraft liner board from the port area to the Tabacalera
Compound, Ermita, Manila. The cargo was insured by respondent UCPB General
Insurance Co., Inc.
On July 14, 1990, contained in 30 metal vans, arrived in Manila on board “M/V
Hayakawa Maru”. After 24 hours, they were unloaded from vessel to the custody
of the arrastre operator, Manila Port Services, Inc. From July 23 to 25, 1990,
petitioner, pursuant to her contract with SMC, withdrew the cargo from the
arrastre operator and delivered it to SMC’s warehouse in Manila. On July 25, the
goods were inspected by Marine Cargo Surveyors, reported that 15 reels of the
semi-chemical fluting paper were “wet/stained/torn” and 3 reels of kraft liner
board were also torn. The damages cost P93,112.00.
SMC collected the said amount from respondent UCPB under its insurance
contract. Respondent on the other hand, as a subrogee of SMC, brought a suit
against petitioner in RTC, Makati City. On December 20, 1995, the RTC rendered
judgment finding petitioner liable for the damage to the shipment. The decision
was affirmed by the CA.
ISSUE: Whether or not Calvo is a common carrier? - YES
Held: In this case the contention of the petitioner, that he is not a common carrier
but a private carrier, has no merit.
Article 1732 makes no distinction between one whose principal business activity
is the carrying of persons or goods or both, and one who does such carrying
only as ancillary activity. Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow
segment of the general population. We think that Article 1733 deliberately
refrained from making such distinction. (De Guzman v. CA, 68 SCRA 612)
The concept of “common carrier” under Article 1732 coincide with the notion of
“public service”, under the Public Service Act which partially supplements the law
on common carrier. Under Section 13, paragraph (b) of the Public Service Act,
it includes:
“ x x x every person that now or hereafter may own, operate, manage, or control
in the Philippines, for hire or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction railway, subway
motor vehicle, either for freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier service of any class,
express service, steamboat, or steamship line, pontines, ferries and water craft,
engaged in the transportation of passengers or freight or both, shipyard, marine
repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation
system, gas, electric light, heat and power, water supply and power petroleum,
sewerage system, wire or wireless communications systems, wire or wireless
broadcasting stations and other similar public services. x x x”
Even though Calvo is a customs broker and not in the business of public
transportation, he is still a common carrier as long as all the requisites are
present.
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 FGU INSURANCE CORPORATION vs. G.P.S TRUCKING CORPORATION and
LAMBERT M. EROLES
FACTS: G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18
June 1994 thirty (30) units of Condura S.D. white refrigerators aboard one of its
Isuzu truck, driven by Lambert Eroles. While the truck was traversing the north
diversion road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it
collided with an unidentified truck, causing it to fall into a deep canal, resulting
in damage to the cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion
Industries, Inc., the value of the covered cargoes: P204, 450.00. FGU, in turn,
being the subrogee of the rights and interests of the insured sought
reimbursement of the amount, from GPS. Since GPS failed to heed the claim, FGU
filed a complaint for damages and breach of contract of carriage against GPS
and its driver with the Regional Trial Court, Branch 66, of Makati City. In its
answer, respondents asserted that GPS was the exclusive hauler only of
Concepcion Industries, Inc., since 1988, and it was not so engaged in business
as a common carrier. Respondents further claimed that the cause of damage
was purely accidental. GPS, instead of submitting its evidence, filed with leave of
court a motion to dismiss the complaint by way of demurrer to evidence on the
ground that petitioner had failed to prove that it was a common carrier. The RTC
and CA both ruled in favor of the Respondent.
ISSUE: WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A
PRIVATE CARRIER, MAY BE PRESUMED TO HAVE BEEN NEGLIGENT WHEN THE
GOODS IT UNDERTOOK TO TRANSPORT SAFELY WERE SUBSEQUENTLY
DAMAGED WHILE IN ITS PROTECTIVE CUSTODY AND POSSESSION.
HELD: In culpa contractual, upon which the action of petitioner rests as being
the subrogee of Concepcion Industries, Inc., the mere proof of the existence of
the contract and the failure of its compliance justify, prima facie, a corresponding
right of relief. Thus, FGU has a claim for the amount paid out.
The law, recognizing the obligatory force of contracts, will not permit a party to
be set free from liability for any kind of misperformance of the contractual
undertaking or a contravention of the tenor thereof
GPS recognizes the existence of a contract of carriage between it and petitioner’s
assured, and admits that the cargoes it has assumed to deliver have been lost
or damaged while in its custody. In such a situation, a default on, or failure of
compliance with, the obligation in this case, the delivery of the goods in its
custody to the place of destination - gives rise to a presumption of lack of care
and corresponding liability on the part of the contractual obligor the burden
being on him to establish otherwise. GPS has failed to do so.
Obligations and Contracts Terms:
• Expectation interest- the interest in having the benefit of his bargain by being
put in as good a position as he would have been in had the contract been
performed.
• Reliance interest- the interest in being reimbursed for loss caused by reliance
on the contract by being put in as good a position as he would have been in had
the contract not been made.
• Restitution interest- which is his interest in having restored to him any benefit
that he has conferred on the other party.
• Subrogee- the person or entity that assumes the legal right to attempt to
collect a claim of another (subrogor) in return for paying the other's expenses
or debts which the other claims against a third party. A subrogee is usually the
insurance company which has insured the party whose expenses were paid.
PHIL AM GEN INSURANCE CO, ET AL. vs. PKS SHIPPING CO
FACTS: Davao Union Marketing Corporation (DUMC) contracted the services of
PKS Shipping Company (PKS Shipping) for the shipment to Tacloban City of
75,000 bags of cement worth P3,375,000.
DUMC insured the goods for its full value with Philippine American General
Insurance Company (Philamgen).
The goods were loaded aboard the dumb barge Limar I belonging to PKS
Shipping.
December 22, 1988 9 pm: While Limar I was being towed by PKS’ tugboat MT
Iron Eagle, the barge sank a couple of miles off the coast of Dumagasa Point, in
Zamboanga del Sur, bringing down with it the entire cargo of 75,000 bags of
cement.
DUMC filed a formal claim with Philamgen for the full amount of the
insurance. Philamgen promptly made payment; it then sought reimbursement
from PKS Shipping of the sum paid to DUMC but the shipping company refused
to pay so Philamgen to file suit against PKS Shipping
RTC: dismissed the complaint - fortuitous event
CA: Affirmed - not a common carrier but a casual occupation
ISSUE: W/N PKS Shipping is NOT liable since it was NOT a common carrier? –
NO.
HELD: Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water, or air for compensation, offering their services to
the public.
Complementary is Section 13, paragraph (b), of the Public Service Act public
service" to be –
"x x x every person that now or hereafter may own, operate, manage, or control
in the Philippines, for hire or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, subway motor vehicle,
either for freight or passenger, or both, with or without fixed route and whatever
may be its classification, freight or carrier service of any class, express service,
steamboat, or steamship, or steamship line, pontines, ferries and water craft,
engaged in the transportation of passengers or freight or both, shipyard, marine
3
repair shop, wharf or dock, ice plant, ice refrigeration plant, canal, irrigation
system, gas, electric light, heat and power, water supply and power petroleum,
sewerage system, wire or wireless communication systems, wire or wireless
broadcasting stations and other similar public services
So understood, the concept of `common carrier’ under Article 1732 may be seen
to coincide neatly with the notion of `public service,’ under the Public Service Act
distinction between:
• common or public carrier
• private or special carrier - character of the business, such that if the
undertaking is an isolated transaction , not a part of the business or
occupation, and the carrier does not hold itself out to carry the goods for
the general public or to a limited clientele, although involving the carriage
of goods for a fee.
• EX: charter party which includes both the vessel and its crew, such as in a
bareboat or demise, where the charterer obtains the use and service of all
or some part of a ship for a period of time or a voyage or voyages and
gets the control of the vessel and its crew.
The regularity of its activities in this area indicates more than just a casual activity
on its part. The appellate court ruled, gathered from the testimonies and sworn
marine protests of the respective vessel masters ofLimar I and MT Iron Eagle,
that there was no way by which the barge’s or the tugboat’s crew could have
prevented the sinking of Limar I. The vessel was suddenly tossed by waves of
extraordinary height of 6 to 8 feet and buffeted by strong winds of 1.5 knots
resulting in the entry of water into the barge’s hatches. The official Certificate of
Inspection of the barge issued by the Philippine Coastguard and the Coastwise
Load Line Certificate would attest to the seaworthiness of Limar I and should
strengthen the factual findings of the appellate court.
Findings of fact of the Court of Appeals generally conclude this Court; none of
the recognized exceptions from the rule -(1) when the factual findings of the
Court of Appeals and the trial court are contradictory; (2) when the conclusion
is a finding grounded entirely on speculation, surmises, or conjectures; (3) when
the inference made by the Court of Appeals from its findings of fact is manifestly
mistaken, absurd, or impossible; (4) when there is a grave abuse of discretion
in the appreciation of facts; (5) when the appellate court, in making its findings,
went beyond the issues of the case and such findings are contrary to the
admissions of both appellant and appellee; (6) when the judgment of the Court
of Appeals is premised on a misapprehension of facts; (7) when the Court of
Appeals failed to notice certain relevant facts which, if properly considered, would
justify a different conclusion; (8) when the findings of fact are themselves
conflicting; (9) when the findings of fact are conclusions without citation of the
specific evidence on which they are based; and (10) when the findings of fact of
the Court of Appeals are premised on the absence of evidence but such findings
are contradicted by the evidence on record – would appear to be clearly extant
in this instance.
ASIA LIGHTERAGE AND SHIPPING, INC vs. CA
FACTS: Asia Lighterage and Shipping, Inc was contracted as carrier to deliver
3,150 metric tons of Better Western White Wheat in bulk, (US$423,192.35) to
the consignee‘s (General Milling Corporation) warehouse at Bo. Ugong, Pasig
City insured by Prudential Guarantee and Assurance, Inc. against loss/damage
for P14,621,771.75.
It appears that on August 17, 1990, the transport of said cargo was suspended
due to a warning of an incoming typhoon. PSTSI III was tied down to other barges
which arrived ahead of it while weathering out the storm that night. A few days
after, the barge developed a list because of a hole it sustained after hitting an
unseen protuberance underneath the water. It filed a Marine Protest on August
28, 1990 and also secured the services of Gaspar Salvaging Corporation to
refloat the barge.
The barge was then towed to ISLOFF terminal before it finally headed towards
the consignee’s wharf on September 5, 1990. Upon reaching the Sta. Mesa
spillways, the barge again ran aground due to strong current.
7 days later, a bidding was conducted to dispose of the damaged wheat retrieved
& loaded on the 3 other barges. The total proceeds from the sale of the salvaged
cargo was P201,379.75.
ISSUES:
1. Whether petitioner is a common carrier. - YES
2. Assuming petitioner is a common carrier, whether it exercised extraordinary
care and diligence in its care and custody of the consignee’s cargo. - NO
HELD:
1. Petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as persons, corporations,
firms or associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation, offering
their services to the public.
In De Guzman vs. CA it was held that the definition of common carriers in Article
1732 of the Civil Code makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who does
such carrying only as an ancillary activity. There is also no distinction between a
person or enterprise offering transportation service on a regular/scheduled
basis and one offering such service on an occasional, episodic or unscheduled
basis.]
The test to determine a common carrier is “whether the given undertaking is a
part of the business engaged in by the carrier which he has held out to the
general public as his occupation rather than the quantity or extent of the
business transacted.” In the case at bar, the petitioner admitted that it is
engaged in the business of shipping, lighterage and drayage, offering its barges
to the public, despite its limited clientele for carrying/transporting goods by water
for compensation.
2. The findings of the lower courts should be upheld. Petitioner failed to exercise
extraordinary diligence in its care and custody of the consignee’s goods.
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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 the case of loss, destruction or
deterioration of the goods, the common carrier must prove that it exercised
extraordinary diligence. There are, however, exceptions
Art. 1734. Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following causes
only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
In the case at bar, the barge completely sank after its towing bits broke, resulting
in the total loss of its cargo. Petitioner claims that this was caused by a typhoon,
hence, it should not be held liable for the loss of the cargo. However, petitioner
failed to prove that the typhoon is the proximate and only cause of the loss of
the goods, and that it has exercised due diligence before, during and after the
occurrence of the typhoon to prevent/minimize the loss. The evidence show that,
even before the towing bits of the barge broke, it had already previously
sustained damage when it hit a sunken object while docked at the Engineering
Island. It even suffered a hole. Clearly, this could not be solely attributed to the
typhoon. Thus, when petitioner persisted to proceed with the voyage, it
recklessly exposed the cargo to further damage.
Moreover, petitioner still headed to the consignee’s wharf despite knowledge of
an incoming typhoon. During the time that the barge was heading towards the
consignee’s wharf on September 5, 1990, typhoon “Loleng” has already entered
the Philippine area of responsibility.
CRISOSTOMO vs. COURT OF APPEALS
FACTS: In May 1991, petitioner Estela L. Crisostomo contracted the services of
respondent Caravan Travel and Tours International, Inc. to arrange and facilitate
her booking, ticketing and accommodation in a tour dubbed “Jewels of Europe”.
The package tour included the countries of England, Holland, Germany, Austria,
Liechstenstein, Switzerland and France at a total cost of P74,322.70. Pursuant
to said contract, Menor, respondent Company’s ticketing manager, went to her
aunt’s residence on June 12, 1991 – Wednesday – to deliver petitioner’s travel
documents and plane tickets. Menor then told her to be at the Ninoy Aquino
International Airport (NAIA) on Saturday, two hours before her flight on board
British Airways.
Without checking her travel documents, petitioner went to NAIA on Saturday, June
15, 1991, to take the flight for the first leg of her journey from Manila to Hong
Kong. To petitioner’s dismay, she discovered that the flight she was supposed
to take had already departed the previous day. She learned that her plane ticket
was for the flight scheduled on June 14, 1991. She thus called up Menor to
complain. Subsequently, Menor prevailed upon petitioner to take another tour
the “British Pageant” which included England, Scotland and Wales in its itinerary.
For this tour package, petitioner was asked anew to pay US$785.00 or
P20,881.00.
She gave respondent US$300 or P7,980.00 as partial payment and commenced
the trip in July 1991. Upon petitioner’s return from Europe, she demanded from
respondent the reimbursement of P61,421.70, representing the difference
between the sum she paid for “Jewels of Europe” and the amount she owed
respondent for the “British Pageant” tour. Despite several demands, respondent
company refused to reimburse the amount, contending that the same was non-
refundable. Petitioner was thus constrained to file a complaint against
respondent for breach of contract of carriage and damages at Regional Trial
Court of Makati City.
The trial court held that respondent was negligent in erroneously advising
petitioner of her departure date through its employee, Menor, who was not
presented as witness to rebut petitioner’s testimony. However, petitioner should
have verified the exact date and time of departure by looking at her ticket and
should have simply not relied on Menor’s verbal representation. The trial court
thus declared that petitioner was guilty of contributory negligence and
accordingly, deducted 10% from the amount being claimed as refund.
Respondent appealed to the Court of Appeals, which likewise found both parties
to be at fault. However, the appellate court held that petitioner is more negligent
than respondent because as a lawyer and well-traveled person, she should have
known better than to simply rely on what was told to her. This being so, she is
not entitled to any form of damages. Petitioner also forfeited her right to the
“Jewels of Europe” tour and must therefore pay respondent the balance of the
price for the “British Pageant” tour.
ISSUE: Is the contract a Contract of Carriage? – NO.
HELD: By definition, a contract of carriage or transportation is one whereby a
certain person or association of persons obligate themselves to transport
persons, things, or news from one place to another for a fixed price.9 Such
person or association of persons are regarded as carriers and are classified as
private or special carriers and common or public carriers. A common carrier is
defined under Article 1732 of the Civil Code as persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water or air, for compensation, offering their services to
the public.
It is obvious from the above definition that respondent is not an entity engaged
in the business of transporting either passengers or goods and is therefore,
neither a private nor a common carrier. Respondent did not undertake to
transport petitioner from one place to another since its covenant with its
customers is simply to make travel arrangements in their behalf. Respondent’s
services as a travel agency include procuring tickets and facilitating travel
permits or visas as well as booking customers for tours.
While petitioner concededly bought her plane ticket through the efforts of
respondent company, this does not mean that the latter ipso facto is a common
carrier. At most, respondent acted merely as an agent of the airline, with whom
petitioner ultimately contracted for her carriage to Europe. Respondent’s
obligation to petitioner in this regard was simply to see to it that petitioner was
properly booked with the airline for the appointed date and time. Her transport
to the place of destination, meanwhile, pertained directly to the airline.
The object of petitioner’s contractual relation with respondent is the latter’s
service of arranging and facilitating petitioner’s booking, ticketing and
accommodation in the package tour. In contrast, the object of a contract of
carriage is the transportation of passengers or goods. It is in this sense that the
5
contract between the parties in this case was an ordinary one for services and
not one of carriage. Petitioner’s submission is premised on a wrong assumption.
SCHMITZ TRANSPORT & BROKERAGE CORPORATION v. TRANSPORT VENTURE,
INC., INDUSTRIAL INSURANCE COMPANY, LTD., et al.
FACTS: SYTCO Pte Ltd. Singapore shipped from the port of Ilyichevsk, Russia on
board M/V ―Alexander Savelievǁ (a vessel of Russian registry and owned by
respondent Black Sea) 545 hot rolled steel sheets. The vessel arrived at the port
of Manila and the Philippine Ports Authority (PPA) assigned it a place of berth
at the outside breakwater at the Manila South Harbor. Petitioner Schmitz
Transport, engaged to secure the requisite clearances, to receive the cargoes
from the shipside, and to deliver them to Little Giant Steelpipe Corporation‘s
warehouse at Cainta, Rizal. It likewise engaged the services of respondent
Transport Venture Inc. (TVI) to send a barge and tugboat at shipside.
The tugboat, after positioning the barge alongside the vessel, left and returned
to the port terminal. Later on, arrastre operator commenced to unload 37 of the
545 coils from the vessel unto the barge. By noon the next day, during which
the weather condition had become inclement due to an approaching storm, the
unloading unto the barge of the 37 coils was accomplished. However, there was
no tugboat that pulled the barge back to the pier. Eventually, because of the
strong waves, the crew of the barge abandoned it and transferred to the vessel.
The barge capsized, washing the 37 coils into the sea. Earnest efforts on the
part of both the consignee Little Giant and Industrial Insurance to recover the
lost cargoes proved futile.
Industrial Insurance later filed a complaint against Schmitz Transport, TVI and
Black Sea through its representative Inchcape (the defendants) before the RTC
of Manila, for the recovery of the amount it paid to Little Giant plus adjustment
fees, attorney‘s fees, and litigation expenses. Industrial Insurance won and the
Schmitz et al.’s motion for reconsideration is denied.
In effect, Schmitz now filed charges against TVI et al. It asserts that in chartering
the barge and tugboat of TVI, it was acting for its principal, consignee Little Giant,
hence, the transportation contract was by and between Little Giant and TVI. The
Court rendered a decision holding Schmitz and TVI liable.
ISSUE: Whether or not the liability for the loss may attach to Black Sea, Schmitz
and TVI?
HELD: TVI‘s failure to promptly provide a tugboat did not only increase the risk
that might have been reasonably anticipated during the shipside operation, but
was the proximate cause of the loss. A man of ordinary prudence would not leave
a heavily loaded barge floating for a considerable number of hours, at such a
precarious time, and in the open sea, knowing that the barge does not have any
power of its own and is totally defenseless from the ravages of the sea. That it
was nighttime and, therefore, the members of the crew of a tugboat would be
charging overtime pay did not excuse TVI from calling for one such tugboat.
As for Schmitz, for it to be relieved of liability, it should, following Article 1739 of
the Civil Code, prove that it exercised due diligence to prevent or minimize the
loss, before, during and after the occurrence of the storm in order that it may be
exempted from liability for the loss of the goods.
While Schmitz sent checkers and a supervisor on board the vessel to counter-
check the operations of TVI, it failed to take all available and reasonable
precautions to avoid the loss. After noting that TVI failed to arrange for the
prompt towage of the barge despite the deteriorating sea conditions, it should
have summoned the same or another tugboat to extend help, but it did not.
The Court holds then that Schmitz and TVI are solidarily liable for the loss of the
cargoes. As for Black Sea, its duty as a common carrier extended only from the
time the goods were surrendered or unconditionally placed in its possession and
received for transportation until they were delivered actually or constructively to
consignee Little Giant
Parties to a contract of carriage may, however, agree upon a definition of delivery
that extends the services rendered by the carrier. In the case at bar, Bill of Lading
No. 2 covering the shipment provides that delivery be made ―to the port of
discharge or so near thereto as she may safely get, always afloat.ǁ The delivery
of the goods to the consignee was not from ―pier to pierǁ but from the shipside
of ―M/V Alexander Savelievǁ and into barges, for which reason the consignee
contracted the services of petitioner. Since Black Sea had constructively
delivered the cargoes to Little Giant, through Schmitz, it had discharged its duty.
In fine, no liability may thus attach to Black Sea.
PHILIPPINES FIRST INSURANCE CO., INC. vs. WALLEM PHILS. SHIPPING, INC.
FACTS: October 1995, Anhui Chemicals Import and Export Corp. loaded on board
M/S Offshore Master a shipment consisting of sodium sulphate anhydrous,
complete and in good order for transportation to and delivery at the port of
Manila for consignee, covered by a clean bill of lading.
On October 16, 1995, the shipment arrived in port of manila and was discharged
which caused various degrees of spillage and losses as evidence by the turn
over survey of the arrastre operator. Asia Star Freight delivered the shipments
from pier to the consignees in Quezon City, during the unloading, it was found
by the consignee that the shipment was damaged and in bad condition.
April 29, 1996, the consignee filed a claim with Wallem for the value of the
damaged shipment, to no avail. Since the shipment was insured with Phil. First
Insurance against all risks in the amount of P2,470,213.50. The consignee filed
a claim against the First Insurance. First insurance after examining the turn-over
survey, the bad order certificate and other documents paid the consignee but
later on sent a demand letter to Wallem for the recovery of the amount paid to
the consignee (in exercise of its right of subrogation). Wallem did not respond
to the claim.
First Insurance then instituted an action before RTC for damages against Wallem.
RTC held the shipping company and the arrastre operator solidarily liable since
both are charged with the obligation to deliver the goods in good order condition.
The CA reversed and set aside the RTC's decision. CA says that there is no
solidary liability between the carrier and the arrastre because it was clearly
established that the damage and losses of the shipment were attributed to the
mishandling by the arrastre operator in the discharge of the shipment.
6
ISSUES:
1. Whether or not the Court of Appeals erred in not holding that as a common
carrier, the carriers duties extend to the obligation to safely discharge the cargo
from the vessel;
2. Whether or not the carrier should be held liable for the cost of the damaged
shipment;
3. Whether or not Wallems failure to answer the extra judicial demand by
petitioner for the cost of the lost/damaged shipment is an implied admission of
the formers liability for said goods;
4. Whether or not the courts below erred in giving credence to the testimony of
Mr. Talens.
Ruling:
(1) Yes, the vessel is a common carrier, and thus the determination of the
existence or absence of liability will be gauged on the degree of diligence
required of a common carrier. (2) The first and second issue will be resolved
concurrently.
(3) The damage of the shipment was documented by the turn0over survey and
request for bad order survey, with these documents, petitioner insist that the
shipment incurred damages while still in the care and responsibility of Wallem
before it was turned over to the arrastre operator. However, RTC found the
testimony of Mr. Talens (cargo surveyor) that the loss was caused by the
mishandling of the arrastre operator. This mishandling was affirmed by the CA
which was the basis for declaring the arrastre operator solely liable for the
damage.
It is established that damage or losses were incurred by the shipment during the
unloading. As common carrier, they are bound to observe extraordinary diligence
in the vigilance over the goods transported by them. Subject to certain
exceptions enumerated under Article 1734 of the Civil Code, common carriers
are responsible for the loss, destruction, or deterioration of the goods. 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.
For marine vessels, Article 619 of the Code of Commerce provides that the ship
captain is liable for the cargo from the time it is turned over to him at the dock
or afloat alongside the vessel at the port of loading, until he delivers it on the
shore or on the discharging wharf at the port of unloading, unless agreed
otherwise.
COGSA provides that under every contract of carriage of goods by sea, the carrier
in relation to the loading, handling, stowage, carriage, custody, care, and
discharge of such goods, shall be subject to the responsibilities and liabilities
and entitled to the rights and immunities set forth in the Act. Section 3 (2) thereof
then states that among the carriers responsibilities are to properly and carefully
load, handle, stow, carry, keep, care for, and discharge the goods carried.
On the other hand, the functions of an arrastre operator involve the handling of
cargo deposited on the wharf or between the establishment of the consignee or
shipper and the ship's tackle. Being the custodian of the goods discharged from
a vessel, an arrastre operator's duty is to take good care of the goods and to
turn them over to the party entitled to their possession.
Handling cargo is mainly the arrastre operator's principal work so its
drivers/operators or employees should observe the standards and measures
necessary to prevent losses and damage to shipments under its custody. Thus,
in this case the appellate court is correct insofar as it ruled that an arrastre
operator and a carrier may not be held solidarily liable at all times. But the
precise question is which entity had custody of the shipment during its unloading
from the vessel?
The records are replete with evidence which show that the damage to the bags
happened before and after their discharge and it was caused by the stevedores
of the arrastre operator who were then under the supervision of Wallem.
It is settled in maritime law jurisprudence that cargoes while being unloaded
generally remain under the custody of the carrier. In the instant case, the
damage or losses were incurred during the discharge of the shipment while
under the supervision of the carrier. Consequently, the carrier is liable for the
damage or losses caused to the shipment. As the cost of the actual damage to
the subject shipment has long been settled, the trial courts finding of actual
damages in the amount of P397,879.69 has to be sustained.
(4) Mr Talens credibility must be respected.
CA's decision is set aside. Wallem is liable.
UNSWORTH TRANSPORT INTERNATIONAL (PHILS.), INC. vs. COURT OF
APPEALS and PIONEER INSURANCE AND SURETY CORPORATION
FACTS: On August 31, 1992, the shipper Sylvex Purchasing Corporation
delivered to UTI a shipment of 27 drums of various raw materials for
pharmaceutical manufacturing, consisting of: "1) 3 drums (of) extracts, flavoring
liquid, flammable liquid x x x banana flavoring; 2) 2 drums (of) flammable liquids
x x x turpentine oil; 2 pallets. STC: 40 bags dried yeast; and 3) 20 drums (of)
Vitabs: Vitamin B Complex Extract." UTI issued Bill of Lading No. C320/C15991-
2, covering the aforesaid shipment. The subject shipment was insured with
private respondent Pioneer Insurance and Surety Corporation in favor of Unilab
against all risks in the amount of P1,779,664.77 under and by virtue of Marine
Risk Note Number MC RM UL 0627 92 and Open Cargo Policy No. HO-022-RIU.
On the same day that the bill of lading was issued, the shipment was loaded in a
sealed 1x40 container van, with no. APLU-982012, boarded on APL’s vessel
M/V "Pres. Jackson," Voyage 42, and transshipped to APL’s M/V "Pres. Taft" for
delivery to petitioner in favor of the consignee United Laboratories, Inc. (Unilab).
On September 30, 1992, the shipment arrived at the port of Manila. On October
6, 1992, petitioner received the said shipment in its warehouse after it stamped
the Permit to Deliver Imported Goods procured by the Champs Customs
Brokerage. Three days thereafter, or on October 9, 1992, Oceanica Cargo
Marine Surveyors Corporation (OCMSC) conducted a stripping survey of the
shipment located in petitioner’s warehouse.
7
Consequently, Unilab’s quality control representative rejected one paper bag
containing dried yeast and one steel drum containing Vitamin B Complex as unfit
for the intended purpose. On November 7, 1992, Unilab filed a formal claim for
the damage against private respondent and UTI. On November 20, 1992, UTI
denied liability on the basis of the gate pass issued by Jardine that the goods
were in complete and good condition; while private respondent paid the claimed
amount on March 23, 1993. By virtue of the Loss and Subrogation
Receipt issued by Unilab in favor of private respondent, the latter filed a
complaint for Damages against APL, UTI and petitioner with the RTC of Makati.
ISSUE: Whether or not petitioner is a common carrier. - YES
HELD: Admittedly, petitioner is a freight forwarder. The term "freight forwarder"
refers to a firm holding itself out to the general public (other than as a pipeline,
rail, motor, or water carrier) to provide transportation of property for
compensation and, in the ordinary course of its business, (1) to assemble and
consolidate, or to provide for assembling and consolidating, shipments, and to
perform or provide for break-bulk and distribution operations of the shipments;
(2) to assume responsibility for the transportation of goods from the place of
receipt to the place of destination; and (3) to use for any part of the
transportation a carrier subject to the federal law pertaining to common carriers.
A freight forwarder’s liability is limited to damages arising from its own
negligence, including negligence in choosing the carrier; however, where the
forwarder contracts to deliver goods to their destination instead of merely
arranging for their transportation, it becomes liable as a common carrier for loss
or damage to goods. A freight forwarder assumes the responsibility of a carrier,
which actually executes the transport, even though the forwarder does not carry
the merchandise itself.
Undoubtedly, UTI is liable as a common carrier. 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. 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, loss, or
destruction of the goods happened, the transporter shall be held responsible.
LOADMASTERS CUSTOMS SERVICES, INC., vs. GLODEL BROKERAGE
CORPORATION and R&B INSURANCE CORPORATION
FACTS: The case is a petition for review on certiorari under Rule 45 of the Revised
Rules of Court assailing the August 24, 2007 Decision of the Court of Appeals
(CA) in CA-G.R. CV No. 82822.
On August 28, 2001, R&B Insurance issued Marine Policy No. MN-00105/2001
in favor of Columbia to insure the shipment of 132 bundles of electric copper
cathodes against All Risks. On August 28, 2001, the cargoes were shipped on
board the vessel "Richard Rey" from Isabela, Leyte, to Pier
10, North Harbor, Manila. They arrived on the same date.
Columbia engaged the services of Glodel for the release and withdrawal of the
cargoes from the pier and the subsequent delivery to its warehouses/plants.
Glodel, in turn, engaged the services of Loadmasters for the use of its delivery
trucks to transport the cargoes to Columbia’s warehouses/plants in Bulacan
and Valenzuela City.
The goods were loaded on board twelve (12) trucks owned by Loadmasters,
driven by its employed drivers and accompanied by its employed truck helpers.
Of the six (6) trucks route to Balagtas, Bulacan, only five (5) reached the
destination. One (1) truck, loaded with 11 bundles or 232 pieces of copper
cathodes, failed to deliver its cargo.
Later on, the said truck, was recovered but without the copper cathodes.
Because of this incident, Columbia filed with R&B Insurance a claim for insurance
indemnity in the amount ofP1,903,335.39. After the investigation, R&B
Insurance paid Columbia the amount ofP1,896,789.62 as insurance indemnity.
R&B Insurance, thereafter, filed a complaint for damages against both
Loadmasters and Glodel before the Regional Trial Court, Branch 14, Manila
(RTC), It sought reimbursement of the amount it had paid to Columbia for the
loss of the subject cargo. It claimed that it had been subrogated "to the right of
the consignee to recover from the party/parties who may be held legally liable
for the loss."
On November 19, 2003, the RTC rendered a decision holding Glodel liable for
damages for the loss of the subject cargo and dismissing Loadmasters’
counterclaim for damages and attorney’s fees against R&B Insurance.
Both R&B Insurance and Glodel appealed the RTC decision to the CA.
On August 24, 2007, the CA rendered that the appellee is an agent of appellant
Glodel, whatever liability the latter owes to appellant R&B Insurance Corporation
as insurance indemnity must likewise be the amount it shall be paid by appellee
Loadmasters. Hence, Loadmasters filed the present petition for review on
certiorari.
ISSUE: Whether or not Loadmasters and Glodel are common carriers to
determine their liability for the loss of the subject cargo.
RULING: The petition is PARTIALLY GRANTED. Judgment is rendered declaring
petitioner Loadmasters Customs Services, Inc. and respondent Glodel Brokerage
Corporation jointly and severally liable to respondent.
Under Article 1732 of the Civil Code, common carriers are persons, corporations,
firms, or associations engaged in the business of carrying or transporting
passenger or goods, or both by land, water or air for compensation, offering
their services to the public. Loadmasters is a common carrier because it is
engaged in the business of transporting goods by land, through its trucking
service. It is a common carrier as distinguished from a private carrier wherein
the carriage is generally undertaken by special agreement and it does not hold
itself out to carry goods for the general public. Glodel is also considered a
common carrier within the context of Article 1732. For as stated and well
provided in the case of Schmitz Transport & Brokerage Corporation v. Transport
8
Venture, Inc., a customs broker is also regarded as a common carrier, the
transportation of goods being an integral part of its business.
Loadmasters and Glodel, being both common carriers, are mandated from the
nature of their business and for reasons of public policy, to observe the
extraordinary diligence in the vigilance over the goods transported by them
according to all the circumstances of such case, as required by Article 1733 of
the Civil Code. When the Court speaks of extraordinary diligence, it is that extreme
measure of care and caution which persons of unusual prudence and
circumspection observe for securing and preserving their own property or
rights. With respect to the time frame of this extraordinary responsibility, the Civil
Code provides that the exercise of extraordinary diligence 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.
The Court is of the view that both Loadmasters and Glodel are jointly and
severally liable to R & B Insurance for the loss of the subject cargo. Loadmasters’
claim that it was never privy to the contract entered into by Glodel with the
consignee Columbia or R&B Insurance as subrogee, is not a valid defense.
For under ART. 2180. The obligation imposed by Article 2176 is demandable
not only for one’s own acts or omissions, but also for those of persons for whom
one is responsible.
xxxx
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though
the former are not engaged in any business or industry.
It is not disputed that the subject cargo was lost while in the custody of
Loadmasters whose employees (truck driver and helper) were instrumental in
the hijacking or robbery of the shipment. As employer, Loadmasters should be
made answerable for the damages caused by its employees who acted within the
scope of their assigned task of delivering the goods safely to the warehouse.
Glodel is also liable because of its failure to exercise extraordinary diligence. It
failed to ensure that Loadmasters would fully comply with the undertaking to
safely transport the subject cargo to the designated destination. Glodel should,
therefore, be held liable with Loadmasters. Its defense of force majeure is
unavailing.
For the consequence, Glodel has no one to blame but itself. The Court cannot
come to its aid on equitable grounds. "Equity, which has been aptly described as
‘a justice outside legality,’ is applied only in the absence of, and never against,
statutory law or judicial rules of procedure." The Court cannot be a lawyer and
take the cudgels for a party who has been at fault or negligent.
MALAYAN INSURANCE CO., INC vs. PHILIPPINES FIRST INSURANCE CO., INC
FACTS: Since 1989, Wyeth Philippines, Inc. (Wyeth) and respondent Reputable
Forwarder Services, Inc. (Reputable) had been annually executing a contract of
carriage, whereby the latter undertook to transport and deliver the former’s
products to its customers, dealers or salesmen.
Wyeth procured Marine Policy from respondent Philippines First Insurance Co.,
Inc. (Philippines First) to secure its interest over its own products.
Wyeth executed its annual contract of carriage with Reputable. It turned out,
however, that the contract was not signed by Wyeth’s representative/s.
Under the contract, Reputable undertook to answer for "all risks with respect to
the goods and shall be liable to the COMPANY (Wyeth), for the loss, destruction,
or damage of the goods/products due to any and all causes whatsoever,
including theft, robbery, flood, storm, earthquakes, lightning, and other force
majeure while the goods/products are in transit and until actual delivery to the
customers, salesmen, and dealers of the COMPANY".
The contract also required Reputable to secure an insurance policy on Wyeth’s
goods. Thus, Reputable signed a Special Risk Insurance Policy (SR Policy) with
petitioner Malayan for the amount of P1 million.
On October 6, 1994, during the effectivity of the Marine Policy and SR Policy,
Reputable received from Wyeth 1,000 boxes of Promil infant formula to be
delivered by Reputable to Mercury Drug Corporation in Quezon City.
Unfortunately, on the same date, the truck carrying Wyeth’s products was
hijacked by about 10 armed men.
Philippines First then demanded reimbursement from Reputable, having been
subrogated to the rights of Wyeth by virtue of the payment. The latter, however,
ignored the demand.
Philippines First instituted an action for sum of money against Reputable. In its
complaint, Philippines First stated that Reputable is a "private corporation
engaged in the business of a common carrier." In its answer. Reputable claimed
that it is a private carrier.
Disclaiming any liability, Malayan argued, among others, that under Section 5 of
the SR Policy, the insurance does not cover any loss or damage to property
which at the time of the happening of such loss or damage is insured by any
marine policy and that the SR Policy expressly excluded third-party liability
RTC - Reputable liable to Philippines First for the amount of indemnity it paid to
Wyeth, among others. In turn, Malayan was found by the RTC to be liable to
Reputable to the extent of the policy coverage.
They now filed the present petition.
1. Malayan also contends that the CA erred when it held that Reputable is a
private carrier and should be bound by the contractual stipulations in the
contract of carriage.
2. Reputable, meanwhile, contends that it is exempt from liability for acts
committed by thieves/robbers who act with grave or irresistible threat
whether it is a common carrier or a private/special carrier.
ISSUE:
1) Whether Reputable is a private carrier - YES
9
2) Whether Reputable is strictly bound by the stipulations in its contract of
carriage with Wyeth, such that it should be liable for any risk of loss or damage,
for any cause whatsoever, including that due to theft or robbery and other force
majeure - YES
HELD: As to issue no. 1
The rule on judicial admission, however, also states that such allegation,
statement, or admission is conclusive as against the pleader and that the facts
alleged in the complaint are deemed admissions of the plaintiff and binding upon
him. In this case, the pleader or the plaintiff who alleged that Reputable is a
common carrier was Philippines First. It cannot, by any stretch of imagination,
be made conclusive as against Reputable whose nature of business is in
question.
Philippines First is not in any position to make any admission, much more a
definitive pronouncement, as to the nature of Reputable’s business and there
appears no other connection between Philippines First and Reputable which
suggests mutual familiarity between them.
Moreover, records show that the alleged judicial admission of Philippines First
was essentially disputed by Reputable when it stated in paragraphs 2, 4, and 11
of its answer that it is actually a private or special carrier.23 In addition, Reputable
stated in paragraph 2 of its third-party complaint that it is "a private carrier
engaged in the carriage of goods."
Under Article 1732 of the Civil Code, common carriers are persons, corporations,
firms, or associations engaged in the business of carrying or transporting
passenger or goods, or both by land, water or air for compensation, offering
their services to the public. On the other hand, a private carrier is one wherein
the carriage is generally undertaken by special agreement and it does not hold
itself out to carry goods for the general public. A common carrier becomes a
private carrier when it undertakes to carry a special cargo or chartered to a
special person only.
2. On the second issue – Reputable is bound by the terms of the contract of
carriage.
The extent of a private carrier’s obligation is dictated by the stipulations of a
contract it entered into, provided its stipulations, clauses, terms and conditions
are not contrary to law, morals, good customs, public order, or public policy.
"The Civil Code provisions on common carriers should not be applied where the
carrier is not acting as such but as a private carrier. Public policy governing
common carriers has no force where the public at large is not involved."
Thus, being a private carrier, the extent of Reputable’s liability is fully governed
by the stipulations of the contract of carriage, one of which is that it shall be
liable to Wyeth for the loss of the goods/products due to any and all causes
whatsoever, including theft, robbery and other force majeure while the
goods/products are in transit and until actual delivery to Wyeth’s customers,
salesmen and dealers.
SPOUSES TEODORO AND NANETTE PEREÑA vs. SPOUSES NICOLAS AND
TERESITA ZARATE
FACTS: In June 1996, Nicolas and Teresita Zarate contracted Teodoro and
Nanette Pereña to transport their (Zarate’s) son, Aaron Zarate, to and from
school. The Pereñas were owners of a van being used for private school
transport.
At about 6:45am of August 22, 1996, the driver of the said private van, Clemente
Alfaro, while the children were on board including Aaron, decided to take a short
cut in order to avoid traffic. The usual short cut was a railroad crossing of the
Philippine National Railway (PNR).
Alfaro saw that the barandilla (the pole used to block vehicles crossing the
railway) was up which means it was okay to cross. He then tried to overtake a
bus. However, there was in fact an oncoming train but Alfaro no longer saw the
train as his view was already blocked by the bus he was trying to overtake. The
bus was able to cross unscathed but the van’s rear end was hit. During the
collision, Aaron, was thrown off the van. His body hit the railroad tracks and his
head was severed. He was only 15 years old.
It turns out that Alfaro was not able to hear the train honking from 50 meters
away before the collision because the van’s stereo was playing loudly.
The Zarates sued PNR and the Pereñas (Alfaro became at-large). Their cause of
action against PNR was based on quasi-delict. Their cause of action against the
Pereñas was based on breach of contract of common carriage.
In their defense, the Pereñas invoked that as private carriers they were not
negligent in selecting Alfaro as their driver as they made sure that he had a
driver’s license and that he was not involved in any accident prior to his being
hired. In short, they observed the diligence of a good father in selecting their
employee.
PNR also disclaimed liability as they insist that the railroad crossing they placed
there was not meant for railroad crossing (really, that’s their defense!).
The RTC ruled in favor of the Zarates. The Court of Appeals affirmed the RTC. In
the decision of the RTC and the CA, they awarded damages in favor of the Zarates
for the loss of earning capacity of their dead son.
The Pereñas appealed. They argued that the award was improper as Aaron was
merely a high school student, hence, the award of such damages was merely
speculative. They cited the case of People vs Teehankee where the Supreme
Court did not award damages for the loss of earning capacity despite the fact
that the victim there was enrolled in a pilot school.
ISSUES: Whether or not the defense of due diligence of a good father by the
Pereñas is untenable? – YES.
Whether or not the award of damages for loss of income is proper? – YES.
