TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
1. G.R. No. 146018 June 25, 2003
EDGAR COKALIONG SHIPPING LINES, INC., Petitioner,
vs.
UCPB GENERAL INSURANCE COMPANY, INC., Respondent.
DECISION
PANGANIBAN, J.:
The liability of a common carrier for the loss of goods may, by stipulation in the bill
of lading, be limited to the value declared by the shipper. On the other hand, the
liability of the insurer is determined by the actual value covered by the insurance
policy and the insurance premiums paid therefor, and not necessarily by the value
declared in the bill of lading.
The Case
Before the Court is a Petition for Review1 under Rule 45 of the Rules of Court, seeking
to set aside the August 31, 2000 Decision2 and the November 17, 2000 Resolution3
of the Court of Appeals4 (CA) in CA-GR SP No. 62751. The dispositive part of the
Decision reads:
"IN THE LIGHT OF THE FOREGOING, the appeal is GRANTED. The Decision appealed
from is REVERSED. [Petitioner] is hereby condemned to pay to [respondent] the total
amount of ₱148,500.00, with interest thereon, at the rate of 6% per annum, from
date of this Decision of the Court. [Respondent’s] claim for attorney’s fees [is]
DISMISSED. [Petitioner’s] counterclaims are DISMISSED."5
The assailed Resolution denied petitioner’s Motion for Reconsideration.
On the other hand, the disposition of the Regional Trial Court’s6 Decision,7 which
was later reversed by the CA, states:
"WHEREFORE, premises considered, the case is hereby DISMISSED for lack of merit.
"No cost."8
The Facts
The facts of the case are summarized by the appellate court in this wise:
"Sometime on December 11, 1991, Nestor Angelia delivered to the Edgar Cokaliong
Shipping Lines, Inc. (now Cokaliong Shipping Lines), [petitioner] for brevity, cargo
consisting of one (1) carton of Christmas décor and two (2) sacks of plastic toys, to be
transported on board the M/V Tandag on its Voyage No. T-189 scheduled to depart
from Cebu City, on December 12, 1991, for Tandag, Surigao del Sur. [Petitioner]
issued Bill of Lading No. 58, freight prepaid, covering the cargo. Nestor Angelia was
both the shipper and consignee of the cargo valued, on the face thereof, in the
amount of ₱6,500.00. Zosimo Mercado likewise delivered cargo to [petitioner],
consisting of two (2) cartons of plastic toys and Christmas decor, one (1) roll of floor
mat and one (1) bundle of various or assorted goods for transportation thereof from
Cebu City to Tandag, Surigao del Sur, on board the said vessel, and said voyage.
[Petitioner] issued Bill of Lading No. 59 covering the cargo which, on the face thereof,
was valued in the amount of ₱14,000.00. Under the Bill of Lading, Zosimo Mercado
was both the shipper and consignee of the cargo.
"On December 12, 1991, Feliciana Legaspi insured the cargo, covered by Bill of Lading
No. 59, with the UCPB General Insurance Co., Inc., [respondent] for brevity, for the
amount of ₱100,000.00 ‘against all risks’ under Open Policy No. 002/9 1/254 for
which she was issued, by [respondent], Marine Risk Note No. 18409 on said date. She
also insured the cargo covered by Bill of Lading No. 58, with [respondent], for the
amount of ₱50,000.00, under Open Policy No. 002/9 1/254 on the basis of which
[respondent] issued Marine Risk Note No. 18410 on said date.
"When the vessel left port, it had thirty-four (34) passengers and assorted cargo on
board, including the goods of Legaspi. After the vessel had passed by the Mandaue-
Mactan Bridge, fire ensued in the engine room, and, despite earnest efforts of the
officers and crew of the vessel, the fire engulfed and destroyed the entire vessel
resulting in the loss of the vessel and the cargoes therein. The Captain filed the
required Marine Protest.
"Shortly thereafter, Feliciana Legaspi filed a claim, with [respondent], for the value of
the cargo insured under Marine Risk Note No. 18409 and covered by Bill of Lading No.
59. She submitted, in support of her claim, a Receipt, dated December 11, 1991,
purportedly signed by Zosimo Mercado, and Order Slips purportedly signed by him
for the goods he received from Feliciana Legaspi valued in the amount of ₱110,056.00.
[Respondent] approved the claim of Feliciana Legaspi and drew and issued UCPB
Check No. 612939, dated March 9, 1992, in the net amount of ₱99,000.00, in
settlement of her claim after which she executed a Subrogation Receipt/Deed, for
said amount, in favor of [respondent]. She also filed a claim for the value of the cargo
covered by Bill of Lading No. 58. She submitted to [respondent] a Receipt, dated
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
December 11, 1991 and Order Slips, purportedly signed by Nestor Angelia for the
goods he received from Feliciana Legaspi valued at ₱60,338.00. [Respondent]
approved her claim and remitted to Feliciana Legaspi the net amount of ₱49,500.00,
after which she signed a Subrogation Receipt/Deed, dated March 9, 1992, in favor of
[respondent].
"On July 14, 1992, [respondent], as subrogee of Feliciana Legaspi, filed a complaint
anchored on torts against [petitioner], with the Regional Trial Court of Makati City,
for the collection of the total principal amount of ₱148,500.00, which it paid to
Feliciana Legaspi for the loss of the cargo, praying that judgment be rendered in its
favor and against the [petitioner] as follows:
‘WHEREFORE, it is respectfully prayed of this Honorable Court that after due hearing,
judgment be rendered ordering [petitioner] to pay [respondent] the following.
1. Actual damages in the amount of ₱148,500.00 plus interest thereon at the legal
rate from the time of filing of this complaint until fully paid;
2. Attorney’s fees in the amount of ₱10,000.00; and
3. Cost of suit.
‘[Respondent] further prays for such other reliefs and remedies as this Honorable
Court may deem just and equitable under the premises.’
"[Respondent] alleged, inter alia, in its complaint, that the cargo subject of its
complaint was delivered to, and received by, [petitioner] for transportation to
Tandag, Surigao del Sur under ‘Bill of Ladings,’ Annexes ‘A’ and ‘B’ of the complaint;
that the loss of the cargo was due to the negligence of the [petitioner]; and that
Feliciana Legaspi had executed Subrogation Receipts/Deeds in favor of [respondent]
after paying to her the value of the cargo on account of the Marine Risk Notes it
issued in her favor covering the cargo.
"In its Answer to the complaint, [petitioner] alleged that: (a) [petitioner] was cleared
by the Board of Marine Inquiry of any negligence in the burning of the vessel; (b) the
complaint stated no cause of action against [petitioner]; and (c) the
shippers/consignee had already been paid the value of the goods as stated in the Bill
of Lading and, hence, [petitioner] cannot be held liable for the loss of the cargo
beyond the value thereof declared in the Bill of Lading.
"After [respondent] rested its case, [petitioner] prayed for and was allowed, by the
Court a quo, to take the depositions of Chester Cokaliong, the Vice-President and
Chief Operating Officer of [petitioner], and a resident of Cebu City, and of Noel Tanyu,
an officer of the Equitable Banking Corporation, in Cebu City, and a resident of Cebu
City, to be given before the Presiding Judge of Branch 106 of the Regional Trial Court
of Cebu City. Chester Cokaliong and Noel Tanyu did testify, by way of deposition,
before the Court and declared inter alia, that: [petitioner] is a family corporation like
the Chester Marketing, Inc.; Nestor Angelia had been doing business with [petitioner]
and Chester Marketing, Inc., for years, and incurred an account with Chester
Marketing, Inc. for his purchases from said corporation; [petitioner] did issue Bills of
Lading Nos. 58 and 59 for the cargo described therein with Zosimo Mercado and
Nestor Angelia as shippers/consignees, respectively; the engine room of the M/V
Tandag caught fire after it passed the Mandaue/Mactan Bridge resulting in the total
loss of the vessel and its cargo; an investigation was conducted by the Board of
Marine Inquiry of the Philippine Coast Guard which rendered a Report, dated
February 13, 1992 absolving [petitioner] of any responsibility on account of the fire,
which Report of the Board was approved by the District Commander of the Philippine
Coast Guard; a few days after the sinking of the vessel, a representative of the Legaspi
Marketing filed claims for the values of the goods under Bills of Lading Nos. 58 and
59 in behalf of the shippers/consignees, Nestor Angelia and Zosimo Mercado;
[petitioner] was able to ascertain, from the shippers/consignees and the
representative of the Legaspi Marketing that the cargo covered by Bill of Lading No.
59 was owned by Legaspi Marketing and consigned to Zosimo Mercado while that
covered by Bill of Lading No. 58 was purchased by Nestor Angelia from the Legaspi
Marketing; that [petitioner] approved the claim of Legaspi Marketing for the value of
the cargo under Bill of Lading No. 59 and remitted to Legaspi Marketing the said
amount under Equitable Banking Corporation Check No. 20230486 dated August 12,
1992, in the amount of ₱14,000.00 for which the representative of the Legaspi
Marketing signed Voucher No. 4379, dated August 12, 1992, for the said amount of
₱14,000.00 in full payment of claims under Bill of Lading No. 59; that [petitioner]
approved the claim of Nestor Angelia in the amount of ₱6,500.00 but that since the
latter owed Chester Marketing, Inc., for some purchases, [petitioner] merely set off
the amount due to Nestor Angelia under Bill of Lading No. 58 against his account with
Chester Marketing, Inc.; [petitioner] lost/[misplaced] the original of the check after it
was received by Legaspi Marketing, hence, the production of the microfilm copy by
Noel Tanyu of the Equitable Banking Corporation; [petitioner] never knew, before
settling with Legaspi Marketing and Nestor Angelia that the cargo under both Bills of
Lading were insured with [respondent], or that Feliciana Legaspi filed claims for the
value of the cargo with [respondent] and that the latter approved the claims of
Feliciana Legaspi and paid the total amount of ₱148,500.00 to her; [petitioner] came
to know, for the first time, of the payments by [respondent] of the claims of Feliciana
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Legaspi when it was served with the summons and complaint, on October 8, 1992;
after settling his claim, Nestor Angelia x x x executed the Release and Quitclaim,
dated July 2, 1993, and Affidavit, dated July 2, 1993 in favor of [respondent]; hence,
[petitioner] was absolved of any liability for the loss of the cargo covered by Bills of
Lading Nos. 58 and 59; and even if it was, its liability should not exceed the value of
the cargo as stated in the Bills of Lading.
"[Petitioner] did not anymore present any other witnesses on its evidence-in-chief. x
x x"9 (Citations omitted)
Ruling of the Court of Appeals
The CA held that petitioner had failed "to prove that the fire which consumed the
vessel and its cargo was caused by something other than its negligence in the upkeep,
maintenance and operation of the vessel."10
Petitioner had paid ₱14,000 to Legaspi Marketing for the cargo covered by Bill of
Lading No. 59. The CA, however, held that the payment did not extinguish petitioner’s
obligation to respondent, because there was no evidence that Feliciana Legaspi (the
insured) was the owner/proprietor of Legaspi Marketing. The CA also pointed out the
impropriety of treating the claim under Bill of Lading No. 58 -- covering cargo valued
therein at ₱6,500 -- as a setoff against Nestor Angelia’s account with Chester
Enterprises, Inc.
Finally, it ruled that respondent "is not bound by the valuation of the cargo under the
Bills of Lading, x x x nor is the value of the cargo under said Bills of Lading conclusive
on the [respondent]. This is so because, in the first place, the goods were insured
with the [respondent] for the total amount of ₱150,000.00, which amount may be
considered as the face value of the goods."11
Hence this Petition.12
Issues
Petitioner raises for our consideration the following alleged errors of the CA:
"I
"The Honorable Court of Appeals erred, granting arguendo that petitioner is liable, in
holding that petitioner’s liability should be based on the ‘actual insured value’ of the
goods and not from actual valuation declared by the shipper/consignee in the bill of
lading.
"II
"The Court of Appeals erred in not affirming the findings of the Philippine Coast Guard,
as sustained by the trial court a quo, holding that the cause of loss of the aforesaid
cargoes under Bill of Lading Nos. 58 and 59 was due to force majeure and due
diligence was [exercised] by petitioner prior to, during and immediately after the fire
on [petitioner’s] vessel.
"III
"The Court of Appeals erred in not holding that respondent UCPB General Insurance
has no cause of action against the petitioner."13
In sum, the issues are: (1) Is petitioner liable for the loss of the goods? (2) If it is liable,
what is the extent of its liability?
This Court’s Ruling
The Petition is partly meritorious.
First Issue:
Liability for Loss
Petitioner argues that the cause of the loss of the goods, subject of this case, was
force majeure. It adds that its exercise of due diligence was adequately proven by the
findings of the Philippine Coast Guard.
We are not convinced. The uncontroverted findings of the Philippine Coast Guard
show that the M/V Tandag sank due to a fire, which resulted from a crack in the
auxiliary engine fuel oil service tank. Fuel spurted out of the crack and dripped to the
heating exhaust manifold, causing the ship to burst into flames. The crack was located
on the side of the fuel oil tank, which had a mere two-inch gap from the engine room
walling, thus precluding constant inspection and care by the crew.
Having originated from an unchecked crack in the fuel oil service tank, the fire could
not have been caused by force majeure. Broadly speaking, force majeure generally
applies to a natural accident, such as that caused by a lightning, an earthquake, a
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
tempest or a public enemy.14 Hence, fire is not considered a natural disaster or
calamity. In Eastern Shipping Lines, Inc. v. Intermediate Appellate Court,15 we
explained:
"x x x. This must be so as it arises almost invariably from some act of man or by human
means. It does not fall within the category of an act of God unless caused by lighting
or by other natural disaster or calamity. It may even be caused by the actual fault or
privity of the carrier.
"Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous
event refers to leases or rural lands where a reduction of the rent is allowed when
more than one-half of the fruits have been lost due to such event, considering that
the law adopts a protective policy towards agriculture.
"As the peril of fire is not comprehended within the exceptions in Article 1734, supra,
Article 1735 of the Civil Code provides that in all cases other than those mentioned
in Article 1734, the common carrier shall be presumed to have been at fault or to
have acted negligently, unless it proves that it has observed the extraordinary
diligence required by law."
Where loss of cargo results from the failure of the officers of a vessel to inspect their
ship frequently so as to discover the existence of cracked parts, that loss cannot be
attributed to force majeure, but to the negligence of those officials.16
The law provides that a common carrier is presumed to have been negligent if it fails
to prove that it exercised extraordinary vigilance over the goods it transported.
Ensuring the seaworthiness of the vessel is the first step in exercising the required
vigilance. Petitioner did not present sufficient evidence showing what measures or
acts it had undertaken to ensure the seaworthiness of the vessel. It failed to show
when the last inspection and care of the auxiliary engine fuel oil service tank was
made, what the normal practice was for its maintenance, or some other evidence to
establish that it had exercised extraordinary diligence. It merely stated that constant
inspection and care were not possible, and that the last time the vessel was dry-
docked was in November 1990. Necessarily, in accordance with Article 173517 of the
Civil Code, we hold petitioner responsible for the loss of the goods covered by Bills of
Lading Nos. 58 and 59.
Second Issue:
Extent of Liability
Respondent contends that petitioner’s liability should be based on the actual insured
value of the goods, subject of this case. On the other hand, petitioner claims that its
liability should be limited to the value declared by the shipper/consignee in the Bill
of Lading.
The records18 show that the Bills of Lading covering the lost goods contain the
stipulation that in case of claim for loss or for damage to the shipped merchandise or
property, "[t]he liability of the common carrier x x x shall not exceed the value of the
goods as appearing in the bill of lading."19 The attempt by respondent to make light
of this stipulation is unconvincing. As it had the consignees’ copies of the Bills of
Lading,20 it could have easily produced those copies, instead of relying on mere
allegations and suppositions. However, it presented mere photocopies thereof to
disprove petitioner’s evidence showing the existence of the above stipulation.
A stipulation that limits liability is valid21 as long as it is not against public policy. In
Everett Steamship Corporation v. Court of Appeals,22 the Court stated:
"A stipulation in the bill of lading limiting the common carrier’s liability for loss or
destruction of a cargo to a certain sum, unless the shipper or owner declares a greater
value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code which
provides:
‘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.’
"Such limited-liability clause has also been consistently upheld by this Court in a
number of cases. Thus, in Sea-Land Service, Inc. vs. Intermediate Appellate Court, we
ruled:
‘It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did
not exist, the validity and binding effect of the liability limitation clause in the bill of
lading here are nevertheless fully sustainable on the basis alone of the cited Civil Code
Provisions. That said stipulation is just and reasonable is arguable from the fact that
it echoes Art. 1750 itself in providing a limit to liability only if a greater value is not
declared for the shipment in the bill of lading. To hold otherwise would amount to
questioning the justness and fairness of the law itself, and this the private respondent
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
does not pretend to do. But over and above that consideration, the just and
reasonable character of such stipulation is implicit in it giving the shipper or owner
the option of avoiding accrual of liability limitation by the simple and surely far from
onerous expedient of declaring the nature and value of the shipment in the bill of
lading.’
"Pursuant to the afore-quoted provisions of law, it is required that the stipulation
limiting the common carrier’s liability for loss must be ‘reasonable and just under the
circumstances, and has been freely and fairly agreed upon.
"The bill of lading subject of the present controversy specifically provides, among
others:
’18. All claims for which the carrier may be liable shall be adjusted and settled on the
basis of the 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 (¥100,000.00) or its equivalent in any other currency per package or
customary freight unit (whichever is least) unless the value of the goods higher than
this amount is declared in writing by the shipper before receipt of the goods by the
carrier and inserted in the Bill of Lading and extra freight is paid as required.’
"The above stipulations are, to our mind, reasonable and just.1avvphi1 In the bill of
lading, the carrier made it clear that its liability would only be up to One Hundred
Thousand (Y100,000.00) Yen. However, the shipper, Maruman Trading, had the
option to declare a higher valuation if the value of its cargo was higher than the
limited liability of the carrier. Considering that the shipper did not declare a higher
valuation, it had itself to blame for not complying with the stipulations." (Italics
supplied)
In the present case, the stipulation limiting petitioner’s liability is not contrary to
public policy. In fact, its just and reasonable character is evident. The
shippers/consignees may recover the full value of the goods by the simple expedient
of declaring the true value of the shipment in the Bill of Lading. Other than the
payment of a higher freight, there was nothing to stop them from placing the actual
value of the goods therein. In fact, they committed fraud against the common carrier
by deliberately undervaluing the goods in their Bill of Lading, thus depriving the
carrier of its proper and just transport fare.
Concededly, the purpose of the limiting stipulation in the Bill of Lading is to protect
the common carrier. Such stipulation obliges the shipper/consignee to notify the
common carrier of the amount that the latter may be liable for in case of loss of the
goods. The common carrier can then take appropriate measures -- getting insurance,
if needed, to cover or protect itself. This precaution on the part of the carrier is
reasonable and prudent. Hence, a shipper/consignee that undervalues the real worth
of the goods it seeks to transport does not only violate a valid contractual stipulation,
but commits a fraudulent act when it seeks to make the common carrier liable for
more than the amount it declared in the bill of lading.
Indeed, Zosimo Mercado and Nestor Angelia misled petitioner by undervaluing the
goods in their respective Bills of Lading. Hence, petitioner was exposed to a risk that
was deliberately hidden from it, and from which it could not protect itself.
It is well to point out that, for assuming a higher risk (the alleged actual value of the
goods) the insurance company was paid the correct higher premium by Feliciana
Legaspi; while petitioner was paid a fee lower than what it was entitled to for
transporting the goods that had been deliberately undervalued by the shippers in the
Bill of Lading. Between the two of them, the insurer should bear the loss in excess of
the value declared in the Bills of Lading. This is the just and equitable solution.
In Aboitiz Shipping Corporation v. Court of Appeals,23 the description of the nature
and the value of the goods shipped were declared and reflected in the bill of lading,
like in the present case. The Court therein considered this declaration as the basis of
the carrier’s liability and ordered payment based on such amount. Following this
ruling, petitioner should not be held liable for more than what was declared by the
shippers/consignees as the value of the goods in the bills of lading.
We find no cogent reason to disturb the CA’s finding that Feliciana Legaspi was the
owner of the goods covered by Bills of Lading Nos. 58 and 59. Undoubtedly, the goods
were merely consigned to Nestor Angelia and Zosimo Mercado, respectively; thus,
Feliciana Legaspi or her subrogee (respondent) was entitled to the goods or, in case
of loss, to compensation therefor. There is no evidence showing that petitioner paid
her for the loss of those goods. It does not even claim to have paid her.
On the other hand, Legaspi Marketing filed with petitioner a claim for the lost goods
under Bill of Lading No. 59, for which the latter subsequently paid ₱14,000. But
nothing in the records convincingly shows that the former was the owner of the
goods. Respondent was, however, able to prove that it was Feliciana Legaspi who
owned those goods, and who was thus entitled to payment for their loss. Hence, the
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754

claim for the goods under Bill of Lading No. 59 cannot be deemed to have been
extinguished, because payment was made to a person who was not entitled thereto.
With regard to the claim for the goods that were covered by Bill of Lading No. 58 and
valued at ₱6,500, the parties have not convinced us to disturb the findings of the CA
that compensation could not validly take place. Thus, we uphold the appellate court’s
ruling on this point.
WHEREFORE, the Petition is hereby PARTIALLY GRANTED. The assailed Decision is
MODIFIED in the sense that petitioner is ORDERED to pay respondent the sums of
₱14,000 and ₱6,500, which represent the value of the goods stated in Bills of Lading
Nos. 59 and 58, respectively. No costs.
Petitioner Carrier) loaded at Kobe, Japan for transportation to Manila, 5,000 pieces
of calorized lance pipes in 28 packages valued at P256,039.00 consigned to Philippine
Blooming Mills Co., Inc., and 7 cases of spare parts valued at P92,361.75, consigned
to Central Textile Mills, Inc. Both sets of goods were insured against marine risk for
their stated value with respondent Development Insurance and Surety Corporation.
In G.R. No. 71478, during the same period, the same vessel took on board 128 cartons
of garment fabrics and accessories, in two (2) containers, consigned to Mariveles
Apparel Corporation, and two cases of surveying instruments consigned to Aman
Enterprises and General Merchandise. The 128 cartons were insured for their stated
value by respondent Nisshin Fire & Marine Insurance Co., for US $46,583.00, and the
2 cases by respondent Dowa Fire & Marine Insurance Co., Ltd., for US $11,385.00.

SO ORDERED. Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the
total loss of ship and cargo. The respective respondent Insurers paid the
corresponding marine insurance values to the consignees concerned and were thus
2. G.R. No. L-69044 May 29, 1987 subrogated unto the rights of the latter as the insured.

EASTERN SHIPPING LINES, INC., petitioner, G.R. NO. 69044

vs.
INTERMEDIATE APPELLATE COURT and DEVELOPMENT INSURANCE & SURETY On May 11, 1978, respondent Development Insurance & Surety Corporation
CORPORATION, respondents. (Development Insurance, for short), having been subrogated unto the rights of the
two insured companies, filed suit against petitioner Carrier for the recovery of the
No. 71478 May 29, 1987 amounts it had paid to the insured before the then Court of First instance of Manila,
Branch XXX (Civil Case No. 6087).
EASTERN SHIPPING LINES, INC., petitioner,
vs. Petitioner-Carrier denied liability mainly on the ground that the loss was due to an
THE NISSHIN FIRE AND MARINE INSURANCE CO., and DOWA FIRE & MARINE extraordinary fortuitous event, hence, it is not liable under the law.