HELD: A carrier is a person or corporation who undertakes to transport or
convey goods or persons from one place to another, gratuitously or for hire. The
carrier is classified either as a private/special carrier or as a common/public
carrier. A private carrier is one who, without making the activity a vocation, or
without holding himself or itself out to the public as ready to act for all who may
10
desire his or its services, undertakes, by special agreement in a particular
instance only, to transport goods or persons from one place to another either
gratuitously or for hire. The provisions on ordinary contracts of the Civil Code
govern the contract of private carriage. The diligence required of a private carrier
is only ordinary, that is, the diligence of a good father of the family. In contrast,
a common carrier is a person, corporation, firm or association engaged in the
business of carrying or transporting passengers or goods or both, by land,
water, or air, for compensation, offering such services to the public. Contracts of
common carriage are governed by the provisions on common carriers of the Civil
Code, the Public Service Act, and other special laws relating to transportation. A
common carrier is required to observe extraordinary diligence, and is presumed
to be at fault or to have acted negligently in case of the loss of the effects of
passengers, or the death or injuries to passengers.
Defense of Due Diligence of a Good Father
This defense is not tenable in this case. The Pereñas are common carriers. They
are not merely private carriers. (Prior to this case, the status of private transport
for school services or school buses is not well settled as to whether or not they
are private or common carriers – but they were generally regarded as private
carriers). Private transport for schools are common carriers. The Pereñas, as
the operators of a school bus service were: (a) engaged in transporting
passengers generally as a business, not just as a casual occupation; (b)
undertaking to carry passengers over established roads by the method by which
the business was conducted; and (c) transporting students for a fee. Despite
catering to a limited clientèle, the Pereñas operated as a common carrier
because they held themselves out as a ready transportation indiscriminately to
the students of a particular school living within or near where they operated the
service and for a fee.
Being a common carrier, what is required of the Pereñas is not mere diligence
of a good father. What is specifically required from them by law is extraordinary
diligence – a fact which they failed to prove in court. Verily, their obligation as
common carriers did not cease upon their exercise of diligently choosing Alfaro
as their employee.
Award of Damages for Aaron’s loss of earning capacity despite he being a high
school student at the time of his death
The award is proper. Aaron was enrolled in a reputable school (Don Bosco). He
was of normal health and was an able-bodied person. Further, the basis of the
computation of his earning capacity was not on what he would have become. It
was based on the current minimum wage. The minimum wage was validly used
because with his circumstances at the time of his death, it is most certain that
had he lived, he would at least be a minimum wage earner by the time he starts
working. This is not being speculative at all.
The Teehankee case was different because in that case, the reason why no
damages were awarded for loss of earning capacity was that the defendants
there were already assuming that the victim would indeed become a pilot –
hence, that made the assumption speculative. But in the case of Aaron, there
was no speculation as to what he might be – but whatever he’ll become, it is
certain that he will at the least be earning minimum wage.
CAN A COMMON CARRIER BECOME A PRIVATE CARRIER?
HOME INSURANCE COMPANY vs. AMERICAN STEAMSHIP AGENCIES, INC. and
LUZON STEVEDORING CORPORATION
FACTS: “Consorcio Pesquero del Peru of South America” shipped freight pre-
paid at Peru, jute bags of Peruvian fish meal through SS Crowborough, covered
by clean bills of lading. The cargo, consigned to San Miguel Brewery, Inc., now
San Miguel Corporation, and insured by Home Insurance Company arrived in
Manila and was discharged into the lighters of Luzon Stevedoring Company.
When the cargo was delivered to consignee San Miguel Brewery Inc., there were
shortages causing the latter to lay claims against Luzon Stevedoring
Corporation, Home Insurance Company and the American Steamship Agencies
(shipowner), owner and operator of SS Crowborough.
Because the others denied liability, Home Insurance Company paid SMBI the
insurance value of the loss, as full settlement of the claim. Having been refused
reimbursement by both the Luzon Stevedoring Corporation and American
Steamship Agencies, Home Insurance Company, as subrogee to the consignee,
filed against them before the CFI of Manila a complaint for recovery of the
payment paid with legal interest, plus attorney’s fees.
In answer, Luzon Stevedoring Corporation alleged that it delivered with due
diligence the goods in the same quantity and quality that it had received the
same from the carrier.
The CFI, after trial, absolved Luzon Stevedoring Corporation, having found the
latter to have merely delivered what it received from the carrier in the same
condition and quality, and ordered American Steamship Agencies to pay Home
Insurance Company the amount demanded with legal interest plus attorney’s
fees.
Disagreeing with such judgment, American Steamship Agencies appealed directly
to Us.
ISSUE: Is the stipulation in the charter party of the owner’s non-liability valid so
as to absolve the American Steamship Agencies from liability for loss? – YES.
HELD: The judgment appealed from is hereby reversed and appellant is absolved
from liability to plaintiff.
The bills of lading, covering the shipment of Peruvian fish meal provide at the
back thereof that the bills of lading shall be governed by and subject to the terms
and conditions of the charter party, if any, otherwise, the bills of lading prevail
over all the agreements. On the bills are stamped “Freight prepaid as per charter
party. Subject to all terms, conditions and exceptions of charter party dated
London, Dec. 13, 1962.”
Section 2, paragraph 2 of the charter party, provides that the owner is liable for
loss or damage to the goods caused by personal want of due diligence on its
part or its manager to make the vessel in all respects seaworthy and to secure
that she be properly manned, equipped and supplied or by the personal act or
default of the owner or its manager. Said paragraph, however, exempts the
11
owner of the vessel from any loss or damage or delay arising from any other
source, even from the neglect or fault of the captain or crew or some other
person employed by the owner on board, for whose acts the owner would
ordinarily be liable except for said paragraph..
The provisions of our Civil Code on common carriers were taken from Anglo-
American law. Under American jurisprudence, a common carrier undertaking to
carry a special cargo or chartered to a special person only, becomes a private
carrier. As a private carrier, a stipulation exempting the owner from liability for
the negligence of its agent is not against public policy, and is deemed valid.
Such doctrine We find reasonable. The Civil Code provisions on common carriers
should not be applied where the carrier is not acting as such but as a private
carrier. The stipulation in the charter party absolving the owner from liability for
loss due to the negligence of its agent would be void only if the strict public policy
governing common carriers is applied. Such policy has no force where the public
at large is not involved, as in the case of a ship totally chartered for the use of a
single party.
And furthermore, in a charter of the entire vessel, the bill of lading issued by the
master to the charterer, as shipper, is in fact and legal contemplation merely a
receipt and a document of title not a contract, for the contract is the charter
party. The consignee may not claim ignorance of said charter party because the
bills of lading expressly referred to the same. Accordingly, the consignees under
the bills of lading must likewise abide by the terms of the charter party. And as
stated, recovery cannot be had thereunder, for loss or damage to the cargo,
against the shipowners, unless the same is due to personal acts or negligence
of said owner or its manager, as distinguished from its other agents or
employees. In this case, no such personal act or negligence has been proved
ARADA vs. CA
FACTS: Alejandro Arada doing business under the name and style South Negros
Enterprises is engaged in the business of small scale shipping as a common
carrier, servicing the hauling of cargoes of different corporations and companies
with 5 vessels it was operating. It entered into a contract with San Miguel
Corporation to transport as a common carrier cargoes of the latter from San
Carlos City Negros Occidental to Mandaue City using one of its vessels M/L Maya.
The cargoes of San Mig Corp valued at 176, 824. 80.
The master crew applied for clearance to sail which was denied by the Phil Coast
Guard due to a typhoon. However, the next day, it was granted clearance as
there was no storm and the sea was calm. So, ML Maya left for Mandaue City.
While it was navigating towards Cebu, a typhoon developed and said vessel sank
with whatever was left if its cargoes. The crew was rescued. The Board of Marine
Inquiry exonerated Arada and his crew from administrative liability.
Meanwhile, San Miguel Corporation filed with the RTC for the recovery of the value
of its cargoes anchored on breach of contract of carriage.
The RTC rendered its decision dismissing the claim of San Miguel for recovery of
the value of its cargoes. On appeal, the CA reversed the decision of the RTC.
Hence, this petition.
ISSUE: WON Arada is liable for the loss of the cargo of San Miguel Corporation?
– YES.
HELD: South Negros Enterprises was exercising its function as a common carrier
when it entered into a contract with San Miguel Corp to carry and transport the
latter’s cargoes. A common carrier both from the nature of its business and for
insistent reasons of public policy is burdened by law with the duty of exercising
extraordinary diligence not only in ensuring the safety of passengers, but in
caring for the goods transported by it. The loss, or deterioration or destruction
of goods turned over to the common carrier for the conveyance to a designated
destination raises instantly a presumption of fault or negligence on the part of
the carrier, save only in cases where such loss, destruction or deterioration
arises from extreme circumstances such as a natural disaster or calamity.
In order that a common carrier may be exempted from responsibility, the natural
disaster must have been the proximate cause of the loss. However, the common
carrier must exercise due diligence to prevent or minimize the loss before, during
and after the occurrence of the flood, storm or other natural disaster in order
that the common carrier may be exempted from liability from the destruction or
deterioration of the goods.
In the case at bar, Southern Negros failed to observe extraordinary diligence
over the cargo in question was negligent previous to the sinking of the carrying
vessel. The master crew knew that there was a typhoon coming before his
departure but did not check where it was. He should have verified first where the
typhoon was before departing. The master crew did not ascertain where the
typhoon was headed by the use of his vessel’s barometer and radio. Neither did
the captain of the vessel monitor and record the weather conditions as required
under Art. 612 of the Code of Commerce.
A common carrier is obliged to observed extraordinary diligence and the failure
of the master crew to ascertain the direction of the storm and the weather
condition of the path they would be traversing, constitute lack of foresight and
minimum vigilance over its cargoes taking into account the surrounding
circumstances of the case.
PLANTERS PRODUCTS, INC. vs. CA
FACTS: Planters Products - purchased from Mitsubishi Inter’l Corp. 9.3K
metric tons of Urea (fertilizer), 46% of which the latter shipped in bulk
aboard the cargo vessel M/V “Sun Plum” owned by Kyosei Kisen
Kabushiki Kaisha (KKKK) time charter-party on the vessel M/V “Sun
Plum” pursuant to the Uniform General Charter was entered into
between Mitsubishi as shipper/charterer and KKKK as shipowner. Before
loading the fertilizer aboard the vessel they were inspected by the
charterer’s representative and found fit. After the Urea fertilizer was
loaded in bulk by stevedores (somebody whose job is to load and unload
ships) hired by and under the supervision of the shipper, the steel
hatches were closed with heavy iron lids, covered with 3 layers of
tarpaulin, then tied with steel bonds. The hatches remained closed and
tightly sealed throughout the entire voyage. Port area was windy, certain
12
portions of the route to the warehouse were sandy and the weather was
variable, raining occasionally while the discharge was in progress. Survey
report revealed a shortage in the cargo of 106.726 M/T and that a
portion of the Urea fertilizer approximating 18 M/T was contaminated
with sand, rust and dirt. Planters Products sent a claim letter to
Soriamont Steamship Agencies, the resident agent of the carrier, for
damages
ISSUES:
1. WON a common carrier becomes a private carrier by reason of a
charter-party? – NO.
2. WON the shipowner was able to prove that he had exercised that
degree of diligence required of him under the law – YES.
HELD:
1. Charter-party – contract by which an entire ship, or some principal
part thereof, is let by the owner to another person for a specified time
or use; contract of affreightment by which the owner of a ship or other
vessel lets the whole or a part of her to a merchant or other person for
the conveyance of goods, on a particular voyage, in consideration of the
payment of freight
2 types of charter-party:
a. contract of affreightment – involves the use of shipping space on
vessels leased by the owner in part or as a whole, to carry goods for
others; may either be: i) time charter - vessel is leased to the charterer
for a fixed period of time; or ii) voyage charter - ship is leased for a
single voyage
b. charter by demise or bareboat charter – whole vessel is let to the
charterer with a transfer to him of its entire command and possession
and consequent control over its navigation, including the master and the
crew, who are his servants
In both types, the charter-party provides for the hire of vessel only, either
for a determinate period of time or for a single or consecutive voyage,
the shipowner to supply the ship’s stores, pay for the wages of the
master and the crew, and defray the expenses for the maintenance of
the ship.
Common or public carrier – see Art. 1732; extends to carriers either by
land, air or water which hold themselves out as ready to engage in
carrying goods or transporting passengers or both for compensation as
a public employment and not as a casual occupation
Distinction between a “common or public carrier” and a “private or
special carrier” lies in the character of the business, such that if the
undertaking is a single transaction, not a part of the general business or
occupation, although involving the carriage of goods for a fee, the
person or corporation offering such service is a private carrier
Common carrier - should observe extraordinary diligence in the vigilance
over the goods they carry; in case of loss, destruction or deterioration
of the goods, it is presumed to be at fault or to have acted negligently,
and the burden of proving otherwise rests on it
Private carrier - exercise of ordinary diligence in the carriage of goods
will suffice; no such presumption applies to private carriers.
Only when the charter includes both the vessel and its crew, as in a
bareboat or demise that a common carrier becomes private, at least
insofar as the particular voyage covering the charter-party is concerned.
When Planters Products chartered the vessel M/V “Sun Plum”, the ship
captain, its officers and compliment were under the employ of the
shipowner and therefore continued to be under its direct supervision and
control. As stranger to the crew and to the ship, Planters Products did
not have the duty of caring for its cargo as it did not have control of the
means in doing so.
2. Before the fertilizer was loaded, the 4 hatches of the vessel were
cleaned, dried and fumigated. After completing the loading of the cargo
in bulk in the ship’s holds, the steel pontoon hatches were closed and
sealed with iron lids, then covered with 3 layers of serviceable tarpaulins
which were tied with steel bonds. The hatches remained close and tightly
sealed while the ship was in transit as the weight of the steel covers
made it impossible for a person to open without the use of the ship’s
boom.
The hull of the vessel was in good condition, foreclosing the possibility
of spillage of the cargo into the sea or seepage of water inside the hull
of the vessel
Stevedores unloaded the cargo under the watchful eyes of the shipmates
who were overseeing the whole operation on rotation basis.
Urea also contains 46% nitrogen and is highly soluble in water. However,
during storage, nitrogen and ammonia do not normally evaporate even
on a long voyage, provided that the temperature inside the hull does not
exceed 80 degrees centigrade.
Dissipation of quantities of fertilizer, or its deterioration in value, is
caused either by an extremely high temperature in its place of storage,
or when it comes in contact with water.
Probability of the cargo being damaged or getting mixed or
contaminated with foreign particles was made greater by the fact that
13
the fertilizer was transported in “bulk,” thereby exposing it to the inimical
effects of the elements and the grimy condition of the various pieces of
equipment used in transporting and hauling it à risk the shipper or the
owner of the goods has to face
LOADSTAR SHIPPING vs. COURT OF APPEALS
FACTS: On November 19, 1984, loadstar received on board its M/V “Cherokee”
bales of lawanit hardwood, tilewood and Apitong Bolidenized for shipment. The
goods, amounting to P6,067, 178. Were insured for the same amount with the
Manila Insurance Company against various risks including “Total Loss by Total
Loss of the Vessel”. On November 20, 1984, on its way to Manila from the port
of Nasipit, Agusan Del Norte, the vessel, along with its cargo, sank off Limasawa
Island. As a result of the total loss of its shipment, the consignee made a claim
with loadstar which, however, ignored the same. As the insurer, MIC paid to the
insured in full settlement of its claim, and the latter executed a subrogation
receipt therefor. MIC thereafter filed a complaint against loadstar alleging that
the sinking of the vessel was due to fault and negligence of loadstar and its
employees.
In its answer, Loadstar denied any liability for the loss of the shipper’s goods
and claimed that the sinking of its vessel was due to force majeure. The court a
quo rendered judgment in favor of MIC., prompting loadstar to elevate the matter
to the Court of Appeals, which however, agreed with the trial court and affirmed
its decision in toto. On appeal, loadstar maintained that the vessel was a private
carrier because it was not issued a Certificate of Public Convenience, it did not
have a regular trip or schedule nor a fixed route, and there was only “one
shipper, one consignee for a special crago”.
ISSUE: Whether or not M/V Cherokee was a private carrier so as to exempt it
from the provisions covering Common Carrier? – NO.
HELD: Loadstar is a common carrier.
The Court held that LOADSTAR is a common carrier. It is not necessary that the
carrier be issued a certificate of public convenience, and this public character is
not altered by the fact that the carriage of the goods in question was periodic,
occasional, episodic or unscheduled. Further, the bare fact that the vessel was
carrying a particular type of cargo for one shipper, which appears to be purely
co-incidental; it is no reason enough to convert the vessel from a common to a
private carrier, especially where, as in this case, it was shown that the vessel was
also carrying passengers.
Article 1732 also carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled basis and
one offering such service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier offering its services to
the "general public," i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general
population.
REGISTERED OWNER LIABLE FOR OPERATION OF COMMON
CARRIERS; KABIT SYSTEM
EREZO vs. JEPTE
FACTS: Defendant-appellant is the registered owner of a six by six truck
bearing. On August, 9, 1949, while the same was being driven by Rodolfo
Espino y Garcia, it collided with a taxicab at the intersection of San Andres and
Dakota Streets, Manila. As the truck went off the street, it hit Ernesto Erezo and
another, and the former suffered injuries, as a result of which he died.
The driver was prosecuted for homicide through reckless negligence. The
accused pleaded guilty and was sentenced to suffer imprisonment and to pay
the heirs of Ernesto Erezo the sum of P3,000. As the amount of the judgment
could not be enforced against him, plaintiff brought this action against the
registered owner of the truck, the defendant-appellant.
The defendant does not deny at the time of the fatal accident the cargo truck
driven by Rodolfo Espino y Garcia was registered in his name. He, however,
claims that the vehicle belonged to the Port Brokerage, of which he was the
broker at the time of the accident. He explained, and his explanation was
corroborated by Policarpio Franco, the manager of the corporation, that the
trucks of the corporation were registered in his name as a convenient
arrangement so as to enable the corporation to pay the registration fee with his
backpay as a pre-war government employee. Franco, however, admitted that the
arrangement was not known to the Motor Vehicle Office.
The trial court held that as the defendant-appellant represented himself to be
the owner of the truck and the Motor Vehicle Office, relying on his representation,
registered the vehicles in his name, the Government and all persons affected by
the representation had the right to rely on his declaration of ownership and
registration. It, therefore, held that the defendant-appellant is liable because he
cannot be permitted to repudiate his own declaration.
ISSUE: WoN Jepte should be liable to Erezo for the injuries occasioned to the
latter because of the negligence of the driver even if he was no longer the owner
of the vehicle at the time of the damage (because he had previously sold it to
another) - YES
HELD: The registered owner, the defendant-appellant herein, is primarily
responsible for the damage caused to the vehicle of the plaintiff-appellee, but he
(defendant-appellant) has a right to be indemnified by the real or actual owner
of the amount that he may be required to pay as damage for the injury caused
to the plaintiff-appellant
The Revised Motor Vehicle Law provides that no vehicle may be used or operated
upon any public highway unless the same is properly registered. Not only are
vehicles to be registered and that no motor vehicles are to be used or operated
without being properly registered for the current year, but that dealers in motor
vehicles shall furnish the Motor Vehicles Office a report showing the name and
address of each purchaser of motor vehicle during the previous month and the
manufacturer's serial number and motor number.
14
Registration is required not to make said registration the operative act by which
ownership in vehicles is transferred, as in land registration cases, because the
administrative proceeding of registration does not bear any essential relation to
the contract of sale between the parties, but to permit the use and operation of
the vehicle upon any public
The main aim of motor vehicle registration is to identify the owner so that if any
accident happens, or that any damage or injury is caused by the vehicles on the
public highways, responsibility therefore can be fixed on a definite individual, the
registered owner.
A registered owner who has already sold or transferred a vehicle has the
recourse to a third-party complaint, in the same action brought against him to
recover for the damage or injury done, against the vendee or transferee of the
vehicle.
BENEDICTO vs. INTERMEDIATE APPELLATE COURT
FACTS: Greenhills Wood Industries bound itself to sell and deliver to Blue Star
Mahogany, Inc. 100,000 board feet of sawn lumber with the understanding that
an initial delivery would be made.
Greenhills resident manager in Maddela, Dominador Cruz, contracted Virgilio
Licuden, the driver of a cargo truck, to transport its sawn lumber to the
consignee Blue Star in Valenzuela, Bulacan; this cargo truck was registered in
the name of Ma. Luisa Benedicto, the proprietor of Macoven Trucking, a business
enterprise engaged in hauling freight the Manager of Blue Star called up
Greenhills’ president informing him that the sawn lumber on board the subject
cargo truck had not yet arrived in Valenzuela, Bulacan; because of the delay in
delivery Blue Star was constrained to look for other suppliers
Greenhill’s filed criminal case against driver Licuden for estafa; and a civil case
for recovery of the value of the lost sawn lumber plus damages against
Benedicto.
Benedicto denied liability as she was a complete stranger to the contract of
carriage, the subject truck having been earlier sold by her to Benjamin Tee; but
the truck had remained registered in her name because Tee have not yet fully
paid the amount of the truck; be that as it may, Tee had been operating the said
truck in Central Luzon from that and Licuden was Tee’s employee and not hers.
ISSUE: WoN Benedicto, being the registered owner of the carrier, should be held
liable for the value of the undelivered or lost sawn lumber? – YES.
HELD: The registered owner liable for consequences flowing from the operations
of the carrier, even though the specific vehicle involved may already have been
transferred to another person. This doctrine rests upon the principle that in
dealing with vehicles registered under the Public Service Law, the public has the
right to assume that the registered owner is the actual or lawful owner thereof It
would be very difficult and often impossible as a practical matter, for members
of the general public to enforce the rights of action that they may have for injuries
inflicted by the vehicles being negligently operated if they should be required to
prove who the actual owner is. Greenhills is not required to go beyond the
vehicle’s certificate of registration to ascertain the owner of the carrier.
BA FINANCE CORP vs. CA
FACTS: Amare, the driver of an Isuzu truck was involved in an accident which
caused the death of three persons. Amare was found guilty beyond reasonable
doubt of reckless imprudence. BA Finance was found liable for damages since
the truck was registered in its name. BA Finance contends that it should not be
held liable since it was not Amare’s employer at the time of the accident. It also
contends that the Isuzu truck was in the possession of Rock Component Phil, by
virtue of a lease agreement. Hence, BA Finance wants to prove who the
actual/real owner is at the time of the accident, and in accordance with such
proof, evade liability and lay the same on the person actually owning the vehicle.
ISSUES:
1. WON BA Finance should be held liable? - YES
2. WON BA Finance can escape liability by proving the actual/real owner of the
truck? - NO
HELD:
1. Yes, BA Finance is liable.
The registered owner of a certificate of public convenience is liable to the public
for the injuries or damages suffered by passengers or third persons caused by
the operation of said vehicle, even though the same had been transferred to a
third person. Under the same principle the registered owner of any vehicle, even
if not used for a public service, should primarily be responsible to the public or
to the third persons for injuries caused the latter while the vehicle is being driven
on the highways or streets.
2. No, the law does not allow him. The law, with its aim and policy in mind, does
not relieve him directly of the responsibility that the law fixes and places upon
him as an incident or consequence of registration. This may appear harsh but
nevertheless, a registered owner who has already sold or transferred a vehicle
has the recourse to a third-party complaint, in the same action brought against
him to recover for the damage or injury done, against the vendee or transferee
of the vehicle.
While the registered owner is primarily responsible for the damage caused,
he has a right to be indemnified by the real or actual owner of the amount that
he may be required to pay as damage for the injury caused.
LIM & GUNNABAN vs. CA & GONZALES
FACTS: Gonzales purchased an Isuzu passenger jeepney from Vallarta. Vallarta
remained as the holder of a certificate of public convenience and the registered
owner of the jeepney. Subsequently, the jeepney collided with a ten-wheeler truck
owned by Lim, driven by Gunnaban which resulted in the death of 1 passenger
and injuries to all others. Failure to arrive to a settlement with Lim for the repair
of the jeepney, Gonzales brought an action for damages against Lim &
Gunnaban. Lim denied liability asserting that Vallarte, and not Gonzales, is the
real party in interest being the registered owner of the jeepney. He further
asserts that an operator of the vehicle continues to be its operator as he remains
the operator of record; and that to recognize an operator under the kabit system
as the real party in interest and to countenance his claim for damages is utterly
subversive of public policy.
15

ISSUE: WON Gonzales, an operator under the kabit system (considering that he
is not the registered owner of the jeepney), may sue for damages against Lim.
Or, WON Gonzales is a real party in interest. - YES
HELD: The evil sought to be prevented in enjoining the kabit system* does not
exist.
1 Neither of the parties to the pernicious kabit system is being held liable for
damages.
2 The case arose from the negligence of another vehicle in using the public road
to whom no representation, or misrepresentation, as regards the ownership and
operation of the passenger jeepney was made and to whom no such
representation, or misrepresentation, was necessary. Thus it cannot be said that
Gonzales and the registered owner of the jeepney were in stoppels for leading
the public to believe that the jeepney belonged to the registered owner.
3 The riding public was not bothered nor inconvenienced at the very least by the
illegal arrangement. On the contrary, it was private respondent himself who had
been wronged and was seeking compensation for the damage done to him.
Certainly, it would be the height of inequity to deny him his right.
Thus, it is evident that private respondent has the right to proceed against
petitioners for the damage caused on his passenger jeepney as well as on his
business.
The kabit system is an arrangement whereby a person who has been granted a
certificate of public convenience allows other persons who own motor vehicles to
operate them under his license, sometimes for a fee or percentage of the
earnings. Although the parties to such an agreement are not outrightly penalized
by law, thekabit system is invariably recognized as being contrary to public policy
and therefore void and inexistent under Art. 1409 of the Civil Code.
It would seem then that the thrust of the law in enjoining the kabit system is not
so much as to penalize the parties but to identify the person upon whom
responsibility may be fixed in case of an accident with the end view of protecting
the riding public. The policy therefore loses its force if the public at large is not
deceived, much less involved.
STATE REGULATION OF COMMON CARRIERS
FISHER vs. YANGCO STEAMSHIP
Facts: The complained alleges that plaintiff is a stockholder in Yangco Steamship
Company, the owner of the large steam vessels, duly licensed to engage in the
coastwise trade of the Philippine Island; that on or about June 10, 1912, the
directors of the company, adopted a resolution which was thereafter ratified and
affirmed by the stockholders of the company “expressly declaring and providing
that the classes of merchandise to be carried by the company in its business as
common carrier do not include dynamite, powder or other explosives, and
expressly prohibiting the officers, agents an d servants of the company from
offering to carry, accepting for carriage or carrying said dynamite, powder or
other explosives.”
Issue: Whether the refusal of the owner and officer of a steam vessel, to accept
for carriage dynamite, powder or other explosives for carriage can be held to be
a lawful act?
Held: The traffic in dynamite gun powder and other explosive is vitally essential
to the material and general welfare of the inhabitants of this islands and it these
products are to continue in general use throughout the Philippines they must be
transported from water to port to port in various island which make up the
Archipelago.
It follows that a refusal by a particular vessel engage as a common carrier of
merchandise in coastwise trade in the Philippine Island to accept such explosives
for carriage constitutes a violation.
The prohibition against discrimination penalized under the statute, unless it can
be shown that there is so Real and substantial danger of disaster necessarily
involved in the courage of any or all of this article of merchandise as to render
such refusal a due or unnecessary or a reasonable exercise or prudence and
discreation on the part of the ship owner.
PANGASINAN TRANSPORT CO. vs. PUBLIC SERVICE COMMISSION
FACTS: This is a case on the certificate of public convenience of petitioner
Pangasinan Transportation Co. Inc (Pantranco). The petitioner has been
engaged for the past twenty years in the business of transporting passengers in
the province of Pangasinan and Tarlac, Nueva Ecija and Zambales. On August
26, 1939, Pantranco filed with the Public Service Commission (PSC) an
application to operate 10 additional buses. PSC granted the application with 2
additional conditions which was made to apply also on their existing
business. Pantranco filed a motion for reconsideration with the Public Service
Commission. Since it was denied, Pantranco then filed a petition/ writ of certiorari.
ISSUE: Whether the legislative power granted to Public Service Commission:- is
unconstitutional and void because it is without imitation- constitutes undue
delegation of powers? – NO.
HELD: The challenged provisions of Commonwealth Act No. 454 are valid and
constitutional because it is a proper delegation of legislative power, so called
Subordinate Legislation. It is a valid delegation because of the growing
complexities of modern government, the complexities or multiplication of
the subjects of governmental regulation and the increased difficulty of
administering the laws. All that has been delegated to the Commission is the
administrative function, involving the use of discretion to carry out the will of the
National Assembly having in view, in addition, the promotion of public interests
in a proper and suitable manner. The Certificate of Public Convenience is
neither a franchise nor contract, confers no property rights and is a mere license
or privilege, subject to governmental control for the good of the public. PSC has
the power, upon notice and hearing, to amend, modify, or revoked at any time
any certificate issued, whenever the facts and circumstances so warranted. The
limitation of 25 years was never heard, so the case was remanded to PSC for
further proceedings. In addition, the Court ruled that, the liberty and property of
16
the citizens should be protected by the rudimentary requirements of fair
play. Not only must the party be given an opportunity to present his case and to
adduce evidence tending to establish the rights that he asserts but the tribunal
must consider the evidence presented. When private property is affected with a
public interest, it ceased to be juris privati or private use only.
PHILIPPINE AIRLINES, INC. vs. CIVIL AERONAUTICS BOARD
FACTS: Grand Air applied for a Certificate of Public Convenience and Necessity
with the Civil Aeronautics Board (CAB). The Chief Hearing Officer issued a notice
of hearing directing Grand Air to serve a copy of the application and notice to all
scheduled Philippine Domestic operators. Grand Air filed its compliance and
requested for a Temporary Operating Permit (TOP). PAL filed an opposition to
the application on the ground that the CAB had no jurisdiction to hear the
application until Grand Air first obtains a franchise to operate from Congress. The
Chief Hearing Officer denied the opposition and the CAB approved the issuance
of the TOP for a period of 3 months. The opposition for the TOP was likewise
denied. The CAB justified its assumption of jurisdiction over Grand Air’s
application on the basis of Republic Act 776 which gives it the specific power to
issue any TOP or Certificate of Public Convenience and Necessity.
ISSUE: Whether or not the CAB can issue a Certificate of Public Convenience and
Necessity or TOP even though the prospective operator does not have a
legislative franchise?
HELD: Yes, as mentioned by the CAB, it is duly authorized to do so under
Republic Act 776 and a legislative franchise is not necessary before it may do
so, since Congress has delegated the authority to authorize the operation of
domestic air transport services to the CAB, an administrative agency. The
delegation of such authority is not without limits since Congress had set specific
standard and limitations on how such authority should be exercised.
Public convenience and necessity exists when the proposed facility will meet a
reasonable want of the public and supply a need which the existing facilities do
not adequately afford.
Thus, the Board should be allowed to continue hearing the application, since it
has jurisdiction over it provided that the applicant meets all the requirements of
the law.
NATURE AND BASIS OF LIABILITY
CANGCO V. MRR
FACTS: January 20, 1915 around 7 to 8 p.m.: Jose Cangco arose from his seat
in the 2nd class-car where he was riding and, making, his exit through the door,
took his position upon the steps of the coach, seizing the upright guardrail with
his right hand for support
As the train slowed down another passenger and also an employee of the
railroad company Emilio Zuñiga got off the same car alighting safely at the point
where the platform begins to rise from the level of the ground.
When the train had proceeded a little farther Cangco stepped off but 1 or both
of his feet came in contact with a sack of watermelons so his feet slipped from
under him and he fell violently on the platform.
His body rolled from the platform and was drawn under the moving car, where
his right arm was badly crushed and lacerated.
the car moved forward possibly 6 meters before it came to a full stop
He was bought to the hospital in the city of Manila where an examination was
made and his arm was amputated
operation was unsatisfactory so he had second operation at another hospital
was performed and the member was again amputated higher up near the
shoulder expending a total of P790.25
It is customary season for harvesting these melons and a large lot had been
brought to the station for the shipment to the market
CFI: favored Manila Railroad Co. (MRR)- Cangco had failed to use due caution in
alighting from the coach and was therefore precluded form recovering
ISSUE: W/N MRR should be held liable? – YES.
HELD: YES. lower court is reversed, and judgment is hereby rendered plaintiff for
the sum of P3,290.25
It can not be doubted that the employees of the railroad company were guilty of
negligence. It necessarily follows that the defendant company is liable for the
damage thereby occasioned unless recovery is barred by the plaintiff's own
contributory negligence.
In resolving this problem it is necessary that each of these conceptions of liability,
to-wit, the primary responsibility of the defendant company and the contributory
negligence of the plaintiff should be separately examined
Article 1903 of the Civil Code is not applicable to obligations arising ex contractu,
but only to extra-contractual obligations — or to use the technical form of
expression, that article relates only to culpa aquiliana and not to culpa
contractual
article 1903 of the Civil Code is not applicable to acts of negligence which
constitute the breach of a contract
two things are apparent: (1) That when an injury is caused by the negligence of
a servant or employee there instantly arises a presumption of law that there was
negligence on the part of the master or employer either in selection of the
servant or employee, or in supervision over him after the selection, or both; and
(2) that that presumption is juris tantum and not juris et de jure, and
consequently, may be rebutted. It follows necessarily that if the employer shows
to the satisfaction of the court that in selection and supervision he has exercised
the care and diligence of a good father of a family, the presumption is overcome
and he is relieved from liability.
17

As a general rule . . . it is logical that in case of extra-contractual culpa, a suing
creditor should assume the burden of proof of its existence, as the only fact upon
which his action is based; while on the contrary, in a case of negligence which
presupposes the existence of a contractual obligation, if the creditor shows that
it exists and that it has been broken, it is not necessary for him to prove
negligence.
The test by which to determine whether the passenger has been guilty of
negligence in attempting to alight from a moving railway train, is that of ordinary
or reasonable care. It is to be considered whether an ordinarily prudent person,
of the age, sex and condition of the passenger, would have acted as the
passenger acted under the circumstances disclosed by the evidence. This care
has been defined to be, not the care which may or should be used by the prudent
man generally, but the care which a man of ordinary prudence would use under
similar circumstances, to avoid injury.
Women, it has been observed, as a general rule are less capable than men of
alighting with safety under such conditions, as the nature of their wearing apparel
obstructs the free movement of the limbs. Again, it may be noted that the place
was perfectly familiar to the plaintiff as it was his daily custom to get on and of
the train at this station. There could, therefore, be no uncertainty in his mind with
regard either to the length of the step which he was required to take or the
character of the platform where he was alighting. Our conclusion is that the
conduct of the plaintiff in undertaking to alight while the train was yet slightly
under way was not characterized by imprudence and that therefore he was not
guilty of contributory negligence.
at the time of the accident, was earning P25 a month as a copyist clerk, and that
the injuries he has suffered have permanently disabled him from continuing that
employment. Defendant has not shown that any other gainful occupation is open
to plaintiff. His expectancy of life, according to the standard mortality tables, is
approximately thirty-three years. We are of the opinion that a fair compensation
for the damage suffered by him for his permanent disability is the sum of P2,500,
and that he is also entitled to recover of defendant the additional sum of
P790.25 for medical attention, hospital services, and other incidental
expenditures connected with the treatment of his injuries.
VDA. DE MEDINA v. CRESENCIA
FACTS: May 31, 1953 – a passenger jeep driven by Brigido Avorque smashed
into a Meralco post on Azcarraga street, resulting in the death of Vicente Medina
(passenger). A crim case for homicide thru reckless imprudence was filed against
driver to which he pleaded guilty on Sept. 9, 1953.
Heirs of Medina reserved their right to file a separate action for dmgs and
brought suit on June 16, 1953 against driver and Cresencia (registered owner
and operator of jeep). Cresencia disclaimed liability saying that he had sold the
jeep in question to Cudiamat (and that there were many subsequent sales after
that until it was purchased in 1953 by Rosario Avorque). The complaint was
amended to include Rosario who admitted to buying the jeep but denied being
the public utility operator of the same. C & R made manifestations admitting that
based on the records of the Motor Vehicles Office and Public Service Commission,
Cresencia was still the registered operator of the jeep while Rosario was the
owner at the time of the accident.
LC: as far as the public is concerned, Cresencia is still the owner and is liable
solidarily with Brigido. Awarded 6k compensatory dmgs, 30k moral dmgs, 10k
exemplary dmgs, 10k nominal dmgs, 5k attys fees and costs. Rosario is absolved
from liability.
ISSUE:
Who is the liable with Brigido (Cresencia or Rosario)? Cresencia
What is the basis of the liability? Culpa contractual
WoN the award of Nominal damages was proper. NO. Nominal damages deleted.
HELD:
1. As held in the case of Montoya v Ignacio: Sec. 20 (g) CA No. 146 as amended,
requires approval of the Public Service Commission (PSC) in order a
franchise/any privilege pertaining thereto may be sold/leased without infringing
the certificate issued to the grantee. This means that:
(1) if property covered by the franchise is transferred/leased without this
requisite approval, the transfer isn’t binding against the public or the PSC; and
(2) in contemplation of law the grantee of record continues to be responsible
under the franchise in relation to the Commission and to the public.
Reason for the rule: franchise is personal in nature + so that PSC may take
proper safeguards (WoN there are justifiable grounds for the transfer/lease of
property covered by franchise OR WoN sale/lease is detrimental to public) to
protect the interest of the public. Since the sale of the jeepney was without the
approval of PSC, Cresencia being the registered owner and operator, is correctly
held liable.
2. Wrt basis of liability
Cresencia: the basis of the action is ER’s subsidiary liability under the RPC for
dmgs arising from EE’s criminal acts. Since Rosario admitted that she is the
employer, she should be the one subsidiarily liable for Brigido’s acts.
SC: The basis for the action isn’t ER’s subsidiary liability but on a breach of the
carrier’s contractual obligation to carry its passengers safely to their destination.
Since the liability for culpa contractual is direct and immediate, there’s no need
to prove Brigido’s insolvency before damages can be recovered from Cresencia.
3. While the award is not questioned, the Ct said that the award of nominal
damages in this case is untenable since the same cannot co-exist with
compensatory damages. The purpose for nominal damages is to vindicate or
recognize a right that has been violated and not to indemnify the plaintiff for any
loss suffered by him (Art 2221, 2223 NCC). Since the LC already awarded
compensatory and exemplary damages, the award for nominal damages is
unnecessary and improper.
PAL V. CA
FACTS: December 1950, he complained toPAL through its authorized official
about the slow reaction and poor judgment of Captain Bustamante.
Notwithstanding said complaint, defendant allowed the pilot to continue flying.
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January 8, 1951: Jesus V. Samson flew as co-pilot on a regular flight from Manila
to Legaspi with stops at Daet, Camarines Norte and Camarines Sur, with Captain
Bustamante as commanding pilot of a PAL C-47 plane
on attempting to land the plane at Daet airport, Captain Bustamante due to his
very slow reaction and poor judgment overshot the airfield and as a result,
notwithstanding the diligent efforts of the Samson to avert an accident, the
airplane crashlanded beyond the runway; that the jolt caused the head of the
plaintiff to hit and break through the thick front windshield of the airplane causing
him severe brain concussion, wounds and abrasions on the forehead with intense
pain
instead of expert and proper medical treatment called for by the nature and
severity of his injuries, PAL simply referred him to a company physician, a general
medical practitioner, who limited the treatment to the exterior injuries without
examining the severe brain concussion
several days after the accident, PAL called back the Samson to active duty as
co-pilot, and was never given any examination
he had been having periodic dizzy spells and had been suffering from general
debility and nervousness
December 21, 1953: he was discharged due to his physical disabilityCFI: PAL to
pay the Samson
§ P1988,000.00 as unearned income or damages
§ P50,000.00 for moral damages
§ P20,000.00 as attorney’s fees
§ P5,000.00 as expenses of litigation
CA: modified entitled to the legal rate of interest n unearned income
ISSUE: W/N PAL was negligent and was liable
HELD: YES. affirmed with slight modification in that the correct amount of
compensatory damages is P204,000.00
Even the doctors presented by PAL admit vital facts about the brain injury. Dr.
Bernardo and Dr. Reyes admits that due to the incident, the plaintiff continuously
complained of his fainting spells, dizziness and headache everytime he flew as a
co-pilot and everytime he went to the clinic no less than 25 times
We also find the imputation of gross negligence by respondent court to PAL for
having allowed Capt. Delfin Bustamante to fly on that fateful day of the accident
on January 8, 1951 to be correct
Bustamante was sick. He admittedly had tumor of the nasopharynx (nose)
The fact that the complaint was not in writing does not detract anything from
theseriousness thereof, considering that a miscalculation would not only cause
the death of the crew but also of the passengers.
One month prior to the crash-landing, when the pilot was preparing to land in
Daet, plaintiff warned him that they were not in the vicinity of Daet but above the
town of Ligao. The plane hit outside the airstrip. In another instance, the pilot
would hit the Mayon Volcano had not Samson warned him.
At least, the law presumes the employer negligent imposing upon it the burden
of proving that it exercised the diligence of a good father of a family in the
supervision of its employees.
PAL would want to tie Samson to the report he signed about the crash-landing.
The report was prepared by his pilot and because the latter pleaded that he had
a family too and would have nowhere to go if he lost his job, Samson’s
compassion would not upturn the truth about the crash-landing
Art. 1733. Common carriers, from the nature of their business and for reasons
of public policy, are bound to observe extraordinary diligence in the vigilance
over the goods and for the safety of the passengers transported by them,
according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed
in Articles 1734, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence
for the safety of the passengers is further set forth in articles 1755 and 1756.
Art. 1755. A common carrier is bound to carry the passenger safely as far as
human care and foresight can provide, using the utmost diligence of very
cautious persons, with a due regard for all the circumstances.
Art. 1756. In case of death of or injuries to passengers, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove
that they observed extraordinary diligence as prescribed in Articles 1733 and
1755.
Article 2205 of the New Civil Code of the Philippines “damages may be recovered
for loss or impairment of earning capacity in cases of temporary or permanent
personal injury."
Art. 1711. Owners of enterprises and other employers are obliged to pay
compensation for the death or injuries to their laborers, workmen, mechanics or
other employees, even though the event may have been purely accidental or
entirely due to a fortuitous cause, if the death or personal injury arose out of
and in the course of the employment. The employer is also liable for
compensation if the employee contracts any illness or disease caused by such
employment or as the result of the nature of the employment. If the mishap was
due to the employee’s own notorious negligence, or voluntary act, or
drunkenness, the employer shall not be liable for compensation. When the
employee’s lack of due care contributed to his death or injury, the compensation
shall be equitably reduced.
Art. 1712. If the death or injury is due to the negligence of a fellow-worker, the
latter and the employer shall be solidarily liable for compensation. If a fellow-
worker’s intentional or malicious act is the only cause of the death or injury, the
employer shall not be answerable, unless it should be shown that the latter did
not exercise due diligence in the selection or supervision of the plaintiffs fellow-
worker.
19
Articles 1169, 2209 and 2212 of the Civil Code govern when interest shall be
computed.
The correct amount of compensatory damages upon which legal interest shall
accrue from the filing of the complaint is P204,000.00 as herein computed and
not P198,000.00
NTFC VS. LORENZO SHIPPING CORPORATION (LSC)
FACTS: The Philippine government entered into a contract of carriage of goods
with petitioner NTFC whereby the latter shipped bags of non-fat dried milk
through respondent LSC. The consignee named in the bills of lading issued by
the respondent was Abdurahma Jama, petitioner’s branch supervisor in
Zamboanga City.
On reaching the port of Zamboanga City, the respondent’s agent unloaded the
goods and delivered the same to petitioner’s warehouse. Before each delivery,
the delivery checkers of respondent’s agent requested Jama to surrender the
original bills of lading, but the latter merely presented certified true copies
thereof. Upon completion of each delivery, the delivery checkers asked Jama to
sign the delivery receipts. However, at times when Jama had to attend to other
business before a delivery was completed, he instructed his subordinates to sign
the delivery receipts for him.
Notwithstanding the precautions taken, petitioner NTFC allegedly did not receive
the good and filed a formal claim for non-delivery of the goods shipped through
respondent. Respondent explained that the cargo had already been delivered to
Jama. The government through the DOH, CARE and NTFC as plaintiffs filed an
action for breach of contract of carriage against respondent as defendant.
ISSUE: Whether or not respondent is presumed at fault or negligent as common
carrier for the loss or deterioration of the goods.
HELD: Article 1733 of the Civil Code demands that a common carrier observe
extraordinary diligence over the goods transported by it. Extraordinary diligence
is that extreme measure of care and caution which persons of unusual prudence
and circumspection use for securing and preserving their own property or rights.
This exacting standard imposed on common carriers in a contract of carriage of
goods is intended to tilt the scales in favor of the shipper who is at the mercy of
the common carrier once the goods have been lodged for shipment. Hence, in
case of loss of goods in transit, the common carrier is presumed under the law
to have been at fault or negligent. However, the presumption of fault or
negligence may be overturned by competent evidence showing that the common
carrier has observed extraordinary diligence over the goods.
The respondent has observed such extraordinary diligence in the delivery of the
goods. Prior to releasing the goods to Jama, the delivery checkers required the
surrender of the original bills of lading, and in their absence, the certified true
copies showing that Jama was indeed the consignee of the goods. In addition,
they required Jama or his designated subordinates to sign the delivery receipts
upon completion of each delivery.
NORTHWEST AIRLINES V CHIONG
FACTS: Philimare, as the authorized Philippine agent of TransOcean, hired
Chiong as third engineer of TransOcean’s vessel M/V Elbia. Subsequently,
Philmare dispatched a letter of guarantee to CL Hutchins and Co., TranOcean’s
agent at the San Diego Port, confirming Chiong’s arrival in time to board the
vessel. For this purpose, Philimare purchased for Chiong a Northwest plane ticket
for San Diego from Manila. Chiong, on queue at the check-in counter, was
informed that his name did not appear in the list of confirmed departing
passengers. He was directed to speak to a man standing outside the Northwest’s
counters from whom Chiong could allegedly obtain a boarding pass. Posthaste,
Chiong approached the man but having no $100 to pay for the boarding pass
he went on queue at the check-in counter again and presented his ticket where
he was made to wait. When Chiong approached Calvo if she had money for the
boarding pass, the latter found something amiss because his plane ticket was
already confirmed. Ultimately, Chiong was not allowed to board the flight and was
unable to work at the M/V Elbia.
It appears that Chiong’s name was crossed out and substituted with "W. Costine"
in Northwest’s Air Passenger Manifest.
Chiong demanded as recompense: (1) the amount equivalent to Chiong’s salary
under the latter’s Crew Agreement with TransOcean; (2) P15,000 for Chiong’s
expenses in fetching and bringing his family from Samar to Manila; (3) P500,000
as moral damages; and (4) P500,000 as legal fees. When Northwest demurred,
Chiong filed a complaint for breach of contract of carriage.
Northwest contradicted the claim that it breached its contract of carriage with
Chiong, reiterating that Chiong had no cause of action against it because per its
records, Chiong was a "no-show" passenger.
The RTC rendered a Decision finding preponderance of evidence in favor of
Chiong, and holding Northwest liable for breach of contract of carriage. The RTC
ruled that the evidence adduced by the parties supported the conclusion that
Chiong was deliberately prevented from checking-in and his boarding pass
unjustifiably withheld to accommodate an American passenger by the name of
W. Costine. The CA affirmed the RTC ruling.
ISSUE: Whether Northwest breached its contract of carriage with Chiong and if
so, whether it is liable for compensatory, actual, moral and exemplary damages,
attorney’s fees, and costs of suit
HELD: In addition to his testimony, Chiong’s evidence consisted of a Northwest
ticket, Chiong’s passport and seaman service record book duly stamped at the
PCG counter, and the testimonies of Calvo, Florencio Gomez, and Philippine
Overseas Employment and Administration (POEA) personnel who all identified
the signature and stamp of the PCG on Chiong’s passport.
Northwest did not present any evidence to support its belated defense that
Chiong departed from the Philippines on April 17, 1989 to work as Third
Engineer on board M/V Elbia under the original crew agreement. Its bare-faced
claim that Chiong was a no-show passenger was belied by the records.
Even if Chiong left the Philippines on April 17, 1989, it would not necessarily
prove that Chiong was a "no-show" on April 1, 1989. Neither does it negate the
already established fact that Chiong had a confirmed ticket for April 1, 1989, and
20
first passed through the PCG counter without delay, then reached and was at the
Northwest check-in counters on time for the scheduled flight.
Northwest breached its contract of carriage with Chiong.
Time and again, we have declared that a contract of carriage, in this case, air
transport, is primarily intended to serve the traveling public and thus, imbued
with public interest. The law governing common carriers consequently imposes
an exacting standard of conduct. As the aggrieved party, Chiong only had to
prove the existence of the contract and the fact of its non-performance by
Northwest, as carrier, in order to be awarded compensatory and actual damages.
Article 2220 of the Civil Code of the Philippines, an award of moral damages, in
breaches of contract, is in order upon a showing that the defendant acted
fraudulently or in bad faith. Bad faith does not simply connote bad judgment or
negligence. It imports a dishonest purpose or some moral obliquity and
conscious doing of a wrong. It means breach of a known duty through some
motive, interest or ill will that partakes of the nature of fraud.
The award of exemplary damages is also correct given the evidence that
Northwest acted in an oppressive manner towards Chiong.
Attorney’s fees may be awarded when a party is compelled to litigate or incur
expenses to protect his interest, or where the defendant acted in gross and
evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just and
demandable claim.
PHILIPPINES FIRST INSURANCE CO., INC. VS WALLEM
FACTS: October 1995, Anhui Chemicals Import and Export Corp. loaded on board
M/S Offshore Master a shipment consisting of sodium sulphate anhydrous,
complete and in good order for transportation to and delivery at the port of
Manila for consignee, covered by a clean bill of lading.
On October 16, 1995, the shipment arrived in port of manila and was discharged
which caused various degrees of spillage and losses as evidence by the turn
over survey of the arrastre operator. Asia Star Freight delivered the shipments
from pier to the consignees in Quezon City, during the unloading, it was found
by the consignee that the shipment was damaged and in bad condition.
April 29, 1996, the consignee filed a claim with Wallem for the value of the
damaged shipment, to no avail. Since the shipment was insured with Phil. First
Insurance against all risks in the amount of P2,470,213.50. The consignee filed
a claim against the First Insurance. First insurance after examining the turn-over
survey, the bad order certificate and other documents paid the consignee but
later on sent a demand letter to Wallem for the recovery of the amount paid to
the consignee (in exercise of its right of subrogation). Wallem did not respond
to the claim.
First Insurance then instituted an action before RTC for damages against Wallem.
RTC held the shipping company and the arrastre operator solidarily liable since
both are charged with the obligation to deliver the goods in good order
condition.
The CA reversed and set aside the RTC's decision. CA says that there is no
solidary liability between the carrier and the arrastre because it was clearly
established that the damage and losses of the shipment were attributed to the
mishandling by the arrastre operator in the discharge of the shipment.
ISSUES:
1. Whether or not the Court of Appeals erred in not holding that as a common
carrier, the carriers duties extend to the obligation to safely discharge the cargo
from the vessel;
2. Whether or not the carrier should be held liable for the cost of the damaged
shipment;
3. Whether or not Wallems failure to answer the extra judicial demand by
petitioner for the cost of the lost/damaged shipment is an implied admission of
the formers liability for said goods;
4. Whether or not the courts below erred in giving credence to the testimony of
Mr. Talens.
HELD:
(1) Yes, the vessel is a common carrier, and thus the determination of the
existence or absence of liability will be gauged on the degree of diligence
required of a common carrier. (2) The first and second issue will be resolved
concurrently.
(3) The damage of the shipment was documented by the turn0over survey and
request for bad order survey, with these documents, petitioner insist that the
shipment incurred damages while still in the care and responsibility of Wallem
before it was turned over to the arrastre operator. However, RTC found the
testimony of Mr. Talens (cargo surveyor) that the loss was caused by the
mishandling of the arrastre operator. This mishandling was affirmed by the CA
which was the basis for declaring the arrastre operator solely liable for the
damage.
It is established that damage or losses were incurred by the shipment during the
unloading. As common carrier, they are bound to observe extraordinary diligence
in the vigilance over the goods transported by them. Subject to certain
exceptions enumerated under Article 1734 of the Civil Code, common carriers
are responsible for the loss, destruction, or deterioration of the goods. 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.
For marine vessels, Article 619 of the Code of Commerce provides that the ship
captain is liable for the cargo from the time it is turned over to him at the dock
or afloat alongside the vessel at the port of loading, until he delivers it on the
shore or on the discharging wharf at the port of unloading, unless agreed
otherwise.
COGSA provides that under every contract of carriage of goods by sea, the carrier
in relation to the loading, handling, stowage, carriage, custody, care, and
discharge of such goods, shall be subject to the responsibilities and liabilities
and entitled to the rights and immunities set forth in the Act. Section 3 (2) thereof
then states that among the carriers responsibilities are to properly and carefully
load, handle, stow, carry, keep, care for, and discharge the goods carried.
On the other hand, the functions of an arrastre operator involve the handling of
cargo deposited on the wharf or between the establishment of the consignee or
shipper and the ship's tackle. Being the custodian of the goods discharged from
a vessel, an arrastre operator's duty is to take good care of the goods and to
turn them over to the party entitled to their possession.
Handling cargo is mainly the arrastre operator's principal work so its
drivers/operators or employees should observe the standards and measures
necessary to prevent losses and damage to shipments under its custody. Thus,
21
in this case the appellate court is correct insofar as it ruled that an arrastre
operator and a carrier may not be held solidarily liable at all times. But the
precise question is which entity had custody of the shipment during its unloading
from the vessel?
The records are replete with evidence which show that the damage to the bags
happened before and after their discharge and it was caused by the stevedores
of the arrastre operator who were then under the supervision of Wallem.
It is settled in maritime law jurisprudence that cargoes while being unloaded
generally remain under the custody of the carrier. In the instant case, the
damage or losses were incurred during the discharge of the shipment while
under the supervision of the carrier. Consequently, the carrier is liable for the
damage or losses caused to the shipment. As the cost of the actual damage to
the subject shipment has long been settled, the trial courts finding of actual
damages in the amount of P397,879.69 has to be sustained.
(4) Mr Talens credibility must be respected.
CA's decision is set aside. Wallem is liable.
LAWS APPLICABLE
AMERICAN HOME ASSURANCE VS. COURT OF APPEALS
FACTS: On or about June 19, 1998, Cheng Hwa Pulp Corp. shipped 5,000 bales
of bleached kraft pulp from Haulien, Taiwan on board “SS Kaunlaran” (owned by
National Marine Corporation). The shipment was consigned to Mayleen Paper,
Inc. which insured the same with American Home Assurance Co. On June 22,
1998, the shipment arrived in manila and was discharged onto the custody of
the Marina Port Services, Inc. However, upon delivery to Mayleen Paper Inc., it
was found that 122 bales had either been damaged or lost with the value of
P61, 263.41.
Mayleen Paper Inc, duly demanded indemnification from NMC but was not
heeded. Mayleen then sought recovery from American Home Assurance, the
insurer, which was adjusted to P31, 506.75. As subrogee, American Home then
filed a suit against NMC for the recovery of the said amount. NMC filed a motion
to dismiss on the ground that there was no cause of action based on Art 848 of
the Code of Commerce which provides “that claims for averages shall not be
admitted if they do not exceed 5% of the interest which the claimant may have
in the vessel or in the cargo if it be gross average and 1% of the goods damaged
if particular average, deducting in both cases the expenses of appraisal, unless
there is an agreement to the contrary. NMC contended that based on the
allegations of the complaint, the loss sustained in the case was P35, 506.75
which is only .18% of P17.420.000.00, the total value of the cargo.
The trial court dismissed the case for lack of cause of action. American Home
then filed a petition for certiorari with the Court of Appeals which later dismissed
as constituting plain errors of law. Hence, this petition.
ISSUE: Whether or not the law on averages applies when there is negligence?
HELD: NO. Common carriers cannot limit their liability for injury or loss of goods
where such injury or loss was caused by its own negligence. Otherwise stated,
the law on averages under the Code of Commerce cannot be applied in
determining liability where there is negligence. It is reasonable to conclude that
the issue of negligence must first be addressed before the proper provisions of
the Code of Commerce on the extent of liability may be applied.
Instead of presenting proof of the exercise of extraordinary diligence as requires
by law, NMC filed its motion to dismiss, hypothetically admitting the truth of the
facts alleged in the complaint to the effect that the loss or damage to the 122
bales was due to the negligence or fault of NMC.
LIABILITY FOR LOSS; PRESUMPTION OF NEGLIGENCE
YNCHAUSTI STEAMSHIP CO. V. DEXTER
FACTS: The Government employed Ynchausti, a common carrier, for the
transportation of 30 cases of White Rose mineral oil and 96 cases of “Cock”
Brand mineral oil on board the steamship Venus, which would journey from
Manila to Aparri.
The carrier received the goods, and to evidence the contract of transportation,
the parties duly executed and delivered a bill of lading.
The bill of lading stipulated that the carrier received the supplies in apparent
good condition, obligating itself to carry said supplies to the place agreed upon,
in accordance with the authorized and prescribed rates and classifications, and
subject to the law of common carriers in force on the date of the shipment, and
to the conditions prescribed by the Insular Collector of Customs in Philippine
Marine Regulations.
Upon delivery, the consignee claimed that one case of White Rose and one case
of “Cock” were delivered empty. The consignee noted these claims on the bill of
lading.
The Insular Purchasing Agent notified Ynchausti that:
• The Insular Auditor had investigated the matter and decided that the
leakages of the 2 cases were due to the carrier’s negligence, and
• He had authorized the deduction of P22.53 from the amount due to the
carrier—an amount equivalent to the estimated value of the goods lost.
Ynchausti protested and demanded payment of the full amount due them. The
Insular Auditor refused the same and tendered a warrant only for the reduced
sum of P60.26.
Ynchausti filed this case (a petition for a writ of mandamus) to compel the
Government to pay the full amount of P82.79.
Ynchausti alleges that the shortages were due to causes unknown to it, and that
there was no fault or negligence on their part or on the part of any of their agents
or servants.
ISSUE: Who bears the loss?
22

HELD: Ynchausti bears the loss.
Competent evidence was provided to show that the shortage existed.
• Under Sec. 646 of the Administrative Code, it is the duty of the consignee
to make a full notation of any loss, evidence or damage on the bill of
lading. The consignee did exactly what was required by the law.
Presumption that Ynchausti is to blame for the loss.
• Ynchausti admits that it received the oil, and the fact of loss was proved
in the proper manner.
Doctrine: the presumption of negligence / liability
• General rule: mere proof of delivery of goods in good order to a carrier,
and proof of their arrival at the place of destination in bad order, makes
a prima facie case against the carrier.
• Exception: if there is an explanation given. The carrier must prove the
loss is due to accident or some other circumstance inconsistent with its
liability.
Dispositive: The Insular Auditor is entitled to withhold the amount equivalent to
the value of the lost oil.
MIRASOL vs. DOLLAR
FACTS: Mirasol is the owner and consignee of two cases of books, shipped in
good order and condition at New York, U.S.A., on board the Robert Dollar
Company's steamship President Garfield, for transport and delivery to Mirasol in
the City of Manila.
The two cases arrived in Manila in bad order and damaged condition, resulting
in the total loss of one case and a partial loss of the other.
Mirasol filed claims but Dollar Company has refused and neglected to pay,
reasoning that the damage "was caused by sea water."
Mirasol alleges that he never entered into any contract with Dollar Company
limiting the latter's liability as a common carrier. When the other case was found,
Mirasol filed a claim for the real damage of the books in the sum of $375.
Dollar Company raises the following defenses:
• The steamship President Garfield was seaworthy and properly manned,
equipped and supplied, and fit for the voyage;
• The damage to Mirasol's merchandise, if any, was not caused through
their negligence, "but that such damage, if any, resulted from faults or
errors in navigation or in the management of said vessel";
• In the bill of lading issued by the Dollar Co., it was agreed in writing that
Dollar Co. should not be "held liable for any loss of, or damage to, any of
said merchandise resulting from any of the following causes, to wit: Acts
of God, perils of the sea or other waters," and that Mirasol's damage, if
any, was caused by "Acts of God" or "perils of the sea";
• The bill of lading stated that in no case shall it be held liable "for or in
respect to said merchandise or property beyond the sum of two hundred
and fifty dollars for any piece, package or any article not enclosed in a
package, unless a higher value is stated herein and ad valorem freight
paid or assessed thereon";
• And that Mirasol had written Dollar Co. a letter saying: “I wish to file claim
of damage to the meager maximum value that your bills of lading will
indemnify me, that is $250 as per condition 13.”
• The damage, if any, was caused by "sea water," and that the bill of lading
exempts Dollar Co. from liability for that cause, as damage by "sea water"
is a shipper's risk.
The lower court ruled in favor of Mirasol, awarding him P2,080.
HELD: Mirasol wins!
On the limitation of carrier’s liability
• There is no claim or pretense that Mirasol signed the bill of lading or that
he knew of his contents at the time that it was issued. In that situation he
was not legally bound by the clause that purports to limit Dollar Co.'s
liability.
On the carrier’s duty, liability and the burden of proof to be exempted from
liability
• Shippers who are forced to ship goods on a ship have some legal rights,
and when goods are delivered on board ship in good order and condition,
and the shipowner delivers them to the shipper in bad order and
condition, it then devolves upon the shipowner to both allege and prove
that the goods were damaged by the reason of some fact which legally
exempts him from liability; otherwise, the shipper would be left without
any redress, no matter what may have caused the damage.
• Dollar Co. having received the two boxes in good condition, its legal duty
was to deliver them to Mirasol in the same condition in which it received
them. From the time of their delivery to Dollar Co. in New York until they
are delivered to Mirasol in Manila, the boxes were under the control and
supervision of the carrier and beyond the control of Mirasol.
• Dollar Co. having admitted that the boxes were damaged while in transit
and in its possession, the burden of proof then shifted, and it devolved
upon the carrier to both allege and prove that the damage was caused
by reason of some fact which exempted it from liability. As to how the
boxes were damaged, when or where, was a matter peculiarly and
exclusively within the knowledge of the carrier.
The fact that the cases were damaged by "sea water," standing alone and within
itself, is not evidence that they were damaged by force majeure or for a cause
beyond the carrier's control. The carrier must prove that the cases were
damaged by “sea water,” as per Art. 361 of the Code of Commerce.
STANDARD VACUUM OIL COMPANY vs. LUZON STEVEDORING CO., INC.
FACTS: Defendant's barge No. L-522 was laden with gasoline belonging to the
plaintiff to be transported from Manila to the Port of Iloilo. Defendant's tugboat
"Snapper" picked up the barge outside the breakwater. The barge was placed
behind the tugboat, it being connected to the latter by a tow rope. Behind the
barge, three other barges were likewise placed. The weather was good when on
that day the tugboat with its tow started on its voyage. The weather remained
23
good on February 3, 1947. About 3:00 AM on February 4, the engine of the
tugboat came to a dead stop. The engineer found out that the trouble was due
to a broken idler. A message was then sent to the defendant's radio station in
Manila informing its official of the engine trouble. The master of the Snapper
attempted to cast anchor but the water areas around Elefante Island were so
deep. In the afternoon, the weather become worse and due to the rough
condition of the sea the anchor chains of the Snapper' and the four barges broke.
They were drifted and were dashed against the rocks. A hole was opened in the
hull of the Snapper', which ultimately caused it to sink, while the barge No. L-
522 was so badly damaged that the gasoline it had on board leaked out.
Defendant failed to transport the gasoline so plaintiff brought an action with CFI
Manila to recover damages. Defendant pleaded that its failure to deliver was due
to fortuitous event or caused by circumstances beyond its control and not to its
fault or negligence or that of any of its employees. The court found that the
disaster was the result of an unavoidable accident and the loss of the gasoline
was due to a fortuitous event hence it dismissed the case.
ISSUE: W/N defendant exercised extraordinary diligence and that the accident
was due to force majeure.
HELD: NO. While the breaking of the idler may be due to an accident, or to
something unexpected, the cause of the disaster which resulted in the loss of
the gasoline can only be attributed to the negligence or lack of precaution to
avert it on the part of defendant. Defendant had enough time to effectuate the
rescue if it had only a competent tug for the purpose because the weather was
good from 3:00 o'clock a.m. to 12:00 o'clock noon of February 4, 1947 and it
was only in the afternoon that the wind began to blow with some intensity,1 but
failed to do so because of that shortcoming. The loss of the gasoline certainly
cannot be said to be due to force majeure or unforeseen event but to the failure
of defendant to extend adequate and proper help. Considering these
circumstances, the Court persuaded to conclude that defendant has failed to
established that it is exempt from liability under the law. Defendant is hereby
ordered to pay to plaintiff the sum of P75,578.50, with legal interest from the
date of the filing of the complaint, with costs.
FIREMAN’S FUND INSURANCE CO vs METRO PORT SERVICES
FACTS: Vulcan Industrial and Mining Corporation imported from the United States
several machineries and equipment which were loaded on board the SIS Albert
Maersk at the port of Philadelphia, U.S.A., and transhipped for Manila through
the vessel S/S Maersk Tempo.
The shipment arrived at the port of Manila on June 3, 1979 and was turned over
complete and in good order condition to the arrastre operator E. Razon Inc.
(now Metro Port Service Inc. and referred to as the ARRASTRE).
A tractor operator, named Danilo Librando and employed by the ARRASTRE, was
ordered to transfer the shipment to the Equipment Yard at Pier 3. While Librando
was maneuvering the tractor (owned and provided by Maersk Line) to the left,
the cargo fell from the chassis and hit one of the container vans of American
President Lines. It was discovered that there were no twist lock at the rear end
of the chassis where the cargo was loaded.
An Insurance was claimed by Vulcan Industrial, in turn, the petitioner insurance
company demanded recovery from Maerks Line. The trial court ruled that Maerks
and Metro Port be held solidarily liable. On appeal by Metro Port, the Court of
Appeals reversed, ruling that it is only Maerks that is liable.
ISSUE:
WON Maerks and Metro Port exercised the proper degree of diligence.
WON Maerks and Metro Port be held liable solidarity.
HELD: Maerks and Metro port did not exercise the proper diligence.
In general, the nature of the work of an arrastre operator covers the handling of
cargoes at piers and wharves. The ARRASTRE is required to provide cargo
handling equipment which includes among others trailers, chassis for containers.
In some cases, however, the shipping line has its own cargo handling equipment.
In this case, Maerks provide for the chassis and tractors and merely requested
the arrastre (Metro) to dispatch a tractor operator. ARRASTRE which had the
sole discretion and prerogative to hire and assign Librando to operate the
tractor. It was also the ARRASTRE's sole decision to detail and deploy Librando
for the particular task from among its pool of tractor operators or drivers. Since
the ARRASTRE offered its drivers for the operation of tractors in the handling of
cargo and equipment, then the ARRASTRE should see to it that the drivers under
its employ must exercise due diligence in the performance of their work.
The testimonies are appreciated and the court held that Maerks is at fault in not
providing twist locks on the chassis and Metro is also at fault for Librando’s
negligence in not checking that the cargo is securely loaded on the chassis.
Both the arrastre and the carrier are charged with and obligated to deliver the
goods in good condition to the consignee.
The legal relationship between the consignee and the arrastre operator is akin
to that of a depositor and warehouseman (Lua Kian v. Manila Railroad Co., 19
SCRA 5 [1967]). The relationship between the consignee and the common
carrier is similar to that of the consignee and the arrastre operator (Northern
Motors, Inc. v. Prince Line, et al., 107 Phil. 253 [1960]). Since it is the duty of
the ARRASTRE to take good care of the goods that are in its custody and to
deliver them in good condition to the consignee, such responsibility also
devolves upon the CARRIER. Both the ARRASTRE and the CARRIER are therefore
charged with and obligated to deliver the goods in good condition to the
consignee.
ABOITIZ SHIPPING vs. CA
FACTS: Anacleto Viana boarded the vessel M/V Antonia owned by petitioner
Aboitiz Shipping Corp at the port at San Jose, Occidental Mindoro, bound for
Manila. The vessel arrived at Pier 4, North Harbor, Manila and was taken over
by Pioneer Stevedoring for the latter to unload the cargoes from the said vessel
pursuant to their Memorandum of Agreement. An hour after the passengers and
Viana had disembarked the vessel the crane operator began its unloading
operation. While the crane was being operated, Viana who had already
disembarked the vessel remembered that some of his cargoes were still loaded
there. He went back and while he was pointing to the crew where his cargoes
24
were, the crane hit him pinning him between the side of the vessel and the crane
resulting to his death. A complaint for damages was filed against petitioner for
breach of contract of carriage. Petitioner contends that Viana ceased to be a
passenger when he disembarked the vessel and that consequently his presence
there was no longer reasonable. CA affirmed the trial court’s order holding
Aboitiz liable. Hence the petition.
ISSUE: Whether or not petitioner is still responsible as a carrier to Viana after the
latter had already disembarked the vessel. – YES.
HELD: The rule is that the relation of carrier and passenger continues until the
passenger has been landed at the port of destination and has left the vessel
owner’s dock or premises. Once created, the relationship will not ordinarily
terminate until the passenger has, after reaching his destination, safely alighted
from the carrier’s conveyance or had a reasonable opportunity to leave the
carrier’s premises. All persons who remain on the premises a reasonable time
after leaving the conveyance are to be deemed passengers, and what is a
reasonable time or a reasonable delay within this rule is to be determined from
all the circumstances, and includes a reasonable time to see after his baggage
and prepare for his departure. The carrier-passenger relationship is not
terminated merely by the fact that the person transported has been carried to
his destination if, for example, such person remains in the carrier’s premises to
claim his baggage.
The primary factor to be considered is the existence of a reasonable cause as
will justify the presence of the victim on or near the petitioner’s vessel. We believe
there exists such a justifiable cause. When the accident occurred, the victim was
in the act of unloading his cargoes, which he had every right to do, from
petitioner’s vessel. As earlier stated, a carrier is duty bound not only to bring its
passengers safely to their destination but also to afford them a reasonable time
to claim their baggage.
Consequently, under the foregoing circumstances, the victim Anacleto Viana is
still deemed a passenger of said carrier at the time of his tragic death.
BANKERS & MANUFACTURERS ASSURANCE CORP. vs. CA
FACTS: 108 cases of copper tubings were imported by Ali Trading Company,
which were insured by petitioner and arrived in Manila on board the vessel S/S
"Oriental Ambassador" on November 4, 1978, and turned over to respondent E.
Razon, the Manila arrastre operator upon discharge at the waterfront. The
carrying vessel is represented in the Philippines by its agent, the other
respondent, F. E. Zuellig and Co., Inc. Upon inspection by the importer, the
shipment was allegedly found to have sustained loses by way of theft and
pilferage for which petitioner, as insurer, compensated the importer.
Hence, petitioner, in subrogation of the importer-consignee and on the basis of
what it asserts had been already established, that a portion of the shipment was
lost through theft and pilferage, filed for recovery of what it paid its insured. It
alleged that the burden of proof of proving a case of non-liability shifted to
private respondents, one of whom, the carrier, being obligated to exercise
extraordinary diligence in the transport and care of the shipment.
RTC OF MANILA: dismissed.
CA: RTC affirmed. Hence, this petition for review on certiorari.
ISSUE: WON the carrier is liable for the loss goods allegedly due to theft and
pilferage? – NO.
HELD: Records show that the shipment involved was "containerized", thus, the
goods under this arrangement are stuffed, packed, and loaded by the shipper
at a place of his choice, usually his own warehouse, in the absence of the carrier.
The container is sealed by the shipper and thereafter picked up by the carrier
and the recital of the bill of lading for goods ordinarily would declare "Said to
Contain", "Shipper’s Load and Count", "Full Container Load", and the amount or
quantity of goods in the container in a particular package is only prima facie
evidence of the amount or quantity which may be overthrown by parol evidence.
A shipment under this arrangement is not inspected or inventoried by the carrier
whose duty is only to transport and deliver the containers in the same condition
as when the carrier received and accepted the containers for transport.
In this case, the copper tubings were placed in 3 containers. When it arrived in
Manila, the shipment was discharge in apparent good order and condition and
from the pier’s docking apron, then were shifted to the container yard of Pier 3
for safekeeping. 3 weeks later, one of the container vans, which contain 19 cases
of the cargo, was "stripped" in the presence of petitioner’s surveyors, and three
cases were found to be in bad order. The 19 cases of the van stripped were then
kept inside Warehouse No. 3 of Pier 3 pending delivery. However, those three
cases found in bad order are not the cases for which the claim was presented,
for although those appeared to be in bad order, the contents remained good
and intact.
The two other container vans were not moved from the container yard and they
were not stripped. The cargo was released to the care of the consignee’s
authorized customs broker, the RGS Customs Brokerage. The broker, accepted
the shipment without exception as to bad order and caused the delivery of the
vans to the consignee’s warehouse in Makati. It was at that place, when the
contents of the two containers were removed and inspected, that petitioner’s
surveyors reported, that the shipment was short of seven cases.
Court agrees with RTC and CA observation that if there was any suspicion or
indication of irregularity or theft or pilferage, plaintiff’s or consignee’s
representatives should have noted the same on the gate passes or insisted that
some form of protest form part of the documents concerning the shipment but
no such step was taken. The shipment appears to have been delivered to the
customs broker in good order and condition and complete save for the three
cases noted as being apparently in bad order.
Furthermore, the stripping was done at the consignee’s warehouse where,
according to plaintiff’s surveyor, the loss of the seven cases was discovered. The
evidence is not settled as whether the defendants’ representatives were notified
of, and were present at, the unsealing and opening of the containers in the
bodega. Nor is the evidence clear how much time elapsed between the release
of the shipment from the pier and the stripping of the containers at consignee’s
bodega. All these fail to discount the possibility that the loss in question could
have taken place after the containers had left the pier.
25
Hence, if any of the vans were found in bad condition, or if any inspection of the
goods was to be done in order to determine the condition thereof, the same
should have been done at pierside, the pier warehouse, or at any time and place
while the vans were under the care and custody of the carrier or of the arrastre
operator. To all appearances, therefore, the shipment was accepted by petitioner
in good order.
SUMMA INSURANCE vs. CA
FACTS: S/S "Galleon Sapphire", a vessel owned by the National Galleon Shipping
Corporation (NGSC), arrived at Pier 3, South Harbor, Manila, carrying a shipment
consigned to the order of Caterpillar Far East Ltd. with Semirara Coal Corporation
(Semirara) as "notify party". The shipment, including a bundle of PC 8 U blades,
was covered by marine issued by petitioner and Bill of Lading. The shipment was
discharged from the vessel to the custody of private respondent, formerly known
as E. Razon, Inc., the exclusive arrastre operator at the South Harbor.
Accordingly, three good-order cargo receipts were issued by NGSC, duly signed
by the ship's checker and a representative of private respondent.The forwarder,
Sterling International Brokerage Corporation, withdrew the shipment from the
pier and loaded it on the barge "Semirara 8104". The barge arrived at its port
of destination, Semirara Island, on Upon inspection, Semirara discovered that
the bundle of PC8U blades was missing at its warehouse.Private respondent
issued a short-landed certificate-stating that the bundle of PC8U blades was
already missing when it received the shipment from the NGSC vessel. Semirara
then filed with petitioner, private respondent and NGSC its claim for
P280,969.68, the alleged value of the lost bundle. Petitioner paid Semirara the
invoice value of the lost shipment. Semirara thereafter executed a release of
claim and subrogation receipt. Consequently, petitioner filed its claims with NGSC
and private respondent but it was unsuccessful. Petitioner then filed a complaint
against NGSC and private respondent for collection of a sum of money, damages
and attorney's fees. The trial court rendered a decision absolving NGSC from
any liability but finding private respondent liable to petitioner. On appeal, the
Court of Appeals modified the decision of the trial court and reduced private
respondent's liability.
ISSUE:
1. Whether or not the private respondent legally liable for the loss of
the shipment in question?
2. What is the extent of its liability
HELD:
1. Yes, SC finds the Respondent liable for the loss. Petitioner was
subrogated to the rights of the consignee. The relationship between the
petitioner and the respondent is akin to that existing between the consignee or
owner of shipped goods and the common carrier, or that between a depositor
and a warehouseman. In the performance of its obligations, an arrastre operator
should observe the same degree of diligence as that required of a common
carrier and a warehouseman as enunciated under Article 1733 of the Civil Code
and Section 3(8) of the Warehouse Receipts Law, respectively. Being the
custodian of the goods discharged from a vessel, an arrastre operator's duty is
to take good care of the goods and to turn them over to the party entitled to
their possession.
2. In the performance of its job, an arrastre operator is bound by the
management contract it had executed with the Bureau of Customs. However, a
management contract, which is a sort of a stipulation pour autrui within the
meaning of Article 1311 of the Civil Code, is also binding on a consignee because
it is incorporated in the gate pass and delivery receipt which must be presented
by the consignee before delivery can be effected to .The insurer, as successor-
in-interest of the consignee, is likewise bound by the management contract.
Indeed, upon taking delivery of the cargo, a consignee (and necessarily its
successor-in-interest) tacitly accepts the provisions of the management contract,
including those which are intended to limit the liability of one of the contracting
parties, the arrastre operator.
SARKIES TOURS PHILIPPINES, INC., v. CA
FACTS: Fatima boarded petitioner's bus bringing 3 pieces of luggage with her.
Her brother helped her load them on the bus compartment. During a stopover
at Daet, it was discovered that only one bag remained in the open compartment.
Private respondents asked assistance from the radio stations and from
Philtranco bus drivers who plied the same route. They were able to recover one
of Fatima's bags. After a few weeks, private respondents formally demanded
from petitioner. In its letter, petitioner tacitly admitted its liability by apologizing
and assuring respondents that efforts were being made to recover the lost items.
Months later, respondents filed a case to recover the value of the remaining lost
items claiming that the loss was due to petitioner's failure to observe
extraordinary diligence in the care of Fatima's luggage and that petitioner dealt
with them in bad faith from the start. Petitioner denied liability on the ground
that Fatima allegedly did not declare any excess baggage upon boarding its bus.
ISSUE: W/N petitioner, as a common carrier, is responsible for the loss? – YES.
HELD: Under the Civil Code, "(c)ommon carriers, from the nature of their
business and for reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods… transported by them," and this
liability "lasts from the time the goods are unconditionally placed in the
possession of, and received by the carrier for transportation until the same are
delivered, actually or constructively, by the carrier to…the person who has a
right to receive them," unless the loss is due to any of the excepted causes under
Article 1734 thereof.
The cause of the loss in the case at bar was petitioner's negligence in not
ensuring that the doors of the baggage compartment of its bus were securely
fastened. Further, where the common carrier accepted its passenger's baggage
for transportation and even had it placed in the vehicle by its own employee, its
failure to collect the freight charge is the common carrier's own lookout; it is
responsible for the consequent loss of the baggage. In this case, petitioner’s
employee even helped Fatima and her brother load the luggages in the bus'
baggage compartment, without asking that they be weighed, declared, receipted
or paid for.
BELGIAN OVERSEAS CHARTERING AND SHIPPING vs. PHILIPPINE FIRST
INSURANCE CO. INC.
26
FACTS: CMC Trading A.G. shipped on board the M/V ‘Anangel Sky’ at Germany
242 coils of various Prime Cold Rolled Steel sheets for transportation to Manila
consigned to the Philippine Steel Trading Corporation. M/V Anangel Sky arrived
at the Manila Port. Subsequently, it discharged subject cargo. 4 coils were found
to be in bad order. Finding the 4 coils in their damaged state to be unfit for the
intended purpose, the consignee Philippine Steel Trading Corporation (PSTC)
declared the same as total loss. Despite receipt of a formal demand, Belgian
Overseas Chartering and Shipping NV ( BOCSNV ) and Jardine Davies Transport
Services Inc. (JDTSI) refused to submit to the consignee’s claim. Consequently,
PFIC paid the consignee 506, 086.50 and was subrogated to the latter’s rights
and causes of action against BOCSNV and JDTSI.
PFIC instituted a complaint for recovery of the amount paid by them, to the
consignee as insured. RTC rendered judgment dismissing the complaint as well
as the defendant’s counterclaim.
On appeal. CA reversed and set aside the decision of the Trial Court and ordered
BOCSNV and JDTSI jointly and severally pay PFIC actual damages representing
the value of damaged cargo, attorney’s fees and cost of suit.
ISSUE: Whether petitioners have overcome the presumption of negligence of a
common carrier? – NO.
HELD: The words “metal envelopes rust strained and slightly dented” were noted
on the Bill of Lading; however, there is no showing that BOCSNV and JDTSI
exercised due diligence to forestall or lessen the loss. Having been in the service
for several years, the master of the vessel should have known at the outset that
metal envelopes in the said state would eventually deteriorate when not properly
stored while in the transit. Equipped with the proper knowledge of the nature of
steel sheets in coils and of the proper way of transporting them, the master of
the vessel and his crew should have undertake precautionary measures to avoid
possible deterioration of the cargo. But none of these measures was taken.
Having failed to discharge the burden of proving that they have exercised the
extraordinary diligence required by law, BOCSNV and JDTSI cannot now escape
liability for the damage to the 4 coils.
Herein, (1) as stated in the bill of lading BOCSNV and JDTSI received the subject
shipment in good order and condition in Germany; (2) prior to the unloading of
the cargo, an inspection report prepared and signed by representative of both
parties showed the steel bonds, the metal envelopes rust-strained and heavily
buckled and the contents thereof exposed and rust; (3) Bad order tally sheet
stated that the 4 coils were In bad order and condition; (4) certificate of analysis
stated that based on the sample submitted and tested, the steel sheets found in
bad order were wet with fresh water and (5) BOCSNV and JDTSI in their letter
addressed to the Philippine Steel Coating Inc., they admitted that they were
aware of the condition of the 4 coil found in bad order and condition. All these
conclusively prove the fact of shipment in good order and condition and the
consequent damage to the 4 coild while in the possession of the petitioner, who
notably failed to explain why.
DISPOSITIVE PORTION: WHEREFORE, the Petition is partly granted and the
assailed Decision MODIFIED. Petitioners liability is reduced to US$2,000 plus
interest at the legal rate of six percent from the time of the filing of the Complaint
on July 25, 1991 until the finality of this Decision, and 12 percent thereafter until
fully paid. No pronouncement as to costs.
ABOITIZ SHIPPING CORPORATION, vs. INSURANCE COMPANY OF
NORTH AMERICA
FACTS: MSAS Cargo International Limited and/or Associated and/or Subsidiary
Companies (MSAS) procured a marine insurance policy from respondent ICNA
UK Limited of London and the insurance was for a transshipment of certain
wooden work tools and workbenches purchased for the consignee Science
Teaching Improvement Project (STIP), Ecotech Center, Sudlon Lahug, Cebu City,
Philippines.
When the cargo reached Manila, it was received by petitioner Aboitiz Shipping
Corporation (Aboitiz) through its duly authorized booking representative, Aboitiz
Transport System and the bill of lading issued by Aboitiz contained the notation
grounded outside warehouse.
The shipment arrived in Cebu City and discharged onto a receiving apron of the
Cebu International Port and it was then brought to the Cebu Bonded
Warehousing Corporation pending clearance from the Customs authorities where
petitioner’s checker noted that the crates were slightly broken or cracked at the
bottom.
Subsequently, then Claims Head of petitioner, received a telephone call from
Bernhard Willig, the representative of consignee who received the shipment,
informing him that the cargo sustained water damage.
ICNA paid the amount of P280,176.92 to consignee and ICNA formally advised
Aboitiz of the claim and subrogation receipt executed in its favor but despite
follow-ups, no reply was received from Aboitiz.
ISSUES:
1. Is respondent ICNA the real party-in-interest that possesses the right
of subrogation to claim reimbursement from petitioner Aboitiz?
2. Was there a timely filing of the notice of claim as required under
Article 366 of the Code of Commerce?
3. If so, can petitioner be held liable on the claim for damages?
HELD:
1. Yes, payment by the insurer to the assured operates as an equitable
assignment of all remedies the assured may have against the third party who
caused the damage. Subrogation is not dependent upon, nor does it grow out
of, any privity of contract or upon written assignment of claim. It accrues simply
upon payment of the insurance claim by the insurer. Upon payment to the
consignee of indemnity for damage to the insured goods, ICNAs entitlement to
subrogation equipped it with a cause of action against petitioner in case of a
contractual breach or negligence.