INSURANCE CO., LTD., respondents.
On August 31, 1979, the Trial Court rendered judgment in favor of Development
Insurance in the amounts of P256,039.00 and P92,361.75, respectively, with legal
MELENCIO-HERRERA, J.: interest, plus P35,000.00 as attorney's fees and costs. Petitioner Carrier took an
appeal to the then Court of Appeals which, on August 14, 1984, affirmed.
These two cases, both for the recovery of the value of cargo insurance, arose from
the same incident, the sinking of the M/S ASIATICA when it caught fire, resulting in Petitioner Carrier is now before us on a Petition for Review on Certiorari.
the total loss of ship and cargo.
G.R. NO. 71478
The basic facts are not in controversy:
On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co. NISSHIN for short),
In G.R. No. 69044, sometime in or prior to June, 1977, the M/S ASIATICA, a vessel and Dowa Fire & Marine Insurance Co., Ltd. (DOWA, for brevity), as subrogees of the
operated by petitioner Eastern Shipping Lines, Inc., (referred to hereinafter as insured, filed suit against Petitioner Carrier for the recovery of the insured value of
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
the cargo lost with the then Court of First Instance of Manila, Branch 11 (Civil Case
No. 116151), imputing unseaworthiness of the ship and non-observance of
extraordinary diligence by petitioner Carrier.
Petitioner Carrier denied liability on the principal grounds that the fire which caused
the sinking of the ship is an exempting circumstance under Section 4(2) (b) of the
Carriage of Goods by Sea Act (COGSA); and that when the loss of fire is established,
the burden of proving negligence of the vessel is shifted to the cargo shipper.
On September 15, 1980, the Trial Court rendered judgment in favor of NISSHIN and
DOWA in the amounts of US $46,583.00 and US $11,385.00, respectively, with legal
interest, plus attorney's fees of P5,000.00 and costs. On appeal by petitioner, the
then Court of Appeals on September 10, 1984, affirmed with modification the Trial
Court's judgment by decreasing the amount recoverable by DOWA to US $1,000.00
because of $500 per package limitation of liability under the COGSA.
Hence, this Petition for Review on certiorari by Petitioner Carrier.
Both Petitions were initially denied for lack of merit. G.R. No. 69044 on January 16,
1985 by the First Division, and G. R. No. 71478 on September 25, 1985 by the Second
Division. Upon Petitioner Carrier's Motion for Reconsideration, however, G.R. No.
69044 was given due course on March 25, 1985, and the parties were required to
submit their respective Memoranda, which they have done.
On the other hand, in G.R. No. 71478, Petitioner Carrier sought reconsideration of
the Resolution denying the Petition for Review and moved for its consolidation with
G.R. No. 69044, the lower-numbered case, which was then pending resolution with
the First Division. The same was granted; the Resolution of the Second Division of
September 25, 1985 was set aside and the Petition was given due course.
At the outset, we reject Petitioner Carrier's claim that it is not the operator of the
M/S Asiatica but merely a charterer thereof. We note that in G.R. No. 69044,
Petitioner Carrier stated in its Petition:
There are about 22 cases of the "ASIATICA" pending in various courts where various
plaintiffs are represented by various counsel representing various consignees or
insurance companies. The common defendant in these cases is petitioner herein,
being the operator of said vessel. ... 1
Petitioner Carrier should be held bound to said admission. As a general rule, the facts
alleged in a party's pleading are deemed admissions of that party and binding upon
it. 2 And an admission in one pleading in one action may be received in evidence
against the pleader or his successor-in-interest on the trial of another action to which
he is a party, in favor of a party to the latter action. 3
The threshold issues in both cases are: (1) which law should govern — the Civil Code
provisions on Common carriers or the Carriage of Goods by Sea Act? and (2) who has
the burden of proof to show negligence of the carrier?
On the Law Applicable
The law of the country to which the goods are to be transported governs the liability
of the common carrier in case of their loss, destruction or deterioration. 4 As the
cargoes in question were transported from Japan to the Philippines, the liability of
Petitioner Carrier is governed primarily by the Civil Code. 5 However, in all matters
not regulated by said Code, the rights and obligations of common carrier shall be
governed by the Code of Commerce and by special laws. 6 Thus, the Carriage of
Goods by Sea Act, a special law, is suppletory to the provisions of the Civil Code. 7
On the Burden of Proof
Under the Civil Code, common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence in the vigilance
over goods, according to all the circumstances of each case. 8 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;
xxx xxx xxx 9
Petitioner Carrier claims that the loss of the vessel by fire exempts it from liability
under the phrase "natural disaster or calamity. " However, we are of the opinion that
fire may not be considered a natural disaster or calamity. This must be so as it arises
almost invariably from some act of man or by human means. 10 It does not fall within
the category of an act of God unless caused by lightning 11 or by other natural
disaster or calamity. 12 It may even be caused by the actual fault or privity of the
carrier. 13
Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous
event refers to leases of rural lands where a reduction of the rent is allowed when
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
more than one-half of the fruits have been lost due to such event, considering that
the law adopts a protection policy towards agriculture. 14
As the peril of the fire is not comprehended within the exception in Article 1734,
supra, Article 1735 of the Civil Code provides that all cases than those mention in
Article 1734, the common carrier shall be presumed to have been at fault or to have
acted negligently, unless it proves that it has observed the extraordinary deligence
required by law.
In this case, the respective Insurers. as subrogees of the cargo shippers, have proven
that the transported goods have been lost. Petitioner Carrier has also proved that the
loss was caused by fire. The burden then is upon Petitioner Carrier to proved that it
has exercised the extraordinary diligence required by law. In this regard, the Trial
Court, concurred in by the Appellate Court, made the following Finding of fact:
The cargoes in question were, according to the witnesses defendant placed in
hatches No, 2 and 3 cf the vessel, Boatswain Ernesto Pastrana noticed that smoke
was coming out from hatch No. 2 and hatch No. 3; that where the smoke was noticed,
the fire was already big; that the fire must have started twenty-four 24) our the same
was noticed; that carbon dioxide was ordered released and the crew was ordered to
open the hatch covers of No, 2 tor commencement of fire fighting by sea water: that
all of these effort were not enough to control the fire.
Pursuant to Article 1733, common carriers are bound to extraordinary diligence in
the vigilance over the goods. The evidence of the defendant did not show that
extraordinary vigilance was observed by the vessel to prevent the occurrence of fire
at hatches numbers 2 and 3. Defendant's evidence did not likewise show he amount
of diligence made by the crew, on orders, in the care of the cargoes. What appears is
that after the cargoes were stored in the hatches, no regular inspection was made as
to their condition during the voyage. Consequently, the crew could not have even
explain what could have caused the fire. The defendant, in the Court's mind, failed to
satisfactorily show that extraordinary vigilance and care had been made by the crew
to prevent the occurrence of the fire. The defendant, as a common carrier, is liable
to the consignees for said lack of deligence required of it under Article 1733 of the
Civil Code. 15
Having failed to discharge the burden of proving that it had exercised the
extraordinary diligence required by law, Petitioner Carrier cannot escape liability for
the loss of the cargo.
And even if fire were to be considered a "natural disaster" within the meaning of
Article 1734 of the Civil Code, it is required under Article 1739 of the same Code that
the "natural disaster" must have been the "proximate and only cause of the loss,"
and that the carrier has "exercised due diligence to prevent or minimize the loss
before, during or after the occurrence of the disaster. " This Petitioner Carrier has
also failed to establish satisfactorily.
Nor may Petitioner Carrier seek refuge from liability under the Carriage of Goods by
Sea Act, It is provided therein that:
Sec. 4(2). Neither the carrier nor the ship shall be responsible for loss or damage
arising or resulting from
(b) Fire, unless caused by the actual fault or privity of the carrier.
xxx xxx xxx
In this case, both the Trial Court and the Appellate Court, in effect, found, as a fact,
that there was "actual fault" of the carrier shown by "lack of diligence" in that "when
the smoke was noticed, the fire was already big; that the fire must have started
twenty-four (24) hours before the same was noticed; " and that "after the cargoes
were stored in the hatches, no regular inspection was made as to their condition
during the voyage." The foregoing suffices to show that the circumstances under
which the fire originated and spread are such as to show that Petitioner Carrier or its
servants were negligent in connection therewith. Consequently, the complete
defense afforded by the COGSA when loss results from fire is unavailing to Petitioner
Carrier.
On the US $500 Per Package Limitation:
Petitioner Carrier avers that its liability if any, should not exceed US $500 per package
as provided in section 4(5) of the COGSA, which reads:
(5) Neither the carrier nor the ship shall in any event be or become liable for any loss
or damage to or in connection with the transportation of goods in an amount
exceeding $500 per package lawful money of the United States, or in case of goods
not shipped in packages, per customary freight unit, or the equivalent of that sum in
other currency, unless the nature and value of such goods have been declared by the
shipper before shipment and inserted in bill of lading. This declaration if embodied in
the bill of lading shall be prima facie evidence, but all be conclusive on the carrier.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
By agreement between the carrier, master or agent of the carrier, and the shipper
another maximum amount than that mentioned in this paragraph may be fixed:
Provided, That such maximum shall not be less than the figure above named. In no
event shall the carrier be Liable for more than the amount of damage actually
sustained.
xxx xxx xxx
Article 1749 of the New Civil Code also allows the limitations of liability in this wise:
Art. 1749. A stipulation that the common carrier's liability as limited to the value of
the goods appearing in the bill of lading, unless the shipper or owner declares a
greater value, is binding.
It is to be noted that the Civil Code does not of itself limit the liability of the common
carrier to a fixed amount per package although the Code expressly permits a
stipulation limiting such liability. Thus, the COGSA which is suppletory to the
provisions of the Civil Code, steps in and supplements the Code by establishing a
statutory provision limiting the carrier's liability in the absence of a declaration of a
higher value of the goods by the shipper in the bill of lading. The provisions of the
Carriage of Goods by.Sea Act on limited liability are as much a part of a bill of lading
as though physically in it and as much a part thereof as though placed therein by
agreement of the parties. 16
In G.R. No. 69044, there is no stipulation in the respective Bills of Lading (Exhibits "C-
2" and "I-3") 1 7 limiting the carrier's liability for the loss or destruction of the goods.
Nor is there a declaration of a higher value of the goods. Hence, Petitioner Carrier's
liability should not exceed US $500 per package, or its peso equivalent, at the time of
payment of the value of the goods lost, but in no case "more than the amount of
damage actually sustained."
The actual total loss for the 5,000 pieces of calorized lance pipes was P256,039
(Exhibit "C"), which was exactly the amount of the insurance coverage by
Development Insurance (Exhibit "A"), and the amount affirmed to be paid by
respondent Court. The goods were shipped in 28 packages (Exhibit "C-2") Multiplying
28 packages by $500 would result in a product of $14,000 which, at the current
exchange rate of P20.44 to US $1, would be P286,160, or "more than the amount of
damage actually sustained." Consequently, the aforestated amount of P256,039
should be upheld.
With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their actual value
was P92,361.75 (Exhibit "I"), which is likewise the insured value of the cargo (Exhibit
"H") and amount was affirmed to be paid by respondent Court. however, multiplying
seven (7) cases by $500 per package at the present prevailing rate of P20.44 to US $1
(US $3,500 x P20.44) would yield P71,540 only, which is the amount that should be
paid by Petitioner Carrier for those spare parts, and not P92,361.75.
In G.R. No. 71478, in so far as the two (2) cases of surveying instruments are
concerned, the amount awarded to DOWA which was already reduced to $1,000 by
the Appellate Court following the statutory $500 liability per package, is in order.