2. Yes, provisions specifying a time to give notice of damage to
common carriers are ordinarily to be given a reasonable and practical, rather
than a strict construction. The call to petitioner was made two days from delivery,
a reasonable period considering that the goods could not have corroded
27
 instantly overnight such that it could only have sustained the damage during
transit. Moreover, petitioner was able to immediately inspect the damage while
the matter was still fresh. In so doing, the main objective of the prescribed time
period was fulfilled. Thus, there was substantial compliance with the notice
requirement in this case.
3. Yes, The rule as stated in Article 1735 of the Civil Code is that in
cases where 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 required by law. Petitioner is thus
liable for the water damage sustained by the goods due to its failure to
satisfactorily prove that it exercised the extraordinary diligence required of
common carriers.
REGIONAL CONTAINER LINES (RCL) OF SINGAPORE vs. THE NETHERLANDS
INSURANCE CO. (PHILIPPINES), INC.
FACTS: RCL is a foreign corporation based in Singapore. It does business in the
Philippines through its agent, EDSA Shipping, a domestic corporation organized
and existing under Philippine laws.
Respondent Netherlands Insurance Company (Philippines), Inc. (Netherlands
Insurance) is likewise a domestic corporation engaged in the marine underwriting
business.
405 cartons of Epoxy molding compound were consigned to be shipped from
Singapore to Manila for TEMIC. U-Freight Singapore contracted Pacific Eagle to
transport cargo. It was stored in its refrigerated container as cargo is highly
presihable. The temperature was 0º Celsius. Pacific Eagle loaded it to M/V Piya
Bhum owned by RCL which the former had a slot charter agreement with. RCL
issued Bill of Lading in favor of Pacific Eagle. Netherlands Insurance issued a
Marine Open Policy to insure cargo in favor of Temic to cover loss/damages. Upon
arrival at Manila, the cargoes were surveyed and it was found to be at the constant
required temperature for several ldays. But later on, it was found out that the
temperature changed when the cargo had already been unloaded, to 33º
Celsius. Surveyor believed the fluctuation was caused by the burnt condenser fan
motor of the refrigerated container. Temic received the shipment and found it to
be damaged. Temic filed a claim for cargo loss against Netherlands Insurance, with
supporting claims documents. The Netherlands Insurance paid Temic the sum
ofP1,036,497.00 under the terms of the Marine Open Policy. Temic then executed
a loss and subrogation receipt in favor of Netherlands Insurance.
Seven months from delivery of the cargo - Netherlands Insurance filed a complaint
for subrogation of insurance settlement with the Regional Trial Court, RCL and
TMS Ship Agencies (TMS) thought to be the local agent of M/V Piya, EDSA Shipping,
Eagle Liner Shipping Agencies, U-Freight Singapore, and U-Ocean (Phils.), Inc.
(U-Ocean). RCL and EDSA Shipping filed motion to dismiss based on demurer to
evidence. They attributed negligence to their co-defendants, that fluctuation of
temperature occurred after cargo has been discharged from vessel but in the
reefer van and that Netherlands is not party in interest hence has no cause of
action. RTC found RCL and EDSA Shipping not liable but this was reversed by CA
and barred them from presenting evidence since they filed for demurer.
Defense of RCL and EDSA Shipping:
1. They attributed any negligence that may have caused the loss of the shipment
to their co- defendants.
a. They contend that the cause of the damage to the cargo was the “fluctuation of
the temperature in the reefer van,” which fluctuation occurred after the cargo
had already been discharged from the vessel; no fluctuation, they point out,
arose when the cargo was still on board M/V Piya Bhum.
b. As the cause of the damage to the cargo occurred after the same was already
discharged from the vessel and was under the custody of the arrastre
operator (International Container Terminal Services, Inc. or ICTSI), RCL and
EDSA Shipping posit that the presumption of negligence provided in Article
1735 of the Civil Code should not apply. What applies in this case is
Article 1734, particularly paragraphs 3 and 4 thereof, which exempts the
carrier from liability for loss or damage to the cargo when it is caused either
by an act or omission of the shipper or by the character of the goods or
defects in the packing or in the containers.
2. They likewise asserted that no valid subrogation exists, as the payment made
by Netherlands Insurance to the consignee was invalid.
RCL and EDSA Shipping, in their motion to dismiss based on demurrer to evidence:
1. Netherlands Insurance had failed to prove any valid subrogation,
2. Netherlands Insurance had failed to establish that any negligence on their part
or that the loss was sustained while the cargo was in their custody.
ISSUE: Whether the CA correctly held RCL and EDSA Shipping liable as common
carriers under the theory of presumption of negligence. – YES.
HELD: RCL and EDSA Shipping failed to satisfy this standard of evidence and
in fact offered no evidence at all on this point; a reversal of a dismissal based on
a demurrer to evidence bars the defendant from presenting evidence
supporting its allegations. The CA correctly ruled that they are deemed to have
waived their right to present evidence, and the presumption of negligence must
stand. It is for this reason as well that the court finds RCL and EDSA Shipping’s
claim that the loss or damage to the cargo was caused by a defect in the
packing or in the containers.
The present case is governed by the following provisions of the Civil Code:
ART. 1733. Common carriers, from the nature of their business and for reasons
of public policy, are bound to observe extraordinary diligence in the vigilance over
the goods and for the safety of the passengers transported by them according to
all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed
in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary
diligence for the safety of the passengers is further set forth in articles1755 and
1756.
ART. 1734. Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following causes
only:
1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
2) Act of the public enemy in war, whether international or civil;
28
3) Act of 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 that 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 by article
1733.
ART. 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 sane 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 articles 1738.
ART. 1738. The extraordinary liability of the common carrier continues to
be operative even during the time the goods are stored in a warehouse of the
carrier at the place of destination, until the consignee has been advised of the
arrival of the goods and has had reasonable opportunity thereafter to remove
them or otherwise dispose of them.
ART. 1742. Even if the loss, destruction, or deterioration of the goods
should be caused by the character of the goods, or the faulty nature of the packing
or of the containers, the common carrier must exercise due diligence to
forestall or lessen the loss.
Rules for the liability of a common carrier for lost or damaged cargo as follows:
(Central Shipping Company, Inc. v. Insurance Company of North America)
(1) Common carriers are bound to observe extraordinary diligence over the goods
they transport, according to all the circumstances of each case;
(2) In the event of loss, destruction, or deterioration of the insured goods, common
carriers are responsible, unless they can prove that such loss, destruction, or
deterioration was brought about by, among others, flood, storm, earthquake,
lightning, or other natural disaster or calamity; and
(3) 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 observed extraordinary diligence.
Arguments of RCL and EDSA Shipping are not meritorious.
A common carrier is presumed to have been negligent if it fails to prove
that it exercised extraordinary vigilance over the goods it transported. When
the goods shipped are either lost or arrived in damaged condition, a presumption
arises against the carrier of its failure to observe that diligence, and there need
not be an express finding of negligence to hold it liable.
To overcome the presumption of negligence, the common carrier must
establish by adequate proof that it exercised extraordinary diligence over the
goods. It must do more than merely show that some other party could be
responsible for the damage.
In the present case, RCL and EDSA Shipping failed to prove that they did
exercise that degree of diligence required by law over the goods
they transported. Indeed, there is sufficient evidence showing that the fluctuation
of the temperature in the refrigerated container van, as recorded in the
temperature chart, occurred after the cargo had been discharged from the vessel
and was already under the custody of the arrastre operator, ICTSI. This evidence,
however, does not disprove that the condenser fan – which caused the fluctuation
of the temperature in the refrigerated container – was not damaged while the
cargo was being unloaded from the ship. It is settled in maritime law jurisprudence
that cargoes while being unloaded generally remain under the custody of the
carrier; RCL and EDSA
Shipping failed to dispute this.
RCL and EDSA Shipping could have offered evidence before the trial court to show
that the damage to the condenser fan did not occur: (1) while the cargo was in
transit; (2) while they were in the act of discharging it from the vessel; or (3) while
they were delivering it actually or constructively to the consignee. They
could have presented proof to show that they exercised extraordinary care and
diligence in the handling of the goods, but they opted to file a demurrer to evidence.
As the order granting their demurrer was reversed on appeal, the CA correctly
ruled that they are deemed to have waived their right to present evidence,
and the presumption of negligence must stand.
It is for this reason as well that we find RCL and EDSA Shipping’s claim that the loss
or damage to the cargo was caused by a defect in the packing or in the
containers. 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 causes in
Article 1734 of the Civil Code 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. RCL and EDSA Shipping, however, failed to satisfy
this standard of evidence and in fact offered no evidence at all on this point; a
reversal of a dismissal based on a demurrer to evidence bars the defendant
from presenting evidence supporting its allegations.
ASIAN TERMINALS, INC. vs. ALLIED GUARANTEE INSURANCE, CO., INC.
FACTS: Marina, the predecessor of Asian Terminals Inc., is an arrastre operator
based on Manila. On February 5, 1989, a shipment of kraft linear board was
loaded and received from the ports of Lake Charles, LA, and Mobile, Al, USA for
transport and delivery to San Miguel. Upon offloading, it was assessed that a
total of 158 rolls were damaged during shipping. Further, upon the goods'
withdrawal from arrastre and their delivery to the customs broker, Dynamic and
eventually to the consignee San Miguel, another 54 rolls were found to have
been damaged, for a total of 212 rolls of damaged shipment worth
P755,666.84.
Allied Insurance was the insurer of the shipment. Thus, it paid San Miguel
P755,666.84 and was subrogated in the latter's right. Allied filed a Complaint
against Transocean, Philippine Transmarine, Dynamic and Marina seeking to be
indemnified for the P755,666.84 it lost paying San Miguel.
ISSUE: Whether or not petitioner has been proven liable for the additional 54
rolls of damaged goods to respondent? – YES.
HELD: Marina, the arrastre operator, from the above evidence, was not able to
overcome the presumption of negligence. The Bad Order Cargo Receipts, the
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Turn Over Survey of Bad Order Cargoes as well as the Request for Bad Order
Survey did not establish that the additional 54 rolls were in good condition while
in the custody of the arrastre. Said documents proved only that indeed the 158
rolls were already damaged when they were discharged to the arrastre operator
and when it was subsequently withdrawn from the arrastre operator by [the]
customs broker. Further, the Turn Over Inspector and the Bad Order Inspector
who conducted the inspections and who signed the Turn Over Survey of Bad
[Order] Cargoes and the Request for Bad Order Survey, respectively, were
not presented by Marina as witnesses to verify the correctness of the document
and to testify that only 158 rolls was reported and no others sustained damage
while the shipment was in its possession.
On the other hand, defendant Dynamic (which) in its capacity as broker, withdrew
the 357 rolls of kraft linear board from the custody of defendant Marina and
delivered the same to the consignee, San Miguel Corporation's warehouse in
Tabacalera at United Nations, Manila, is considered a common carrier.
It is noteworthy to mention that "in general, the nature of the work of an arrastre
operator covers the handling of cargoes at piers and wharves,"
"To carry out its duties, the arrastre is required to provide cargo handling
equipment which includes, among others, trailer, chassis for containers."
Hence, the "legal relationship betw.een the consignee and the arrastre operator
is akin to that of a depositor and the warehouseman. The relationship between
the consignee and the common carrier is similar to that of the consignee and the
arrastre operator. Since it is the duty of the arrastre to take good care of the
goods that are in its custody and to deliver them in good condition to the
consignee, such responsibility also develops upon the carrier. Both the arrastre
and the carrier are, therefore, charged with and obligated to deliver the goods
in good condition to the consignee."
Since the relationship of an arrastre operator and a consignee is akin to that
between a warehouseman and a depositor, then, in instances when the
consignee claims any loss, the burden of proof is on the arrastre operator to
show that it complied with the obligation to deliver the goods and that the losses
were not due to its negligence or that of its employees.
the broker, Dynamic, cannot alone be held liable for the additional 54 rolls of
damaged goods since such damage occurred during the following instances: (1)
while the goods were in the custody of the arrastre ATI; (2) when they were in
transition from ATI's custody to that of Dynamic (i.e., during loading to Dynamic's
trucks); and (3) during Dynamic's custody.
While the trial court could not determine with pinpoint accuracy who among the
two caused which particular damage and in what proportion or quantity, it was
clear that both ATI and Dynamic failed to discharge the burden of proving that
damage on the 54 rolls did not occur during their custody. As for petitioner ATI,
in particular, what worked against it was the testimony, as cited above, that its
employees' use of the wrong lifting equipment while loading the goods onto
Dynamic's trucks had a role in causing the damage. Such is a finding of fact
made by the trial court which this Court, without a justifiable ground, will not
disturb,
The arrastre operator's principal work is that of handling cargo, so that its
drivers/operators or employees should observe the standards and measures
necessary to prevent losses and damage to shipments under its custody.
In the performance of its obligations, an arrastre operator should observe the
same degree of diligence as that required of a common carrier and a
warehouseman.
Being the custodian of the goods discharged from a vessel, an arrastre
operator's duty is to take good care of the goods and to turn them over to the
party entitled to their possession. With such a responsibility, the arrastre
operator must prove that the losses were not due to its negligence or to that of
its employees. And to prove the exercise of diligence in handling the subject
cargoes, petitioner must do more than merely show the possibility that some
other party could be responsible for the loss or the damage. It must prove that
it exercised due care in the handling thereof.
a mere sign-off from the customs broker's representative that he had received
the subject shipment "in good order and condition without exception" would not
absolve the arrastre from liability, simply because the representative's
signature merely signifies that said person thereby frees the arrastre from any
liability for loss or damage to the cargo so withdrawn while the same was in the
custody of such representative to whom the cargo was released, but it does not
foreclose the remedy or right of the consignee (or its subrogee) to prove that
any loss or damage to the subject shipment occurred while the same was under
the custody, control and possession of the arrastre operator.
As it is now established that there was negligence in both petitioner ATI's and
Dynamic's performance of their duties in the handling, storage and delivery of
the subject shipment to San Miguel, resulting in the loss of 54 rolls of kraft linear
board, both shall be solidarily liable for such loss.
EXEMPTION FROM LIABILITY
TAN CHIONG SIAN vs. INCHAUSTI AND CO.
FACTS: Three bill of lading were executed.
To this end 3 bills of lading were executed (38, 39, and 76). The steamer
Sorsogo arrived at the port of Gubat on 28 November 1908 and as the lorcha
Pilar the other vessel to which the merchandise was to be transshipped for its
transportation to Samar was not yet there. The cargo was unloaded and stored
in the defendant company’s warehouses at that port. The lorcha Pilar arrived
several days later and the merchandise owned by Sip and other goods were
transported to Catarman, Samar.
On 5 December 1908, however, before the Pilar could leave for its destination a
heavy and strong wind caused the lorcha to wrecked and its cargo including Sip’s
package were scattered. Workmen of Inchausti tried to save the merchandize but
it is already futile so they proceeded to have it sold at public auction before a
notary for the sum of P1,693.67
30

A complaint was filed against Inchausti because the same neither carried nor
delivered his merchandise to Ong Bieng Sip, in Catarman, but unjustly and
negligently failed to do so, with the result that the said merchandise was almost
totally lost, and thus claimed the value of the merchandise which was P20,000,
legal interest thereon from 25 November 1908, and the cost of the suit.
ISSUE: WON Inchausti is liable for the shipwreck? – NO.
HELD: Wreck of lorcha due to fortuitous event; Loss cannot be attributed to
Inchausti or its agents.
From the moment that it is held that the loss of the said lorcha was due to force
majeure, a fortuitous.
event, with no conclusive proof of negligence or of the failure to take the
precautions such as diligent and careful persons usually adopt to avoid the loss
of the boat and its cargo, it is neither just nor proper to attribute the loss or
damage of the goods in question to any fault, carelessness, or negligence on
the part of Inchausti and its agents and, especially, the patron of the lorcha Pilar.
Inchausti took all measures for he salvage of goods recoverable after the
accident.
Herein, subsequent to the wreck, Inchausti’s agent took all the requisite
measures for the salvage of such of the goods as could be recovered after the
accident, which he did with the knowledge of the shipper, Ong Bieng Sip, and, in
effecting their sale, he endeavored to secure all possible advantage to the
Chinese shipper; in all these proceedings, he acted in obedience to the law.
Article 1601 of the Civil Code prescribes that “Carriers of goods by land or by
water shall be subject with regard to the keeping and preservation of the things
entrusted to them, to the same obligations as determined for innkeepers by
articles 1783 and 1784. The provisions of this article shall be understood
without prejudice to what is prescribed by the Code of Commerce with regard to
transportation by sea and land.”
The general rule established in Article 840 is that the loss of the vessel and of
its cargo, as the result of shipwreck, shall fall upon the respective owners thereof,
save for the exceptions specified in the second of the said articles. These legal
provisions are in harmony with those of articles 361 and 362 of the Code of
Commerce, and are applicable whenever it is proved that the loss of, or damage
to, the goods was the result of a fortuitous event or of force majeure; but the
carrier shall be liable for the loss or the damage arising from the causes
aforementioned, if it shall have been proven that they occurred through his own
fault or negligence or by his failure to take the same precautions usually adopted
by diligent and careful persons.
MARTINI LTD. vs. MACONDRAY & CO.
FACTS: September 1916, G. Martini, Ltd. arranged with Macondray& Co. Inc., as
agents of the Eastern andAustralian Steamship Company, for the shipment of
219 cases or packages of chemical products from Manila,Philippine Islands, to
Kobe, Japan.
September 15, 1916 (Friday), Martini applied to Macondray for necessary space
on the steamship Eastern, and received a shipping order, which constituted
authority for the ship’s officers to receive the cargo aboard. The mate’s receipt
did not come to Martini’s hand until Monday night, but as Martini was desirous
of obtaining the bills of lading on the Saturday morning preceding in order that
he might negotiate them at the bank, a request was made for the delivery of the
bills of lading on that day. To effectuate this, Martini was required to enter into
the written obligation, calling itself a “letter of guarantee.”
In conformity with the purpose of this document the bills of lading were issued,
and the negotiable copies were, upon the same day, negotiated at the bank by
the plaintiff for 90% of the invoice value of the goods. The bills of lading
contained on their face, conspicuously stenciled, the words “on deck at shipper’s
risks.” The mate’s receipt, received by the plaintiff two days later also bore the
notation “on deck at shipper’s risk,” written with pencil, and evidently by the
officer who took the cargo on board and signed the receipt. Martini says that
upon seeing the stamped “on deck at shipper’s risks”, he at once called the
attention of S. Codina (Martini Employee whose duty it was to attend to all
shipments of merchandise and who in fact had entire control of all matters
relating to the shipping of the cargo)
Martini sent Macondray letters stating that they would be held liable for any
damage or loss if the goods were stowed on deck.
2nd letter of Martini to Macondray
“It is the prevailing practice that, whenever a cargo is being carried on deck,
shipowners or agents give advice of it to shippers previous to shipment taking
place, and obtain their consent to it. If we had been advised of it, shipment would
not have been effected by us. We regret very much this occurrence, but you will
understand that in view of your having acted in this case on your own
responsibility, we shall have to hold you amenable for any consequences that
may be caused from your action.”
Macondray called Codina by telephone andtold him that Macondray could not
accept the cargo for transportation otherwise than on deck and that if Martini
were dissatisfied, the cargo could be discharged from the ship.
There is substantial conformity in the testimony of the two parties with respect
to the time of the conversation by telephone and the nature of the message
which Macondray& Company intended to convey, though the witnesses differ as
to some details and in respect to what occurred immediately thereafter. But in
conclusion, seems clear enough that, although Martini & Company would have
greatly preferred for the cargo to be carried under the hatches, they
nevertheless consented for it to go on deck.
• The goods were embarked at Manila on the steamship Eastern and were
carried to Kobe on the deck of that ship, on 16 September 1916. Upon
arrival at the port of destination it was found that the chemicals comprised
in the shipment had suffered damage from the effects of both fresh and
salt water.
31
• An action was instituted by Martini to recover the amount of the damage
thereby occasioned.
ISSUE(S): WON Macondray should be held liable? – NO.
HELD: Protected the ship from liability for the consequences of negligent acts, if
negligence had been alleged and proved.
It is inferable that one reason why Martini allowed the cargo to be carried away
without being discharged, was that the bills had been discounted and to stop the
shipment would have entailed the necessity of refunding the money which the
bank had advanced, with the inconveniences incident thereto. Another reason
apparently was that Martini discerned, or thought he discerned the possibility of
shifting the risk so as to make it fall upon the ship’s company
Having determined that the Plaintiff consented to the shipment of the cargo on
deck, we proceed to consider whether the Defendant can be held liable for the
damage which befell the cargo in question. It of course goes without saying that
if a clean bill of lading had been issued and the Plaintiff had not consented for
the cargo to go on deck, the ship’s company would have been liable for all
damage which resulted from the carriage on deck.
It is apparent that damage here was caused by rain and sea water — the risk
of which is inherently incident to carriage on deck — the Defendant cannot be
held liable. It is not permissible for the court, in the absence of any allegation or
proof of negligence, to attribute negligence to the ship’s employees in the matter
of protecting the goods from rains and storms. The complaint on the contrary
clearly indicates that the damage done was due to the mere fact of carriage on
deck, no other fault or delinquency on the part of anybody being alleged.
Paragraph 19 of the bills of lading, the ship is not to be held liable, in the case
of goods signed for as carried on deck, for any loss or damage from any cause
whatever.” We are not to be understood as holding that this provision would
have protected the ship from liability for the consequences of negligent acts, if
negligence had been alleged and proved.
Cases Mentioned
The Paragon
the master stowed the goods on deck; and a storm having arisen, it became
necessary to jettison them. None of the cargo in the hold was lost. It was thus
evident that although the cargo in question was lost by peril of the sea, it would
not have been lost except for the fact that it was being carried on deck. It was
held that the ship was liable.
Van Horn vs. Taylor
Goods stowed on deck were lost in a collision. The court found that the ship
carrying these goods was not at fault, and that the shipper had notice of the fact
that the cargo was being carried on deck. It was held that the ship was not liable.
Lawrence vs. Minturn
Stowed on deck with the consent of the shipper were jettisoned during a storm
at sea. In discussing whether this cargo was entitled to general average, the
Supreme Court of the United States said:
Gould vs. Oliver
“Where the loading on deck has taken place with the consent of the merchant, it
is obvious that no remedy against the shipowner or master for a wrongful loading
of the goods on deck can exist. The foreign authorities are indeed express; on
that point. And the general rule of the English law, that no one can maintain an
action for a wrong, where he has consented or contributed to the act which
occasioned his loss, leads to the same conclusion.”
Clark vs. Barnwell
Here, the Supreme Court distinguishes with great precision between the situation
where the burden of proof is upon the ship owner to prove that the loss resulted
from an excepted peril and that where the burden of proof is upon the owner of
the cargo to prove that the loss was caused by negligence on the part of the
persons employed in the conveyance of the goods. The first two syllabi in Clark
vs. Barnwell read as follows: “Where goods are shipped and the usual bill
oflading given, ‘promising to deliver them in good order, the dangers of the seas
excepted,’ and they are foundto be damaged the onus probandi is upon the
owners of the vessel, to show that the injury was occasioned byone of the
excepted causes. But, although the injury may have been occasioned by one of
the excepted causes,yet still the owners of the vessel are responsible if the injury
might have been avoided, by the exercise ofreasonable skill and attention on the
part of the persons employed in the conveyance of the goods. But
theonusprobandi then becomes shifted upon the shipper, to show the
negligence… Damage due to dampness not the fault of master or owners.
EASTERN SHIPPING LINES, INC. vs. IAC AND DEVELOPMENT INSURANCE &
SURETY CORP.
FACTS: A vessel operated by petitioner Eastern Shipping Lines, Inc., loaded at
Kobe, Japan for transportation to Manila, 5000 pieces of calorized lance pipes
in 28 packages consigned to Philippine Blooming Mills Co., Inc., and 7 cases of
spare parts consigned to Central Textile Mills, Inc.; both sets of goods were
insured with Development Insurance and Surety Corp.
(G.R. No. 71478): the same vessel took on board 128 cartons of garment fabrics
and accessories, in 2 containers, consigned to Mariveles Apparel Corporation,
and two cases of surveying instruments consigned to Aman Enterprises and
General Merchandise
The vessel caught fire and sank, resulting in the total loss of ship and cargo
ISSUES:
1. Which law should govern — the Civil Code provisions on Common carriers or
the Carriage of Goods by Sea Act?
2. Who has the burden of proof to show negligence of the carrier?
3. what is the extent of the carrier’s liability?
HELD:
1. The law of the country to which the goods are to be transported governs the
liability of the common carrier in case of their loss, destruction or deterioration.
As the cargoes were transported from Japan to the Philippines, the liability of
Petitioner Carrier is governed primarily by the Civil Code. However, in all matters
not regulated by said Code, the rights and obligations of common carrier shall
32
be governed by the Code of Commerce and by special laws. Thus, the Carriage
of Goods by Sea Act, a special law, is suppletory to the provisions of the Civil
Code.
2. Article 1735 of the Civil Code provides that all cases than those mention in
Article 1734, the common carrier shall be presumed to have been at fault or to
have acted negligently, unless it proves that it has observed the extraordinary
diligence required by law. The burden is upon Eastern Shipping Lines to prove
that it has exercised the extraordinary diligence required by law.
Note: fire –not considered a natural disaster or calamity within the contemplation
of Art. 1734 for it arises almost invariably from some act of man or by human
means; it does not fall within the category of an act of God unless caused by
lightning or by other natural disaster or calamity
Having failed to discharge the burden of proving that it had exercised the
extraordinary diligence required by law, Eastern Shipping Lines cannot escape
liability for the loss of the cargo.
As it was at fault, it cannot seek the protective mantle of Sec. 4(2) of Carriage of
Goods by Sea Act which provides: “Neither the carrier nor the ship shall be
responsible for loss or damage arising or resulting from x x x (b) Fire, unless
caused by the actual fault or privity of the carrier.”
There was actual fault of the carrier shown by lack of diligence in that when the
smoke was noticed, the fire was already big; that the fire must have started 24
hours before the same was noticed; and that after the cargoes were stored in
the hatches, no regular inspection was made as to their condition during the
voyage.
3. See Art. 1749.
G.R. No. 69044: no stipulation in the Bills of Lading limiting the carrier’s liability
for the loss or destruction of the goods; no declaration of a higher value of the
goods; Hence, Eastern Shipping Lines’ liability should not exceed US $500 per
package (as provided in 4(5) of the COGSA), or its peso equivalent, at the time
of payment of the value of the goods lost, but in no case more than the amount
of damage actually sustained.
EASTERN SHIPPING LINES vs. CA
FACTS: On September 4, 1978, 13 coils of uncoated 7-wire stress relieved wire
strand were shipped on board "Japri Venture," owned and operated by the
defendant Eastern Shipping Lines, Inc., at Kobe, Japan, for delivery to Stresstek
Post-Tensioning Phils., Inc. in Manila, which were insured by the plaintiff First
Nationwide Assurance Corporation for P171,923.
While enroute from Kobe to Manila, the carrying vessel "encountered very rough
seas and stormy weather" for three days, more or less.
On September 16, 1978, Japri arrived in Manila and discharged the cargo to the
custody of E. Razon, Inc. When inspected, all the cargoes were wet and that all
13 coils were extremely rusty and totally unsuitable for the intended purpose.
First Nationwide indemnified the consignee for damage and loss to the insured
cargo. First Nationwide filed a complaint against Eastern and E.Razon in RTC for
the recovery of the amount it paid due to the consignee.
RTC:dismissed the complaint CA: liable:Razon-8/13 and Eastern-5/13
ISSUE: WON P IS LIABLE EVEN THOUGH THE SHIPMENT WAS ALREADY IN
CUSTODY OF THE ARRASTRE OPERATOR? – YES.
HELD: Plainly, the heavy seas and rains referred to in the master's report were
not caso fortuito, but normal occurrences that an ocean-going vessel,
particularly in the month of September which, in our area, is a month of rains
and heavy seas would encounter as a matter of routine. They are not unforeseen
nor unforeseeable. These are conditions that ocean-going vessels would
encounter and provide for, in the ordinary course of a voyage. That rain water
(not sea water) found its way into the holds of the Jupri Venture is a clear
indication that care and foresight did not attend the closing of the ship's hatches
so that rain water would not find its way into the cargo holds of the ship.
Moreover, under Article 1733 of the Civil Code, common carriers are bound to
observe "extra-ordinary vigilance over goods . . . .according to all circumstances
of each case," and Article 1735 of the same Code states, to wit:
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.
Since the carrier has failed to establish any caso fortuito, the presumption by law
of fault or negligence on the part of the carrier applies; and the carrier must
present evidence that it has observed the extraordinary diligence required by
Article 1733 of the Civil Code in order to escape liability for damage or
destruction to the goods that it had admittedly carried in this case. No such
evidence exists of record. Thus, the carrier cannot escape liability.
The presumption, therefore, that the cargo was in apparent good condition when
it was delivered by the vessel to the arrastre operator by the clean tally sheets
has been overturned and traversed. The evidence is clear to the effect that the
damage to the cargo was suffered while aboard petitioner's vessel.
DELSAN TRANSPORT LINES, INC., vs. THE HON. COURT OF APPEALS
FACTS: The facts show that Caltex Philippines (Caltex for brevity) entered into a
contract of affreightment with the petitioner, Delsan Transport Lines, Inc., for a
period of one year whereby the said common carrier agreed to transport Caltex’s
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 the private
respondent, American Home Assurance Corporation. During the voyage, the
vessel sank. The insurer paid Caltex and now seeks recovery under the right of
subrogation. The trial court found the vessel seaworthy and the incident was
caused by force majeure hence, exempt from liability. CA reversed the trial
33
 court’s decision, explaining that petitioner was liable as a common carrier due
to lack of manpower and absent any explanation why the vessel sank.
ISSUE: Whether or not there was an implied admission of seaworthiness thus
precluding the right of recovery by private respondent as insurer? – NO.
Whether or not the non-presentation of the marine insurance policy bars the
complaint for recovery of sum of money for lack of cause of action.
HELD: The payment made by the private respondent for the insured’s value of
the lost cargo operates as waiver of its (private respondent) 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 vessel’s seaworthiness by the private respondent as to
foreclose recourse against the petitioner for any liability under its contractual
obligation as a common carrier. The fact of payment grants the private
respondent subrogatory right which enables it to exercise legal remedies that
would otherwise be available to Caltex as owner of the lost cargo against the
petitioner 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 circumstance 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 that they observed extraordinary diligence.
The said presumption was not overturned by petitioner in this case. Hence,
private respondent as insurer can exercise its right of subrogation against
petitioner.
Thus, as the appellate court correctly ruled, petitioner’s 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 when the said
vessel sank.
Anent the second issue, it is our view and so hold 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 herein private respondent 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.
COKALIONG SHIPPING vs. UCPB
FACTS: December 11, 1991: Nestor Angelia (shipper and consignee) delivered to
the petitioner Edgar Cokaliong Shipping Lines, Inc. (now Cokaliong Shipping Lines),
a cargo consisting of one (1) carton of Christmas decor and two (2) sacks of plastic
toys, to be transported on board the M/V Tandag from Cebu City for Tandag,
Surigao del Sur. This cargo is under Bill of Lading No. 58, in the amount
of P6,500.00.
Zosimo Mercado (another shipper and consignee) likewise delivered cargo to
petitioner consisting of two (2) cartons of plastic toys and Christmas decor, one
(1) roll of floor mat and one (1) bundle of various or assorted goods. This is under
Bill of Lading No. 59,valued in the amount of P14,000.00
FelicianaLegaspi(owner of the goods) insured the cargo, covered by BOL Nos. 59
and No. 58, with the UCPB General Insurance Co., Inc., [respondent]. No. 59 was
insured for P100,000 while No. 58 for P50,000. [*Note that both amounts are far
from the actual and declared value in the BOLs issued by Cokaliong]
After the vessel had passed by the Mandaue-Mactan Bridge, fire ensued in the
engine room, and, despite earnest efforts of the officers and crew of the vessel,
the fire engulfed and destroyed the entire vessel resulting in the loss of the vessel
and the cargoes therein.
FelicianaLegaspi filed a claim, with [respondent], for the value of the cargos
insured. The latter approved the claim. For Bill of Lading No. 59, Legaspi received
from UCPB P99,000.00 while for No. 58, P60,338.00.
UCPB as subrogee of Legaspi, filed a complaint anchored on torts against
petitioner, with the RTC of Makati City, for the collection of the total principal amount
of P148,500.00. Respondent allegedthat the loss of the cargo was due to the
negligence of the petitioner
Petitioner alleged that: (a) It was cleared by the Board of Marine Inquiry of any
negligence in the burning of the vessel; and (b) it cannot be held liable for the loss
of the cargo beyond the value thereof declared in the Bill of Lading.
ISSUES:
(1) Is petitioner liable for the loss of the goods? YES
(2) If it is liable, what is the extent of its liability? According to what was reflected
in the Bill of Lading.
HELD:
1. Petitioner’s argument: the cause of the loss of the goods, subject of this case,
was force majeure. It adds that its exercise of due diligence was adequately proven
by the findings of the Philippine Coast Guard.
SC: We are not convinced. The uncontroverted findings of the Philippine Coast
Guard show that the M/V Tandag sank due to a fire, which resulted from a crack in
the auxiliary engine fuel oil service tank.The crack was located on the side of the
fuel oil tank, which had a mere two-inch gap from the engine room walling, thus
precluding constant inspection and care by the crew
Having originated from an unchecked crack in the fuel oil service tank, the fire
could not have been caused by force majeure. Broadly speaking, force majeure
generally applies to a natural accident, such as that caused by a lightning, an
earthquake, a tempest or a public enemy.
34
Hence, fire is not 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. It may even be caused by the actual fault or privity of the carrier.
Peril of fire is not comprehended within the exceptions in Article 1734; Article 1735
applies (please see provision)
Where loss of cargo results from the failure of the officers of a vessel to inspect
their ship frequently so as to discover the existence of cracked parts, that loss
cannot be attributed to force majeure, but to the negligence of those officials.
Ensuring the seaworthiness of the vessel is the first step in exercising the required
vigilance. Petitioner did not present sufficient evidence showing what measures or
acts it had undertaken to ensure the seaworthiness of the vessel.
It failed to show when the last inspection and care of the auxiliary engine fuel oil
service tank was made, or some other evidence to establish that it had exercised
extraordinary diligence.
It merely stated that constant inspection and care were not possible, and that the
last time the vessel was dry-docked was in November 1990.
2. Respondent’s contention: Petitioner’s liability should be based on the actual
insured value of the goods, subject of this case.
Petitioner’s: its liability should be limited to the value declared by the
shipper/consignee in the Bill of Lading.
SC: Petitioner should not be held liable for more than what was declared by the
shippers/consignees as the value of the goods in the bills of lading.
Ratio:The records show that the Bills of Lading covering the lost goods contain the
stipulation that in case of claim for loss or for damage to the shipped merchandise
or property, [t]he liability of the common carrier x xx shall not exceed the value of
the goods as appearing in the bill of lading.
A stipulation that limits liability is validas long as it is not against public policy.
Following provisions apply in the present case:
Art. 1749. A stipulation that the common carriers liability is limited to the value of
the goods appearing in the bill of lading, unless the shipper or owner declares a
greater value, is binding.
Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper
for the loss, destruction, or deterioration of the goods is valid, if it is reasonable
and just under the circumstances, and has been freely and fairly agreed upon.
Pursuant to the afore-quoted provisions of law, it is required that the stipulation
limiting the common carriers liability for loss must be reasonable and just under
the circumstances, and has been freely and fairly agreed upon.
In the present case, the stipulation limiting petitioner’s liability is not contrary to
public policy.
The shippers/consignees may recover the full value of the goods by the simple
expedient of declaring the true value of the shipment in the Bill of Lading. Other
than the payment of a higher freight, there was nothing to stop them (Legaspi,
et.al) from placing the actual value of the goods therein.
In fact, they committed fraud against the common carrier by deliberately
undervaluing the goods in their Bill of Lading, thus depriving the carrier of its
proper and just transport fare.
Concededly, the purpose of the limiting stipulation in the Bill of Lading is to protect
the common carrier. Such stipulation obliges the shipper/consignee to notify the
common carrier of the amount that the latter may be liable for in case of loss of
the goods. The common carrier can then take appropriate measures -- getting
insurance, if needed, to cover or protect itself. This precaution on the part of the
carrier is reasonable and prudent.
ASIA LIGHTERAGE AND SHIPPING, INC vs. CA
FACTS: Asia Lighterage and Shipping, Inc was contracted as carrier to deliver
3,150 metric tons of Better Western White Wheat in bulk, (US$423,192.35) to
the consignee‘s (General Milling Corporation) warehouse at Bo. Ugong, Pasig
City insured by Prudential Guarantee and Assurance, Inc. against loss/damage
for P14,621,771.75.
It appears that on August 17, 1990, the transport of said cargo was suspended
due to a warning of an incoming typhoon. PSTSI III was tied down to other barges
which arrived ahead of it while weathering out the storm that night. A few days
after, the barge developed a list because of a hole it sustained after hitting an
unseen protuberance underneath the water. It filed a Marine Protest on August
28, 1990 and also secured the services of Gaspar Salvaging Corporation to
refloat the barge.
The barge was then towed to ISLOFF terminal before it finally headed towards
the consignee’s wharf on September 5, 1990. Upon reaching the Sta. Mesa
spillways, the barge again ran aground due to strong current.
7 days later, a bidding was conducted to dispose of the damaged wheat retrieved
& loaded on the 3 other barges. The total proceeds from the sale of the salvaged
cargo was P201,379.75.
ISSUES:
1. Whether petitioner is a common carrier.
2. Assuming petitioner is a common carrier, whether it exercised extraordinary
care and diligence in its care and custody of the consignee’s cargo.
HELD:
1. Petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as persons, corporations,
firms or associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation, offering
their services to the public.
In De Guzman vs. CA it was held that the definition of common carriers in Article
35
1732 of the Civil Code makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who does
such carrying only as an ancillary activity. There is also no distinction between a
person or enterprise offering transportation service on a regular/scheduled
basis and one offering such service on an occasional, episodic or unscheduled
basis.]
The test to determine a common carrier is “whether the given undertaking is a
part of the business engaged in by the carrier which he has held out to the
general public as his occupation rather than the quantity or extent of the
business transacted.” In the case at bar, the petitioner admitted that it is
engaged in the business of shipping, lighterage and drayage, offering its barges
to the public, despite its limited clientele for carrying/transporting goods by water
for compensation.
2. The findings of the lower courts should be upheld. Petitioner failed to exercise
extraordinary diligence in its care and custody of the consignee’s goods.
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 the case of loss, destruction or
deterioration of the goods, the common carrier must prove that it exercised
extraordinary diligence.There are, however, exceptions
Art. 1734. Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following causes
only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
In the case at bar, the barge completely sank after its towing bits broke, resulting
in the total loss of its cargo. Petitioner claims that this was caused by a typhoon,
hence, it should not be held liable for the loss of the cargo. However, petitioner
failed to prove that the typhoon is the proximate and only cause of the loss of
the goods, and that it has exercised due diligence before, during and after the
occurrence of the typhoon to prevent/minimize the loss. The evidence show that,
even before the towing bits of the barge broke, it had already previously
sustained damage when it hit a sunken object while docked at the Engineering
Island. It even suffered a hole. Clearly, this could not be solely attributed to the
typhoon. Thus, when petitioner persisted to proceed with the voyage, it
recklessly exposed the cargo to further damage.
Moreover, petitioner still headed to the consignee’s wharf despite knowledge of
an incoming typhoon. During the time that the barge was heading towards the
consignee’s wharf on September 5, 1990, typhoon “Loleng” has already entered
the Philippine area of responsibility.
DSR-SENATOR LINES AND C.F. SHARP AND COMPANY, INC., vs. FEDERAL
PHOENIX ASSURANCE CO., INC.,
FACTS: Berde Plants delivered 632 units of artificial trees to C.F. Sharp and
Company, Inc. C.F. Sharp for transportation and delivery to the consignee, Al-
Mohr International Group, in Riyadh, Saudi Arabia.
C.F. Sharp is the General Ship Agent of DSR-Senator Lines, a foreign shipping
corporation. Federal Phoenix Assurance insured the cargo against all risks in the
amount of ₱941,429.61.
The cargo was loaded in M/S "Arabian Senator. On June 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.
Consequently, Federal Phoenix Assurance paid Berde Plants ₱941,429.61
corresponding to the amount of insurance for the cargo. In turn Berde Plants
executed in its favor a "Subrogation Receipt"5 dated January 17, 1994.
On February 8, 1994, Federal Phoenix Assurance sent a letter to C.F. Sharp
demanding payment of ₱941,429.61. C.F. Sharp denied any liability on the
ground that such liability was extinguished when the vessel carrying the cargo
was gutted by fire.
Thus, 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 ₱941,429.61,
compensatory damages of ₱100,000.00 and costs.
ISSUE: WON DSR-Senator Lines and C.F. Sharp are liable for the loss of the
cargo? – YES.
HELD:
Article 1734 of the Civil Code 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, 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."
Fire is not one of those enumerated under the above provision which exempts a
carrier from liability for loss or destruction of the cargo.
In Eastern Shipping Lines, Inc. vs. Intermediate Appellate Court,9 we ruled that
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.
36
Even if fire were to be considered a natural disaster within the purview of Article
1734, it is required under Article 1739 of the same Code that the natural disaster
must have been the proximate and only cause of the loss, and that the carrier
has exercised due diligence to prevent or minimize the loss before, during or
after the occurrence of the disaster.
destruction or deterioration was brought about -- among others -- by "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.

Respondent Federal Phoenix Assurance raised the presumption of negligence In the present case, petitioner disclaims responsibility for the loss of the cargo
against petitioners. However, they failed to overcome it by sufficient proof of by claiming the occurrence of a "storm" under Article 1734(1). It attributes the
extraordinary diligence. sinking of its vessel solely to the weather condition between 10:00 p.m. on July
25, 1990 and 1:25 a.m. on July 26, 1990.

In the present case, petitioner has not given the Court sufficient cogent reasons
CENTRAL SHIPPING COMPANY, INC vs. INSURANCE COMPANY OF NORTH
to disturb the conclusion of the CA that the weather encountered by the vessel
AMERICA
was not a "storm" as contemplated by Article 1734(1). Established is the fact
that between 10:00 p.m. on July 25, 1990 and 1:25 a.m. on July 26, 1990, M/V
FACTS: On July 25, 1990 at Puerto Princesa, Palawan, the [petitioner] received
Central Bohol encountered a southwestern monsoon in the course of its voyage.