In respect of the shipment of 128 cartons of garment fabrics in two (2) containers and
insured with NISSHIN, the Appellate Court also limited Petitioner Carrier's liability to
$500 per package and affirmed the award of $46,583 to NISSHIN. it multiplied 128
cartons (considered as COGSA packages) by $500 to arrive at the figure of $64,000,
and explained that "since this amount is more than the insured value of the goods,
that is $46,583, the Trial Court was correct in awarding said amount only for the 128
cartons, which amount is less than the maximum limitation of the carrier's liability."
We find no reversible error. The 128 cartons and not the two (2) containers should
be considered as the shipping unit.
In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 (1981), the
consignees of tin ingots and the shipper of floor covering brought action against the
vessel owner and operator to recover for loss of ingots and floor covering, which had
been shipped in vessel — supplied containers. The U.S. District Court for the Southern
District of New York rendered judgment for the plaintiffs, and the defendant
appealed. The United States Court of Appeals, Second Division, modified and
affirmed holding that:
When what would ordinarily be considered packages are shipped in a container
supplied by the carrier and the number of such units is disclosed in the shipping
documents, each of those units and not the container constitutes the "package"
referred to in liability limitation provision of Carriage of Goods by Sea Act. Carriage
of Goods by Sea Act, 4(5), 46 U.S.C.A.& 1304(5).
Even if language and purposes of Carriage of Goods by Sea Act left doubt as to
whether carrier-furnished containers whose contents are disclosed should be treated
as packages, the interest in securing international uniformity would suggest that they
should not be so treated. Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A. 1304(5).
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
... After quoting the statement in Leather's Best, supra, 451 F 2d at 815, that treating
a container as a package is inconsistent with the congressional purpose of
establishing a reasonable minimum level of liability, Judge Beeks wrote, 414 F. Supp.
at 907 (footnotes omitted):
Although this approach has not completely escaped criticism, there is, nonetheless,
much to commend it. It gives needed recognition to the responsibility of the courts
to construe and apply the statute as enacted, however great might be the temptation
to "modernize" or reconstitute it by artful judicial gloss. If COGSA's package limitation
scheme suffers from internal illness, Congress alone must undertake the surgery.
There is, in this regard, obvious wisdom in the Ninth Circuit's conclusion in Hartford
that technological advancements, whether or not forseeable by the COGSA
promulgators, do not warrant a distortion or artificial construction of the statutory
term "package." A ruling that these large reusable metal pieces of transport
equipment qualify as COGSA packages — at least where, as here, they were carrier
owned and supplied — would amount to just such a distortion.
Certainly, if the individual crates or cartons prepared by the shipper and containing
his goods can rightly be considered "packages" standing by themselves, they do not
suddenly lose that character upon being stowed in a carrier's container. I would liken
these containers to detachable stowage compartments of the ship. They simply serve
to divide the ship's overall cargo stowage space into smaller, more serviceable loci.
Shippers' packages are quite literally "stowed" in the containers utilizing stevedoring
practices and materials analogous to those employed in traditional on board stowage.
In Yeramex International v. S.S. Tando,, 1977 A.M.C. 1807 (E.D. Va.) rev'd on other
grounds, 595 F 2nd 943 (4 Cir. 1979), another district with many maritime cases
followed Judge Beeks' reasoning in Matsushita and similarly rejected the functional
economics test. Judge Kellam held that when rolls of polyester goods are packed into
cardboard cartons which are then placed in containers, the cartons and not the
containers are the packages.
xxx xxx xxx
The case of Smithgreyhound v. M/V Eurygenes, 18 followed the Mitsui test:
Eurygenes concerned a shipment of stereo equipment packaged by the shipper into
cartons which were then placed by the shipper into a carrier- furnished container.
The number of cartons was disclosed to the carrier in the bill of lading. Eurygenes
followed the Mitsui test and treated the cartons, not the container, as the COGSA
packages. However, Eurygenes indicated that a carrier could limit its liability to $500
per container if the bill of lading failed to disclose the number of cartons or units
within the container, or if the parties indicated, in clear and unambiguous language,
an agreement to treat the container as the package.
(Admiralty Litigation in Perpetuum: The Continuing Saga of Package Limitations and
Third World Delivery Problems by Chester D. Hooper & Keith L. Flicker, published in
Fordham International Law Journal, Vol. 6, 1982-83, Number 1) (Emphasis supplied)
In this case, the Bill of Lading (Exhibit "A") disclosed the following data:
2 Containers
(128) Cartons)
Men's Garments Fabrics and Accessories Freight Prepaid
Say: Two (2) Containers Only.
Considering, therefore, that the Bill of Lading clearly disclosed the contents of the
containers, the number of cartons or units, as well as the nature of the goods, and
applying the ruling in the Mitsui and Eurygenes cases it is clear that the 128 cartons,
not the two (2) containers should be considered as the shipping unit subject to the
$500 limitation of liability.
True, the evidence does not disclose whether the containers involved herein were
carrier-furnished or not. Usually, however, containers are provided by the carrier. 19
In this case, the probability is that they were so furnished for Petitioner Carrier was
at liberty to pack and carry the goods in containers if they were not so packed. Thus,
at the dorsal side of the Bill of Lading (Exhibit "A") appears the following stipulation
in fine print:
11. (Use of Container) Where the goods receipt of which is acknowledged on the face
of this Bill of Lading are not already packed into container(s) at the time of receipt,
the Carrier shall be at liberty to pack and carry them in any type of container(s).
The foregoing would explain the use of the estimate "Say: Two (2) Containers Only"
in the Bill of Lading, meaning that the goods could probably fit in two (2) containers
only. It cannot mean that the shipper had furnished the containers for if so, "Two (2)
Containers" appearing as the first entry would have sufficed. and if there is any
ambiguity in the Bill of Lading, it is a cardinal principle in the construction of contracts
that the interpretation of obscure words or stipulations in a contract shall not favor
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
the party who caused the obscurity. 20 This applies with even greater force in a
contract of adhesion where a contract is already prepared and the other party merely
adheres to it, like the Bill of Lading in this case, which is draw. up by the carrier. 21
On Alleged Denial of Opportunity to Present Deposition of Its Witnesses: (in G.R. No.
69044 only)
Petitioner Carrier claims that the Trial Court did not give it sufficient time to take the
depositions of its witnesses in Japan by written interrogatories.
We do not agree. petitioner Carrier was given- full opportunity to present its evidence
but it failed to do so. On this point, the Trial Court found:
xxx xxx xxx
Indeed, since after November 6, 1978, to August 27, 1979, not to mention the time
from June 27, 1978, when its answer was prepared and filed in Court, until September
26, 1978, when the pre-trial conference was conducted for the last time, the
defendant had more than nine months to prepare its evidence. Its belated notice to
take deposition on written interrogatories of its witnesses in Japan, served upon the
plaintiff on August 25th, just two days before the hearing set for August 27th,
knowing fully well that it was its undertaking on July 11 the that the deposition of the
witnesses would be dispensed with if by next time it had not yet been obtained, only
proves the lack of merit of the defendant's motion for postponement, for which
reason it deserves no sympathy from the Court in that regard. The defendant has told
the Court since February 16, 1979, that it was going to take the deposition of its
witnesses in Japan. Why did it take until August 25, 1979, or more than six months,
to prepare its written interrogatories. Only the defendant itself is to blame for its
failure to adduce evidence in support of its defenses.
xxx xxx xxx 22
Petitioner Carrier was afforded ample time to present its side of the case. 23 It cannot
complain now that it was denied due process when the Trial Court rendered its
Decision on the basis of the evidence adduced. What due process abhors is absolute
lack of opportunity to be heard. 24
On the Award of Attorney's Fees:
Petitioner Carrier questions the award of attorney's fees. In both cases, respondent
Court affirmed the award by the Trial Court of attorney's fees of P35,000.00 in favor
of Development Insurance in G.R. No. 69044, and P5,000.00 in favor of NISSHIN and
DOWA in G.R. No. 71478.
Courts being vested with discretion in fixing the amount of attorney's fees, it is
believed that the amount of P5,000.00 would be more reasonable in G.R. No. 69044.
The award of P5,000.00 in G.R. No. 71478 is affirmed.
WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that petitioner Eastern
Shipping Lines shall pay the Development Insurance and Surety Corporation the
amount of P256,039 for the twenty-eight (28) packages of calorized lance pipes, and
P71,540 for the seven (7) cases of spare parts, with interest at the legal rate from the
date of the filing of the complaint on June 13, 1978, plus P5,000 as attorney's fees,
and the costs.
2) In G.R.No.71478,the judgment is hereby affirmed.
SO ORDERED.
3.
G.R. No. 116940 June 11, 1997
THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC., petitioner,
vs.
COURT OF APPEALS and FELMAN SHIPPING LINES, respondents.
BELLOSILLO, J.:
This case deals with the liability, if any, of a shipowner for loss of cargo due to its
failure to observe the extraordinary diligence required by Art. 1733 of the Civil Code
as well as the right of the insurer to be subrogated to the rights of the insured upon
payment of the insurance claim.
On 6 July 1983 Coca-Cola Bottlers Philippines, Inc., loaded on board "MV Asilda," a
vessel owned and operated by respondent Felman Shipping Lines (FELMAN for
brevity), 7,500 cases of 1-liter Coca-Cola softdrink bottles to be transported from
Zamboanga City to Cebu City for consignee Coca-Cola Bottlers Philippines, Inc.,
Cebu.1 The shipment was insured with petitioner Philippine American General
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Insurance Co., Inc. (PHILAMGEN for brevity), under Marine Open Policy No. 100367-
PAG.
"MV Asilda" left the port of Zamboanga in fine weather at eight o'clock in the evening
of the same day. At around eight forty-five the following morning, 7 July 1983, the
vessel sank in the waters of Zamboanga del Norte bringing down her entire cargo
with her including the subject 7,500 cases of 1-liter Coca-Cola softdrink bottles.
On 15 July 1983 the consignee Coca-Cola Bottlers Philippines, Inc., Cebu plant, filed a
claim with respondent FELMAN for recovery of damages it sustained as a result of
the loss of its softdrink bottles that sank with "MV Asilda." Respondent denied the
claim thus prompting the consignee to file an insurance claim with PHILAMGEN which
paid its claim of P755,250.00.
Claiming its right of subrogation PHILAMGEN sought recourse against respondent
FELMAN which disclaimed any liability for the loss. Consequently, on 29 November
1983 PHILAMGEN sued the shipowner for sum of money and damages.
In its complaint PHILAMGEN alleged that the sinking and total loss of "MV Asilda" and
its cargo were due to the vessel's unseaworthiness as she was put to sea in an
unstable condition. It further alleged that the vessel was improperly manned and that
its officers were grossly negligent in failing to take appropriate measures to proceed
to a nearby port or beach after the vessel started to list.
On 15 February 1985 FELMAN filed a motion to dismiss based on the affirmative
defense that no right of subrogation in favor of PHILAMGEN was transmitted by the
shipper, and that, in any event, FELMAN had abandoned all its rights, interests and
ownership over "MV Asilda" together with her freight and appurtenances for the
purpose of limiting and extinguishing its liability under Art. 587 of the Code of
Commerce.2
On 17 February 1986 the trial court dismissed the complaint of PHILAMGEN. On
appeal the Court of Appeals set aside the dismissal and remanded the case to the
lower court for trial on the merits. FELMAN filed a petition for certiorari with this
Court but it was subsequently denied on 13 February 1989.
On 28 February 1992 the trial court rendered judgment in favor of FELMAN.3 It ruled
that "MV Asilda" was seaworthy when it left the port of Zamboanga as confirmed by
certificates issued by the Philippine Coast Guard and the shipowner's surveyor
attesting to its seaworthiness. Thus the loss of the vessel and its entire shipment
could only be attributed to either a fortuitous event, in which case, no liability should
attach unless there was a stipulation to the contrary, or to the negligence of the
captain and his crew, in which case, Art. 587 of the Code of Commerce should apply.
The lower court further ruled that assuming "MV Asilda" was unseaworthy, still
PHILAMGEN could not recover from FELMAN since the assured (Coca-Cola Bottlers
Philippines, Inc.) had breached its implied warranty on the vessel's seaworthiness.
Resultantly, the payment made by PHILAMGEN to the assured was an undue, wrong
and mistaken payment. Since it was not legally owing, it did not give PHILAMGEN the
right of subrogation so as to permit it to bring an action in court as a subrogee.
On 18 March 1992 PHILAMGEN appealed the decision to the Court of Appeals. On 29
August 1994 respondent appellate court rendered judgment finding "MV Asilda"
unseaworthy for being top-heavy as 2,500 cases of Coca-Cola softdrink bottles were
improperly stowed on deck. In other words, while the vessel possessed the necessary
Coast Guard certification indicating its seaworthiness with respect to the structure of
the ship itself, it was not seaworthy with respect to the cargo. Nonetheless, the
appellate court denied the claim of PHILAMGEN on the ground that the assured's
implied warranty of seaworthiness was not complied with. Perfunctorily,
PHILAMGEN was not properly subrogated to the rights and interests of the shipper.
Furthermore, respondent court held that the filing of notice of abandonment had
absolved the shipowner/agent from liability under the limited liability rule.
The issues for resolution in this petition are: (a) whether "MV Asilda" was seaworthy
when it left the port of Zamboanga; (b) whether the limited liability under Art. 587 of
the Code of Commerce should apply; and, (c) whether PHILAMGEN was properly
subrogated to the rights and legal actions which the shipper had against FELMAN, the
shipowner.
"MV Asilda" was unseaworthy when it left the port of Zamboanga. In a joint
statement, the captain as well as the chief mate of the vessel confirmed that the
weather was fine when they left the port of Zamboanga. According to them, the
vessel was carrying 7,500 cases of 1-liter Coca-Cola softdrink bottles, 300 sacks of
seaweeds, 200 empty CO2 cylinders and an undetermined quantity of empty boxes
for fresh eggs. They loaded the empty boxes for eggs and about 500 cases of Coca-
Cola bottles on deck.4 The ship captain stated that around four o'clock in the morning
of 7 July 1983 he was awakened by the officer on duty to inform him that the vessel
had hit a floating log. At that time he noticed that the weather had deteriorated with
strong southeast winds inducing big waves. After thirty minutes he observed that the
vessel was listing slightly to starboard and would not correct itself despite the heavy
rolling and pitching. He then ordered his crew to shift the cargo from starboard to
portside until the vessel was balanced. At about seven o'clock in the morning, the
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
master of the vessel stopped the engine because the vessel was listing dangerously
to portside. He ordered his crew to shift the cargo back to starboard. The shifting of
cargo took about an hour afterwhich he rang the engine room to resume full speed.
At around eight forty-five, the vessel suddenly listed to portside and before the
captain could decide on his next move, some of the cargo on deck were thrown
overboard and seawater entered the engine room and cargo holds of the vessel. At
that instance, the master of the vessel ordered his crew to abandon ship. Shortly
thereafter, "MV Asilda" capsized and sank. He ascribed the sinking to the entry of
seawater through a hole in the hull caused by the vessel's collision with a partially
submerged log.5
The Elite Adjusters, Inc., submitted a report regarding the sinking of "MV Asilda." The
report, which was adopted by the Court of Appeals, reads —
We found in the course of our investigation that a reasonable explanation for the
series of lists experienced by the vessel that eventually led to her capsizing and
sinking, was that the vessel was top-heavy which is to say that while the vessel may
not have been overloaded, yet the distribution or stowage of the cargo on board was
done in such a manner that the vessel was in top-heavy condition at the time of her
departure and which condition rendered her unstable and unseaworthy for that
particular voyage.
In this connection, we wish to call attention to the fact that this vessel was designed
as a fishing vessel . . . and it was not designed to carry a substantial amount or
quantity of cargo on deck. Therefore, we believe strongly that had her cargo been
confined to those that could have been accommodated under deck, her stability
would not have been affected and the vessel would not have been in any danger of
capsizing, even given the prevailing weather conditions at that time of sinking.
But from the moment that the vessel was utilized to load heavy cargo on its deck, the
vessel was rendered unseaworthy for the purpose of carrying the type of cargo
because the weight of the deck cargo so decreased the vessel's metacentric height
as to cause it to become unstable.
Finally, with regard to the allegation that the vessel encountered big waves, it must
be pointed out that ships are precisely designed to be able to navigate safely even
during heavy weather and frequently we hear of ships safely and successfully
weathering encounters with typhoons and although they may sustain some amount
of damage, the sinking of ship during heavy weather is not a frequent occurrence and
is not likely to occur unless they are inherently unstable and unseaworthy . . . .
We believe, therefore, and so hold that the proximate cause of the sinking of the M/V
"Asilda" was her condition of unseaworthiness arising from her having been top-
heavy when she departed from the Port of Zamboanga. Her having capsized and
eventually sunk was bound to happen and was therefore in the category of an
inevitable occurrence (emphasis supplied).6
We subscribe to the findings of the Elite Adjusters, Inc., and the Court of Appeals that
the proximate cause of the sinking of "MV Asilda" was its being top-heavy. Contrary
to the ship captain's allegations, evidence shows that approximately 2,500 cases of
softdrink bottles were stowed on deck. Several days after "MV Asilda" sank, an
estimated 2,500 empty Coca-Cola plastic cases were recovered near the vicinity of
the sinking. Considering that the ship's hatches were properly secured, the empty
Coca-Cola cases recovered could have come only from the vessel's deck cargo. It is
settled that carrying a deck cargo raises the presumption of unseaworthiness unless
it can be shown that the deck cargo will not interfere with the proper management
of the ship. However, in this case it was established that "MV Asilda" was not
designed to carry substantial amount of cargo on deck. The inordinate loading of
cargo deck resulted in the decrease of the vessel's metacentric height 7 thus making
it unstable. The strong winds and waves encountered by the vessel are but the
ordinary vicissitudes of a sea voyage and as such merely contributed to its already
unstable and unseaworthy condition.
On the second issue, Art. 587 of the Code of Commerce is not applicable to the case
at bar.8 Simply put, the ship agent is liable for the negligent acts of the captain in the
care of goods loaded on the vessel. This liability however can be limited through
abandonment of the vessel, its equipment and freightage as provided in Art. 587.
Nonetheless, there are exceptional circumstances wherein the ship agent could still
be held answerable despite the abandonment, as where the loss or injury was due to
the fault of the shipowner and the captain.9 The international rule is to the effect
that the right of abandonment of vessels, as a legal limitation of a shipowner's liability,
does not apply to cases where the injury or average was occasioned by the
shipowner's own fault. 10 It must be stressed at this point that Art. 587 speaks only
of situations where the fault or negligence is committed solely by the captain. Where
the shipowner is likewise to be blamed, Art. 587 will not apply, and such situation will
be covered by the provisions of the Civil Code on common carrier. 11
It was already established at the outset that the sinking of "MV Asilda" was due to its
unseaworthiness even at the time of its departure from the port of Zamboanga. It
was top-heavy as an excessive amount of cargo was loaded on deck. Closer
supervision on the part of the shipowner could have prevented this fatal
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
miscalculation. As such, FELMAN was equally negligent. It cannot therefore escape
liability through the expedient of filing a notice of abandonment of the vessel by
virtue of Art. 587 of the Code of Commerce.
Under Art 1733 of 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 and for the safety of the passengers
transported by them, according to all the circumstances of each case . . ." In the event
of loss of goods, common carriers are presumed to have acted negligently. FELMAN,
the shipowner, was not able to rebut this presumption.
In relation to the question of subrogation, respondent appellate court found "MV
Asilda" unseaworthy with reference to the cargo and therefore ruled that there was
breach of warranty of seaworthiness that rendered the assured not entitled to the
payment of is claim under the policy. Hence, when PHILAMGEN paid the claim of the
bottling firm there was in effect a "voluntary payment" and no right of subrogation
accrued in its favor. In other words, when PHILAMGEN paid it did so at its own risk.
It is generally held that in every marine insurance policy the assured impliedly
warrants to the assurer that the vessel is seaworthy and such warranty is as much a
term of the contract as if expressly written on the face of the policy. 12 Thus Sec. 113
of the Insurance Code provides that "(i)n every marine insurance upon a ship or
freight, or freightage, or upon anything which is the subject of marine insurance, a
warranty is implied that the ship is seaworthy." Under Sec. 114, a ship is "seaworthy
when reasonably fit to perform the service, and to encounter the ordinary perils of
the voyage, contemplated by the parties to the policy." Thus it becomes the
obligation of the cargo owner to look for a reliable common carrier which keeps its
vessels in seaworthy condition. He may have no control over the vessel but he has
full control in the selection of the common carrier that will transport his goods. He
also has full discretion in the choice of assurer that will underwrite a particular
venture.
We need not belabor the alleged breach of warranty of seaworthiness by the assured
as painstakingly pointed out by FELMAN to stress that subrogation will not work in
this case. In policies where the law will generally imply a warranty of seaworthiness,
it can only be excluded by terms in writing in the policy in the clearest language. 13
And where the policy stipulates that the seaworthiness of the vessel as between the
assured and the assurer is admitted, the question of seaworthiness cannot be raised
by the assurer without showing concealment or misrepresentation by the assured.
14
The marine policy issued by PHILAMGEN to the Coca-Cola bottling firm in at least two
(2) instances has dispensed with the usual warranty of worthiness. Paragraph 15 of
the Marine Open Policy No. 100367-PAG reads "(t)he liberties as per Contract of
Affreightment the presence of the Negligence Clause and/or Latent Defect Clause in
the Bill of Lading and/or Charter Party and/or Contract of Affreightment as between
the Assured and the Company shall not prejudice the insurance. The seaworthiness
of the vessel as between the Assured and the Assurers is hereby admitted."15
The same clause is present in par. 8 of the Institute Cargo Clauses (F.P.A.) of the policy
which states "(t)he seaworthiness of the vessel as between the Assured and
Underwriters in hereby admitted . . . ." 16
The result of the admission of seaworthiness by the assurer PHILAMGEN may mean
one or two things: (a) that the warranty of the seaworthiness is to be taken as
fulfilled; or, (b) that the risk of unseaworthiness is assumed by the insurance
company. 17 The insertion of such waiver clauses in cargo policies is in recognition of
the realistic fact that cargo owners cannot control the state of the vessel. Thus it can
be said that with such categorical waiver, PHILAMGEN has accepted the risk of
unseaworthiness so that if the ship should sink by unseaworthiness, as what occurred
in this case, PHILAMGEN is liable.
Having disposed of this matter, we move on to the legal basis for subrogation.
PHILAMGEN's action against FELMAN is squarely sanctioned by Art. 2207 of the Civil
Code which provides:
Art. 2207. If the plaintiff's property has been insured, and he has received indemnity
from the insurance company for the injury or loss arising out of the wrong or breach
of contract complained of, the insurance company shall be subrogated to the rights
of the insured against the wrongdoer or the person who has violated the contract. If
the amount paid by the insurance company does not fully cover the injury or loss, the
aggrieved party shall be entitled to recover the deficiency from the person causing
the loss or injury.
In Pan Malayan Insurance Corporation v. Court of Appeals, 18 we said that payment
by the assurer to the assured operates as an equitable assignment to the assurer of
all the remedies which the assured may have against the third party whose
negligence or wrongful act caused the loss. The right of subrogation is not dependent
upon, nor does it grow out of any privity of contract or upon payment by the
insurance company of the insurance claim. It accrues simply upon payment by the
insurance company of the insurance claim.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
The doctrine of subrogation has its roots in equity. It is designed to promote and to
accomplish justice and is the mode which equity adopts to compel the ultimate
payment of a debt by one who in justice, equity and good conscience ought to pay.