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
The Note of Marine Protest, which the captain of the vessel issued under oath,
Alaska Lumber Co., Inc.
stated that he and his crew encountered a southwestern monsoon about 2200
hours on July 25, 1990, and another monsoon about 2400 hours on July 26,
"The cargo was insured for ₱3,000,000.00 against total loss under INSURANCE
1990. Even petitioner admitted in its Answer that the sinking of M/V Central
COMPANY OF NORTH AMERICA Marine Cargo Policy No. MCPB-00170.
Bohol had been caused by the strong southwest monsoon.

on July 26, 1990, while enroute to Manila, the vessel listed about 10 degrees
Even if the weather encountered by the ship is to be deemed a natural disaster
starboardside, due to the shifting of logs in the hold. After the listing of the vessel
under Article 1739 of the Civil Code, petitioner failed to show that such natural
had increased to 15 degrees, the ship captain ordered his men to abandon ship.
disaster or calamity was the proximate and only cause of the loss. Human agency
And at about 0130 hours of the same day the vessel completely sank. Due to
must be entirely excluded from the cause of injury or loss. In other words, the
the sinking of the vessel, the cargo was totally lost.
damaging effects blamed on the event or phenomenon must not have been
caused, contributed to, or worsened by the presence of human participation.7
"The consignee, Alaska Lumber Co. Inc., presented a claim for the value of the
The defense of fortuitous event or natural disaster cannot be successfully made
shipment to the petitioner but the latter failed and refused to settle the claim,
when the injury could have been avoided by human precaution. We also find no
hence [respondent], being the insurer, paid said claim and now seeks to be
reason to disturb the CA’s finding that the loss of the vessel was caused not only
subrogated to all the rights and actions of the consignee as against the
by the southwestern monsoon, but also by the shifting of the logs in the hold.
[petitioner
Such shifting could been due only to improper stowage.
The vessel proceeded through the first southwestern monsoon without any
Petitioner, while admitting the sinking of the vessel, interposed the defense that
mishap, and that it began to list only during the second monsoon immediately
the vessel was fully manned, fully equipped and in all respects seaworthy; that
after the logs had shifted and seawater had entered the hold. Petitioner’s own
all the logs were properly loaded and secured; that the vessel’s master exercised
witnesses, boatswain Eduardo Viñas Castro and oiler Frederick Perena, are one
due diligence to prevent or minimize the loss before, during and after the
in saying that the vessel encountered two weather disturbances, one at around
occurrence of the storm. It raised as its main defense that the proximate and
10 o’clock to 11 o’clock in the evening and the other at around 12 o’clock
only cause of the sinking of its vessel and the loss of its cargo was a natural
midnight. Both disturbances were coupled with waves and heavy rains, yet, the
disaster, a tropical storm which neither petitioner nor the captain of its vessel
vessel endured the first and not the second. The reason is plain. The vessel felt
could have foreseen.
the strain during the second onslaught because the logs in the bodega shifted
and there were already seawater that seeped inside." In the hold, the sloshing
ISSUE:
of tons of water back and forth had created pressures that eventually caused
1. Whether the carrier is liable for the loss of the cargo
the ship to sink. Had the logs not shifted, the ship could have survived and
2. Whether the doctrine of limited liability is applicable.
reached at least the port of El Nido.
3. Whether the loss of the cargo was due to the occurrence of a natural disaster;
and if so, whether its sole and proximate cause was such natural disaster or
The manner of stowage in the lower hold was not sufficient to secure the logs in
whether petitioner was partly to blame for failing to exercise due diligence in the
the event the ship should roll in heavy weather. Notably, the logs were of different
prevention of that loss.
lengths ranging from 3.7 to 12.7 meters.35 Being clearly prone to shifting, the
round logs should not have been stowed with nothing to hold them securely in
HELD:
place. Each pile of logs should have been lashed together by cable wire, and the
1. In the event of loss, destruction or deterioration of the insured goods,
wire fastened to the side of the hold. Considering the strong force of the wind
common carriers are responsible; that is, unless they can prove that such loss,

37
and the roll of the waves, the loose arrangement of the logs did not rule out the
possibility of their shifting. By force of gravity, those on top of the pile would
naturally roll towards the bottom of the ship.
The evidence indicated that strong southwest monsoons were common
occurrences during the month of July. Thus, the officers and crew of M/V Central
Bohol should have reasonably anticipated heavy rains, strong winds and rough
seas. They should then have taken extra precaution in stowing the logs in the
hold, in consonance with their duty of observing extraordinary diligence in
safeguarding the goods. But the carrier took a calculated risk in improperly
securing the cargo. Having lost that risk, it cannot now escape responsibility for
the loss.
2. 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 shipowner and
the captain. It has already been established that the sinking of M/V Central Bohol
had been caused by the fault or negligence of the ship captain and the crew, as
shown by the improper stowage of the cargo of logs. "Closer supervision on the
part of the shipowner could have prevented this fatal miscalculation." As such,
the shipowner was equally negligent. It cannot escape liability by virtue of the
limited liability rule.
LEA MER INDUSTRIES, INC., , vs. MALAYAN INSURANCE CO., INC.
FACTS: Ilian Silica Mining entered into a contract of carriage with Lea Mer
Industries, Inc., for the shipment of 900 metric tons of silica sand valued at
₱565,000. Consigned to Vulcan Industrial and Mining Corporation, the cargo
was to be transported from Palawan to Manila.
On October 1991, the silica sand was placed on board Judy VII, a barge leased
by Lea Mer. During the voyage, the vessel sank, resulting in the loss of the cargo.
Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost cargo.
To recover the amount paid and in the exercise of its right of subrogation,
Malayan demanded reimbursement from Lea Mer, which refused to comply.
Consequently, Malayan instituted a Complaint with the Regional Trial Court (RTC)
of Manila on September 4, 1992, for the collection of the amount paid to Vulcan.
ISSUE:
1. WON the petitioner is a common carrier (YES)
2. WON petitioner is liable for the loss of the cargo (YES)
HELD:
1. The Court corrects the trial court’s finding that petitioner became a private
carrier when Vulcan chartered it. Charter parties are classified as contracts of
demise (or bareboat) and affreightment, which are distinguished as follows:
"Under the demise or bareboat charter of the vessel, the charterer will generally
be considered as owner for the voyage or service stipulated. The charterer mans
the vessel with his own people and becomes, in effect, the owner pro hac vice,
subject to liability to others for damages caused by negligence. To create a
demise, the owner of a vessel must completely and exclusively relinquish
possession, command and navigation thereof to the charterer; anything short of
such a complete transfer is a contract of affreightment (time or voyage charter
party) or not a charter party at all." The distinction is significant, because a
demise or bareboat charter indicates a business undertaking that is private in
character. Consequently, the rights and obligations of the parties to a contract
of private carriage are governed principally by their stipulations, not by the law
on common carriers.
The Contract in the present case was one of affreightment, as shown by the fact
that it was petitioner’s crew that manned the tugboat M/V Ayalit and controlled
the barge Judy VII. Necessarily, petitioner was a common carrier, and the
pertinent law governs the present factual circumstances.
2. PET failed to overcome the presumption of negligence.
Common carriers are presumed to have been at fault or to have acted negligently
for loss or damage to the goods that they have transported.26 This presumption
can be rebutted only by proof that they observed extraordinary diligence, or that
the loss or damage was occasioned by 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."28
Article 1174 of the Civil Code provides that "no person shall be responsible for
a fortuitous event which could not be foreseen, or which, though foreseen, was
inevitable." Thus, if the loss or damage was due to such an event, a common
carrier is exempted from liability.
Elements of a "fortuitous event" :
(a) the cause of the unforeseen and unexpected occurrence, or the failure of
the debtors to comply with their obligations, must have been independent of
human will;
(b) the event that constituted the caso fortuito must have been impossible to
foresee or, if foreseeable, impossible to avoid;
(c) the occurrence must have been such as to render it impossible for the
debtors to fulfill their obligation in a normal manner; and
(d) the obligor must have been free from any participation in the aggravation of
the resulting injury to the creditor.
To excuse the common carrier fully of any liability, the fortuitous event must have
been the proximate and only cause of the loss. Moreover, it should have
exercised due diligence to prevent or minimize the loss before, during and after
the occurrence of the fortuitous event.
There is no controversy regarding the loss of the cargo in the present case. As
the common carrier, petitioner bore the burden of proving that it had exercised
extraordinary diligence to avoid the loss, or that the loss had been occasioned
by a fortuitous event -- an exempting circumstance.
It was precisely this circumstance that petitioner cited to escape liability. Lea Mer
claimed that the loss of the cargo was due to the bad weather condition brought
about by Typhoon Trining. Evidence was presented to show that petitioner had
not been informed of the incoming typhoon, and that the Philippine Coast Guard
had given it clearance to begin the voyage. On October 25, 1991, the date on
38
which the voyage commenced and the barge sank, Typhoon Trining was allegedly
far from Palawan, where the storm warning was only "Signal No. 1."The evidence
presented by petitioner in support of its defense of fortuitous event was sorely
insufficient.
First, petitioner presented no evidence that it had attempted to minimize or
prevent the loss before, during or after the alleged fortuitous event.
Second, the alleged fortuitous event was not the sole and proximate cause of
the loss. There is a preponderance of evidence that the barge was not seaworthy
when it sailed for Manila. Respondent was able to prove that, in the hull of the
barge, there were holes that might have caused or aggravated the sinking.
Because the presumption of negligence or fault applied to petitioner, it was
incumbent upon it to show that there were no holes; or, if there were, that they
did not aggravate the sinking.
ALEJANDRO ARADA vs. HONORABLE COURT OF APPEALS
FACTS: Alejandro Arada , is the proprietor and operator of the firm South Negros
Enterprises. It is engaged in the business of small scale shipping as a common
carrier, servicing the hauling of cargoes of different corporations and companies
with the five (5) vessels it was operating.
Petitioner entered into a contract with private respondent to safely transport as
a common carrier, cargoes of the latter from San Carlos City, Negros Occidental
to Mandaue City using one of petitioner's vessels, M/L Maya. The cargoes of
private respondent consisted of 9,824 cases of beer empties valued at
P176,824.80.
On March 24, 1982, petitioner thru its crew master, Mr. Vivencio Babao, applied
for a clearance with the Philippine Coast Guard for M/L Maya to leave the port of
San Carlos City, but due to a typhoon, it was denied. On March 25 M/L Maya was
given clearance as there was no storm and the sea was calm. Hence, said vessel
left for Mandaue City. While it was navigating towards Cebu, a typhoon developed
and said vessel was buffeted on all its sides by big waves. Its rudder was
destroyed and it drifted for sixteen (16) hours although its engine was running.
On March 27 the vessel sank with whatever was left of its cargoes. The crew was
rescued by a passing pump boat and was brought to Calanggaman Island. Later
in the afternoon, they were brought to Palompon, Leyte, where Vivencio Babao
filed a marine protest. The Commandant of the Philippine Coast Guard rendered
a decision exonerating the owner/operator officers and crew of the ill-fated M/L
Maya from any administrative liability on account of said incident.
On March 1983, Private respondent filed a complaint in the Regional Trial Court
its first cause of action being for the recovery of the value of the cargoes
anchored on breach of contract of carriage.
ISSUE: WON petitioner is liable for the value of the lost cargoes. – YES.
HELD: Petitioner contends that it was not in the exercise of its function as a
common carrier when it entered into a contract with private respondent, but was
then acting as a private carrier not bound by the requirement of extraordinary
diligence and that the factual findings of the Board of Marine Inquiry and the
Special Board of Marine Inquiry exonerating it are binding and conclusive on the
Court.
In the case at bar, Petitioner was exercising its function as a common carrier
when it entered into a contract with private respondent to carry and transport
the latter's cargoes. This fact is best supported by the admission of petitioner's
son, Mr. Eric Arada, who testified as the officer-in-charge for operations of South
Negros Enterprises in Cebu City.
In order that the common carrier may be exempted from responsibility, the
natural disaster must have been the proximate and only cause of the loss.
However, the common carrier must exercise due diligence to prevent or minimize
the loss before, during and after the occurrence of flood, storm or other natural
disaster in order that the common carrier may be exempted from liability for the
destruction or deterioration of the goods.
In the instant case, the appellate court was correct in finding that petitioner failed
to observe the extraordinary diligence over the cargo in question and he or the
master in his employ was negligent previous to the sinking of the carrying vessel.
• BABAO, the master of the carrying vessel, knew that there was a typboon
coming before his departure but did not check where it was.
• If only for the fact that he was first denied clearance to depart on March
24, 1982, obviously because of a typhoon coming, Babao, as master of
the vessel, should have verified first where the typhoon was before
departing on March 25, 1982. Prudence dictates that he should have
ascertained first where the storm was before departing as it might be on
his path.
• CA’s conclusion as to the negligence of petitioner is supported by
evidence. Based on testimony and records of the case.
• Furthermore, the records show that the crew of M/L Maya did not have
the required qualifications provided for in P.D. No. 97 or the Philippine
Merchant Marine Officers Law, all of whom were unlicensed. While it is true
that they were given special permit to man the vessel, such permit was
issued at the risk and responsibility of the owner
Finally, petitioner claims that the factual findings of the Special Board of Marine
Inquiry exonerating the owner/operator, crew officers of the ill-fated vessel M/L
Maya from any administrative liability is binding on the court.
In rejecting petitioner's claim, respondent court was correct in ruling that "such
exoneration was but with respect to the administrative liability of the
owner/operator, officers and crew of the ill-fated" vessel. It could not have meant
exoneration of appellee from liability as a common carrier for his failure to
observe extraordinary diligence in the vigilance over the goods it was
transporting and for the negligent acts or omissions of his employees. The
Philippine Merchant Marine Rules and Regulations particularly Chapter XVI
thereof entitled "Marine Investigation and Suspension and Revocation
Proceedings" limits the jurisdiction of the Board of Marine Inquiry and Special
Board of Marine Inquiry to the administrative aspect of marine casualties in so
far as it involves the shipowners and officers.
39
 THE PHILIPPINE AMERICAN GENERAL INSURANCE vs. MGG MARINE SERVICES,
INC. and DOROTEO GAERLAN
FACTS: On March 1987, San Miguel Corporation insured several beer bottle
cases with an aggregate value of P5,836,222.80 with petitioner Philippine
American General Insurance Company. The cargo were loaded on board the M/V
Peatheray Patrick-G to be transported from Mandaue City to Bislig, Surigao del
Sur.
After having been cleared by the Coast Guard Station in Cebu the previous day,
the vessel left the port of Mandaue City for Bislig, Surigao del Sur on March 2,
1987. The weather was calm when the vessel started its voyage. The following
day M/V Peatheray Patrick-G listed and subsequently sunk off Cawit Point,
Cortes, Surigao del Sur. As a consequence thereof, the cargo belonging to San
Miguel Corporation was lost.
San Miguel Corporation claimed the amount of its loss from the insurance
Company (PET). The latter paid the former P5,836,222.80.
On March 18, 1987, Mr. Eduardo Sayo, a surveyor from the Manila Adjusters
and Surveyors Co., went where the vessel was cast ashore, to investigate the
circumstances surrounding the loss of the cargo. In his report, he stated that
the vessel was structurally sound and that he did not see any damage or crack
thereon. He concluded that the proximate cause of the listing and subsequent
sinking of the vessel was the shifting of ballast water from starboard to portside.
It affected the stability of the vessel.
On November 1987, petitioner (insurance company) filed case for collection
against private respondents to recover the amount it paid to San Miguel
Corporation for the loss of the latter's cargo.
Meanwhile, the Board of Marine Inquiry rendered its decision exonerating the
captain and crew of the ill-fated vessel for any administrative liability. It found
that the cause of the sinking of the vessel was the existence of strong winds and
enormous waves. It was further held by the Board that said fortuitous event was
the proximate and only cause of the vessel's sinking.
ISSUE: Whether the loss of the cargo was due to the occurrence of a natural
disaster, and if so, whether such natural disaster was the sole and proximate
cause of the loss or whether private respondents were partly to blame for failing
to exercise due diligence to prevent the loss of the cargo. – YES. YES.
HELD: Even in cases where a natural disaster is the proximate and only cause of
the loss, a common carrier is still required to exercise due diligence to prevent
or minimize loss before, during and after the occurrence of the natural disaster,
for it to be exempt from liability under the law for the loss of the goods. If a
common carrier fails to exercise due diligence to preserve and protect the goods
carried by it on the occasion of a natural disaster, it will be deemed to have been
negligent, and the loss will not be considered as having been due to a natural
disaster under Article 1734.
The Court of Appeals, citing the decision of the Board of Marine Inquiry in the
administrative case against the vessel's crew (BMI--646-87), found that the loss
of the cargo was due solely to the existence of a fortuitous event. The findings
of the Board of Marine Inquiry indicate that the attendance of strong winds and
huge waves while the M/V Peatheray Patrick-G was sailing through Cortes,
Surigao del Norte on March 3, 1987 was indeed fortuitous. A fortuitous event
has been defined as one which could not be foreseen, or which though foreseen,
is inevitable.
In the case at bar, it was adequately shown that before the M/V Peatheray
Patrick-G left the port of Mandaue City, the Captain confirmed with the Coast
Guard that the weather condition would permit the safe travel of the vessel to
Bislig, Surigao del Sur. Thus, he could not be expected to have foreseen the
unfavorable weather condition that awaited the vessel in Cortes, Surigao del Sur.
It was the presence of the strong winds and enormous waves which caused the
vessel to list, keel over, and consequently lose the cargo contained therein.
The appellate court likewise found that there was no negligence on the part of
the crew of the M/V Peatheray Patrick-G, citing the decision of the Board of
Marine Inquiry. That the vessel was granted SOLAS clearance by the Philippine
Coast Guard on March 1, 1987 to depart from Mandawe City for Bislig, Surigao
del Sur as evidenced by a certification issued to D.C. Gaerlan Oil Products by
Coast Guard Station Cebu dated December 23, 1987. Based on the foregoing
circumstances, "LCT Peatheray Patrick-G" should be considered seaworthy
vessel at the time she undertook that fateful voyage on March 2, 1987.
Overloading was also eliminated as a possible cause of the sinking of the vessel,
as the evidence showed that its freeboard clearance was substantially greater
than the authorized freeboard clearance.
Although the Board of Marine Inquiry ruled only on the administrative liability of
the captain and crew of the M/V Peatheray Patrick-G, it had to conduct a
thorough investigation of the circumstances surrounding the sinking of the vessel
and the loss of its cargo in order to determine their responsibility, if any. The
results of its investigation as embodied in its decision on the administrative case
clearly indicate that the loss of the cargo was due solely to the attendance of
strong winds and huge waves which caused the vessel accumulate water, tilt to
the port side and to eventually keel over. There was thus no error on the part of
the Court of Appeals in relying on the factual findings of the Board of Marine
Inquiry, for such factual findings, being supported by substantial evidence are
persuasive, considering that said administrative body is an expert in matters
concerning marine casualties.
Since the presence of strong winds and enormous waves at Cortes, Surigao del
Sur on March 3, 1987 was shown to be the proximate and only cause of the
sinking of the M/V Peatheray Patrick-G and the loss of the cargo belonging to
San Miguel Corporation.
FGU INSURANCE CORPORATION vs. THE COURT OF APPEALS
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.
40
On 23 September 1979, San Miguel Corporation (SMC) shipped from Mandaue
City, Cebu, on board the D/B Lucio, for towage by M/T ANCO. It has cargoes the
consignee of which as covered by the Bill of Lading No. 1 was SMC’s Beer
Marketing Division (BMD)-Estancia Beer Sales Office, Estancia, Iloilo, while the
consignee for the cargoes covered by Bill of Lading No. 2 was SMC’s BMD-San
Jose Beer Sales Office, San Jose, Antique.
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 o’clock 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, 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. SMC’s District Sales Supervisor requested
ANCO’s representative to transfer the barge to a safer place because the vessel
might not be able to withstand the big waves.
ANCO’s representative did not heed the request because he was confident that
the barge could withstand the waves. However, 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 10-11 pm Oct 1, 1979, the crew of D/B Lucio abandoned the vessel
because the barge’s 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 SMC’s consignee 29,210 cases of Pale
Pilsen and Five Hundred Fifty 550 cases of Cerveza Negra. As a consequence of
the incident, SMC filed a complaint for Breach of Contract of Carriage and
Damages against ANCO for the amount P1,346,197.00 plus interest, litigation
expenses and Twenty-Five Percent (25%) of the total claim as attorney’s fees.
ANCO admitted that the cases of beer Pale Pilsen and Cerveza Negra mentioned
in the complaint were indeed loaded on the vessel belonging to ANCO. It claimed
however that it had an agreement with SMC that ANCO would not be liable for
any losses or damages resulting to the cargoes by reason of fortuitous event.
Since the cases of beer Pale Pilsen and Cerveza Negra were lost by reason of a
storm, a fortuitous event which battered and sunk the vessel in which they were
loaded, they should not be held liable. Subsequently, ANCO, with leave of court,
filed a Third-Party Complaint against FGU, alleging that before the vessel of ANCO
left for San Jose, Antique with the cargoes owned by SMC, the cargoes, to the
extent of Twenty Thousand (20,000) cases, were insured with FGU for a total
amount of Eight Hundred Fifty-Eight Thousand Five Hundred Pesos
(P858,500.00) under Marine Insurance Policy No. 29591.
ISSUES:
1. WON res judicata applies in the case (NO)
2. WON the negligence of ANCOS representatives is the proximate cause of
the loss (YES)
3. WON typhoon Sisang exempts them from liability (NO)
4. WON FGU can be held liable under the insurance policy to reimburse ANCO
for the loss of the cargoes despite the findings of the respondent court
that such loss was occasioned by the blatant negligence of the latter’s
employees. (NO)
HELD:
1. It is ANCO’s contention that the decision in Civil Case No. R-19341,5 which
was decided in its favor, constitutes res judicata with respect to the issues raised
in the case at bar.
The contention is without merit. There can be no res judicata as between Civil
Case No. R-19341 and the case at bar. There is no question that the first three
elements of res judicata as enumerated above are indeed satisfied by the
decision in Civil Case No. R-19341. However, the doctrine is still inapplicable due
to the absence of the last essential requisite of identity of parties, subject matter
and causes of action.
The parties in Civil Case No. R-19341 were ANCO as plaintiff and FGU as
defendant while in the instant case, SMC is the plaintiff and the Estate of Ang Gui
represented by Lucio, Julian and Jaime, all surnamed Ang and Co To as
defendants, with the latter merely impleading FGU as third-party defendant.
The subject matter of Civil Case No. R-19341 was the insurance contract entered
into by ANCO, the owner of the vessel, with FGU covering the vessel D/B Lucio,
while in the instant case, the subject matter of litigation is the loss of the cargoes
of SMC, as shipper, loaded in the D/B Lucio and the resulting failure of ANCO to
deliver to SMC’s consignees the lost cargo.
Moreover, the subject matter of the third-party complaint against FGU in this
case is different from that in Civil Case No. R-19341. In the latter, ANCO was
suing FGU for the insurance contract over the vessel while in the former, the
third-party complaint arose from the insurance contract covering the cargoes on
board the D/B Lucio.
2. A careful study of the records shows no cogent reason to fault the findings
of the lower court, as sustained by the appellate court, that ANCO’s
representatives failed to exercise the extraordinary degree of diligence required
by the law to exculpate them from liability for the loss of the cargoes.
- ANCO admitted that they failed to deliver to the designated consignee the
29,210 cases of Pale Pilsen and 550 cases of Cerveza Negra.
- it is borne out in the testimony of the witnesses on record that the barge
D/B Lucio had no engine of its own and could not maneuver by itself. Yet,
the patron of ANCO’s tugboat M/T ANCO left it to fend for itself
notwithstanding the fact that as the two vessels arrived at the port of San
Jose, Antique, signs of the impending storm were already manifest. At that
precise moment, since it is the duty of the defendant to exercise and
observe extraordinary diligence in the vigilance over the cargo of the
plaintiff, the patron or captain of M/T ANCO, representing the defendant
could have placed D/B Lucio in a very safe location before they left
knowing or sensing at that time the coming of a typhoon. The presence
of big waves and dark clouds could have warned the patron or captain of
M/T ANCO to insure the safety of D/B Lucio including its cargo. Had the
patron or captain of M/T ANCO, the representative of the defendants
41
 observed extraordinary diligence in placing the D/B Lucio in a safe place,
the loss to the cargo of the plaintiff could not have occurred.
- The records show that the D/B Lucio was the only vessel left at San Jose,
Antique, during the time in question. The other vessels were transferred
and temporarily moved to Malandong, 5 kilometers from wharf where the
barge remained.
3. 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 SMC’s 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 ANCO’s 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.
4. The ordinary negligence of the insured and his agents has long been held as
a part of the risk which the insurer takes upon himself, and the existence of
which, where it is the proximate cause of the loss, does not absolve the insurer
from liability. But willful exposure, gross negligence, negligence amounting to
misconduct, etc., have often been held to release the insurer from such liability.
The United States Supreme Court has made a distinction between ordinary
negligence and gross negligence or negligence amounting to misconduct and its
effect on the insured’s right to recover under the insurance contract. According
to the Court, while mistake and negligence of the master or crew are incident to
navigation and constitute a part of the perils that the insurer is obliged to incur,
such negligence or recklessness must not be of such gross character as to
amount to misconduct or wrongful acts; otherwise, such negligence shall release
the insurer from liability under the insurance contract.
In the case at bar, both the trial court and the appellate court had concluded
from the evidence that the crewmembers of both the D/B Lucio and the M/T
ANCO were blatantly negligent. The blatant negligence of ANCO’s employees is
of such gross character that it amounts to a wrongful act which must exonerate
FGU from liability under the insurance contract.
There was blatant negligence on the part of the employees of defendants-
appellants when the patron (operator) of the tug boat immediately left the barge
at the San Jose, Antique wharf despite the looming bad weather. Negligence was
likewise exhibited by the defendants-appellants’ representative who did not heed
Macabuag’s request that the barge be moved to a more secure place. The
negligence of the defendants-appellants is proved by the fact that on 01 October
1979, the only simple vessel left at the wharf in San Jose was the D/B Lucio.
SCHMITZ TRANSPORT & BROKERAGE CORPORATION vs. TRANSPORT VENTURE,
INC., INDUSTRIAL INSURANCE COMPANY, LTD.
FACTS: On September 1991, SYTCO Pte Ltd. Singapore shipped from the port of
Ilyichevsk, Russia on board M/V "Alexander Saveliev" (owned by Black Sea) 545
hot rolled steel sheets in coil.
The cargoes, which were to be discharged favor of the consignee Little Giant
Steel Pipe Corporation (Little Giant), were insured with Industrial Insurance
Company Ltd. (Industrial Insurance).
The vessel arrived at the port of Manila on October 1991 and the PPA assigned
it a place of berth at the outside breakwater at the Manila South Harbor. Schmitz
Transport, whose services the consignee engaged to secure the requisite
clearances, to receive the cargoes from the shipside, and to deliver them to its
warehouse at Cainta, Rizal, in turn engaged the services of TVI to send a barge
and tugboat at shipside.
On October 26, 1991, TVI’s tugboat "Lailani" towed the barge "Erika V" to
shipside. The tugboat, after positioning the barge alongside the vessel, left and
returned to the port terminal. At 9:00 p.m., arrastre operator Ocean Terminal
Services Inc. commenced to unload 37 of the 545 coils from the vessel unto the
barge. By 12:30 a.m. of October 27, 1991 during which the weather condition
had become inclement due to an approaching storm, the unloading unto the
barge of the 37 coils was accomplished. However, no tugboat pulled the barge
back to the pier.
On October 27, 1991, due to strong waves, the crew of the barge abandoned it
and transferred to the vessel. The waves capsized the barge washing the 37
coils into the sea. At 7 a.m. on the same day, a tugboat finally arrived to pull the
already empty and damaged barge back to the pier.
Little Giant filed a formal claim against Industrial Insurance which paid it the
amount of ₱5,246,113.11. Subrogation receipt was issued in favor of the latter.
Industrial Insurance later filed a complaint against Schmitz Transport, TVI, and
Black Sea through its representative Inchcape (the defendants) before the RTC
of Manila.
PET argues that:
o It is a customs broker and not a common carrier
o Its an agent of Little Giant. Hence, any negligence on its part is negligence
of the principal
ISSUES:
1. WON the loss of the cargoes was due to a fortuitous event, independent of
any act of negligence on the part of petitioner Black Sea and TVI (NO)
2. If there was negligence, whether liability for the loss may attach to Black Sea,
petitioner and TVI.
HELD:
1. That no tugboat towed back the barge to the pier after the cargoes were
completely loaded by 12:30 in the morning is, however, a material fact which the
appellate court failed to properly consider and appreciate — the proximate
cause of the loss of the cargoes. Had the barge been towed back promptly to
42
the pier, the deteriorating sea conditions notwithstanding, the loss could have
been avoided. But the barge was left floating in open sea until big waves set in
at 5:30 a.m., causing it to sink along with the cargoes. The loss thus falls outside
the "act of God doctrine."(fortuitous)
The appellate court, in affirming the finding of the trial court that human
intervention in the form of contributory negligence by all the defendants resulted
to the loss of the cargoes, held that unloading outside the breakwater, instead
of inside the breakwater, while a storm signal was up constitutes negligence.
However, from a review of the records of the case, there is no indication that
there was greater risk in loading the cargoes outside the breakwater. The
weather on October 26, 1991 remained normal with moderate sea condition
such that port operations continued and proceeded normally. The weather data
report furnished by PAG-ASA states that while typhoon signal No. 1 was hoisted
over Metro Manila on October 23-31, 1991, the sea condition at the port of
Manila at 5:00 p.m. - 11:00 p.m. of October 26, 1991 was moderate. (OBITER)
2. Petitioner and TVI are joint and severally liable (Solidary liability)
In the case of TVI, while it acted as a private carrier for which it was under no
duty to observe extraordinary diligence, it was still required to observe ordinary
diligence to ensure the proper and careful handling, care and discharge of the
carried goods. However, it failed to do so.
TVI’s failure to promptly provide a tugboat did not only increase the risk that
might have been reasonably anticipated during the shipside operation, but was
the proximate cause of the loss. A man of ordinary prudence would not leave a
heavily loaded barge floating for a considerable number of hours, at such a
precarious time, and in the open sea, knowing that the barge does not have any
power of its own and is totally defenseless from the ravages of the sea. That it
was nighttime and, therefore, the members of the crew of a tugboat would be
charging overtime pay did not excuse TVI from calling for one such tugboat.
As for petitioner, for it to be relieved of liability, it should prove that it exercised
due diligence to prevent or minimize the loss, before, during and after the
occurrence of the storm in order that it may be exempted from liability for the
loss of the goods. While petitioner sent checkers and a supervisor on board the
vessel to counter-check the operations of TVI, it failed to take all available and
reasonable precautions to avoid the loss. After noting that TVI failed to arrange
for the prompt towage of the barge despite the deteriorating sea conditions, it
should have summoned the same or another tugboat to extend help, but it did
not.
The liability of the common carrier and the independent contractor would be
solidary. A contractual obligation can be breached by tort and when the same
act or omission causes the injury, one resulting in culpa contractual and the
other in culpa aquiliana, Article 2194 of the Civil Code can well apply. In fine, a
liability for tort may arise even under a contract, where tort is that which breaches
the contract. Stated differently, when an act which constitutes a breach of
contract would have itself constituted the source of a quasi-delictual liability had
no contract existed between the parties, the contract can be said to have been
breached by tort, thereby allowing the rules on tort to apply.
BLACKSEA : no liability
As for Black Sea, its duty as a common carrier extended only from the time the
goods were surrendered or unconditionally placed in its possession and received
for transportation until they were delivered actually or constructively to
consignee Little Giant.Parties to a contract of carriage may, however, agree upon
a definition of delivery that extends the services rendered by the carrier. In the
case at bar, Bill of Lading No. 2 covering the shipment provides that delivery be
made "to the port of discharge or so near thereto as she may safely get, always
afloat."
The delivery of the goods to the consignee was not from "pier to pier" but from
the shipside of "M/V Alexander Saveliev" and into barges, for which reason the
consignee contracted the services of petitioner. Since Black Sea had
constructively delivered the cargoes to Little Giant, through petitioner, it had
discharged its duty.
COMPANIA MARITIMA V COURT OF APPEALS
FACTS: Vicente Concepcion is doing business under the name of Consolidated
Construction. Being a Manila based contractor, Concepcion had to ship his
construction equipment to Cagayan de Oro. On August 28, 1964, Concepcion
shipped 1 unit pay loader, 4 units of 6x6 Roe trucks, and 2 pieces of water tanks.
The aforementioned equipment was loaded aboard the MV Cebu, which left
Manila on August 30, 1964 and arrived at Cagayan de Oro on September 1,
1964. The Reo trucks and water tanks were safely unloaded however the pay
loader suffered damage while being unloaded. The damaged pay loader was
taken to the petitioner’s compound in Cagayan de Oro.
Consolidated Construction thru Vicente Concepcion wrote CompaniaMaritima to
demand a replacement of the broken pay loader and also asked for damages.
Unable to get a response, Concepcion sent another demand letter. Petitioner
meanwhile, sent the damaged payloader to Manila, it was weighed at San Miguel
Corporation, where it was found that the payloader actually weighed 7.5 tons
and not 2.5 tons as declared in its bill of lading. Due to this, petitioner denied
the claim for damages of Consolidated Construction. Consolidated then filed an
action for damages against petitioner with the Court of First Instance of Manila.
The Court of First Instance dismissed the complaint stating that the proximate
cause of the fall of the payloader which caused its damage was the act or
omission of Vicente Concepcion for misrepresenting the weight of the payloader
as 2.5 tons instead of its true weight of 7.5 tons. On appeal, the Court of Appeals,
reversed the decision of the Court of First Instance and ordered the plaintiff to
pay Concepcion damages. Hence this petition.
ISSUE: Whether or not the act of respondent Concepcion of misdeclaring the true
weight of the payloader the proximate and only cause of the damage of the
payloader?
RULING: NO.
The general rule under Articles 1735 and 1752 of the Civil Code is that common
carriers are presumed to have been at fault or to have acted negligently in case
the goods transported by them are lost, destroyed or had deteriorated. To
overcome the presumption of liability for the loss, destruction or deterioration of
the goods under Article 1735, the common carriers must prove that they
observed extraordinary diligence as required in Article 1733 of the Civil Code.
The responsibility of observing extraordinary diligence in the vigilance over the
43
goods is further expressed in Article 1734 of the same Code, the article invoked
by petitioner to avoid liability for damages.
In the instant case, We are not persuaded by the proferred explanation of
petitioner alleged to be the proximate cause of the fall of the payloader while it
was being unloaded at the Cagayan de Oro City pier. Petitioner seems to have
overlooked the extraordinary diligence required of common carriers in the
vigilance over the goods transported by them by virtue of the nature of their
business, which is impressed with a special public duty.
Thus, Article 1733 of the Civil Code provides:
Art. 1733. Common carriers, from the nature of their business and for reason of
public policy, are bound to observe extraordinary diligence in the vigilance over
the goods and for the safety of the passengers transported by them according
to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed
in Articles 1734, 1735 and 1745, Nos. 5, 6 and 7, ...
The extraordinary diligence in the vigilance over the goods tendered for shipment
requires the common carrier to know and to follow the required precaution for
avoiding damage to, or destruction of the goods entrusted to it for safe carriage
and delivery. It requires common carriers to render service with the greatest skill
and foresight and "to use all reasonable means to ascertain the nature and
characteristic of goods tendered for shipment, and to exercise due care in the
handling and stowage including such methods as their nature requires."11 Under
Article 1736 of the Civil Code, the responsibility to observe extraordinary
diligence commences and 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 without prejudice to the
provisions of Article 1738.
Where, as in the instant case, petitioner, upon the testimonies of its own crew,
failed to take the necessary and adequate precautions for avoiding damage to,
or destruction of, the payloader entrusted to it for safe carriage and delivery to
Cagayan de Oro City, it cannot be reasonably concluded that the damage caused
to the payloader was due to the alleged misrepresentation of private respondent
Concepcion as to the correct and accurate weight of the payloader. As found by
the respondent Court of Appeals, the fact is that petitioner used a 5-ton capacity
lifting apparatus to lift and unload a visibly heavy cargo like a payloader. Private
respondent has, likewise, sufficiently established the laxity and carelessness of
petitioner's crew in their methods of ascertaining the weight of heavy cargoes
offered for shipment before loading and unloading them, as is customary among
careful persons.
TABACALERA V NORTH FRONT
FACTS: Sacks of grains were loaded on board a vessel owned by North Front
Shipping (common carrier); the consignee: Republic Floor Mills. The vessel was
inspected by representatives of the shipper prior to the transport and was found
fitting to carry the cargo; it was also issued a Permit to Sail. The goods were
successfully delivered but it was not immediately unloaded by the consignee.
There were a shortage of 23.666 metric tons and some of the merchandise was
already moldy and deteriorating. Hence, the consignee rejected all the cargo and
demanded payment of damages from the common carrier. Upon refusal, the
insurance companies (petitioners) were obliged to pay. Petitioners now allege
that there was negligence on the part of the carrier. The trial court ruled that
only ordinary diligence was required since the charter-party agreement
converted North Front Shipping into a private carrier.
ISSUE: Whether or not North Front should be held liable? – YES.
HELD: North Front Shipping Services, Inc., proved that the vessel was inspected
prior to actual loading by representatives of the shipper and was found fit to take
a load of corn grains. They were also issued Permit to Sail by the Coast
Guard. The master of the vessel testified that the corn grains were farm wet
when loaded. However, this testimony was disproved by the clean bill of lading
issued by North Front Shipping Services, Inc., which did not contain a notation
that the corn grains were wet and improperly dried. Having been in the service
since 1968, the master of the vessel would have known at the outset that corn
grains that were farm wet and not properly dried would eventually deteriorate
when stored in sealed and hot compartments as in hatches of a ship. Equipped
with this knowledge, the master of the vessel and his crew should have
undertaken precautionary measures to avoid or lessen the cargo's possible
deterioration as they were presumed knowledgeable about the nature of such
cargo. But none of such measures was taken.
In CompaniaMaritima v. Court of Appeals[5] we ruled –
x xxx Mere proof of delivery of the goods in good order to a common carrier,
and of their arrival at the place of destination in bad order, makes out prima
facie case against the common carrier, so that if no explanation is given as to
how the loss, deterioration or destruction of the goods occurred, the common
carrier must be held responsible. Otherwise stated, it is incumbent upon the
common carrier to prove that the loss, deterioration or destruction was due to
accident or some other circumstances inconsistent with its liability x xxx
The extraordinary diligence in the vigilance over the goods tendered for shipment
requires the common carrier to know and to follow the required precaution for
avoiding damage to, or destruction of the goods entrusted to it for safe carriage
and delivery. It requires common carriers to render service with the greatest skill
and foresight and 'to use all reasonable means to ascertain the nature and
characteristics of goods tendered for shipment, and to exercise due care in the
handling and stowage, including such methods as their nature requires'
(underscoring supplied).
In fine, we find that the carrier failed to observe the required extraordinary
diligence in the vigilance over the goods placed in its
care. The proofs presented by North Front ShippingServices, Inc., were
insufficient to rebut the prima facie presumption of private respondent's
negligence, more so if we consider the evidence adduced by petitioners.
It is not denied by the insurance companies that the vessel was indeed inspected
before actual loading and that North Front 777 was issued a Permit to Sail. They
proved the fact of shipment and its consequent loss or damage while in the
actual possession of the carrier. Notably, the carrier failed to volunteer any
44
explanation why there was spoilage and how it occurred. On the other hand, it
was shown during the trial that the vessel had rusty bulkheads and the wooden
boards and tarpaulins bore heavy concentration of molds. The tarpaulins used
were not new, contrary to the claim of North Front Shipping Services, Inc., as
there were already several patches on them, hence, making it highly probable
for water to enter.
Laboratory analysis revealed that the corn grains were contaminated with salt
water. North Front Shipping Services, Inc., failed to rebut all these arguments. It
did not even endeavor to establish that the loss, destruction or deterioration of
the goods was due to the following: (a) flood, storm, earthquake, lightning, or
other natural disaster or calamity; (b) act of the public enemy in war, whether
international or civil; (c) act or omission of the shipper or owner of the goods;
(d) the character of the goods or defects in the packing or in the containers; (e)
order or act of competent public authority.[6] This is a closed list. If the cause of
destruction, loss or deterioration is other than the enumerated circumstances,
then the carrier is rightly liable therefor.
However, we cannot attribute the destruction, loss or deterioration of the cargo
solely to the carrier. We find the consignee Republic Flour Mills Corporation
guilty of contributorynegligence. It was seasonably notified of the arrival of the
barge but did not immediately start the unloading operations. No explanation
was proffered by the consignee as to why there was a delay of six (6) days. Had
the unloading been commenced immediately the loss could have been
completely avoided or at least minimized.
GOVERNMENT V YNCHAUSTI
FACTS: The tiles in question were received by the defendant from the plaintiff,
as represented on a Government bill of lading known as "General Form No. 9-A,"
which was made out and submitted by a representative of the Bureau of Supply
to the defendant. (Exhibit A.) At the head of Exhibit A is found the following:
"You are hereby authorized to receive, carry, and deliver the following described
merchandise to treasurer of Iloilo at Iloilo in accordance with the authorized and
prescribed rates and classifications, and according to the laws of common
carriers in force on the date hereof, settlement and payment of charges to be
made by Bureau of Supply. (Sgd.) T. R. SCHOON, Chief Division of Supplies,
Bureau of Supply."
On the said bill of lading we find the following, which was stamped thereon by
the defendant:
"The goods have been accepted for transportation subject to the conditions
prescribed by the Insular Collector of Customs in Philippine Marine Regulations,
page 16, under the heading ’Bill of Lading Conditions.’"
The lower court, in discussing the said bill of lading with the two conditions found
thereon, reached the conclusion that the plaintiff was bound by the terms of the
bill of lading as issued by the defendant and not by the terms which the plaintiff
attempted to impose, — that is to say, that such merchandise was to be carried
at owner’s risk only; that there was no presumption of negligence on the part of
the defendant from the fact that the tiles were broken when received by the
consignee; and that since the plaintiff I did not prove negligence on the part of
the defendant, the former was not entitled to recover damages from the latter.