19 Therefore, the payment made by PHILAMGEN to Coca-Cola Bottlers Philippines,
Inc., gave the former the right to bring an action as subrogee against FELMAN. Having
failed to rebut the presumption of fault, the liability of FELMAN for the loss of the
7,500 cases of 1-liter Coca-Cola softdrink bottles is inevitable.
WHEREFORE, the petition is GRANTED. Respondent FELMAN SHIPPING LINES is
ordered to pay petitioner PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC.,
Seven Hundred Fifty-five Thousand Two Hundred and Fifty Pesos (P755,250.00) plus
legal interest thereon counted from 29 November 1983, the date of judicial demand,
pursuant to Arts. 2212 and 2213 of the Civil Code. 20
SO ORDERED.
4.
G.R. No. 108897 October 2, 1997
SARKIES TOURS PHILIPPINES, INC., petitioner,
vs.
HONORABLE COURT OF APPEALS (TENTH DIVISION), DR. ELINO G. FORTADES,
MARISOL A. FORTADES and FATIMA MINERVA A. FORTADES, respondents.
ROMERO, J.:
This petition for review is seeking the reversal of the decision of the Court of Appeals
in CA-G.R. CV No. 18979 promulgated on January 13, 1993, as well as its resolution
of February 19, 1993, denying petitioner's motion for reconsideration for being a
mere rehash of the arguments raised in the appellant's brief.
The case arose from a damage suit filed by private respondents Elino, Marisol, and
Fatima Minerva, all surnamed Fortades, against petitioner for breach of contract of
carriage allegedly attended by bad faith.
On August 31, 1984, Fatima boarded petitioner's De Luxe Bus No. 5 in Manila on her
way to Legazpi City. Her brother Raul helped her load three pieces of luggage
containing all of her optometry review books, materials and equipment, trial lenses,
trial contact lenses, passport and visa, as well as her mother Marisol's U.S.
immigration (green) card, among other important documents and personal
belongings. Her belongings were kept in the baggage compartment of the bus, but
during a stopover at Daet, it was discovered that only one bag remained in the open
compartment. The others, including Fatima's things, were missing and might have
dropped along the way. Some of the passengers suggested retracing the route of the
bus to try to recover the lost items, but the driver ignored them and proceeded to
Legazpi City.
Fatima immediately reported the loss to her mother who, in turn, went to petitioner's
office in Legazpi City and later at its head office in Manila. Petitioner, however, merely
offered her P1,000.00 for each piece of luggage lost, which she turned down. After
returning to Bicol, disappointed but not defeated, mother and daughter asked
assistance from the radio stations and even from Philtranco bus drivers who plied the
same route on August 31st. The effort paid off when one of Fatima's bags was
recovered. Marisol further reported the incident to the National Bureau of
Investigation's field office in Legazpi City and to the local police.
On September 20, 1984, respondents, through counsel, formally demanded
satisfaction of their complaint from petitioner. In a letter dated October 1, 1984, the
latter apologized for the delay and said that "(a) team has been sent out to Bicol for
the purpose of recovering or at least getting the full detail"1 of the incident.
After more than nine months of fruitless waiting, respondents decided to file the case
below to recover the value of the remaining lost items, as well as moral and
exemplary damages, attorney's fees and expenses of litigation. They claimed 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, on the other hand, disowned any liability for the loss on the ground that
Fatima allegedly did not declare any excess baggage upon boarding its bus.
On June 15, 1988, after trial on the merits, the court a quo adjudged the case in favor
of respondents, viz.:
PREMISES CONSIDERED, judgment is hereby rendered in favor of the plaintiffs (herein
respondents) and against the herein defendant Sarkies Tours Philippines, Inc.,
ordering the latter to pay to the former the following sums of money, to wit:
1. The sum of P30,000.00 equivalent to the value of the personal belongings of
plaintiff Fatima Minerva Fortades, etc. less the value of one luggage recovered;
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
2. The sum of P90,000.00 for the transportation expenses, as well as moral damages;
3. The sum of P10,000.00 by way of exemplary damages;
4. The sum of P5,000.00 as attorney's fees; and
5. The sum of P5,000.00 as litigation expenses or a total of One Hundred Forty
Thousand (P140,000.00) Pesos.
to be paid by herein defendant Sarkies Tours Philippines, Inc. to the herein plaintiffs
within 30 days from receipt of this Decision.
SO ORDERED.
On appeal, the appellate court affirmed the trial court's judgment, but deleted the
award of moral and exemplary damages. Thus,
WHEREFORE, premises considered, except as above modified, fixing the award for
transportation expenses at P30,000.00 and the deletion of the award for moral and
exemplary damages, the decision appealed from is AFFIRMED, with costs against
defendant-appellant.
SO ORDERED.
Its motion for reconsideration was likewise rejected by the Court of Appeals, so
petitioner elevated its case to this Court for a review.
After a careful scrutiny of the records of this case, we are convinced that the trial and
appellate courts resolved the issues judiciously based on the evidence at hand.
Petitioner claims that Fatima did not bring any piece of luggage with her, and even if
she did, none was declared at the start of the trip. The documentary and testimonial
evidence presented at the trial, however, established that Fatima indeed boarded
petitioner's De Luxe Bus No. 5 in the evening of August 31, 1984, and she brought
three pieces of luggage with her, as testified by her brother Raul,2 who helped her
pack her things and load them on said bus. One of the bags was even recovered by a
Philtranco bus driver. In its letter dated October 1, 1984, petitioner tacitly admitted
its liability by apologizing to respondents and assuring them that efforts were being
made to recover the lost items.
The records also reveal that respondents went to great lengths just to salvage their
loss. The incident was reported to the police, the NBI, and the regional and head
offices of petitioner. Marisol even sought the assistance of Philtranco bus drivers and
the radio stations. To expedite the replacement of her mother's lost U.S. immigration
documents, Fatima also had to execute an affidavit of loss.3 Clearly, they would not
have gone through all that trouble in pursuit of a fancied loss.
Fatima was not the only one who lost her luggage. Apparently, other passengers had
suffered a similar fate: Dr. Lita Samarista testified that petitioner offered her
P1,000.00 for her lost baggage and she accepted it;4 Carleen Carullo-Magno lost her
chemical engineering review materials, while her brother lost abaca products he was
transporting to Bicol.5
Petitioner's receipt of Fatima's personal luggage having been thus established, it
must now be determined if, as a common carrier, it is responsible for their loss. Under
the Civil Code, "(c)ommon carriers, from the nature of their business and for reasons
of public policy, are bound to observe extraordinary diligence in the vigilance over
the goods . . . transported by them,"6 and this liability "lasts from the time the goods
are unconditionally placed in the possession of, and received by the carrier for
transportation until the same are delivered, actually or constructively, by the carrier
to . . . the person who has a right to receive them,"7 unless the loss is due to any of
the excepted causes under Article 1734 thereof.8
The cause of the loss in the case at bar was 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
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
other two contained optometry books, materials, equipment, as well as vital
documents and personal belongings. Respondents had to shuttle between Bicol and
Manila in their efforts to be compensated for the loss. During the trial, Fatima and
Marisol had to travel from the United States just to be able to testify. Expenses were
also incurred in reconstituting their lost documents. Under these circumstances, the
Court agrees with the Court of Appeals in awarding P30,000.00 for the lost items and
P30,000.00 for the transportation expenses, but disagrees with the deletion of the
award of moral and exemplary damages which, in view of the foregoing proven facts,
with negligence and bad faith on the fault of petitioner having been duly established,
should be granted to respondents in the amount of P20,000.00 and P5,000.00,
respectively.
WHEREFORE, the assailed decision of the Court of Appeals dated January 13, 1993,
and its resolution dated February 19, 1993, are hereby AFFIRMED with the
MODIFICATION that petitioner is ordered to pay respondents an additional
P20,000.00 as moral damages and P5,000.00 as exemplary damages. Costs against
petitioner.
SO ORDERED.
5.
G.R. No. 114167 July 12, 1995
COASTWISE LIGHTERAGE CORPORATION, petitioner,
vs.
COURT OF APPEALS and the PHILIPPINE GENERAL INSURANCE COMPANY,
respondents.
RESOLUTION
FRANCISCO, R., J.:
This is a petition for review of a Decision rendered by the Court of Appeals, dated
December 17, 1993, affirming Branch 35 of the Regional Trial Court, Manila in holding
that herein petitioner is liable to pay herein private respondent the amount of
P700,000.00, plus legal interest thereon, another sum of P100,000.00 as attorney's
fees and the cost of the suit.
The factual background of this case is as follows:
Pag-asa Sales, Inc. entered into a contract to transport molasses from the province
of Negros to Manila with Coastwise Lighterage Corporation (Coastwise for brevity),
using the latter's dumb barges. The barges were towed in tandem by the tugboat MT
Marica, which is likewise owned by Coastwise.
Upon reaching Manila Bay, while approaching Pier 18, one of the barges, "Coastwise
9", struck an unknown sunken object. The forward buoyancy compartment was
damaged, and water gushed in through a hole "two inches wide and twenty-two
inches long"1 As a consequence, the molasses at the cargo tanks were contaminated
and rendered unfit for the use it was intended. This prompted the consignee, Pag-
asa Sales, Inc. to reject the shipment of molasses as a total loss. Thereafter, Pag-asa
Sales, Inc. filed a formal claim with the insurer of its lost cargo, herein private
respondent, Philippine General Insurance Company (PhilGen, for short) and against
the carrier, herein petitioner, Coastwise Lighterage. Coastwise Lighterage denied the
claim and it was PhilGen which paid the consignee, Pag-asa Sales, Inc., the amount of
P700,000.00, representing the value of the damaged cargo of molasses.
In turn, PhilGen then filed an action against Coastwise Lighterage before the Regional
Trial Court of Manila, seeking to recover the amount of P700,000.00 which it paid to
Pag-asa Sales, Inc. for the latter's lost cargo. PhilGen now claims to be subrogated to
all the contractual rights and claims which the consignee may have against the carrier,
which is presumed to have violated the contract of carriage.
The RTC awarded the amount prayed for by PhilGen. On Coastwise Lighterage's
appeal to the Court of Appeals, the award was affirmed.
Hence, this petition.
There are two main issues to be resolved herein. First, whether or not petitioner
Coastwise Lighterage was transformed into a private carrier, by virtue of the contract
of affreightment which it entered into with the consignee, Pag-asa Sales, Inc.
Corollarily, if it were in fact transformed into a private carrier, did it exercise the
ordinary diligence to which a private carrier is in turn bound? Second, whether or not
the insurer was subrogated into the rights of the consignee against the carrier, upon
payment by the insurer of the value of the consignee's goods lost while on board one
of the carrier's vessels.
On the first issue, petitioner contends that the RTC and the Court of Appeals erred in
finding that it was a common carrier. It stresses the fact that it contracted with Pag-
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
asa Sales, Inc. to transport the shipment of molasses from Negros Oriental to Manila
and refers to this contract as a "charter agreement". It then proceeds to cite the case
of Home Insurance Company vs. American Steamship Agencies, Inc.2 wherein this
Court held: ". . . a common carrier undertaking to carry a special cargo or chartered
to a special person only becomes a private carrier."
Petitioner's reliance on the aforementioned case is misplaced. In its entirety, the
conclusions of the court are as follows:
Accordingly, the charter party contract is one of affreightment over the whole vessel,
rather than a demise. As such, the liability of the shipowner for acts or negligence of
its captain and crew, would remain in the absence of stipulation.3
The distinction between the two kinds of charter parties (i.e. bareboat or demise and
contract of affreightment) is more clearly set out in the case of Puromines, Inc. vs.
Court of Appeals,4 wherein we ruled:
Under the demise or bareboat charter of the vessel, the charterer will generally be
regarded as the owner for the voyage or service stipulated. The charterer mans the
vessel with his own people and becomes 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.
On the other hand a contract of affreightment is one in which the owner of the vessel
leases part or all of its space to haul goods for others. It is a contract for special service
to be rendered by the owner of the vessel and under such contract the general owner
retains the possession, command and navigation of the ship, the charterer or
freighter merely having use of the space in the vessel in return for his payment of the
charter hire. . . . .
. . . . An owner who retains possession of the ship though the hold is the property of
the charterer, remains liable as carrier and must answer for any breach of duty as to
the care, loading and unloading of the cargo. . . .
Although a charter party may transform a common carrier into a private one, the
same however is not true in a contract of affreightment on account of the
aforementioned distinctions between the two.
Petitioner admits that the contract it entered into with the consignee was one of
affreightment.5 We agree. Pag-asa Sales, Inc. only leased three of petitioner's vessels,
in order to carry cargo from one point to another, but the possession, command and
navigation of the vessels remained with petitioner Coastwise Lighterage.
Pursuant therefore to the ruling in the aforecited Puromines case, Coastwise
Lighterage, by the contract of affreightment, was not converted into a private carrier,
but remained a common carrier and was still liable as such.
The law and jurisprudence on common carriers both hold that the mere proof of
delivery of goods in good order to a carrier and the subsequent arrival of the same
goods at the place of destination in bad order makes for a prima facie case against
the carrier.
It follows then that the presumption of negligence that attaches to common carriers,
once the goods it transports are lost, destroyed or deteriorated, applies to the
petitioner. This presumption, which is overcome only by proof of the exercise of
extraordinary diligence, remained unrebutted in this case.
The records show that the damage to the barge which carried the cargo of molasses
was caused by its hitting an unknown sunken object as it was heading for Pier 18. The
object turned out to be a submerged derelict vessel. Petitioner contends that this
navigational hazard was the efficient cause of the accident. Further it asserts that the
fact that the Philippine Coastguard "has not exerted any effort to prepare a chart to
indicate the location of sunken derelicts within Manila North Harbor to avoid
navigational accidents"6 effectively contributed to the happening of this mishap.
Thus, being unaware of the hidden danger that lies in its path, it became impossible
for the petitioner to avoid the same. Nothing could have prevented the event, making
it beyond the pale of even the exercise of extraordinary diligence.
However, petitioner's assertion is belied by the evidence on record where it appeared
that far from having rendered service with the greatest skill and utmost foresight,
and being free from fault, the carrier was culpably remiss in the observance of its
duties.
Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was
not licensed. The Code of Commerce, which subsidiarily governs common carriers
(which are primarily governed by the provisions of the Civil Code) provides:
Art. 609. — Captains, masters, or patrons of vessels must be Filipinos, have legal
capacity to contract in accordance with this code, and prove the skill capacity and
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
qualifications necessary to command and direct the vessel, as established by marine
and navigation laws, ordinances or regulations, and must not be disqualified
according to the same for the discharge of the duties of the position. . . .
Clearly, petitioner Coastwise Lighterage's embarking on a voyage with an unlicensed
patron violates this rule. It cannot safely claim to have exercised extraordinary
diligence, by placing a person whose navigational skills are questionable, at the helm
of the vessel which eventually met the fateful accident. It may also logically, follow
that a person without license to navigate, lacks not just the skill to do so, but also the
utmost familiarity with the usual and safe routes taken by seasoned and legally
authorized ones. Had the patron been licensed, he could be presumed to have both
the skill and the knowledge that would have prevented the vessel's hitting the sunken
derelict ship that lay on their way to Pier 18.
As a common carrier, petitioner is liable for breach of the contract of carriage, having
failed to overcome the presumption of negligence with the loss and destruction of
goods it transported, by proof of its exercise of extraordinary diligence.
On the issue of subrogation, which petitioner contends as inapplicable in this case,
we once more rule against the petitioner. We have already found petitioner liable for
breach of the contract of carriage it entered into with Pag-asa Sales, Inc. However,
for the damage sustained by the loss of the cargo which petitioner-carrier was
transporting, it was not the carrier which paid the value thereof to Pag-asa Sales, Inc.
but the latter's insurer, herein private respondent PhilGen.
Article 2207 of the Civil Code is explicit on this point:
Art. 2207. If the plaintiffs property has been insured, and he has received indemnity
from the insurance company for the injury or loss arising out of the wrong or breach
of contract complained of, the insurance company shall be subrogated to the rights
of the insured against the wrongdoer or the person who violated the contract. . . .
This legal provision containing the equitable principle of subrogation has been
applied in a long line of cases including Compania Maritima v. Insurance Company of
North America;7 Fireman's Fund Insurance Company v. Jamilla & Company, Inc.,8 and
Pan Malayan Insurance Corporation v. Court of Appeals,9 wherein this Court
explained:
Article 2207 of the Civil Code is founded on the well-settled principle of subrogation.
If the insured property is destroyed or damaged through the fault or negligence of a
party other than the assured, then the insurer, upon payment to the assured will be
subrogated to the rights of the assured to recover from the wrongdoer to the extent
that the insurer has been obligated to pay. Payment by the insurer to the assured
operated as an equitable assignment to the former of all remedies which the latter
may have against the third party whose negligence or wrongful act caused the loss.
The right of subrogation is not dependent upon, nor does it grow out of, any privity
of contract or upon written assignment of claim. It accrues simply upon payment of
the insurance claim by the insurer.
Undoubtedly, upon payment by respondent insurer PhilGen of the amount of
P700,000.00 to Pag-asa Sales, Inc., the consignee of the cargo of molasses totally
damaged while being transported by petitioner Coastwise Lighterage, the former was
subrogated into all the rights which Pag-asa Sales, Inc. may have had against the
carrier, herein petitioner Coastwise Lighterage.
WHEREFORE, premises considered, this petition is DENIED and the appealed decision
affirming the order of Branch 35 of the Regional Trial Court of Manila for petitioner
Coastwise Lighterage to pay respondent Philippine General Insurance Company the
"principal amount of P700,000.00 plus interest thereon at the legal rate computed
from March 29, 1989, the date the complaint was filed until fully paid and another
sum of P100,000.00 as attorney's fees and costs"10 is likewise hereby AFFIRMED
SO ORDERED.
6.
G.R. No. 177116 February 27, 2013
ASIAN TERMINALS, INC., Petitioner,
vs.
SIMON ENTERPRISES, INC., Respondent.
DECISION
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, assailing the Decision1 dated November 27, 2006 and
Resolution2 dated March 23, 2007 of the Court of Appeals (CA) in CA-G.R. CV No.
71210.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
The facts are as follows:
On October 25, 1995, Contiquincybunge Export Company loaded 6,843.700 metric
tons of U.S. Soybean Meal in Bulk on board the vessel MN "Sea Dream" at the Port of
Darrow, Louisiana, U.S.A., for delivery to the Port of Manila to respondent Simon
Enterprises, Inc., as consignee. When the vessel arrived at the South Harbor in Manila,
the shipment was discharged to the receiving barges of petitioner Asian Terminals,
Inc. (ATI), the arrastre operator. Respondent later received the shipment but claimed
having received only 6,825.144 metric tons of U.S. Soybean Meal, or short by 18.556
metric tons, which is estimated to be worth US$7,100.16 or ₱186,743.20.3
On November 25, 1995, Contiquincybunge Export Company made another shipment
to respondent and allegedly loaded on board the vessel M/V "Tern" at the Port of
Darrow, Louisiana, U.S.A. 3,300.000 metric tons of U.S. Soybean Meal in Bulk for
delivery to respondent at the Port of Manila. The carrier issued its clean Berth Term
Grain Bill of Lading.4
On January 25, 1996, the carrier docked at the inner Anchorage, South Harbor,
Manila. The subject shipment was discharged to the receiving barges of petitioner
ATI and received by respondent which, however, reported receiving only 3,100.137
metric tons instead of the manifested 3,300.000 metric tons of shipment.
Respondent filed against petitioner ATI and the carrier a claim for the shortage of
199.863 metric tons, estimated to be worth US$79,848.86 or ₱2,100,025.00, but its
claim was denied.
Thus, on December 3, 1996, respondent filed with the Regional Trial Court (RTC) of
Manila an action for damages5 against the unknown owner of the vessels M/V "Sea
Dream" and M/V "Tern," its local agent Inter-Asia Marine Transport, Inc., and
petitioner ATI alleging that it suffered the losses through the fault or negligence of
the said defendants. Respondent sought to claim damages plus attorney’s fees and
costs of suit. Its claim against the unknown owner of the vessel M/V "Sea Dream,"
however, was later settled in a Release and Quitclaim6 dated June 9, 1998, and only
the claims against the unknown owner of the M/V "Tern," Inter-Asia Marine
Transport, Inc., and petitioner ATI remained.
In their Answer,7 the unknown owner of the vessel M/V "Tern" and its local agent
Inter-Asia Marine Transport, Inc., prayed for the dismissal of the complaint essentially
alleging lack of cause of action and prescription. They alleged as affirmative defenses
the following: that the complaint does not state a cause of action; that plaintiff
and/or defendants are not the real parties-in-interest; that the cause of action had
already prescribed or laches had set in; that the claim should have been filed within
three days from receipt of the cargo pursuant to the provisions of the Code of
Commerce; that the defendant could no longer check the veracity of plaintiff’s claim
considering that the claim was filed eight months after the cargo was discharged from
the vessel; that plaintiff hired its own barges to receive the cargo and hence, any
damages or losses during the discharging operations were for plaintiff’s account and
responsibility; that the statement of facts bears no remarks on any short-landed
cargo; that the draft survey report indicates that the cargo discharged was more than
the figures appearing in the bill of lading; that because the bill of lading states that
the goods are carried on a "shipper’s weight, quantity and quality unknown" terms
and on "all terms, conditions and exceptions as per charter party dated October 15,
1995," the vessel had no way of knowing the actual weight, quantity, and quality of
the bulk cargo when loaded at the port of origin and the vessel had to rely on the
shipper for such information; that the subject shipment was discharged in Manila in
the same condition and quantity as when loaded at the port of loading; that
defendants’ responsibility ceased upon discharge from the ship’s tackle; that the
damage or loss was due to the inherent vice or defect of the goods or to the
insufficiency of packing thereof or perils or dangers or accidents of the sea, pre-
shipment damage or to improper handling of the goods by plaintiff or its
representatives after discharge from the vessel, for which defendants cannot be
made liable; that damage/loss occurred while the cargo was in the possession,
custody or control of plaintiff or its representative, or due to plaintiff’s own
negligence and careless actuations in the handling of the cargo; that the loss is less
than 0.75% of the entire cargo and assuming arguendo that the shortage exists, the
figure is well within the accepted parameters when loading this type of bulk cargo;
that defendants exercised the required diligence under the law in the performance
of their duties; that the vessel was seaworthy in all respects; that the vessel went
straight from the port of loading to Manila, without passing through any intermediate
ports so there was no chance for any loss of the cargo; the plaintiff’s claim is excessive,
grossly overstated, unreasonable and a mere paper loss and is certainly
unsubstantiated and without any basis; the terms and conditions of the relevant bill
of lading and the charter party, as well as the provisions of the Carriage of Goods by
Sea Act and existing laws, absolve the defendants from any liability; that the subject
shipment was received in bulk and thus defendant carrier has no knowledge of the
condition, quality and quantity of the cargo at the time of loading; that the complaint
was not referred to the arbitrators pursuant to the bill of lading; that liability, if any,
should not exceed the CIF value of the lost cargo, or the limits of liability set forth in
the bill of lading and the charter party. As counterclaim, defendants prayed for the
payment of attorney’s fees in the amount of ₱220,000. By way of cross-claim, they
ask for reimbursement from their co-defendant, petitioner ATI, in the event that they
are held liable to plaintiff.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Petitioner ATI meanwhile alleged in its Answer8 that it exercised the required
diligence in handling the subject shipment. It moved for the dismissal of the
complaint, and alleged by way of special and affirmative defense that plaintiff has no
valid cause of action against petitioner ATI; that the cargo was completely discharged
from the vessel M/V "Tern" to the receiving barges owned or hired by the plaintiff;
and that petitioner ATI exercised the required diligence in handling the shipment. By
way of counterclaim, petitioner ATI argued that plaintiff should shoulder its expenses
for attorney’s fees in the amount of ₱20,000 as petitioner ATI was constrained to
engage the services of counsel to protect its interest.