The lower court rendered judgment absolving the defendant from all liability
under the complaint.
The appellant contends also that it was not bound by the terms and conditions
inserted by the appellee, because (a) the reference made by the appellee to the
"Philippine Marine Regulations" prescribed by the Collector of Customs was
vague; that the appellee should have expressed the conditions fully and clearly
on the face of the bill of lading; and (b) that the Insular Collector of Customs had
no authority to issue such regulations
ISSUE: Whether or not there was a presumption of negligence on the part of the
defendant? – NO.
HELD: With reference to the contention of the appellant that the Collector of
Customs had no authority to make such regulations, it may be said in the present
ease that the binding effect of the conditions stamped on the bill of lading did
not proceed from the authority of the Collector of Customs but from the actual
contract which the parties made in the present case. Each bill of lading is a
contract and the parties thereto are bound by its terms.
Finding as we do that the tiles in question were shipped at the owner’s risk,
under the law in this jurisdiction, the carrier is only liable where the evidence
shows that he was guilty of some negligence and that the damages claimed were
the result of such negligence. As was said above, the plaintiff offered no proof
whatever to show negligence on the part of the defendant.
The plaintiff cites some American authorities to support its contention that the
carrier is an absolute insurer of merchandise shipped and that the proof of
breakage or damage to goods shipped in the hands of the carrier makes out a
prime facie case of negligence against him, and that the burden of proof is
thrown on him to show due care and diligence.
The law upon that question in this jurisdiction is found in articles 361 and 362
of the Commercial Code. Article 361 provides:
"ART. 361. Merchandise shall be transported at the risk and venture of the
shipper, if the contrary be not expressly stipulated.
"Therefore, all damages and impairment, suffered by the goods in transportation
by reason of accident, force majeure, or by virtue of the nature or defect of the
articles, shall be for the account and risk of the shipper.
"The proof of these accidents is incumbent upon the carrier."
Article 362 provides:
"ART. 362. The carrier, however, shall be liable for the losses and damages
arising from the causes mentioned in the foregoing article, if it be proved against
him that they occurred on account of his negligence or because he did not take
the precautions usually adopted by careful persons, unless the shipper
committed fraud in the bill of lading stating that the goods were of a class or
quality different from what they really were. . . ."virtua1aw library
45
Under the provisions of article 361 the defendant, in order to free itself from
liability, was only obliged to prove that the damages suffered by the goods were
"by virtue of the nature or defect of the articles." Under the provisions of article
362 the plaintiff, in order to hold the defendant liable, was obliged to prove that
the damages to the goods by virtue of their nature, occurred on account of its
negligence or because the defendant did not take the precaution usually adopted
by careful persons.
The defendant herein proved, and the plaintiff did not attempt to dispute, that
the tiles in question were of a brittle and fragile nature and that they were
delivered by the plaintiff to the defendant without any packing or protective
covering. The defendant also offered proof to show that there was no negligence
on its part, by showing that the tiles were loaded, stowed, and discharged in a
careful and diligent manner.
In this jurisdiction there is no presumption of negligence on the part of the
carriers in case like the present. The plaintiff, not having proved negligence on
the part of the defendant, is not entitled to recover damages.
SOUTHERN LINES V COURT OF APPEALS
FACTS: The City of Iloilo requisitioned for rice from the National Rice and Corn
Corporation (NARIC) in Manila. NARIC, pursuant to the order, shipped 1,726
sacks of rice consigned to the City of Iloilo on board the SS “General Wright”
belonging to the Southern Lines, Inc.
The City of Iloilo received the shipment and paid the total charged amount.
However, it was discovered in the bill of lading that there was shortage equivalent
to 41 sacks of rice. The City of Iloilo filed a complaint against NARIC and the
Southern Lines, Inc. for the recovery of the amount representing the value of the
shortage of the shipment of rice. The lower court absolved NARIC, but held
Southern Lines, Inc. liable to pay the shortage. CA affirmed the trial court’s
decision, hence, this petition.
ISSUE: Whether or not Southern Lines is liable for the loss or shortage of the rice
shipped? – YES.
HELD: Article 361 of the Code of Commerce provides: .
ART. 361. — The merchandise shall be transported at the risk and venture of
the shipper, if the contrary has not been expressly stipulated.
As a consequence, all the losses and deteriorations which the goods may suffer
during the transportation by reason of fortuitous event, force majeure, or the
inherent nature and defect of the goods, shall be for the account and risk of the
shipper.
Proof of these accidents is incumbent upon the carrier.
Article 362 of the same Code provides: .
ART. 362. — Nevertheless, the carrier shall be liable for the losses and damages
resulting from the causes mentioned in the preceding article if it is proved, as
against him, that they arose through his negligence or by reason of his having
failed to take the precautions which usage his establisbed among careful
persons, unless the shipper has committed fraud in the bill of lading,
representing the goods to be of a kind or quality different from what they really
were.
If, notwithstanding the precautions referred to in this article, the goods
transported run the risk of being lost, on account of their nature or by reason of
unavoidable accident, there being no time for their owners to dispose of them,
the carrier may proceed to sell them, placing them for this purpose at the
disposal of the judicial authority or of the officials designated by special
provisions.
Under the provisions of Article 361, the defendant-carrier in order to free itself
from liability, was only obliged to prove that the damages suffered by the goods
were "by virtue of the nature or defect of the articles." Under the provisions of
Article 362, the plaintiff, in order to hold the defendant liable, was obliged to
prove that the damages to the goods by virtue of their nature, occurred on
account of its negligence or because the defendant did not take the precaution
adopted by careful persons.
Petitioner claims exemption from liability by contending that the shortage in the
shipment of rice was due to such factors as the shrinkage, leakage or spillage of
the rice on account of the bad condition of the sacks at the time it received the
same and the negligence of the agents of respondent City of Iloilo in receiving
the shipment. The contention is untenable, for, if the fact of improper packing is
known to the carrier or his servants, or apparent upon ordinary observation, but
it accepts the goods notwithstanding such condition, it is not relieved of liability
for loss or injury resulting thereform.
CALVO V UCPB
FACTS: Petitioner VirginesCalvo, owner of Transorient Container Terminal
Services, Inc. (TCTSI), and a custom broker, entered into a contract with San
Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting
paper and 124 reels of kraft liner board from the port area to the Tabacalera
Compound, Ermita, Manila. The cargo was insured by respondent UCPB General
Insurance Co., Inc.
On July 14, 1990, contained in 30 metal vans, arrived in Manila on board “M/V
Hayakawa Maru”. After 24 hours, they were unloaded from vessel to the custody
of the arrastre operator, Manila Port Services, Inc. From July 23 to 25, 1990,
petitioner, pursuant to her contract with SMC, withdrew the cargo from the
arrastre operator and delivered it to SMC’s warehouse in Manila. On July 25, the
goods were inspected by Marine Cargo Surveyors, reported that 15 reels of the
semi-chemical fluting paper were “wet/stained/torn” and 3 reels of kraft liner
board were also torn. The damages cost P93,112.00.
SMC collected the said amount from respondent UCPB under its insurance
contract. Respondent on the other hand, as a subrogee of SMC, brought a suit
against petitioner in RTC, Makati City. On December 20, 1995, the RTC rendered
judgment finding petitioner liable for the damage to the shipment. The decision
was affirmed by the CA.
46
ISSUE: Whether or not Calvo should be held liable? – YES.
HELD: In this case the contention of the petitioner, that he is not a common
carrier but a private carrier, has no merit.
Article 1732 makes no distinction between one whose principal business activity
is the carrying of persons or goods or both, and one who does such carrying
only as ancillary activity. Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow
segment of the general population. We think that Article 1733 deliberately
refrained from making such distinction. (De Guzman v. CA, 68 SCRA 612)
The concept of “common carrier” under Article 1732 coincide with the notion of
“public service”, under the Public Service Act which partially supplements the law
on common carrier. Under Section 13, paragraph (b) of the Public Service Act,
it includes:
“ x xx every person that now or hereafter may own, operate, manage, or control
in the Philippines, for hire or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction railway, subway
motor vehicle, either for freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier service of any class,
express service, steamboat, or steamship line, pontines, ferries and water craft,
engaged in the transportation of passengers or freight or both, shipyard, marine
repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation
system, gas, electric light, heat and power, water supply and power petroleum,
sewerage system, wire or wireless communications systems, wire or wireless
broadcasting stations and other similar public services. x xx”
BELGIAN OVERSEAS V PFIC
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
consignee’s claim. Consequently, Belgian Overseas paid the consignee
P506,086.50, and was subrogated to the latter’s rights and causes of action
against defendants-appellees. Subsequently, plaintiff-appellant instituted this
complaint for recovery of the amount paid by them, to the consignee as insured.
Impugning the propriety of the suit against them, defendants-appellees imputed
that the damage and/or loss was due to pre-shipment damage, to the inherent
nature, vice or defect of the goods, or to perils, danger and accidents of the sea,
or to insufficiency of packing thereof, or to the act or omission of the shipper of
the goods or their representatives. 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? – NO.
HELD: 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.
IRON BULK V REMINGTON
47
FACTS: Remington Industrial ordered 194 hot rolled steel sheets from
Wangs. Wangs forwarded the order to its supplier Burwill. The sheets
were loaded on MV Indian Reliance in Poland and shipped to the Philippines
under a Bill of Lading. Iron Bulk Shipping represented the charterer in the
Philippines.
Upon discharge of the cargo, the sheets were found to be wet and with rust
extending to 50 to 60% of each sheet.
No one honored the claims of loss and as recourse, Remington filed an action
for collection. Both lower and appellate courts ruled in favor of Remington.
The charterer‘s defense (Iron Bulk) was that the sheets were already rusty when
they were loaded on the ship. However, the Bill of Lading it issued was found to
be a clean bill of lading (i.e. it does not indicate any defect on the goods covered
by it). The sheets were found to be in a ―fair, usually accepted conditionǁ.
The supplier‘s defense (Wangs) was that Iron Bulk did not exercise extraordinary
diligence in shipping the sheets.
The appellate court dismissed the case against Wangs and now, only Iron Bulk
raised the case on certiorari.
ISSUE: Whether or not Iron Bulk exercised the required extraordinary diligence?
NO.
HELD: Diligence required: Even if the cargo was already in a damaged condition
at the time it was accepted for transportation, the carrier is not relieved from
its responsibility to exercise due care in handling the merchandise and in
employing the necessary precautions to prevent the cargo from further
deteriorating. Extraordinary diligence requires the common carrier to know and
to follow the required precaution for avoiding damage to, or destruction of the
goods entrusted to it for safe carriage and delivery. The common carrier must
exercise due diligence to forestall or lessen the loss (by applying additional
safety measures to make sure that the cargo is protected from corrosion).
Presumption: Except in the cases mentioned under Art. 1734, 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.
A.F. SANCHEZ BROKERAGE INC., v. THE HON. COURT OF APPEALS and FGU
INSURANCE CORPORATION
A common carrier is liable to the resulting damage to the goods if the improper
packaging is known to the carrier or his employees or is apparent upon ordinary
observation, but he nevertheless accepts the same without protest or exception.
FACTS: Respondent FGU Insurance Corporation (FGU) brought an action for
reimbursement against petitioner A.F. Sanchez Brokerage Inc. (Sanchez
Brokerage) to collect the amount paid by the former to Wyeth-Suaco
Laboratories Inc. (Wyeth-Suaco) as insurance payment for the goods delivered
in bad condition.
A.F. Brokerage refused to admit liability for the damaged goods which it delivered
from Philippines Skylanders, Inc. (PSI) to Wyeth-Suaco as it maintained that the
damage was due to improper and insufficient export packaging, discovered when
the sealed containers were opened outside the PSI warehouse.
The Regional Trial Court of Makati dismissed the said complaint; however, the
decision was subsequently reversed and set aside by the Court of Appeals,
finding that Sanchez Brokerage is liable for the carriage of cargo as a ―common
carrierǁ by definition of the New Civil Code.
ISSUE: Whether or not the FGU Insurance is liable for the delivery of the damaged
goods?
HELD: As defined under Article 1732 of the Civil Code, common carriers are
persons, corporations, firms or associations engaged in the business of carrying
or transporting passengers or goods or both by land, water or air for
compensation, offering their services to the public. It does not distinguish
between one whose principal business activity is the carrying of goods and one
who does such carrying only as an ancillary activity. The contention therefore of
Sanchez Brokerage that it is not a common carrier but a customs broker whose
principal function is to prepare the correct customs declaration and proper
shipping documents as required by law is bereft of merit. It suffices that petitioner
undertakes to deliver the goods for pecuniary consideration.
In this light, Sanchez Brokerage as a common carrier is mandated to observe,
under Article 1733 of the Civil Code, extraordinary diligence in the vigilance over
the goods it transports according to all the circumstances of each case. In the
event that the goods are lost, destroyed or deteriorated, it is presumed to have
been at fault or to have acted negligently, unless it proves that it observed
extraordinary diligence.
The concept of ―extra-ordinary diligenceǁ was explained in CompaniaMaritima
v. Court of Appeals. 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 characteristics of goods tendered for
shipment and to exercise due care in the handling and storage including such
methods as their nature requires.
It was established that Sanchez Brokerage received the cargoes from the PSI
warehouse in good order and condition and that upon delivery by petitioner
some of the cargoes were found to be in bad order as noted in the Delivery
Receipt and as indicated in the Survey and Destruction Report.
While paragraph no. 4 of Article 1734 of the Civil Code exempts a common carrier
from liability if the loss or damage is due to the character of the goods or defects
in the packaging or in the containers, the rule is that if the improper packaging
is known to the carrier or his employees or is apparent upon ordinary
observation, but he nevertheless accepts the same without protest or exception
notwithstanding such condition, he is not relieved of liability for the resulting
damage. If the claim of Sanchez Brokerage that some of the cartons were already
damaged upon delivery to it were true, then it should naturally have received the
48
cargo under protest or with reservation duly noted on the receipt issued by PSI
but it made no such protest or reservation.
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.
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
winchman from the ICTSI, exclusive arrastre operator of MICT.
DenastoDauz, 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 Dauz’s
experience, this was a normal procedure. As the crate was being hoisted from
the vessel’s hatch, the mid-portion of the wooden flooring suddenly snapped in
the air, about five feet high from the vessel’s 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? – NO.
HELD: 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 carrier’s 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
aforecited causes claimed by it by a preponderance of evidence. If the carrier
succeeds, the burden of evidence is shifted to the shipper to prove that the
carrier is negligent.
“Defect” is the want or absence of something necessary for completeness or
perfection; a lack or absence of something essential to completeness; a
deficiency in something essential to the proper use for the purpose for which a
thing is to be used. On the other hand, inferior means of poor quality, mediocre,
or second rate. A thing may be of inferior quality but not necessarily defective.
In other words, “defectiveness” is not synonymous with “inferiority.”
x xx
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 xx
REGIONAL CONTAINER LINES (RCL) OF SINGAPORE vs. THE NETHERLANDS
INSURANCE CO. (PHILIPPINES)
FACTS: RCL is a foreign corporation based in Singapore. It does business in the
Philippines through its agent, EDSA Shipping, a domestic corporation organized
and existing under Philippine laws.
49
Respondent Netherlands Insurance Company (Philippines), Inc. (Netherlands
Insurance) is likewise a domestic corporation engaged in the marine underwriting
business.
405 cartons of Epoxy molding compound were consigned to be shipped from
Singapore to Manila for TEMIC. U-Freight Singapore contracted Pacific Eagle to
transport cargo. It was stored in its refrigerated container as cargo is highly
presihable. The temperature was 0º Celsius. Pacific Eagle loaded it to M/V
PiyaBhum owned by RCL which the former had a slot charter agreement with.
RCL issued Bill of Lading in favor of Pacific Eagle. Netherlands Insurance issued
a Marine Open Policy to insure cargo in favor of Temic to cover loss/damages.
Upon arrival at Manila, the cargoes were surveyed and it was found to be at the
constant required temperature for several ldays. But later on, it was found out
that the temperature changed when the cargo had already been unloaded,
to 33º Celsius. Surveyor believed the fluctuation was caused by the burnt
condenser fan motor of the refrigerated container. Temic received the shipment
and found it to be damaged. Temic filed a claim for cargo loss against
Netherlands Insurance, with supporting claims documents. The Netherlands
Insurance paid Temic the sum ofP1,036,497.00 under the terms of the Marine
Open Policy. Temic then executed a loss and subrogation receipt in favor of
Netherlands Insurance.
Seven months from delivery of the cargo - Netherlands Insurance filed a
complaint for subrogation of insurance settlement with the Regional Trial Court,
RCL and TMS Ship Agencies (TMS) thought to be the local agent of M/V Piya,
EDSA Shipping, Eagle Liner Shipping Agencies, U-Freight Singapore, and U-
Ocean (Phils.), Inc. (U-Ocean). RCL and EDSA Shipping filed motion to dismiss
based on demurer to evidence. They attributed negligence to their co-
defendants, that fluctuation of temperature occurred after cargo has been
discharged from vessel but in the reefer van and that Netherlands is not party in
interest hence has no cause of action. RTC found RCL and EDSA Shipping not
liable but this was reversed by CA and barred them from presenting evidence
since they filed for demurer.
Defense of RCL and EDSA Shipping:
1. They attributed any negligence that may have caused the loss of the shipment
to their co- defendants.
a. They contend that the cause of the damage to the cargo was the “fluctuation
of the temperature in the reefer van,” which fluctuation occurred after the cargo
had already been discharged from the vessel; no fluctuation, they point out,
arose when the cargo was still on board M/V PiyaBhum.
b. As the cause of the damage to the cargo occurred after the same was already
discharged from the vessel and was under the custody of the arrastre operator
(International Container Terminal Services, Inc. or ICTSI), RCL and EDSA Shipping
posit that the presumption of negligence provided in Article 1735 of the
Civil Code should not apply. What applies in this case is Article 1734,
particularly paragraphs 3 and 4 thereof, which exempts the carrier from liability
for loss or damage to the cargo when it is caused either by an act or omission
of the shipper or by the character of the goods or defects in the packing or in
the containers.
2. They likewise asserted that no valid subrogation exists, as the payment made
by Netherlands Insurance to the consignee was invalid.
3. That the Netherland Insurance has no cause of action, and is not the real
party-in-interest,
4. The claim is barred by laches/prescription.
RCL and EDSA Shipping, in their motion to dismiss based on demurrer to
evidence:
1. Netherlands Insurance had failed to prove any valid subrogation,
2. Netherlands Insurance had failed to establish that any negligence on their
part or that the loss was sustained while the cargo was in their custody.
ISSUE: Whether the CA correctly held RCL and EDSA Shipping liable as common
carriers under the theory of presumption of negligence. – YES.
HELD: RCL and EDSA Shipping failed to satisfy this standard of evidence and
in fact offered no evidence at all on this point; a reversal of a dismissal based
on a demurrer to evidence bars the defendant from presenting evidence
supporting its allegations. The CA correctly ruled that they are deemed to
have waived their right to present evidence, and the presumption of
negligence must stand. It is for this reason as well that the court finds RCL and
EDSA Shipping’s claim that the loss or damage to the cargo was caused by
a defect in the packing or in the containers.
The present case is governed by the following provisions of the Civil Code:
ART. 1733. Common carriers, from the nature of their business and for reasons
of public policy, are bound to observe extraordinary diligence in the vigilance
over the goods and for the safety of the passengers transported by them
according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further
expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the
extraordinary diligence for the safety of the passengers is further set forth in
articles1755 and 1756.
ART. 1734. Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following causes
only:
1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
2) Act of the public enemy in war, whether international or civil;
3) Act of 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 that 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 by article 1733.
ART. 1736. The extraordinary responsibility of the common carrier lasts from
the time the goods are unconditionally placed in the possession of, and
50
received by the carrier for transportation until the sane 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 articles 1738.
ART. 1738. The extraordinary liability of the common carrier continues
to be operative even during the time the goods are stored in a warehouse of
the carrier at the place of destination, until the consignee has been advised
of the arrival of the goods and has had reasonable opportunity thereafter to
remove them or otherwise dispose of them.
ART. 1742. Even if the loss, destruction, or deterioration of the goods
should be caused by the character of the goods, or the faulty nature of the
packing or of the containers, the common carrier must exercise due diligence
to forestall or lessen the loss.
Rules for the liability of a common carrier for lost or damaged cargo as follows:
(Central Shipping Company, Inc. v. Insurance Company of North America)
(1) Common carriers are bound to observe extraordinary diligence over the
goods they transport, according to all the circumstances of each case;
(2) In the event of loss, destruction, or deterioration of the insured goods,
common carriers are responsible, unless they can prove that such loss,
destruction, or deterioration was brought about by, among others, flood, storm,
earthquake, lightning, or other natural disaster or calamity; and
(3) 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 observed extraordinary diligence.
Arguments of RCL and EDSA Shipping are not meritorious.
A common carrier is presumed to have been negligent if it fails to prove
that it exercised extraordinary vigilance over the goods it transported. When
the goods shipped are either lost or arrived in damaged condition, a
presumption arises against the carrier of its failure to observe that diligence,
and there need not be an express finding of negligence to hold it liable.
To overcome the presumption of negligence, the common carrier
must establish by adequate proof that it exercised extraordinary diligence over
the goods. It must do more than merely show that some other party could be
responsible for the damage.
In the present case, RCL and EDSA Shipping failed to prove that they
did exercise that degree of diligence required by law over the
goods they transported. Indeed, there is sufficient evidence showing that the
fluctuation of the temperature in the refrigerated container van, as recorded in
the temperature chart, occurred after the cargo had been discharged from the
vessel and was already under the custody of the arrastre operator, ICTSI. This
evidence, however, does not disprove that the condenser fan – which caused
the fluctuation of the temperature in the refrigerated container – was not
damaged while the cargo was being unloaded from the ship. It is settled in
maritime law jurisprudence that cargoes while being unloaded generally remain
under the custody of the carrier; RCL and EDSA
Shipping failed to dispute this.
RCL and EDSA Shipping could have offered evidence before the trial court to
show that the damage to the condenser fan did not occur: (1) while the cargo
was in transit; (2) while they were in the act of discharging it from the vessel; or
(3) while they were delivering it actually or constructively to the consignee.
They could have presented proof to show that they exercised extraordinary care
and diligence in the handling of the goods, but they opted to file a demurrer to
evidence. As the order granting their demurrer was reversed on appeal, the
CA correctly ruled that they are deemed to have waived their right to
present evidence, and the presumption of negligence must stand.
It is for this reason as well that we find RCL and EDSA Shipping’s claim that the
loss or damage to the cargo was caused by a defect in the packing or
in the containers. 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 causes in Article 1734 of the Civil Code 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. RCL and EDSA Shipping,
however, failed to satisfy this standard of evidence and in fact offered no
evidence at all on this point; a reversal of a dismissal based on a demurrer to
evidence bars the defendant from presenting evidence supporting its
allegations.
GANZON vs. COURT OF APPEALS
FACTS: Facts:
Private respondent Tumambing contracted the services of petitioner Ganzon to
haul 305 tons of scrap iron from Bataan to the port of Manila on board the
lighter LCT “Batman.” Petitioner sent his lighter with its Captain Filomeno to dock
at Mariveles, where respondent Tumambing delivered the scrap irons for loading
which also begun on the same day. Mayor Advincula arrived at the port and
demanded P 5,000 shakedown from respondent. The two ended up in a heated
argument where respondent had to be taken to a hospital to be treated of a
gunshot wound. After sometime, the loading of the scrap iron was resumed. But
now, the Acting Mayor together with 3 policemen ordered Captain Filomeno to
dump the scrap iron where the lighter was docked and the rest to be brought to
NASSCO compound. Later, the Acting Mayor issued a receipt stating that the
Municipality had taken custody of the scrap iron. Respondent instituted an action
for damages against petitioner. Respondent Court found in favor for Tumambing.
ISSUE: Whether or not petitioner Ganzon, a common carrier, can be exempt from
liability by invoking order of competent authority? – NO.
HELD: The petitioner has failed to show that the loss of the scraps was due to
any of the following causes enumerated in Article 1734 of the Civil Code.
Before the appellee Ganzon could be absolved from responsibility on the ground
that he was ordered by competent public authority to unload the scrap iron, it
must be shown that Acting Mayor Basilio Rub had the power to issue the disputed
order, or that it was lawful, or that it was issued under legal process of authority.
The appellee failed to establish this. Indeed, no authority or power of the acting
51
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. The fact
remains that the order given by the acting mayor to dump the scrap iron into the
sea was part of the pressure applied by Mayor Jose Advincula to shakedown the
appellant for P5,000.00. The order of the acting mayor did not constitute valid
authority for appellee Mauro Ganzon and his representatives to carry out. The
petitioner was not duty bound to obey the illegal order to dump into the sea the
scrap iron.
DURATION OF LIABILITY
MARITIMA V. INSURANCE CO. OF NORTH AMERICA
FACTS: October, 1952: Macleod and Company of the Philippines (Macleod)
contracted by telephone the services of the Compañia Maritima (CM), a shipping
corporation, for:
shipment of 2,645 bales of hemp from the Macleod's Sasa private pier at Davao
City to Manila.
subsequent transhipment to Boston, Massachusetts, U.S.A. on board the S.S.
Steel Navigator.
This oral contract was later on confirmed by a formal and written booking issued
by Macleod's branch office in Sasa and handcarried to CM's branch office in
Davao in compliance with which the CM sent to Macleod's private wharf LCT Nos.
1023 and 1025 on which the loading of the hemp was completed on October
29, 1952.
The 2 lighters were manned each by a patron and an assistant patron.
The patrons of both barges issued the corresponding carrier's receipts and that
issued by the patron of Barge No. 1025 reads in part:
Received in behalf of S.S. Bowline Knot in good order and condition from
MACLEOD AND COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at
Manila onto S.S. Steel Navigator.
FINAL DESTINATION: Boston.
Early hours of October 30: LCT No. 1025 sank, resulting in the damage or loss
of 1,162 bales of hemp loaded therein
Macleod promptly notified the carrier's main office in Manila and its branch in
Davao advising it of its liability
The damaged hemp was brought to Odell Plantation in Madaum, Davao, for
cleaning, washing, reconditioning, and redrying. Total loss adds up to
P60,421.02.
All abaca shipments of Macleod were insured with the Insurance Company of
North America against all losses and damages.
Macleod filed a claim for the loss it suffered with the insurance company and was
paid P64,018.55.
Subrogation agreement between Macleod and the insurance company wherein
the Macleod assigned its rights over the insured and damaged cargo.
October 28, 1953.: failing to recover from the carrier P60,421.02 (amount
supported by receipts), the insurance company instituted the present action
CA affirmed RTC: ordering CM to pay the insurance co.
ISSUE: W/N there was a contract of carriage bet. CM (carrier) and Macleod
(shipper) – YES.
HELD: Receipt of goods by the carrier has been said to lie at the foundation of
the contract to carry and deliver, and if actually no goods are received there can
be no such contract.
The liability and responsibility of the carrier under a contract for the carriage of
goods commence on their actual delivery to, or receipt by, the carrier or an
authorized agent. ... and delivery to a lighter in charge of a vessel for shipment
on the vessel, where it is the custom to deliver in that way.
Whenever the control and possession of goods passes to the carrier and nothing
remains to be done by the shipper, then it can be said with certainty that the
relation of shipper and carrier has been established.
As regards the form of the contract of carriage it can be said that provided that
there is a meeting of the minds and from such meeting arise rights and
obligations, there should be no limitations as to form.
The bill of lading is not essential.
Even where it is provided by statute that liability commences with the issuance
of the bill of lading, actual delivery and acceptance are sufficient to bind the
carrier.
Marine surveyors, attributes the sinking of LCT No. 1025 to the 'non-water-tight
conditions of various buoyancy compartments
LUDO & LUYM CORP. VS. I.V. BINAMIRA
FACTS: Delta Photo Supply Company of New York shipped on board the M/S
“FERNSIDE” at New York, U.S.A., 6 cases of films and/or photographic supplies
consigned to the order of I. V. Binamira. A Bill of Lading was issued where the
carrier and the consignee have stipulated to limit the responsibility of the carrier
for the loss or damage that may be caused to the goods before they are actually
delivered. The films were discharged at the port of Cebu by the stevedoring
company hired by petitioner as agent of the carrier. The cargo was received by
the Visayan Cebu Terminal Company, Inc., the arrastre operator appointed by
the Bureau of Customs. During the discharge, the cargo was inspected by both
the stevedoring company and the arrastre operator, and the films were found to
52
be in good condition. But after it was delivered to respondent after 3 days, the
same was examined by a surveyor and found out that some films and supplies
were missing.
ISSUE: WON the carrier is responsible for the loss though the films were lost after
the shipment was discharged from the ship and placed in the possession and
custody of the customs arrastre? – NO.
HELD: It is true that, as a rule, a common carrier is responsible for the loss,
destruction or deterioration of the goods it assumes to carry from one place to
another unless the same is due to any to any of the causes mentioned in Article
1734 on the new Civil Code. But this shall only apply when the loss, destruction
or deterioration takes place while the goods are in the possession of the carrier,
and not after it has lost control of them.
The parties may agree to limit the liability of the carrier considering that the
goods have still to go through the inspection of the customs authorities before
they are actually turned over to the consignee. This is a situation where we may
say that the carrier losses control of the goods because of a custom regulation
and it is unfair that it be made responsible for what may happen during the
interregnum. And this is precisely what was done by the parties herein. In the bill
of lading that was issued covering the shipment in question, both the carrier and
the consignee have stipulated to limit the responsibility of the carrier for the loss
or damage that may be caused to the goods before they are actually delivered.
SERVANDO vs. PHIL STEAM
FACTS: Clara UyBico and AmparoServando loaded on board a vessel of
Philippine Steam Navigation Co. for carriage from Manila to Negros Occidental
1,528 cavans of rice and 44 cartons of colored paper, toys and general
merchandise.
The contract of carriage of cargo was evidenced by a Bill of Lading (B/L). There
was a stipulation limiting the responsibility of the carrier for loss or damage that
may be caused to the shipment
a. “carrier shall not be responsible for loss or damage to shipments billed
‘owner’s risk’ unless such loss or damage is due to the negligence of the carrier.
Nor shall the carrier be responsible for loss or damage caused by force
majeure, dangers or accidents of the sea, war, public enemies, fire”.
Upon arrival of the vessel at its destination, the cargoes were discharged in good
condition and placed inside the warehouse of the Bureau of Customs.
UyBico was able to take delivery of 907 cavans of rice.
Unfortunately, the warehouse was razed by fire of unknown origin later that same
day destroying the remaining cargoes.
UyBico and Servando filed a claim for the value of the goods against the carrier.
The lower court ruled in their favor. It held that the delivery of the shipment to
the warehouse is not the delivery contemplated by Art. 1736 of the CC. And since
the burning of the warehouse occurred prior to the actual or constructive delivery
of the goods, the loss is chargeable against the vessel.
ISSUE: Whether or not the carrier is liable for the loss of the goods? – NO.
HELD: Article 1736 of the CC imposes upon common carriers the duty to observe
extraordinary diligence from the moment the goods are unconditionally placed
in their possession "until the same are delivered, actually or constructively, by
the carrier to the consignee or to the person who has a right to receive them,
without prejudice to the provisions of Article 1738.” The court a quo held that
the delivery of the shipment in question to the warehouse of the Bureau of
Customs is not the delivery contemplated by Article 1736; and since the burning
of the warehouse occurred before actual or constructive delivery of the goods to
the appellees, the loss is chargeable against the appellant.
It should be pointed out, however, that in the bills of lading issued for the cargoes
in question, the parties agreed to limit the responsibility of the carrier. The
stipulation is valid not being contrary to law, morals or public policy.
The petitioners however, contend that the stipulation does not bind them since
it was printed at the back of the B/L and that they did not sign the same.
However, as the Court held in OngYiu vs. CA, while it may be true that a passenger
had not signed the plane ticket, he is nevertheless bound by the provisions
thereof. Such provisions have been held to be a part of the contract of carriage,
and valid and binding upon the passenger regardless of the latter's lack of
knowledge or assent to the regulation.
Also, where fortuitous event is the immediate and proximate cause of the loss,
the obligor is exempt from liability for non-performance.In the case at bar, the
burning of the customs warehouse was an extraordinary event which happened
independently of the will of the appellant. The latter could not have foreseen the
event.
There is nothing in the record to show that the carrier incurred in delay in the
performance of its obligation. It appears that it had not only notified UyBico and
Servando of the arrival of their shipment, but had demanded that the same be
withdrawn. In fact, pursuant to such demand, UyBico had taken delivery of 907
cavans of rice before the burning of the warehouse.
Nor can the carrier or its employees be charged with negligence. The storage of
the goods in the Customs warehouse pending withdrawal thereof by UyBico and
Servando was undoubtedly made with their knowledge and consent. Since the
warehouse belonged to and was maintained by the government, it would be
unfair to impute negligence to the carrier, the latter having no control whatsoever
over the same.
SAMAR MINING vs. NORDEUSCHER
FACTS: The case arose from an importation made by Samar Mining Co. Inc. of 1
crate Optima welded wedge wire sieves through the M/S Schwabenstein, a vessel
owned by Nordeutscher Lloyd, (represented in the Philippines by its agent, C.F.
Sharp & Co., Inc.), which shipment is covered by Bill of Lading No. 18 duly issued
to consignee Samar Mining. Upon arrival of the vessel at the port of Manila, the
importation was unloaded and delivered in good order and condition to the
53
bonded warehouse of AMCYL. The goods were however never delivered to, nor
received by, the consignee at the port of destination — Davao. When the letters
of complaint sent to Nordeutscher Lloyd failed to elicit the desired response,
Samar Mining filed a formal claim for P1,691.93, the equivalent of $424.00 at
the prevailing rate of exchange at that time, against the former, but neither paid.
Samar Mining filed a suit to enforce payment. Nordeutscher Lloyd and CF Sharp
& Co. brought in AMCYL as third party defendant. The trial court rendered
judgment in favor of Samar Mining, ordering Nordeutscher Lloyd, et. al. to pay
the amount of P1,691.93 plus attorney’s fees and costs. However, the Court
stated that Nordeutscher Lloyd, et. al. may recoup whatever they may pay Samar
Mining by enforcing the judgment against third party defendant AMCYL, which
had earlier been declared in default. Nordeutscher Lloyd and C.F. Sharp & Co.
appealed from said decision.
The following are the pertinent ports, as provided in the bill of lading:
Port of Loading: Bremen, Germany
Port of discharge from ship: Manila
Port of destination/Port of discharge of the goods: Davao
As plainly indicated on the face of the bill, the vessel M/S Schwabenstein is to
transport the goods only up to Manila. Thereafter, the goods are to be
transshipped by the carrier to the port of destination.
ISSUE:
Whether or not a stipulation in the bill of lading exempting the carrier from liability
for loss of goods not in its actual custody (i.e., after their discharge from the
ship) is valid.
HELD: It is clear that in discharging the goods from the ship at the port of Manila,
and delivering the same into the custody of AMCYL, the bonded warehouse,
appellants were acting in full accord with the contractual stipulations contained
in Bill of Lading No. 18. The delivery of the goods to AMCYL was part of
appellants' duty to transship (meaning to transfer for further transportation from
one ship or conveyance to another) the goods from Manila to their port of
destination-Davao.
The extent of appellant carrier's responsibility and/or liability in the
transshipment of the goods in question are spelled out and delineated under
Section 1, paragraph 3 of Bill of Lading No. 18, to wit: “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”. Further, in Section 11 of the same
bill, it was provided that “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…”
We find merits in Nordeutscher’s contention that they are not liable for the loss
of the subject goods by claiming that they have discharged the same in full and
good condition unto the custody of AMCYL at the port of discharge from ship —
Manila, and therefore, pursuant to the aforequoted stipulation (Sec. 11) in the
bill of lading, their responsibility for the cargo had ceased.The validity of
stipulations in bills of lading exempting the carrier from liability for loss or
damage to the goods when the same are not in its actual custody has been
upheld by Us in PHOENIX ASSURANCE CO., LTD. vs. UNITED STATES LINES, 22
SCRA 674 (1968), ruling that “pursuant to the terms of the Bill of Lading,
appellee's responsibility as a common carrier ceased the moment the goods
were unloaded in Manila and in the matter of transshipment, appellee acted
merely as an agent of the shipper and consignee”
In the present case, by the authority of the above pronouncements, and in
conformity with the pertinent provisions of the Civil Code, Section 11 of Bill of
Lading No. 18 and the third paragraph of Section 1 thereof are valid stipulations
between the parties insofar as they exempt the carrier from liability for loss or
damage to the goods while the same are not in the latter's actual custody.
Acareful perusal of the provisions of the New Civil Code on common carriers
directs our attention to Article 1736, which reads: “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.” In relation to this, Article
1738 provides: “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.”
Art. 1738 finds no applicability to the instant case. The said article contemplates
a situation where the goods had already reached their place of destination and
are stored in the warehouse of the carrier. The subject goods were still awaiting
transshipment to their port of destination, and were stored in the warehouse of
a third party when last seen and/or heard of. However, Article 1736 is applicable
to the instant suit. Under said article, the carrier may be relieved of the
responsibility for loss or damage to the goods upon actual or constructive
delivery of the same by the carrier to the consignee, or to the person who has a
right to receive them. There is actual delivery in contracts for the transport of
goods when possession has been turned over to the consignee or to his duly
authorized agent and a reasonable time is given him to remove the goods. In
the present case, there was actual delivery to the consignee through its duly
authorized agent, the carrier.
Lastly, two undertakings are embodied in the bill of lading: the transport of goods
from Germany to Manila, and the transshipment of the same goods from Manila
to Davao, with Samar Mining acting as the agent of the consignee. The moment
the subject goods are discharged in Manila, Samar Mining’s personality changes
from that of carrier to that of agent of the consignee. Such being the case, there
was, in effect, actual delivery of the goods from appellant as carrier to the same
appellant as agent of the consignee. Upon such delivery, the appellant, as
erstwhile carrier, ceases to be responsible for any loss or damage that may befall
the goods from that point onwards. This is the full import of Article 1736.
But even as agent of the consignee, the appellant cannot be made answerable
54
for the value of the missing goods. It is true that the transshipment of the goods,
which was the object of the agency, was not fully performed. However, appellant
had commenced said performance, the completion of which was aborted by
circumstances beyond its control. An agent who carries out the orders and
instructions of the principal without being guilty of negligence, deceit or fraud,
cannot be held responsible for the failure of the principal to accomplish the object
of the agency.
GANZON V. CA
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 captain’s 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? – YES.
HELD: 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 fullfilment of the
obligation is not considered force majeure.
MACAM vs. COURT OF APPEALS
FACTS: Benito Macam, doing business under name Ben-Mac Enterprises,
shipped on board vessel Nen-Jiang, owned and operated by 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 by Bill of Lading No. HKG 99013. The shipment was
bound for Hongkong with 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 possession of 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
55
shipper’s 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 RTC’s
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 deliverthe 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 fruitsand 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.
SCHMITZ TRANSPORT & BROKERAGE CORPORATION v. TRANSPORT VENTURE,
INC., INDUSTRIAL INSURANCE COMPANY, LTD., et al.
FACTS: SYTCO Pte Ltd. Singapore shipped from the port of Ilyichevsk, Russia on
board M/V ―Alexander Savelievǁ (a vessel of Russian registry and owned by
respondent Black Sea) 545 hot rolled steel sheets. The vessel arrived at the port
of Manila and the Philippine Ports Authority (PPA) assigned it a place of berth
at the outside breakwater at the Manila South Harbor. Petitioner Schmitz
Transport, engaged to secure the requisite clearances, to receive the cargoes
from the shipside, and to deliver them to Little Giant Steelpipe Corporation‘s
warehouse at Cainta, Rizal. It likewise engaged the services of respondent
Transport Venture Inc. (TVI) to send a barge and tugboat at shipside.
The tugboat, after positioning the barge alongside the vessel, left and returned
to the port terminal. Later on, arrastre operator commenced to unload 37 of the
545 coils from the vessel unto the barge. By noon the next day, during which
the weather condition had become inclement due to an approaching storm, the
unloading unto the barge of the 37 coils was accomplished. However, there was
no tugboat that pulled the barge back to the pier. Eventually, because of the
strong waves, the crew of the barge abandoned it and transferred to the vessel.
The barge capsized, washing the 37 coils into the sea. Earnest efforts on the
part of both the consignee Little Giant and Industrial Insurance to recover the
lost cargoes proved futile.
Industrial Insurance later filed a complaint against Schmitz Transport, TVI and
Black Sea through its representative Inchcape (the defendants) before the RTC
of Manila, for the recovery of the amount it paid to Little Giant plus adjustment
fees, attorney‘s fees, and litigation expenses. Industrial Insurance won and the
Schmitz et al.’s motion for reconsideration is denied.
In effect, Schmitz now filed charges against TVI et al. It asserts that in chartering
the barge and tugboat of TVI, it was acting for its principal, consignee Little Giant,
hence, the transportation contract was by and between Little Giant and TVI. The
Court rendered a decision holding Schmitz and TVI liable.
ISSUE: Whether or not the liability for the loss may attach to Black Sea, Schmitz
and TVI?
HELD: TVI‘s failure to promptly provide a tugboat did not only increase the risk
that might have been reasonably anticipated during the shipside operation, but
was the proximate cause of the loss. A man of ordinary prudence would not leave
a heavily loaded barge floating for a considerable number of hours, at such a
precarious time, and in the open sea, knowing that the barge does not have any
power of its own and is totally defenseless from the ravages of the sea. That it
was nighttime and, therefore, the members of the crew of a tugboat would be
charging overtime pay did not excuse TVI from calling for one such tugboat.
As for Schmitz, for it to be relieved of liability, it should, following Article 1739 of
the Civil Code, prove that it exercised due diligence to prevent or minimize the
loss, before, during and after the occurrence of the storm in order that it may be
exempted from liability for the loss of the goods.
While Schmitz sent checkers and a supervisor on board the vessel to counter-
check the operations of TVI, it failed to take all available and reasonable
precautions to avoid the loss. After noting that TVI failed to arrange for the
prompt towage of the barge despite the deteriorating sea conditions, it should
have summoned the same or another tugboat to extend help, but it did not.
The Court holds then that Schmitz and TVI are solidarily liable for the loss of the
cargoes. As for Black Sea, its duty as a common carrier extended only from the
time the goods were surrendered or unconditionally placed in its possession and
received for transportation until they were delivered actually or constructively to
consignee Little Giant
Parties to a contract of carriage may, however, agree upon a definition of delivery
that extends the services rendered by the carrier. In the case at bar, Bill of Lading
No. 2 covering the shipment provides that delivery be made ―to the port of
discharge or so near thereto as she may safely get, always afloat.ǁ The delivery
of the goods to the consignee was not from ―pier to pierǁ but from the shipside
of ―M/V Alexander Savelievǁ and into barges, for which reason the consignee
56
contracted the services of petitioner. Since Black Sea had constructively
delivered the cargoes to Little Giant, through Schmitz, it had discharged its duty.
In fine, no liability may thus attach to Black Sea.
AGREEMENT LIMITING LIABILITY
HOME INSURANCE COMPANY vs. AMERICAN STEAMSHIP AGENCIES, INC. and
LUZON STEVEDORING CORPORATION
FACTS: “Consorcio Pesquero del Peru of South America” shipped freight pre-
paid at Peru, jute bags of Peruvian fish meal through SS Crowborough, covered
by clean bills of lading. The cargo, consigned to San Miguel Brewery, Inc., now
San Miguel Corporation, and insured by Home Insurance Company arrived in
Manila and was discharged into the lighters of Luzon Stevedoring Company.
When the cargo was delivered to consignee San Miguel Brewery Inc., there were
shortages causing the latter to lay claims against Luzon Stevedoring
Corporation, Home Insurance Company and the American Steamship Agencies
(shipowner), owner and operator of SS Crowborough.
Because the others denied liability, Home Insurance Company paid SMBI the
insurance value of the loss, as full settlement of the claim. Having been refused
reimbursement by both the Luzon Stevedoring Corporation and American
Steamship Agencies, Home Insurance Company, as subrogee to the consignee,
filed against them before the CFI of Manila a complaint for recovery of the
payment paid with legal interest, plus attorney’s fees.
In answer, Luzon Stevedoring Corporation alleged that it delivered with due
diligence the goods in the same quantity and quality that it had received the
same from the carrier.
The CFI, after trial, absolved Luzon Stevedoring Corporation, having found the
latter to have merely delivered what it received from the carrier in the same
condition and quality, and ordered American Steamship Agencies to pay Home
Insurance Company the amount demanded with legal interest plus attorney’s
fees.
Disagreeing with such judgment, American Steamship Agencies appealed directly
to Us.
ISSUE: Is the stipulation in the charter party of the owner’s non-liability valid so
as to absolve the American Steamship Agencies from liability for loss? – YES.
HELD: The judgment appealed from is hereby reversed and appellant is absolved
from liability to plaintiff.
The bills of lading, covering the shipment of Peruvian fish meal provide at the
back thereof that the bills of lading shall be governed by and subject to the terms
and conditions of the charter party, if any, otherwise, the bills of lading prevail
over all the agreements. On the bills are stamped “Freight prepaid as per charter
party. Subject to all terms, conditions and exceptions of charter party dated
London, Dec. 13, 1962.”
Section 2, paragraph 2 of the charter party, provides that the owner is liable for
loss or damage to the goods caused by personal want of due diligence on its
part or its manager to make the vessel in all respects seaworthy and to secure
that she be properly manned, equipped and supplied or by the personal act or
default of the owner or its manager. Said paragraph, however, exempts the
owner of the vessel from any loss or damage or delay arising from any other
source, even from the neglect or fault of the captain or crew or some other
person employed by the owner on board, for whose acts the owner would
ordinarily be liable except for said paragraph..
The provisions of our Civil Code on common carriers were taken from Anglo-
American law. Under American jurisprudence, a common carrier undertaking to
carry a special cargo or chartered to a special person only, becomes a private
carrier. As a private carrier, a stipulation exempting the owner from liability for
the negligence of its agent is not against public policy, and is deemed valid.
Such doctrine We find reasonable. The Civil Code provisions on common carriers
should not be applied where the carrier is not acting as such but as a private
carrier. The stipulation in the charter party absolving the owner from liability for
loss due to the negligence of its agent would be void only if the strict public policy
governing common carriers is applied. Such policy has no force where the public
at large is not involved, as in the case of a ship totally chartered for the use of a
single party.
And furthermore, in a charter of the entire vessel, the bill of lading issued by the
master to the charterer, as shipper, is in fact and legal contemplation merely a
receipt and a document of title not a contract, for the contract is the charter
party. The consignee may not claim ignorance of said charter party because the
bills of lading expressly referred to the same. Accordingly, the consignees under
the bills of lading must likewise abide by the terms of the charter party. And as
stated, recovery cannot be had thereunder, for loss or damage to the cargo,
against the shipowners, unless the same is due to personal acts or negligence
of said owner or its manager, as distinguished from its other agents or
employees. In this case, no such personal act or negligence has been proved.
DE GUZMAN vs. CA
FACTS: Respondent Ernesto Cendaña, a junk dealer, was engaged in buying up
used bottles and scrap metal in Pangasinan. Upon gathering sufficient quantities
of such scrap material, respondent would bring such material to Manila for
resale. He utilized two (2) six-wheeler trucks which he owned for hauling the
material to Manila. On the return trip to Pangasinan, respondent would load his
vehicles with cargo which various merchants wanted delivered to differing
establishments in Pangasinan. For that service, respondent charged freight rates
which were commonly lower than regular commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman, a merchant and
authorized dealer of General Milk Company (Philippines), Inc. in Urdaneta,
Pangasinan, contracted with respondent for the hauling of 750 cartons of Liberty
filled milk from a warehouse of General Milk in Makati, Rizal, to petitioner’s
establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1
December 1970, respondent loaded in Makati the merchandise on to his trucks:
57
150 cartons were loaded on a truck driven by respondent himself; while 600
cartons were placed on board the other truck which was driven by Manuel
Estrada, respondent’s driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600
boxes never reached petitioner, since the truck which carried these boxes was
hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed
men who took with them the truck, its driver, his helper and the cargo.
On 6 January 1971, petitioner commenced action against private respondent in
the Court of First Instance of Pangasinan, demanding payment of P22,150.00,
the claimed value of the lost merchandise, plus damages and attorney’s fees. On
December 10, 1975, the trial court rendered a Decision finding private
respondent to be a common carrier and holding him liable for the value of the
undelivered goods (P22,150.00) as well as for P4,000.00 as damages and
P2,000.00 as attorney’s fees.
The Court of Appeals reversed the judgment of the trial court and held that
respondent had been engaged in transporting return loads of freight, as a casual
occupation a sideline to his scrap iron business and not as a common carrier.
ISSUE: Whether or not the hijacking of respondent’s truck was force majeure.
HELD: The hijacking of the carrier’s truck does not fall within any of the five (5)
categories of exempting causes in Art. 1734. Hence, the private respondent as
common carrier is presumed to have been at fault or to have acted negligently.
This presumption, however, may be overthrown by proof of extraordinary
diligence on the part of private respondent.
However, under Article 1745 (6) above, a common carrier is held responsible
and will not be allowed to divest or to diminish such responsibility· even for acts
of strangers like thieves or robbers, except where such thieves or robbers in fact
acted with grave or irresistible threat, violence or force. The court believes and
so holds that the limits of the duty of extraordinary diligence in the vigilance over
the goods carried are reached where the goods are lost as a result of a robbery
which is attended by grave or irresistible threat, violence or force.
In the instant case, armed men held up the second truck owned by private
respondent which carried petitioner’s cargo. The robbers not only took away the
truck and its cargo but also kidnapped the driver and his helper, detaining them
for several days and later releasing them in another province (in Zambales). In
these circumstances, we hold that the occurrence of the loss must reasonably
be regarded as quite beyond the control of the common carrier and properly
regarded as a fortuitous event. It is necessary to recall that even common
carriers are not made absolute insurers against all risks of travel and of transport
of goods, and are not held liable for acts or events which cannot be foreseen or
are inevitable, provided that they shall have complied with the rigorous standard
of extraordinary diligence.
VALENZUELA HARDWOOD VS. CA
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 former’s 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 VHIS.
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? – YES.
HELD: Xxx [I]t is undisputed that private respondent had acted as a private
carrier in transporting petitioner’s 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
shipowner 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.
xxx
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
58
in a contract of private carriage can stipulate the carrier’s 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.
H. E. HEACOCK COMPANY VS. MACONDRAY & COMPANY, INC.,
FACTS: On or about the 5th day of June, 1919, the plaintiff (Heacock) caused
to be delivered on board of steamship Bolton Castle, then in the harbor of New
York, four cases of merchandise one of which contained twelve (12) 8-day
Edmond clocks properly boxed and marked for transportation to Manila, and
paid freight on said clocks from New York to Manila in advance. The said
steampship arrived in the port of Manila on or about the 10th day of September,
1919, consigned to the defendant (Macondray) as agent and representative of
said vessel in said port. Neither the master of said vessel nor the
defendant herein, as its agent, delivered to the plaintiff the aforesaid twelve 8-
day Edmond clocks, although demand was made upon them for their
delivery. The invoice value of the said twelve 8-day Edmond clocks in the city of
New York was P22 and the market value of the same in the City of Manila at the
time when they should have been delivered to the plaintiff was P420. The bill of
lading issued and delivered to the plaintiff by the master of the said
steamship Bolton Castle contained, among others, the following clauses:
1. It is mutually agreed that the value of the goods receipted for above does
not exceed $500 per freight ton, or, in proportion for any part of a ton, unless
the value be expressly stated herein and ad valorem freight paid thereon.
9. Also, that in the event of claims for short delivery of, or damage to, cargo
being made, the carrier shall not be liable for more than the net invoice price
plus freight and insurance less all charges saved, and any loss or damage for
which the carrier may be liable shall be adjusted pro rata on the said basis. No
greater value than $500, U. S. currency, per freight ton was declared by the
plaintiff on the aforesaid clocks, and no ad valorem freight was paid thereon. On
or about October 9, 1919, the defendant tendered to the plaintiff P76.36, the
proportionate freight ton value of the aforesaid twelve 8-day Edmond clocks, in
payment of plaintiff's claim, which tender plaintiff rejected. The lower court, in
accordance with clause 9 of the bill of lading above quoted, rendered judgment
in favor of the plaintiff against the defendant for the sum of P226.02, this being
the invoice value of the clocks in question plus the freight and insurance thereon,
with legal interest thereon from November 20, 1919, the date of the complaint,
together with costs. From that judgment both parties appealed to this court. The
plaintiff-appellant (Heacock) insists that it is entitled to recover from the
defendant the market value of the clocks in question, to wit: the sum of P420.
The defendant-appellant (Macondray), on the other hand, contends that, in
accordance with clause 1 of the bill of lading, the plaintiff is entitled to recover
only the sum of P76.36, the proportionate freight ton value of the said clocks.
The claim of the plaintiff is based upon the argument that the two clause in the
bill of lading above quoted, limiting the liability of the carrier, are contrary to
public order and, therefore, null and void. The defendant, on the other hand,
contends that both of said clauses are valid, and the clause 1 should have
been applied by the lower court instead of clause 9.
ISSUES:
1. May a common carrier, by stipulations inserted in the bill of lading, limit its
liability for the loss of or damage to the cargo to an agreed valuation of the
latter?
2. Whether clause 1 or clause 9 of the bill of lading is to be adopted as the
measure of defendant's liability.
HELD:
1. Yes, it may do so. Three kinds of stipulations have often been made in a bill
of lading. The first is one exempting the carrier from any and all liability for loss
or damage occasioned by its own negligence. The second is one providing for
an unqualified limitation of such liability to an agreed valuation. And the third is
one limiting the liability of the carrier to an agreed valuation unless the shipper
declares a higher value and pays a higher rate of freight. According to an
almost uniform weight of authority, the first and second kinds of stipulations are
invalid as being contrary to public policy, but the third is valid and
enforceable. The authorities relied upon by the plaintiff-appellant (Heacock)
support the proposition that the first and second stipulations in a bill of lading
are invalid which either exempt the carrier from liability for loss or
damage occasioned by its negligence, or provide for an unqualified limitation
of such liability to an agreed valuation. A reading of clauses 1 and 9 of the bill of
lading, however, clearly shows that the present case falls within the third
stipulation, to wit: That a clause in a bill of lading limiting the liability of the carrier
to a certain amount unless the shipper declares a higher value and pays a higher
rate of freight, is valid and enforceable. A limitation of liability based upon an
agreed value to obtain a lower rate does not conflict with any sound principle of
public policy; and it is not conformable to plain principles of justice that a shipper
may understate value in order to reduce the rate and then recover a larger value
in case of loss. It seems clear from the foregoing authorities that the clauses (1
and 9) of the bill of lading here in question are not contrary to public order.
Article 1255 of the Civil Code provides that "the contracting parties
may establish any agreements, terms and conditions they may deem advisable,
provided they are not contrary to law, morals or public order."
Said clauses of the bill of lading are, therefore, valid and binding upon the parties
thereto.
2. It will be noted, however, that whereas clause 1 contains
only an implied undertaking to settle in case of loss on the basis of
not exceeding $500 per freight ton, clause 9 contains an express undertaking
to settle on the basis of the net invoice price plus freight and insurance less all
charges saved. "Any loss or damage for which the carrier may be liable shall be
adjusted pro rata on the said basis," clause 9 expressly provides. It seems to
the Court that there is an irreconcilable conflict between the two clauses with
regard to the measure of defendant's liability. It is difficult to reconcile them
without doing violence to the language used and reading exceptions
and conditions into the undertaking contained in clause 9 that are not there. This
being the case, the bill of lading in question should be interpreted against the
defendant carrier, which drew said contract. "
A written contract should, in case of doubt, be interpreted against the party
who has drawn the contract. It is a well-known principle of construction
that ambiguity or uncertainty in an agreement must be construed most strongly
59
against the party causing it. These rules as applicable to contracts contained in
bills of lading. "
In construing a bill of lading given by the carrier for the safe transportation and
delivery of goods shipped by a consignor, the contract will be construed most
strongly against the carrier, and favorably to the consignor, in case of doubt in
any matter of construction."
It follows from all of the foregoing that the judgment appealed from should be
affirmed.
JUAN YSMAEL & CO., INC. vs. GABINO BARRETTO & CO.
FACTS: A domestic corporation, seeks to recover from the defendants P9,940.
95 the alleged value of four cases of merchandise which it delivered to the
steamship Andres on October 25, 1922, at Manila to be shipped to Surigao, but
which were never delivered to Salomon Sharuff, the consignee, or returned to
the plaintiff. Defendants make a specific denial of all of the material allegations
of the complaint, and as special defense allege that the four cases of
merchandise in question were never delivered to them, and that under the
provisions of paragraph the provisions of paragraph 7 of the printed conditions
appearing on the back of the bill of lading, plaintiff's right of action is barred for
the reason that it was not brought within sixty days from the time the cause of
action accrued. Defendants further alleged that under and by virtue of provision
12 of the bill of lading referred to in plaintiff's amended complaint, the
defendants are not liable in excess of three hundred pesos (P300) 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 shipment, etc.
Lower court:
Judgment in favor of plaintiff for the full amount of its claim
ISSUE: Whether or not the lower court erred in ruling in favor of plaintiff and
disregarding the stipulation limiting the value of defendants‘ liability under clause
12 printed in the Bill of lading?
HELD: The SC upheld the findings of the trial court that the defendants received
from the plaintiff corporation 164 cases of merchandise, and delivered at
Surigao only 160 cases of such merchandise, and that defendants failed to
deliver the said four cases in Surigao when plaintiff's representative took delivery
of the cargo at that port, and that the original figure "1" and the word "bulto"
appearing on the back of Exhibit 1 were changed by Galleros to read "5" and
"bultos." The testimony of Claro Galleros to the effect that, according to the
tallies made by him on the back of Exhibit 1 during the course of loading,
only 160 cases were loaded, on board the steamer Andres
stands uncorroborated, and it is not supported by the tallies themselves,
as these tallies give a total of 161 cases. Appellants rely on clause 12 of the bill
of lading, which is as follows:
It is expressly understood that carrier shall not be liable
for loss or damage from any cause or for any reason to an amount exceeding
three hundred pesos (P300) Philippine currency for any single package of silk
or other valuable cargo, nor for
an amount exceeding one hundred pesos (P100) Philippine currency for any si
ngle package of other cargo, unless the value and contents of such packages
are correctly declared in this bill of lading at the time
of shipment and freight paid in accord with the actual measurement or weight of
the cargo shipped.
That condition is printed on the back of the bill of lading. The ship in question
was a common carrier and, as such, must have been operated as a public utility.
It is a matter of common knowledge that large quantities of silk are imported in
the Philippine Islands, and that after being imported, they are sold by the
merchants in Manila and other large seaports, and then shipped to different
points and places in the Islands. Hence, there is nothing unusual about
the shipment of silk. In truth and in fact, it is a matter of usual and ordinary
business. There was no fraud or concealment in the shipment in question. Clause
12 above quoted places a limit of P300 "for any single package of silk." The
evidence shows that 164 "cases" were shipped, and that the value of each
case was very near P2,500. In this situation, the limit of defendants' liability
for each case of silk "for loss or damage from any cause or for any reason" would
put it in the power of the defendants to have taken the whole cargo of 164 cases
of silk at a valuation of P300 for each case, or less than one-eight of its actual
value. If that rule of law should be 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.
Citing case law:
PAR. 194. 6. Reasonable of Limitation.
— The validity of stipulations limiting the carriers liability is to be determined
by their reasonableness and their conformity to the sound public policy,
in accordance with which the obligations of the carrier to the public are settled.
It cannot lawfully stipulate for exemption from liability, unless such exemption is
just and reasonable, and unless the contract is freely and fairly made. No
contractual limitation is reasonable which is subversive of public policy. PAR.
195. 7. What Limitations of Liability Permissible.
a. Negligence
(1) Rule in America
(a) In Absence of Organic or Statutory Provisions Regulating Subject
aa. Majority Rule. — In the absence of statute, it is settled by the weight of
authority in the United States, that whatever limitations against its common-law
liability are permissible to a carrier, it cannot limit its liability for injury to or
loss of goods shipped, where such injury or loss is caused by its own negligence.
This is the common-law doctrine and it makes no difference that there is
no statutory prohibition against contracts of this character. PAR. 196.
bb. Considerations on Which Rule Based. — The rule, it is said, rests on
considerations of public policy. The undertaking is to carry the goods, and to
relieve the shipper from all liability for loss or damage arising from negligence in
performing its contract is to ignore the contract itself. 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. The shipper and the common carrier
are not on equal terms; the shipper must send his freight by the common carrier,
or not at all; he is therefore entirely at the mercy of the carrier, unless protected
60
by the higher power of the law against being forced into contracts limiting
the carrier's liability. Such contracts are wanting in the element of
voluntary assent. PAR. 197.
cc. Application and Extent of Rule —
(aa) Negligence of Servants. — The rule prohibiting limitation of liability for
negligence is often stated as a prohibition of any contract relieving the carrier
from loss or damage caused by its own negligence or misfeasance, or that of
its servants; and it has been specifically decided in many cases that no contract
limitation will relieve the carrier from responsibility for the negligence,
unskillfulness, or carelessness of its employees.
Based upon the findings of fact of the trial court which are sustained by the
evidence, the plaintiff delivered to the defendants 164 cases of silk consigned
and to be delivered by the defendants to Salomon Sharuff in Surigao. Four of
such cases were never delivered, and the evidence shows that their value is the
alleged in the complaint. There is no merit in the appeal. The judgment of the
lower court is affirmed, with costs.
NORTHERN MOTORS, INC. vs. PRINCE LINE, ROOSEVELT STEAMSHIP AGENCY
INC., COLUMBIAN ROPE COMPANY OF THE PHILIPPINES, INC., and/or DELGADO
BROTHERS, INC.
FACTS: Northern Motors Inc. is the owner, by transfer from Liddel & Co., Inc., of
a consignment of merchandise, consisting of 33 cases of auto spare parts and
accessories, covered by Bill of Lading No. 19, discharged in Manila into the
custody of Delgado Brothers, Inc., and later cleared and taken delivery of by
Luzon Brokerage Co., Inc., as agents of the consignee, upon presentation of the
corresponding release papers from the Bureau of Customs.
However, instead of 33, cases, only 32 were delivered to Northern Motors Inc.
broker. Northern Motors Inc., thereupon, demanded payment of the reasonable
value (P3,117.53) of the missing case from Delgado Brothers, Inc., but later
offered to refund only P500.00, claiming that under paragraph 15 of its
Management Contract, its liability is limited only to P500.00 unless the value of
the merchandise is otherwise specified or manifested.
*Court of First Instance of Manila ordered Delgado Brothers, Inc., as the arrastre
contractor in the Port of Manila, to pay Northern Motors the amount of P500.00
and costs, instead of P3,117.53 as demanded by it in its complaint.
ISSUE(s):
(1) WON the provisions of Paragraph 15 of the Management Contract between
Delgado Bothers, Inc. and the Bureau of Customs are valid
(2) If the provisions of Paragraph 15 of the Management Contract is valid, WON
Northern Motors Inc. is bound by said provisions.
HELD:
(1) Anent the first issue, Paragraph 15 of the Management Contract provides:
“15. . Delgado Brothers, Inc shall be solely responsible as an independent
contractor for, and promptly pay to the steamship company, consignee,
consignor, or other interested party or parties the invoice value of each package
but which in no case shall be more than five hundred pesos (P500.00) for each
package, unless the value is otherwise specified or manifested, and the
corresponding arrastre charges had been paid, including all damages that may
be suffered on account of loss, destruction, or damage of any merchandise while
in the custody or under the control of the Delgado Brothers, Inc upon any pier,
wharf or other designated place under the supervision of the BUREAU, . . . “
Consequently, the questioned provision is neither unfair nor arbitrary, as
contended, because the Northern Motors Inc has it in his hands to hold, if he so
wishes, the Delgado Brothers, Inc responsible for the full value of his
merchandise by merely specifying it in any of the various documents required of
him,1 in clearing the merchandise from the customs. What would, indeed, be
unfair and arbitrary is to hold the Delgado Brothers, Inc liable for the full value
of the merchandise after the consignee has paid the arrastre charges only a
basis much lower than the true value of the goods.
This Court has held as valid and binding a similar provision in a bill of lading
limiting the carrier's liability to a specific amount, unless the shipper expressly
declares a higher valuation and pays the corresponding rate thereon. (H. E.
Heacock Company vs. Macondray & Company, Inc., 42 Phil., 205; Freixas and
Company vs. Pacific Mail Steamship Co., 42 Phil., 199.)2
The principle above enunciated was finally incorporated as law in Article 1749 of
the new Civil Code, which reads:
“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.”
The same is true in the warehousing business where limitation on the
warehouseman's liability is universally recognized and upheld. Thus —
“In the absence of a prohibitory statute, the validity of a limitation of the amount
of liability is generally upheld, where with a view to obtaining a compensation
commensurate to the risk assumed, the warehouseman stipulates that unless
the valuation of the property committed to his care is disclosed, his responsibility
for loss or damage shall not exceed a certain amount or that in case of loss or
damages the valuation fixed in the receipt shall be controlling." (Am. Jur., Vol.
56, p. 419, citing Taussig vs. Bode, 134 Cal. 260, 66 P. 159, 54 LRA 772, 86
Am. St. Rep. 250; Central Storage Whse. Co. vs. Pickering, 114 Ohio St. 76, 151
NE 29, 141 ALR 768).
The legal relationship created between the Northern Motors Inc or owner of the
imported goods who withdraws them from the customs house and the Delgado
Brothers, Inc whose services are utilized for the purpose or that between a
depositor and the warehouseman, to warrant, in our opinion, the application of
the same or similar principle.
(2) Article 1311 par (2) of the new Civil Code, states:
“If a contract should contain some stipulation in favor of a third person, he may
demand its fulfillment provided he communicated his acceptance to the obligor
before its revocation. A mere incidental benefit or interest of a person is not
sufficient. The contracting parties must have clearly and deliberately conferred a
favor upon a third person.”
61
Tested in the light of the above legal provision, Paragraph 15 of the Management
Contract in question, it is believed, contains provisions which are in the nature of
stipulations pour autrui, that is, for the benefit or in favor of a third party, the
Northern Motors Inc in the case at bar.
Delgado Brothers, Inc and the Bureau of Customs deliberately and purposely
conferred benefit upon Northern Motors Inc t, because it is to the latter that the
merchandise was to be delivered in good order and payment made, in the event
of damage, destruction, or loss thereof while in Delgado Brothers, Inc s control
or custody.
Northern Motors Inc expressed its acceptance on the said favor and
communicated it thereof to Liddel & Co.
It is undisputed, therefore, that appellant took delivery of its cargo from Delgado
Brothers, Inc, as arrastre operator under the Management Contract, and after
the presentation and signing by it, through its duly authorized broker, of the
pertinent documents covering the release of said cargoes.
Under the law,6 before delivery of the cargo could be made, Northern Motors Inc
or his representative must first clear them from the Bureau of Customs and
obtain therefrom a Delivery Permit and a Gate Pass. Among the conditions
imposed by law for this purpose is for Northern Motors Inc to submit to the
Collector of Customs a written declaration containing, inter alia, a "just and
faithful account of the actual cost of said merchandise, including and specifying
the value of all containers or coverings, and that nothing has been omitted
therefrom or concealed whereby the Government of the Republic of the
Philippines might be defrauded of any part of the duties lawfully due on the
merchandise."
Both in the delivery permit and the gate pass thus obtained, the following
annotation appears:
“…All amendments thereto or alterations thereon, particularly but not limited to
Paragraph 15 thereof limiting the company liability to P500.00 per package,
unless the value of the goods is otherwise specified or manifested”
Even, Northern Motors Inc was not a signatory to said Management Contract, it
legally became a party thereto when it (through its broker, the Luzon Brokerage
Co. Inc.) obtained the delivery permit and gate pass in the above manner
prescribed by law and, making use of them, demanded from Delgado Brothers,
Inc the delivery of the 33 cases, pursuant to Delgado Brothers, Inc 's undertaking
in virtue of the very same Management Contract.
Again, it became bound when it brought court action against Delgado Brothers,
Inc, also by virtue of the latter's obligations as the arrastre contractor under the
same Management Contract, for the purpose of recovering the reasonable value
of the missing case of auto spare parts and accessories.
" Northern Motors Inc should not take advantage of the Management Contract
when it suits him to do so and reject its provisions when it thinks otherwise." The
principle is the same or similar to that involved in the case of Mendoza vs.
Philippine Air Lines, Inc. (90 Phil., 836), wherein it was held that —
“Mendoza’s demand for the delivery of the can of film to him at the Pili Air Port
may be regarded as a notice of his acceptance of the stipulation of the delivery
in his favor contained in the contract of carriage and delivery. In this case, he
also made himself a party to the contract, or at least has come to court to enforce
it. His cause of action must necessarily be founded on its breach.”
The limited liability provision in Paragraph 15 of the Management Contract in
question has no statutory basis under Act No. 3002, as amended, inasmuch as
the question was never raised by appellant in the court a quo. The rule is well-
settled that no question will be considered by the appellate court which has not
been raised in the court below. (Toribio vs. Decasa, 55 Phil., 461; San Agustin
vs. Barrios, 68 Phil. 475.)
SEA-LAND SERVICE, INC. vs. INTERMEDIATE APPELLATE COURT
FACTS: On or about January 8, 1981, Sea-Land Service, Inc. (Sea-Land), a
foreign shipping and forwarding company licensed to do business in the
Philippines, received from Seaborne Trading Company in Oakland, California a
shipment consigned to Sen Hiap Hing the business name used by Paulino Cue in
the wholesale and retail trade which he operated out of an establishment located
on Borromeo and Plaridel Streets, Cebu City. The shipper did not declare the
value of the shipmen and no value was indicated in the bill of lading. The bill
described the shipment only as "8 CTNS on 2 SKIDS-FILES.”
The shipment arrived in Manila on February 12, 1981, and there discharged into
the custody of the arrastre contractor and the customs and port authorities.
Sometime between February 13 and 16, 1981, after the shipment had been
transferred near Warehouse 3 at Pier 3 in South Harbor, Manila, awaiting trans-
shipment to Cebu, it was stolen by pilferers and has never been recovered.
On March 10, 1981, Paulino Cue, the consignee, made formal claim upon Sea-
Land for the value of the lost shipment allegedly amounting to P179,643.48.
Sea-Land offered to settle for US$4,000.00, or its then Philippine peso
equivalent of P30,600.00, asserting that said amount represented its maximum
liability for the loss of the shipment under the package limitation clause in the
covering bill of lading. Cue rejected the offer and thereafter brought suit for
damages against Sea-Land in the then Court of First Instance of Cebu.
The trial court rendered judgment in favor of Cue, sentencing Sea-Land to pay
him P186,048.00 representing the Philippine currency value of the lost cargo,
P55,814.00 for unrealized profit with one (1%) percent monthly interest from
the filing of the complaint until fully paid, P25,000.00 for attorney's fees and
P2,000.00 as litigation expenses. The Intermediate Appellate Court affirmed said
decision.
ISSUE: Whether or not the “package limitation clause,” a stipulation limiting the
liability of the carrier for loss and damage to the shipment to the amount fixed
in the bill of lading, is valid and binding against the shipper and the consignee
in view of the shipper’s failure to declare the actual value of the shipment. -YES
HELD: There is nothing in the Civil Code which absolutely prohibits agreements
between shipper and carrier limiting the latter's liability for loss of or damage to
cargo shipped under contracts of carriage. The Civil Code in fact has agreements
62
of such character in contemplation in providing, in its Articles 1749 and 1750,
that:
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.
Here, the just and reasonable character of the questioned stipulation is implicit
from the fact that the shipper or owner is given the option under Article 1749 of
avoiding accrual of liability limitation by simply declaring the nature and value of
the shipment in the bill of lading. Also, the shipper here did not complain of
having been "rushed," imposed upon or deceived in any significant way into
agreeing to ship the cargo under a bill of lading carrying such a stipulation;
therefore, there is no ground to assume that its agreement to the said stipulation
was not freely and fairly sought and given.
Furthermore, since the liability of a common carrier for loss of or damage to
goods transported by it under a contract of carriage is 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 petitioner Sea-Land to the
respondent consignee while governed primarily by the Civil Code may suppletorily
be governed, in all matters not determined thereby, by the Code of Commerce
and special laws. One of these suppletory special laws is the Carriage of Goods
by Sea Act (COGSA) and Sec. 4(5) of the said act provides that:
“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 not be conclusive on the carrier.
By agreement between the carrier, master, or agent of the carrier, and the
shipper another maximum amount than that mentioned in this paragraph may
be fixed: Provided That such maximum shall not be less than the figure above
named. In no event shall the carrier be liable for more than the amount of
damage actually sustained.”
The package limitation clause of the bill of lading in question is a virtual copy of
the first paragraph of the foregoing provision. Therefore, there can be no
question as to the validity of such clause for it is in conformity with the said
provision of law. Verily, nothing contained in section 4(5) of the Carriage of
Goods by Sea Act is repugnant to or inconsistent with any of the just-cited
provisions of the Civil Code. Said section merely gives more flesh and greater
specificity to the rather general terms of Article 1749 (without doing any violence
to the plain intent thereof) and of Article 1750, to give effect to just agreements
limiting carriers' liability for loss or damage which are freely and fairly entered
into.
Therefore, there can be no doubt or equivocation about the validity and
enforceability of freely-agreed-upon stipulations in a contract of carriage or bill
of lading limiting the liability of the carrier to an agreed valuation unless the
shipper declares a higher value and inserts it into said contract or bill. This pro
position, moreover, rests upon an almost uniform weight of authority.
CITADEL LINES, INC. vs. COURT OF APPEALS
FACTS: Petitioner Citadel Lines, Inc. –CARRIER; Manila Wine Merchants, Inc. –
CONSIGNEE;
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," as evidenced by Bill of Lading No. 70621374 2
and Bill of Lading No. 70608680 3 of the Ben Line Containers Ltd. The shipment
arrived at the Port of Manila Pier 13, on April 18, 1979 in container van No.
BENU 204850-9. The said container was received by E. Razon, Inc. (later known
as Metro Port Service, Inc. and referred to herein as the ARRASTRE) under Cargo
Receipt No. 71923 dated April 18, 1979.
On April 30, 1979, the container van, which contained two shipments was
stripped. One shipment was delivered and the other shipment consisting of the
imported British manufactured cigarettes was palletized. Due to lack of space at
the Special Cargo Coral, the aforesaid cigarettes were placed in two containers
with two pallets in container No. BENU 204850-9, the original container, and
four pallets in container No. BENU 201009-9, with both containers duly
padlocked and sealed by the representative of the CARRIER.
In the morning of May 1, 1979, the CARRIER'S headchecker discovered that
container van No. BENU 201009-9 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. This was confirmed in the report of said
Superintendent Sibucao to Ricardo Cosme, Assistant Operations Manager, dated
May 1, 1979 5 and the Official Report/Notice of Claim of Citadel Lines, Inc. to E.
Razon, Inc. dated May 8, 1979. 6 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 inside container van No. BENU 201009-9 which was
padlocked and sealed by the representatives of the CARRIER without any
participation of the ARRASTRE.
When the CONSIGNEE learned that 90 cases were missing, it filed a formal claim
dated May 21, 1979, 7 with the CARRIER, demanding the payment of
P315,000.00 representing the market value of the missing cargoes. The
CARRIER, in its reply letter dated May 23, 1979, 8 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, dated June 4,
1979, 9 with the ARRASTRE, demanding payment of the value of the goods but
said claim was denied.
63
TC-exonerated arrastre.CA-affirmed TC
ISSUE:
a. Whether the stipulation limiting the liability of the carrier contained in the bill
of lading is valid.
b. WON the loss occurred in the custody of Citadel or E. Razon.
HELD:
a. YES. The SC find the award of damages in the amount of P312,800.00 for the
value of the goods lost, based on the alleged market value thereof, to be
erroneous. It is clearly and expressly provided under Clause 6 of the
aforementioned bills of lading issued by the CARRIER that its liability is limited to
$2.00 per kilo. Basic is the rule, long since enshrined as a statutory provision,
that a stipulation limiting the liability of the carrier to the value of the goods
appearing in the bill of lading, unless the shipper or owner declares a greater
value, is binding. Further, 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.
The CONSIGNEE itself admits in its memorandum that the value of the goods
shipped does not appear in the bills of lading. 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. In Sea-land Service, Inc. vs. Intermediate Appellate Court, et al. the SC
there explained what is a just and reasonable, and a fair and free, stipulation, in
this wise:
. . . That said stipulation is just and reasonable arguable from the fact that it
echoes Art. 1750 itself in providing a limit to liability only if a greater value is not
declared for the shipment in the bill of lading. To hold otherwise would amount
to questioning the justice and fairness of that law itself, and this the private
respondent does not pretend to do. But over and above that consideration the
just and reasonable character of such stipulation is implicit in it giving the shipper
or owner the option of avoiding accrual of liability limitation by the simple and
surely far from onerous expedient of declaring the nature and value of the
shipment in the bill of lading. And since the shipper here has not been heard to
complain of having been "rushed," imposed upon or deceived in any significant
way into agreeing to ship the cargo under a bill of lading carrying such a
stipulation — in fact, it does not appear, that said party has been heard from at
all insofar as this dispute is concerned — there is simply no ground for assuming
that its agreement thereto was not as the law would require, freely and fairly
sought and well.
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.
b. The subject shipment was lost while it was still in the custody of herein
petitioner 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 therefor.
EVERETT STEAMSHIP vs. CA
FACTS: Hernandez trading company imported three crates of bus spare parts
marked as Marco 12, Marco 13, Marco 14 from its supplier Maruman trading
company.
Said crates were shipped from Japan to Manila on noard the vessel owned by
Everette Orient Lines. Upon arrival in Manila, it was discovered that Marco 14
was missing.
Hernandez makes a formal claim to Everette in an amount of 1 mill ++ Yen,
which is the amount of the cargo lost.
However, Everett offers an amount of 100k because it is the amount that was
stipulated in its Bill of Lading.
Hernandez files a case at the RTC of Caloocan, RTC rules1 in favor of Hernandez
holding Everett liable for the amount of !mill ++ Yen.
THE CA affirmed the RTC’s ruling and made an additional observation that since
Hernandez is not a privy to the contract in the bill of lading ( the contract was
entered by Everett and Maruman trading [shipper]), and so the 100k limit
stipulated will not bind Hernandez making Everett liable for the full amount of
1mill ++ Yen.
ISSUE
1. Is Everett liable for the full amount or the amount that was stipulated in the
contract?- WHAT WAS STIPULATED IN THE CONTRACT
2. Is Hernandez a privy to the contract which says that Petitioner is liable only
for 100k? YES
HELD: 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:
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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 that the shipper did not declare a higher
valuation, it had itself to blame for not complying with the stipulations.
The trial court’s ratiocination that private respondent could not have “fairly and
freely” agreed to the limited liability clause in the bill of lading because the said
conditions were printed in small letters does not make the bill of lading invalid.
In Ong Yiu VS. CA the court said that
“ contracts of adhesion wherein one party imposes a ready-made form of
contract on the other, as the plane ticket in the case at bar, are contracts
not entirely prohibited
A contract limiting liability upon an agreed valuation does not offend against the
policy of the law forbidding one from contracting against his own negligence.
The shipper, Maruman Trading, we assume, has been extensively engaged in the
trading business. It can not be said to be ignorant of the business transactions
it entered into involving the shipment of its goods to its customers. The shipper
could not have known, or should know the stipulations in the bill of lading and
there it should have declared a higher valuation of the goods shipped. Moreover,
Maruman Trading has not been heard to complain that it has been deceived or
rushed into agreeing to ship the cargo in petitioner’s vessel.
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. Private respondent
(Hernandez) formally claimed reimbursement for the missing goods from
petitioner and subsequently filed a case against the latter based on the very
same bill of lading, it (private respondent) accepted the provisions of the
contract and thereby made itself a party thereto, or at least has come to court
to enforce it. Thus, private respondent cannot now reject or disregard the
carrier’s limited liability stipulation in the bill of lading. In other words, private
respondent is bound by the whole stipulations in the bill of lading and must
respect the same.
COKALIONG SHIPPING vs. UCPB
FACTS: December 11, 1991: Nestor Angelia (shipper and consignee) delivered
to the petitioner Edgar Cokaliong Shipping Lines, Inc. (now Cokaliong Shipping
Lines), a cargo consisting of one (1) carton of Christmas decor and two (2)
sacks of plastic toys, to be transported on board the M/V Tandag from Cebu City
for Tandag, Surigao del Sur. This cargo is under Bill of Lading No. 58, in the
amount of P6,500.00.
Zosimo Mercado (another shipper and consignee) likewise delivered cargo to
petitioner consisting of two (2) cartons of plastic toys and Christmas decor, one
(1) roll of floor mat and one (1) bundle of various or assorted goods. This is
under Bill of Lading No. 59, valued in the amount of P14,000.00 Feliciana
Legaspi (owner of the goods) insured the cargo, covered by BOL Nos. 59 and
No. 58, with the UCPB General Insurance Co., Inc., [respondent]. No. 59 was
insured for P100,000 while No. 58 for P50,000. [*Note that both amounts are
far from the actual and declared value in the BOLs issued by Cokaliong] After
the vessel had passed by the Mandaue-Mactan Bridge, fire ensued in the engine
room, and, despite earnest efforts of the officers and crew of the vessel, the fire
engulfed and destroyed the entire vessel resulting in the loss of the vessel and
the cargoes therein. Feliciana Legaspi filed a claim, with [respondent], for the
value of the cargos insured. The latter approved the claim. For Bill of Lading No.
59, Legaspi received from UCPB P99,000.00 while for No. 58, P60,338.00.
UCPB as subrogee of Legaspi, filed a complaint anchored on torts against
petitioner, with the RTC of Makati City, for the collection of the total principal
amount of P148,500.00. Respondent alleged that the loss of the cargo was due
to the negligence of the petitioner. Petitioner alleged that: (a) It was cleared by
the Board of Marine Inquiry of any negligence in the burning of the vessel; and
(b) it cannot be held liable for the loss of the cargo beyond the value thereof
declared in the Bill of Lading.
ISSUES:
(1) Is petitioner liable for the loss of the goods? YES
(2) If it is liable, what is the extent of its liability? According to what was reflected
in the Bill of Lading
HELD:
(1) Petitioner’s argument: the cause of the loss of the goods, subject of this
case, was force majeure. It adds that its exercise of due diligence was adequately
proven by the findings of the Philippine Coast Guard.
SC: We are not convinced. The uncontroverted findings of the Philippine Coast
Guard show that the M/V Tandag sank due to a fire, which resulted from a crack
in the auxiliary engine fuel oil service tank. The crack was located on the side of
the fuel oil tank, which had a mere two-inch gap from the engine room walling,
thus precluding constant inspection and care by the crew. Having originated from
an unchecked crack in the fuel oil service tank, the fire could not have been
caused by force majeure. Broadly speaking, force majeure generally applies to
a natural accident, such as that caused by a lightning, an earthquake, a tempest
or a public enemy. Hence, fire is not 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. It may even be caused by the actual fault or
65
privity of the carrier. Peril of fire is not comprehended within the exceptions in
Article 1734; Article 1735 applies (please see provision)
Where loss of cargo results from the failure of the officers of a vessel to inspect
their ship frequently so as to discover the existence of cracked parts, that loss
cannot be attributed to force majeure, but to the negligence of those officials.
Ensuring the seaworthiness of the vessel is the first step in exercising the
required vigilance. Petitioner did not present sufficient evidence showing what
measures or acts it had undertaken to ensure the seaworthiness of the vessel.
It failed to show when the last inspection and care of the auxiliary engine fuel oil
service tank was made, or some other evidence to establish that it had exercised
extraordinary diligence. It merely stated that constant inspection and care were
not possible, and that the last time the vessel was dry-docked was in November
1990.
(2) Respondent’s contention: petitioner’s liability should be based on the actual
insured value of the goods, subject of this case. Petitioner’s: its liability should
be limited to the value declared by the shipper/consignee in the Bill of Lading.
SC: Petitioner should not be held liable for more than what was declared by the
shippers/consignees as the value of the goods in the bills of lading.
Ratio: The records show that the Bills of Lading covering the lost goods contain
the stipulation that in case of claim for loss or for damage to the shipped
merchandise or property, [t]he liability of the common carrier x x x shall not
exceed the value of the goods as appearing in the bill of lading.
A stipulation that limits liability is valid as long as it is not against public policy.
Art 1749 and 1750 apply in the present case.
Pursuant to the afore-quoted provisions of law, it is required that the stipulation
limiting the common carriers liability for loss must be reasonable and just under
the circumstances, and has been freely and fairly agreed upon. In the present
case, the stipulation limiting petitioner’s liability is not contrary to public policy.
The shippers/consignees may recover the full value of the goods by the simple
expedient of declaring the true value of the shipment in the Bill of Lading. Other
than the payment of a higher freight, there was nothing to stop them (Legaspi,
et.al) from placing the actual value of the goods therein.
In fact, they committed fraud against the common carrier by deliberately
undervaluing the goods in their Bill of Lading, thus depriving the carrier of its
proper and just transport fare. Concededly, the purpose of the limiting stipulation
in the Bill of Lading is to protect the common carrier. Such stipulation obliges
the shipper/consignee to notify the common carrier of the amount that the latter
may be liable for in case of loss of the goods. The common carrier can then take
appropriate measures -- getting insurance, if needed, to cover or protect itself.
This precaution on the part of the carrier is reasonable and prudent.
SHEWARAM VS. PHILIPPINE AIRLINES
FACTS: Parmanand Shewaram, a Hindu from Davao, boarded a PAL plane bound
for Manila from Zamboanga. He checked in 3 baggages: a suitcase and 2
other bags. PAL’s personnel mistagged his baggage to “Iligan” instead of
“Manila.”
The baggage was said to be tampered when it was found.
Among his baggage was a camera with P800.00 and it was lost. PAL offered to
pay P100.00. Shewaram wanted full payment of P800.00.
A PAL ticket, on the reverse side, stated in fine print: “The liability, if any, for loss
or damage to checked baggage or for delay in the delivery thereof is limited to
its value and, unless the passenger declares in advance a higher valuation and
pay an additional charge therefor, the value shall be conclusively deemed not to
exceed P100.00 for each ticket.”
PAL maintains that in view of the failure of the Shewaram to declare a
higher value for his luggage, and pay the freight on the basis of said declared
value when he checked such luggage at the Zamboanga City airport, pursuant
to the abovequoted condition, appellee can not demand payment from
the appellant of an amount in excess of P100.00.
ISSUE: Whether the limited liability rule shall apply in the case at bar? – NO.
HELD: The limited liability rule shall not apply. Since this is a stipulation on
qualified liability, which operates to reduce the liability of the carrier, the carrier
and the shipper must agree thereupon. Otherwise, the carrier will be liable for
full.
PAL is fully liable (for full) because Shewaran did not agree to the stipulation on
the ticket, as manifested by the fact that Shewaram did not sign the ticket.
Ticket should have been signed. Article 1750 of the New Civil Code which
provides as follows: 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 accordance with the above-quoted provision of Article
1750 of the New Civil Code, 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 the case at bar, the requirements have not been met. It cannot be said that
the appellee 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 tickets 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 liability of the appellant should be governed by the provisions of Article 1734
and 1735 of the NCC. 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
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negligence of the appellant as a common carrier, the liability of the appellant is
clear- it must pay the appellee the value of those articles.
ONG YUI vs. CA
FACTS: On august 26, 1967, Ong Yiu was a fare paying passenger of respondent
PAL from Mactan, Cebu to Butuan City wherein he was scheduled to attend a
trial. As a passenger, he checked in one piece of luggae, blue maleta for which
he was issued a claim ticket. Upon arrival at Butuan City, petitioner claimed his
luggage but it could not be found. PAL Butuan sent a message to PAL Cebu
which in turn sent a message to PAL Manila that same afternoon. PAL Manila
advised PAL Cebu that the luggage has been overcarried to Manila and that it
would be forwarded to PAL Cebu that same day. PAL Cebu then advised PAL
Butuan that the luggage will be forwarded the following day, on scheduled
morning flight. This message was not received by PAL Butuan as all the
personnel had already gone for the day. Meanwhile, Ong Yiu was worried about
the missing luggage because it contained vital documents needed for the trial
the next day so he wired PAL Cebu demanding delivery of his luggage before
noon that next day or he would hold PAL liable for damages based on gross
negligence. Early morning, petitioner went to the Butuan Airport to inquire about
the luggage but did not wait for the arrival of the morning flight at 10:00am.
which carried his luggage. A certain Dagorro, a driver of a colorum car, who also
used to drive the petitioner volunteered to take the luggage to the petitioner. He
revelaed that the documents were lost. Ong Yiu demanded from PAL Cebu actual
and compensatory damages as an incident of breach of contract of carriage.
ISSUE:
1. Whether or not PAL is guilty of only simple negligence and not gross
negligence?
2. Whether the doctrine of limited liability doctrine applies in the instant
case?
HELD: PAL had not acted in bad faith. It exercised due diligence in looking for
petitioner’s luggage which had been miscarried. Had petitioner waited or caused
someone to wait at the airport for the arrival of the morning flight which carried
his luggage, he would have been able to retrieve his luggage sooner. In the
absence of a wrongful act or omission or fraud, the petitioner is not entitled to
moral damages. Neither is he entitled to exemplary damages absent any proof
that the defendant acted in a wanton, fraudulent, reckless manner.
The limited liability applies in this case. On the presumed negligence of PAL, its
liability for the loss however, is limited on the stipulation written on the back of
the plane
Ticket which is P100 per baggage. The petitioner not having declared a greater
value and not having called the attention of PAL on its true value and paid the
tariff therefore. The stipulation is printed in reasonably and fairly big letters and
is easily readable. Moreso, petitioner had been a frequent passenger of PAL
from Cebu to Butuan City and back and he being a lawyer and a businessman,
must be fully aware of these conditions.
PAN AMERICAN AIRWAYS vs. IAC
FACTS: Plaintiff Rene V. Pangan, pres. and gen. mngr. of the plaintiffs Sotang
Bastos and Archer Production while in San Francisco, Califonia and Primo
Quesada of Prime Films, San Francisco, California, entered into an agreement
where the former, for US $2,500.00 per picture, bound himself to supply the
latter with 3 films. ('Ang Mabait, Masungit at ang Pangit,' 'Big Happening with
Chikiting and Iking,' and 'Kambal Dragon' for exhibition in the United States.) It
was also agreed that plaintiffs would provide the promotional and advertising
materials.
On his way home to the Philippines, Pangan visited Guam where he contacted
Leo Slutchnick of the Hafa Adai Organization. Pangan entered into a verbal
agreement with Slutchnick for the exhibition of 2 of the films at the Hafa Adai
Theater in Guam for P7,000.00 per picture. Pangan also provided the
promotional and advertising materials for the films.
Due to the above agreements, Pangan caused the preparation of the requisite
promotional handbills and still pictures for which he paid P12,900.00. Likewise
in preparation for his trip abroad to comply with his contracts, Pangan purchased
14 clutch bags, 4 capiz lamps and 4 barong tagalog, total value of P4,400.00.
Pangan obtained from defendant Pan Am's Manila Office (through Your Travel
Guide) an economy class airplane ticket for Manila to Guam on defendant's Flight
(No. 842) upon payment of the regular fare.
The Your Travel Guide is a tour and travel office owned and managed by plaintiffs
witness Mila de la Rama.
2 hours before departure time Pangan was at the defendant's ticket counter at
the Manila International Airport and presented his ticket and checked in his 2
luggages, for which he was given baggage claim tickets.
The 2 luggages had the promotional & advertising materials, clutch bags, barong
tagalog and his personal belongings.
Subsequently, Pangan was informed that his name was not in the manifest and
so he could not take Flight (No. 842) in the economy class. Since there was no
space in the economy class, Pangan took the first class because he wanted to
be on time in Guam to comply with his commitment with an additional sum of
$112.00.
When Pangan arrived in Guam, his 2 luggages did not arrive with his flight, as a
consequence of which his agreements with Slutchnick and Quesada for the
exhibition of the films in Guam and in the United States were cancelled.
He then filed a written claim for his missing luggages.
Upon arrival in the Philippines, Pangan contacted his lawyer, who made the
necessary representations to protest as to the treatment which he received from
the employees of the defendant and the loss of his two luggages.
Defendant Pan Am assured Pangan that his grievances would be investigated
and given its immediate consideration.
67
The present complaint was filed by the plaintiff due to Pan Am’s failure to
communicate with Pangan.
CFI: Pan Am liable. (actual damages with interest, attys fees, and costs of suit)
IAC: Affirmed.
ISSUE: Whether or not the IAC erred as a matter of law in affirming the CFI's
award of actual damages beyond the limitation of liability set forth in the Warsaw
Convention and the contract of carriage? – YES.
HELD: YES, petitioner's liability for the lost baggage is limited to $20.00 per kilo
or $600.00, as stipulated at the back of the ticket.
WHEREFORE, the Petition is GRANTED and the Decision of the IAC is SET ASIDE
and a new judgment is rendered ordering petitioner to pay private respondents
damages in the amount of US $600.00 or its equivalent in Philippine currency at
the time of actual payment.
The airline ticket contains the following conditions:
NOTICE
If the passenger's journey involves an ultimate destination or stop in a country
other than the country of departure the Warsaw Convention may be applicable
and the Convention governs and in most cases limits the liability of carriers for
death or personal injury and in respect of loss of or damage to baggage. See
also notice headed "Advice to International Passengers on Limitation of Liability.
CONDITIONS OF CONTRACT
1. As used in this contract "ticket" means this passenger ticket and baggage
check of which these conditions and the notices form part, "carriage" is
equivalent to "transportation," "carrier" means all air carriers that carry or
undertake to carry the passenger or his baggage hereunder or perform any
other service incidental to such air carriage. "WARSAW CONVENTION" means the
convention for the Unification of Certain Rules Relating to International Carriage
by Air signed at Warsaw, 12th October 1929, or that Convention as amended at
The Hague, 28th September 1955, whichever may be applicable.
2. Carriage hereunder is subject to the rules and limitations relating to liability
established by the Warsaw Convention unless such carriage is not "international
carriage" as defined by that Convention.
3. To the extent not in conflict with the foregoing carriage and other services
performed by each carrier are subject to: (i) provisions contained in this ticket,
(ii) applicable tariffs, (iii) carrier's conditions of carriage and related regulations
which are made part hereof (and are available on application at the offices of
carrier), except in transportation between a place in the United States or Canada
and any place outside thereof to which tariffs in force in those countries apply.
xxx xxx xxx
NOTICE OF BAGGAGE LIABILITY LIMITATIONS
Liability for loss, delay, or damage to baggage is limited as follows unless a
higher value is declared in advance and additional charges are paid: (1) for most
international travel (including domestic portions of international journeys) to
approximately $9.07 per pound ($20.00 per kilo) for checked baggage and
$400 per passenger for unchecked baggage: (2) for travel wholly between U.S.
points, to $750 per passenger on most carriers (a few have lower limits). Excess
valuation may not be declared on certain types of valuable articles. Carriers
assume no liability for fragile or perishable articles. Further information may be
obtained from the carrier.
On the basis of the said stipulations printed at the back of the ticket, petitioner
contends that its liability for the lost baggage of Pangan is limited to $600.00
($20.00 x 30 kilos) as the latter did not declare a higher value for his baggage
and pay the corresponding additional charges.
Petitioner cites Ong Yiu v. CA, where the Court sustained the validity of a printed
stipulation at the back of an airline ticket limiting the liability of the carrier for lost
baggage to a specified amount and ruled that the carrier's liability was limited to
said amount since the passenger did not declare a higher value, much less pay
additional charges. (Ong Yiu is squarely applicable to the instant case.)
While it may be true that petitioner had not signed the plane ticket, he is,
nevertheless bound by the provisions thereof. "Such provisions have been held
to be a part of the contract of carriage, and valid and binding upon the passenger
regardless of the latter's lack of knowledge or assent to the regulation." It is
known as a contract of "adhesion" wherein one party imposes a ready made form
of contract on the other, as the plane ticket in the case at bar, are contracts not
entirely prohibited. The one who adheres to the contract is in reality free to reject
it entirely; if he adheres, he gives his consent.
Randolph v. American Airline: A contract limiting liability upon an agreed valuation
does not offend against the policy of the law forbidding one from contracting
against his own negligence.
On the other hand, the ruling in Shewaram v. Philippine Air Lines, Inc., where the
Court held that the stipulation limiting the carrier's liability to a specified amount
was invalid, finds no application in the instant case, as the ruling in said case
was premised on the finding that the conditions printed at the back of the ticket
were so small and hard to read that they would not warrant the presumption that
the passenger was aware of the conditions and that he had freely and fairly
agreed thereto. In the instant case, similar facts that would make the case fall
under the exception have not been alleged, much less shown to exist.
Northwest Airlines, Inc. v. Cuenca: "To apply the Warsaw Convention which limits
a carrier's liability to US$9.07 per pound or US$20.00 per kilo in cases of
contractual breach of carriage is against public policy" is utterly misplaced.
Mendoza v. Philippine Air Lines, Inc.: Under Art.1107 of the Civil Code, a debtor
in good faith like the defendant herein, may be held liable only for damages that
were foreseen or might have been foreseen at the time the contract of
transportation was entered into…Before defendant could be held to special
damages, such as the present alleged loss of profits on account of delay or
failure of delivery, it must have appeared that he had notice at the time of delivery
to him of the particular circumstances attending the shipment, and which
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probably would lead to such special loss if he defaulted. Or, as the rule has been
stated in another form, in order to purpose on the defaulting party further liability
than for damages naturally and directly, i.e., in the ordinary course of things,
arising from a breach of contract, such unusual or extraordinary damages must
have been brought within the contemplation of the parties as the probable result
of breach at the time of or prior to contracting. Generally, notice then of any
special circumstances which will show that the damages to be anticipated from a
breach would be enhanced has been held sufficient for this effect.
Thus, applying the ruling to the instant case, in the absence of a showing that
Pan Am's attention was called to the special circumstances requiring prompt
delivery of Pangan's luggages, Pan Am cannot be held liable for the cancellation
of Pangan’s contracts as it could not have foreseen such an eventuality when it
accepted the luggages for transit.
The Court is unable to uphold the IAC's disregard the ruling in Mendoza that
petitioner is liable for damages based on the finding that "[tlhe undisputed fact
is that the contracts of the plaintiffs for the exhibition of the films in Guam and
California were cancelled because of the loss of the 2 luggages in question." The
evidence reveals that the proximate cause of the cancellation of the contracts
was Pangan's failure to deliver the promotional and advertising materials on the
dates agreed upon. For this petitioner cannot be held liable. Pangan had not
declared the value of the 2 luggages he had checked in and paid additional
charges. Neither was petitioner privy to respondents' contracts nor was its
attention called to the condition therein requiring delivery of the promotional and
advertising materials on or before a certain date.
PAN AMERICAN WORLD AIRWAYS, INC. vs. RAPADAS
FACTS: On January 16, 1975, Private respondent Jose Rapadas held passenger
ticket and baggage claim check for petitioner’s flight No. 841 with the route from
Guam to Manila .While standing in line to board the flight at the Guam airport,
private respondent Rapadas was ordered by petitioner's handcarry control agent
to check-in his Samsonite attache case. Private respondent Rapadas protested
pointing to the fact that other co-passengers were permitted to handcarry bulkier
baggages. He stepped out of the line only to go back again at the end of it to
try if he can get through without having to register his attache 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 plane
if he insisted and argued on personally taking the valise with him, he acceded to
checking it in. He then gave his attache case to his brother who happened to be
around and who checked it in for him, but without declaring its contents or the
value of its contents.
Upon arriving in Manila private respondent Rapadas claimed and was given all
his checked-in baggages except the attache case. He sent his son, Jorge
Rapadas to request for the search of the missing luggage. The petitioner exerted
efforts to locate the luggage through the Pan American World Airways-Manila
International Airport (PAN AM-MIA) Baggage Service but they were not able to
locate the attache case. Private respondent Rapadas thens received a letter from
the petitioner's counsel offering to settle the claim for the sum of $160.00
representing the petitioner's alleged limit of liability for loss or damage to a
passenger's personal property under the contract of carriage between Rapadas
and PAN AM. Refusing to accept this kind of settlement, Rapadas filed the instant
action for damages.
The lower court ruled in favor of Rapadas after finding no stipulation giving notice
to the baggage liability limitation. On appeal, the Court of Appeals affirmed the
trial court decision. Hence, this petition.
ISSUE: Whether or not a passenger is bound by the terms of a passenger ticket
declaring the limitations of carrier’s liability? – YES.
HELD: Yes. The Warsaw Convention, as amended, specifically provides that it is
applicable to international carriage which it defines in Article 1, par. 2 as follows:
(2) For the purposes of this Convention, the expression "international carriage"
means any carriage in which, according to the agreement between the parties,
the place of departure and the place of destination, whether or not there be a
breach in the carriage or a transhipment, are situated either within the territories
of two High Contracting Parties or within the territory of a single High Contracting
Party if there is an agreed stopping place within the territory of another State,
even if that State is not a High Contracting Party. Carriage between two points
within the territory of a single High Contracting Party without an agreed stopping
place within the territory of another State is not international carriage for the
purposes of this Convention. ("High Contracting Party" refers to a state which
has ratified or adhered to the Convention, or which has not effectively denounced
the Convention [Article 40A(l)]).
Nowhere in the Warsaw Convention, as amended, is such a detailed notice of
baggage liability limitations required. Nevertheless, it should become a common,
safe and practical custom among air carriers to indicate beforehand the precise
sums equivalent to those fixed by the Convention. The Convention governs the
availment of the liability limitations where the baggage check is combined with or
incorporated in the passenger ticket. In the case at bar, the baggage check is
combined with the passenger ticket in one document of carriage. The passenger
ticket complies with Article 3, which provides:
(c) a notice to the effect that, if the passenger's journey involves an ultimate
destination or stop in a country other than the country of departure, the Warsaw
Convention may be applicable and that the Convention governs and in most
cases limits the liability of carriers for death or personal injury and in respect of
loss of or damage to baggage.
What the petitioner is concerned about is whether or not the notice, which it did
not fail to state in the plane ticket and which it deemed to have been read and
accepted by the private respondent will be considered by this Court as adequate
under the circumstances of this case. As earlier stated, the Court finds the
provisions in the plane ticket sufficient to govern the limitations of liabilities of
the airline for loss of luggage. The passenger, upon contracting with the airline
and receiving the plane ticket, was 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.
The facts show that the private respondent actually refused to register the
attache case and chose to take it with him despite having been ordered by the
PANAM agent to check it in. In attempting to avoid registering the luggage by
going back to the line, private respondent manifested a disregard of airline rules
69
on allowable handcarried baggages. Prudence of a reasonably careful person
also dictates that cash and jewelry should be removed from checked-in-luggage
and placed in one's pockets or in a handcarried Manila-paper or plastic
envelope.
The alleged lack of enough time for him to make a declaration of a higher value
and to pay the corresponding supplementary charges cannot justify his failure
to comply with the requirement that will exclude the application of limited liability.
ROBLES vs. SANTOS
DOCTRINE:
1. If the damage or loss was not due to fortuitous events, force majeure or
inherent nature and defect of goods, but was traceable to the own negligence of
the common carrier, then he is liable.
2. Provided that there is meeting of the minds and from such meeting arise rights
and obligations, there should be no limitations as to the form of the contract of
carriage. Bill of lading is not essential to the contract, although it may be
obligatory by reason of the regulations of railroad companies or as a condition
imposed in the contract by agreement of that parties themselves.
FACTS: Plaintiff Rufina Robles brought the present action against defendant
operator and driver Jose Santos to recover the value of her lost goods. Sitting in
the front seat of Santos’ old Roadster with her large buri bag containing two
bolts of cloth called “gris” and 10 undershirts, Robles was told by Santos to
transfer her baggage to the trunk compartment possibly because of its bulk.
Robles objected because it might get lost but later on agreed upon the
reassurance of Santos that the compartment will be locked. On the way to Manila,
the compartment was opened from time to time as other passengers got their
baggages. Upon arrival in Bambang, Manila, Robles found that her bag with its
contents is missing.
ISSUE: W/N defendant operator is liable? – YES.
HELD: Judgment was modified as to amount of damages.
The defendant, being habitually engaged in transportation for the public, is
bound and governed by the Code of Commerce in his relations and responsibility
to his passengers and their baggage or goods. The last paragraph of Article 361
of the Code of Commerce, placing upon the carrier the burden of proof to show
that the loss or damage was caused by fortuitous events, force majeure or
inherent nature and defect of goods, implies that if the damage or loss was
traceable to the own negligence of the common carrier, then he is liable.
Had defendant allowed plaintiff to keep her bag near her and guard it, the loss
would never have occurred. There was misdelivery resulting in complete loss.
The defendant as a carrier failed to exercise the necessary supervision and care
to prevent the loss.
On defendant’s contention that no bill of lading was issued and that he is thus
not liable for loss, it must be noted that the bill of lading is not indispensable.
Provided that there is meeting of the minds and from such meeting arise rights
and obligations, there should be no limitations as to the form of the contract of
carriage. Bill of lading is not essential to the contract, although it may be
obligatory by reason of the regulations of railroad companies or as a condition
imposed in the contract by agreement of that parties themselves.
ALITALIA vs. IAC
FACTS: Dr. Felipa Pablo, an associate professor in the University of the
Philippines and a research grantee of the Philippine Atomic Energy Agency, was
invited to take part at a meeting of the Department of Research and Isotopes in
Italy in view of her specialized knowledge in “foreign substances in food and the
agriculture environment”. She would be the second speaker on the first day of
the meeting. Dr. Pablo booked passage on petitioner Alitalia. She arrived in Milan
on the day before the meeting, but was told that her luggage was delayed and
was in a succeeding flight from Rome to Milan. The luggage included her
materials for the presentation. The succeeding flights did not carry her luggage.
Desperate, she went to Rome to try to locate the luggage herself, but to no avail.
She returned to Manila without attending the meeting. She demanded reparation
for the damages. She rejected Alitalia’s offer of free airline tickets and
commenced an action for damages. As it turned out, the luggage was actually
forwarded to Ispra, but only a day after the scheduled appearance. It was
returned to her after 11 months. The trial court ruled in favor of Dr. Pablo, and
this was affirmed by the Court of Appeals.
ISSUES:
(1) Whether the Warsaw Convention should be applied to limit Alitalia’s liability?
(2) Whether Dr. Pablo is entitled to nominal damages?
HELD:
(1) Under the Warsaw Convention, an air carrier is made liable for damages for:
a. The death, wounding or other bodily injury of a passenger if the accident
causing it took place on board the aircraft or I the course of its operations
of embarking or disembarking;
b. The destruction or loss of, or damage to, any registered luggage or goods,
if the occurrence causing it took place during the carriage by air; and
c. Delay in the transportation by air of passengers, luggage or goods.
The convention however denies to the carrier availment of the provisions which
exclude or limit his liability, if the damage is caused by his wilful misconduct, or
by such default on his part as is considered to be equivalent to wilful
misconduct. The Convention does not thus operate as an exclusive enumeration
of the instances of an airline's liability, or as an absolute limit of the extent of
that liability. It should be deemed a limit of liability only in those cases where the
cause of the death or injury to person, or destruction, loss or damage to property
or delay in its transport is not attributable to or attended by any wilful
misconduct, bad faith, recklessness, or otherwise improper conduct on the part
of any official or employee for which the carrier is responsible, and there is
otherwise no special or extraordinary form of resulting injury.
In the case at bar, no bad faith or otherwise improper conduct may be ascribed
to the employees of petitioner airline; and Dr. Pablo's luggage was eventually
returned to her, belatedly, it is true, but without appreciable damage. The fact
is, nevertheless, that some species of injury was caused to Dr. Pablo because
petitioner ALITALIA misplaced her baggage and failed to deliver it to her at the
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time appointed - a breach of its contract of carriage. Certainly, the compensation
for the injury suffered by Dr. Pablo cannot under the circumstances be restricted
to that prescribed by the Warsaw Convention for delay in the transport of
baggage.
(2) She is not, of course, entitled to be compensated for loss or damage to her
luggage. She is however entitled to nominal damages which, as the law says, is
adjudicated in order that a right of the plaintiff, which has been violated or
invaded by the defendant, may be vindicated and recognized, and not for the
purpose of indemnifying the plaintiff that for any loss suffered and this Court
agrees that the respondent Court of Appeals correctly set the amount thereof at
PhP 40,000.00.
The Court also agrees that respondent Court of Appeals correctly awarded
attorney’s fees to Dr. Pablo and the amount of PhP 5,000.00 set by it is
reasonable in the premises. The law authorizes recovery of attorney’s fees inter
alia where, as here, the defendant’s act or omission has compelled the plaintiff
to litigate with third persons or to incur expenses to protect his interest or where
the court deems it just and equitable.
PHILIPPINE AIR LINES vs. HON. COURT OF APPEALS
FACTS: At about 5:30 a.m. on April 17, 1985, plaintiff [Co], accompanied by his
wife and son, arrived at the Manila International Airport aboard defendant
airline's PAL Flight No. 107 from San Francisco, California, U.S.A. Soon after his
embarking (sic), plaintiff proceeded to the baggage retrieval area to claim his
checks in his possession. Plaintiff found eight of his luggage, but despite diligent
search, he failed to locate ninth luggage, with claim check number 729113 which
is the one in question in this case.
"Plaintiff then immediately notified defendant company through its employee,
Willy Guevarra, who was then in charge of the PAL claim counter at the airport.
Willy Guevarra, who testified during the trial court on April 11, 1986, filled up the
printed form known as a Property Irregularity Report (Exh. "A"), acknowledging
one of the plaintiff's luggages to be missing (Exh. "A-1"), and signed after asking
plaintiff himself to sign the same document (Exh. "A-2"). In accordance with this
procedure in cases of this nature, Willy Guevarra asked plaintiff to surrender to
him the nine claim checks corresponding to the nine luggages, i.e., including the
one that was missing.
The incontestable evidence further shows that plaintiff lost luggage was a
Samsonite suitcase measuring about 62 inches in length, worth about
US$200.00 and containing various personal effects purchased by plaintiff and
his wife during their stay in the United States and similar other items sent by their
friends abroad to be given as presents to relatives in the Philippines. Plaintiff's
invoices evidencing their purchases show their missing personal effects to be
worth US$1,243.01, in addition to the presents entrusted to them by their
friends which plaintiffs testified to be worth about US$500.00 to US$600.00
(Exhs. "D", "D-1", to "D-17"; tsn, p. 4, July 11, 1985; pp. 5-14, March 7, 1986).
Plaintiff on several occasions unrelentingly called at defendant's office in order
to pursue his complaint about his missing luggage but no avail. Thus, on April
15, 1985, plaintiff through his lawyer wrote a demand letter to defendant
company though Rebecca V. Santos, its manager, Central Baggage Services
(Exhs. "B" & "B-1"). On April 17, 1985, Rebecca Santos replied to the demand
letter (Exh. "B") acknowledging "that to date we have been unable to locate your
client's (plaintiff's) baggage despite our careful search" and requesting plaintiff's
counsel to "please extend to him our sincere apologies for the inconvenience he
was caused by this unfortunate incident" (Exh. "C"). Despite the letter (Exh. "C"),
however, defendants never found plaintiff's missing luggage or paid its
corresponding value. Consequently, on May 3, 1985, plaintiff filed his present
complaint against said defendants. (pp. 38-40, Rollo.)
Co sued the airline for damages.
Regional Trial Court of Pasay City found the defendant airline (now petitioner)
liable.
On appeal, the Court of Appeals affirmed in toto the trial court's award.
ISSUE: WON CA erred in
1. in affirming the conclusion of the trial court that the petitioner's retrieval
baggage report was a fabrication;
2. 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
3. in awarding private respondent Isidro Co actual and exemplary damages,
attorney's fees, and costs.
HELD: The first and third assignments of error raise purely factual issues which
are not reviewable by this Court (Sec. 2, Rule 45, Rules of Court). The Court
reviews only questions of law which must be distinctly set forth in the petition.
(Hodges vs. People, 68 Phil. 178.) The probative value of petitioner's retrieval
report was passed upon by the Regional Trial Court of Pasay City, whose finding
was affirmed by the Court of Appeals as follows:
In this respect, it is further argued that appellee should produce his claim tag if
he had not surrendered it because there was no baggage received. It appeared,
however, that appellee surrendered all the nine claim checks corresponding to
the nine luggages, including the one that was missing, to the PAL officer after
accomplishing the Property, Irregularity Report. Therefore, it could not be
possible for appellee to produce the same in court. It is now for appellant airlines
to produce the veracity of their Baggage Retrieval Report by corroborating
evidence other than testimonies of their employees. Such document is within the
control of appellant and necessarily requires other corroborative evidence. Since
there is no compelling reason to reverse the factual findings of the lower court,
this Court resolves not to disturb the same. (p. 41, Rollo.)
Whether or not the lost luggage was ever retrieved by the passenger, and
whether or not the actual and exemplary damages awarded by the court to him
are reasonable, are factual issues which we may not pass upon in the absence
of special circumstances requiring a review of the evidence.
In Alitalia vs. IAC (192 SCRA 9, 18, citing Pan American World Airways, Inc. vs.
IAC 164 SCRA 268), the Warsaw Convention limiting the carrier's liability was
applied because of a simple loss of baggage without any improper conduct on
71
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.
Petitioner 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 (p. 3, tsn,
July 18, 1985).
We find no merit in that contention. In Samar Mining Company, Inc. vs.
Nordeutscher Lloyd (132 SCRA 529), 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.
The provisions of the New Civil Code on common carriers are Articles 1733, 1735
and 1753 which provide:
Art. 1733. Common carriers, from the nature of their business and for reasons
of public policy, are bound to observe extraordinary diligence in the vigilance
over the goods and for the safety of the passengers transported by them,
according to all the circumstances of each case.
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.
Art. 1753. The law of the country to which the goods are to be transported shall
govern the liability of the common carrier for their loss, destruction or
deterioration.
Since the passenger's destination in this case was the Philippines, Philippine law
governs the liability of the carrier for the loss of the passenger's luggage.
In this case, the petitioner failed to overcome, not only the presumption, but
more importantly, the private respondent's evidence, proving that the carrier's
negligence was the proximate cause of the loss of his baggage. Furthermore,
petitioner acted in bad faith in faking a retrieval receipt to bail itself out of having
to pay Co's claim.
The Court of Appeals therefore did not err in disregarding the limits of liability
under the Warsaw Convention.
The award of exemplary damages and attorney's fees to the private respondent
was justified. In the cases of Imperial Insurance, Inc. vs. Simon, 122 Phil. 189
and Bert Osmeña and Associates vs. CA, 120 SCRA 396, the appellant was
awarded attorney's fees because of appellee's failure to satisfy the former's just
and valid demandable claim which forced the appellant to litigate. Likewise, in
the case of Phil. Surety Ins. Co., Inc. vs. Royal Oil Products, 102 Phil. 326, this
Court justified the grant of exemplary damages and attorney's fees to the
petitioner's failure, even refusal, to pay the private respondent's valid claim.
CATHAY PACIFIC AIRWAYS vs. CA
FACTS: On 19 October 1975, respondent Tomas L. Alcantara was a first class
passenger of petitioner Cathay Pacific Airways from Manila to Hongkong and
onward from Hongkong to Jakarta. The purpose of his trip was to attend the
following day, October 20, 1975, a conference with the Director General of Trade
of Indonesia. He checked in his luggage which contained not only his clothing
and articles for personal use but also papers and documents he needed for the
conference.
Upon his arrival in Jakarta, respondent discovered that his luggage was missing.
Private respondent was told that his luggage was left behind in Hongkong. For
this, respondent Alcantara was offered $20.00 as "inconvenience money" to buy
his immediate personal needs until the luggage could be delivered to him. The
respondent, as a result of the incident had to seek postponement of his pre-
arranged conference.
When his luggage finally reached Jakarta more than twenty four hours later, it
was not delivered to him at his hotel but was required by petitioner to be picked
up by an official of the Philippine Embassy.
Respondent filed a case for damages in the CFI of Lanao del Norte which ruled
in his favour.
Both parties appealed to the Court of Appeals. Court of Appeals rendered its
decision affirming the decision of the CFI but by modifying its awards by
increasing the damages.
ISSUE: Whether or not the Court of Appeals erred in not applying the Warsaw
Convention to limit the liability of the respondent airline? - NO.
HELD: xxx… although the Warsaw Convention has the force and effect of law in
this country, being a treaty commitment assumed by the Philippine government,
said convention 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, which is clearly the case before Us. For, the
Warsaw Convention itself provides in Art. 25 that —
"(1) The carrier shall not be entitled to avail himself of the provisions of this
convention which exclude or limit his liability, if the damage is caused by his wilfull
misconduct or by such default on his part as, in accordance with the law of the
court to which the case is submitted, is considered to be equivalent to wilfull
misconduct."
72
(2) Similarly the carrier shall not be entitled to avail himself of the said provisions,
if the damage is caused under the same circumstances by any agent of the
carrier acting within the scope of his employment."
When petitioner airline misplaced respondent's luggage and failed to deliver it to
its passenger at the appointed place and time, some special species of injury
must have been caused to him. For sure, the latter underwent profound distress
and anxiety, and the fear of losing the opportunity to fulfill the purpose of his
trip. In fact, for want of appropriate clothings for the occasion brought about by
the delay of the arrival of his luggage, to his embarrassment and consternation
respondent Alcantara had to seek postponement of his pre-arranged conference
with the Director General of Trade of the host country.
In one case, his Court observed that a traveller would naturally suffer mental
anguish, anxiety and shock when he finds that his luggage did not travel with him
and he finds himself in a foreign land without any article of clothing other than
what he has on.
Thus, respondent is entitled to moral and exemplary damages. We however find
the award by the Court of Appeals of P80,000.00 for moral damages excessive,
hence, We reduce the amount to P30,000.00. The exemplary damages of
P20,000.00 being reasonable is maintained, as well as the attorney's fees of
P25,000.00 considering that petitioner's act or omission has compelled
Alcantara to litigate with third persons or to incur expenses to protect his
interest.
SARKIES TOURS PHILS. V. IAC
FACTS: Fatima boarded petitioner's bus bringing 3 pieces of luggage with her.
Her brother helped her load them on the bus compartment. During a stopover
at Daet, it was discovered that only one bag remained in the open compartment.
Private respondents asked assistance from the radio stations and from
Philtranco bus drivers who plied the same route. They were able to recover one
of Fatima's bags. After a few weeks, private respondents formally demanded
from petitioner. In its letter, petitioner tacitly admitted its liability by apologizing
and assuring respondents that efforts were being made to recover the lost items.
Months later, respondents filed a case to recover the value of the remaining lost
items claiming that the loss was due to petitioner's failure to observe
extraordinary diligence in the care of Fatima's luggage and that petitioner dealt
with them in bad faith from the start. Petitioner denied liability on the ground
that Fatima allegedly did not declare any excess baggage upon boarding its bus.
ISSUE:
WON Sarkies Tours is liable? – YES.
HELD: The cause of the loss in the case at bar was petitioner's negligence in not
ensuring that the doors of the baggage compartment of its bus were securely
fastened. As a result of this lack of care, almost all of the luggage was lost, to
the prejudice of the paying passengers. As the Court of Appeals correctly
observed:
. . . . Where the common carrier accepted its passenger's baggage for
transportation and even had it placed in the vehicle by its own employee, its
failure to collect the freight charge is the common carrier's own lookout. It is
responsible for the consequent loss of the baggage. In the instant case,
defendant appellant's employee even helped Fatima Minerva Fortades and her
brother load the luggages/baggages in the bus' baggage compartment, without
asking that they be weighed, declared, receipted or paid for (TSN, August 4,
1986, pp. 29, 34, 54, 57, 70; December 23, 1987, p. 35). Neither was this
required of the other passengers (TSN, August 4, 1986, p. 104; February 5,
1988; p. 13).
Finally, petitioner questions the award of actual damages to respondents. On
this point, we likewise agree with the trial and appellate courts' conclusions.
There is no dispute that of the three pieces of luggage of Fatima, only one was
recovered. The other two contained optometry books, materials, equipment, as
well as vital documents and personal belongings. Respondents had to shuttle
between Bicol and Manila in their efforts to be compensated for the loss. During
the trial, Fatima and Marisol had to travel from the United States just to be able
to testify. Expenses were also incurred in reconstituting their lost documents.
Under these circumstances, the Court agrees with the Court of Appeals in
awarding P30,000.00 for the lost items and P30,000.00 for the transportation
expenses, but disagrees with the deletion of the award of moral and exemplary
damages which, in view of the foregoing proven facts, with negligence and bad
faith on the fault of petitioner having been duly established, should be granted
to respondents in the amount of P20,000.00 and P5,000.00, respectively.
DELAY IN DELIVERY OF CARGO
MAERSKLINE vs. COURT OF APPEALS
FACTS: Petitioner Maersk Line is engaged in the transportation of goods by sea,
doing business in the Philippines through its general agent Compania General
de Tabacos de Filipinas.
Private respondent Efren Castillo, on the other hand, is the proprietor of Ethegal
Laboratories, a firm engaged in the manutacture of pharmaceutical products.
On November 12, 1976, private respondent ordered from Eli Lilly. Inc. of Puerto
Rico through its (Eli Lilly, Inc.'s) agent in the Philippines, Elanco Products,
600,000 empty gelatin capsules for the manufacture of his pharmaceutical
products. The capsules were placed in six (6) drums of 100,000 capsules each
valued at US $1,668.71.
Through a Memorandum of Shipment, the shipper Eli Lilly, Inc. of Puerto Rico
advised private respondent as consignee that the 600,000 empty gelatin
capsules in six (6) drums of 100,000 capsules each, were already shipped on
board MV "Anders Maerskline" under Voyage No. 7703 for shipment to the
Philippines via Oakland, California. In said Memorandum, shipper Eli Lilly, Inc.
specified the date of arrival to be April 3, 1977.
For reasons unknown, said cargo of capsules were mishipped and diverted to
Richmond, Virginia, USA and then transported back Oakland, Califorilia. The
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goods finally arrived in the Philippines on June 10, 1977 or after two (2) months
from the date specified in the memorandum. As a consequence, private
respondent as consignee refused to take delivery of the goods on account of its
failure to arrive on time.
Private respondent alleging gross negligence and undue delay in the delivery of
the goods, filed an action before the court a quo for rescission of contract with
damages against petitioner and Eli Lilly, Inc. as defendants.
Denying that it committed breach of contract, petitioner alleged in its that answer
that the subject shipment was transported in accordance with the provisions of
the covering bill of lading and that its liability under the law on transportation of
good attaches only in case of loss, destruction or deterioration of the goods as
provided for in Article 1734 of Civil Code (Rollo, p. 16).
Defendant Eli Lilly, Inc., on the other hand, filed its answer with compulsory and
cross-claim. In its cross-claim, it alleged that the delay in the arrival of the subject
merchandise was due solely to the gross negligence of petitioner Maersk Line.
The trial court rendered a decision in favor of Castillo hold that there was a
breach in the performance of their obligation by the defendant Maersk Line
consisting of their negligence to ship the 6 drums of empty Gelatin Capsules
which under their own memorandum shipment would arrive in the Philippines on
April 3, 1977 which under Art. 1170 of the New Civil Code, they stood liable for
damages.
On appeal, respondent court rendered its decision dated August 1, 1990
affirming with modifications the lower court's decision.
ISSUE: WON Maersk Line is liable for damages resulting from delay in the delivery
of the shipment in the absence in the bill of lading of a stipulation on the period
of delivery.
HELD: Petitioner maintains that it cannot be held for damages for the alleged
delay in the delivery of the 600,000 empty gelatin capsules since it acted in good
faith and there was no special contract under which the carrier undertook to
deliver the shipment on or before a specific date.
The bill of lading covering the subject shipment among others, reads:
6. GENERAL
(1) The Carrier does not undertake that the goods shall arive at the port of
discharge or the place of delivery at any particular time or to meet any particular
market or use and save as is provided in clause 4 the Carrier shall in no
circumstances be liable for any direct, indirect or consequential loss or damage
caused by delay. If the Carrier should nevertheless be held legally liable for any
such direct or indirect or consequential loss or damage caused by delay, such
liability shall in no event exceed the freight paid for the transport covered by this
Bill of Lading.
It is not disputed that the aforequoted provision at the back of the bill of lading,
in fine print, is a contract of adhesion. Generally, contracts of adhesion are
considered void since almost all the provisions of these types of contracts are
prepared and drafted only by one party, usually the carrier. The only participation
left of the other party in such a contract is the affixing of his signature thereto,
hence the term "Adhesion".
Nonetheless, settled is the rule that bills of lading are contracts not entirely
prohibited. One who adheres to the contract is in reality free to reject it in its
entirety; if he adheres, he gives his consent (Magellan Manufacturing Marketing
Corporation v. Court of Appeals, et al., 201 SCRA 102 [1991]).
However, the aforequoted ruling applies only if such contracts will not create an
absurd situation as in the case at bar. The questioned provision in the subject
bill of lading has the effect of practically leaving the date of arrival of the subject
shipment on the sole determination and will of the carrier.
While it is true 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 to
deliver at a given date or time, delivery of shipment or cargo should at least be
made within a reasonable time.
In Saludo, Jr. v. Court of Appeals (207 SCRA 498 [1992]) this Court held:
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 properly 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 default in himself, and
has no remedy over, then 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 is
to be determined from the circumstances surrounding the case and by
application of the ordinary rules for the interpretation of contracts.
An examination of the subject bill of lading shows that the subject shipment was
estimated to arrive in Manila on April 3, 1977. While there was no special contract
entered into by the parties indicating the date of arrival of the subject shipment,
petitioner nevertheless, was very well aware of the specific date when the goods
were expected to arrive as indicated in the bill of lading itself. In this regard,
there arises no need to execute another contract for the purpose as it would be
a mere superfluity.
In the case before us, we find that a delay in the delivery of the goods spanning
a period of two (2) months and seven (7) days falls was beyond the realm of
reasonableness. Described as gelatin capsules for use in pharmaceutical
products, subject shipment was delivered to, and left in, the possession and
custody of petitioner-carrier for transport to Manila via Oakland, California. But
through petitioner's negligence was mishipped to Richmond, Virginia.
Petitioner's insitence that it cannot be held liable for the delay finds no merit.
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