On May 10, 2001, the RTC of Manila rendered a Decision9 holding petitioner ATI and
its co-defendants solidarily liable to respondent for damages arising from the
shortage. The RTC held:
WHEREFORE, premises considered, judgment is hereby rendered ordering
defendants M/V "Tern" Inter-Asia Marine Transport, Inc. and Asian Terminal Inc.
jointly and severally liable to pay plaintiff Simon Enterprises the sum of
₱2,286,259.20 with legal interest from the date the complaint was filed until fully
satisfied, 10% of the amount due plaintiff as and for attorney’s fees plus the costs of
suit.
Defendants’ counterclaim and cross claim are hereby DISMISSED for lack of merit.
SO ORDERED.10
The trial court found that respondent has established that the losses/shortages were
incurred prior to its receipt of the goods. As such, the burden shifted to the carrier to
prove that it exercised extraordinary diligence as required by law to prevent the loss,
destruction or deterioration.
However, the trial court held that the defendants failed to prove that they did so. The
trial court gave credence to the testimony of Eduardo Ragudo, a super cargo of
defendant Inter-Asia Marine Transport, Inc., who admitted that there were spillages
or overflow down to the spillage saver. The trial court also noted that said witness
also declared that respondent’s representative was not allowed to sign the Master’s
Certificate. Such declaration, said the trial court, placed petitioner ATI in a bad light
and weakened its stand.
Not satisfied, the unknown owner of the vessel M/V "Tern," Inter-Asia Marine
Transport, Inc. and petitioner ATI respectively filed appeals to the CA. In their petition,
the unknown owner of the vessel M/V "Tern" and Inter-Asia Marine Transport, Inc.
raised the question of whether the trial court erred in finding that they did not
exercise extraordinary diligence in the handling of the goods.11
On the other hand, petitioner ATI alleged that:
THE COURT-A-QUO COMMITTED SERIOUS AND REVERSIBLE ERROR IN HOLDING
DEFENDANT[-]APPELLANT ATI SOLIDARILY LIABLE WITH CO-DEFENDANT APPELLANT
INTERASIA MARINE TRANSPORT, INC. CONTRARY TO THE EVIDENCE PRESENTED.12
On November 27, 2006, the CA promulgated the assailed Decision, the decretal
portion of which reads:
WHEREFORE, the appealed Decision dated May 10, 2001 is affirmed, except the
award of attorney’s fees which is hereby deleted.
SO ORDERED.13
In affirming the RTC Decision, the CA held that there is no justification to disturb the
factual findings of the trial court which are entitled to respect on appeal as they were
supported by substantial evidence. It agreed with the findings of the trial court that
the unknown owner of the vessel M/V "Tern" and Inter-Asia Marine Transport, Inc.
failed to establish that they exercised extraordinary diligence in transporting the
goods or exercised due diligence to forestall or lessen the loss as provided in Article
174214 of the Civil Code. The CA also ruled that petitioner ATI, as the arrastre
operator, should be held jointly and severally liable with the carrier considering that
petitioner ATI’s stevedores were under the direct supervision of the unknown owner
of M/V "Tern" and that the spillages occurred when the cargoes were being unloaded
by petitioner ATI’s stevedores.
Petitioner ATI filed a motion for reconsideration,15 but the CA denied its motion in a
Resolution16dated March 23, 2007. The unknown owner of the vessel M/V "Tern"
and Inter-Asia Marine Transport, Inc. for their part, appealed to this Court via a
petition for review on certiorari, which was docketed as G.R. No. 177170. Its appeal,
however, was denied by this Court on July 16, 2007 for failure to sufficiently show
any reversible error committed by the CA in the challenged Decision and Resolution
as to warrant the exercise of this Court’s discretionary appellate jurisdiction. The
unknown owner of M/V "Tern" and Inter-Asia Marine Transport, Inc. sought
reconsideration of the denial but their motion was denied by the Court in a
Resolution dated October 17, 2007.17
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Meanwhile, on April 20, 2007, petitioner ATI filed the present petition raising the sole
issue of whether the appellate court erred in affirming the decision of the trial court
holding petitioner ATI solidarily liable with its codefendants for the shortage incurred
in the shipment of the goods to respondent.
Petitioner ATI argues that:
1. Respondent failed to prove that the subject shipment suffered actual loss/shortage
as there was no competent evidence to prove that it actually weighed 3,300 metric
tons at the port of origin.
2. Stipulations in the bill of lading that the cargo was carried on a "shipper’s weight,
quantity and quality unknown" is not contrary to public policy. Thus, herein petitioner
cannot be bound by the quantity or weight of the cargo stated in the bill of lading.
3. Shortage/loss, if any, may have been due to the inherent nature of the shipment
and its insufficient packing considering that the subject cargo was shipped in bulk and
had a moisture content of 12.5%.
4. Respondent failed to substantiate its claim for damages as no competent evidence
was presented to prove the same.1âwphi1
5. Respondent has not presented any scintilla of evidence showing any
fault/negligence on the part of herein petitioner.
6. Petitioner ATI should be entitled to its counterclaim.18
Respondent, on the other hand, quotes extensively the CA decision and maintains its
correctness.
We grant the petition.
The CA erred in affirming the decision of the trial court holding petitioner ATI
solidarily liable with its co-defendants for the shortage incurred in the shipment of
the goods to respondent.
We note that the matters raised by petitioner ATI involve questions of fact which are
generally not reviewable in a petition for review on certiorari under Rule 45 of the
1997 Rules of Civil Procedure, as amended, as the Court is not a trier of facts. Section
1 thereof provides that "the petition x x x shall raise only questions of law, which
must be distinctly set forth."
A question of law exists when the doubt or controversy concerns the correct
application of law or jurisprudence to a certain set of facts; or when the issue does
not call for an examination of the probative value of the evidence presented, the
truth or falsehood of facts being admitted. A question of fact exists when the doubt
or difference arises as to the truth or falsehood of facts or when the query invites
calibration of the whole evidence considering mainly the credibility of the witnesses,
the existence and relevancy of specific surrounding circumstances as well as their
relation to each other and to the whole, and the probability of the situation.19
The well-entrenched rule in our jurisdiction is that only questions of law may be
entertained by this Court in a petition for review on certiorari. This rule, however, is
not ironclad and admits certain exceptions, such as when (1) the conclusion is
grounded on speculations, surmises or conjectures; (2) the inference is manifestly
mistaken, absurd or impossible; (3) there is grave abuse of discretion; (4) the
judgment is based on a misapprehension of facts; (5) the findings of fact are
conflicting; (6) there is no citation of specific evidence on which the factual findings
are based; (7) the findings of absence of facts are contradicted by the presence of
evidence on record; (8) the findings of the Court of Appeals are contrary to those of
the trial court; (9) the Court of Appeals manifestly overlooked certain relevant and
undisputed facts that, if properly considered, would justify a different conclusion;
(10) the findings of the Court of Appeals are beyond the issues of the case; and (11)
such findings are contrary to the admissions of both parties.20
After a careful review of the records, we find justification to warrant the application
of the fourth exception. The CA misapprehended the following facts.
First, petitioner ATI is correct in arguing that the respondent failed to prove that the
subject shipment suffered actual shortage, as there was no competent evidence to
prove that it actually weighed 3,300 metric tons at the port of origin.
Though it is true that common carriers are presumed to have been at fault or to have
acted negligently if the goods transported by them are lost, destroyed, or
deteriorated, and that the common carrier must prove that it exercised extraordinary
diligence in order to overcome the presumption,21 the plaintiff must still, before the
burden is shifted to the defendant, prove that the subject shipment suffered actual
shortage. This can only be done if the weight of the shipment at the port of origin
and its subsequent weight at the port of arrival have been proven by a
preponderance of evidence, and it can be seen that the former weight is considerably
greater than the latter weight, taking into consideration the exceptions provided in
Article 173422 of the Civil Code.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
In this case, respondent failed to prove that the subject shipment suffered shortage,
for it was not able to establish that the subject shipment was weighed at the port of
origin at Darrow, Louisiana, U.S.A. and that the actual weight of the said shipment
was 3,300 metric tons.
The Berth Term Grain Bill of Lading23 (Exhibit "A"), the Proforma Invoice24 (Exhibit
"B"), and the Packing List25 (Exhibit "C"), being used by respondent to prove that the
subject shipment weighed 3,300 metric tons, do not, in fact, help its cause. The Berth
Term Grain Bill of Lading states that the subject shipment was carried with the
qualification "Shipper’s weight, quantity and quality unknown," meaning that it was
transported with the carrier having been oblivious of the weight, quantity, and
quality of the cargo. This interpretation of the quoted qualification is supported by
Wallem Philippines Shipping, Inc. v. Prudential Guarantee & Assurance, Inc.,26 a case
involving an analogous stipulation in a bill of lading, wherein the Supreme Court held
that:
Indeed, as the bill of lading indicated that the contract of carriage was under a "said
to weigh" clause, the shipper is solely responsible for the loading while the carrier is
oblivious of the contents of the shipment. (Emphasis supplied)
Similarly, International Container Terminal Services, Inc. v. Prudential Guarantee &
Assurance Co., Inc.,27 explains the meaning of clauses analogous to "Shipper’s weight,
quantity and quality unknown" in this manner:
This means that the shipper was solely responsible for the loading of the container,
while the carrier was oblivious to the contents of the shipment x x x. The arrastre
operator was, like any ordinary depositary, duty-bound to take good care of the
goods received from the vessel and to turn the same over to the party entitled to
their possession, subject to such qualifications as may have validly been imposed in
the contract between the parties. The arrastre operator was not required to verify
the contents of the container received and to compare them with those declared by
the shipper because, as earlier stated, the cargo was at the shipper’s load and count
x x x. (Italics in the original; emphasis supplied)
Also, Bankers & Manufacturers Assurance Corporation v. Court of Appeals28
elucidates thus:
The recital of the bill of lading for goods thus transported [i.e., transported in sealed
containers or "containerized"] 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 x x x.
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 x x x. (Emphasis
supplied)
Hence, as can be culled from the above-mentioned cases, the weight of the shipment
as indicated in the bill of lading is not conclusive as to the actual weight of the goods.
Consequently, the respondent must still prove the actual weight of the subject
shipment at the time it was loaded at the port of origin so that a conclusion may be
made as to whether there was indeed a shortage for which petitioner must be liable.
This, the respondent failed to do.
The Proforma Invoice militates against respondent’s claim that the subject shipment
weighed 3,300 metric tons. The pertinent portion of the testimony of Mr. Jose
Sarmiento, respondent’s Claims Manager, is narrated below:
Atty. Rebano: You also identified a while ago, Mr. Witness Exhibit B, the invoice. Why
does it state as description of the cargo three thousand metric tons and not three
thousand three hundred?
A: Usually there is a contract between the supplier and our company that embodied
[sic] in the letter credit [sic] that they have the option to ship the cargo plus or minus
ten percent of the quantity.
xxxx
Q: So, it is possible for the shipper to ship less than ten percent in [sic] the quantity
stated in the invoice and it will still be a valid shipment. Is it [sic] correct?
A: It [sic] is correct but we must be properly advised and the commercial invoice
should indicate how much they sent to us.29 (Emphasis supplied)
The quoted part of Mr. Sarmiento’s testimony not only shows uncertainty as to the
actual weight of the shipment, it also shows that assuming respondent did order
3,300 metric tons of U.S. Soybean Meal from Contiquincybunge Export Company, and
also assuming that it only received 3,100.137 metric tons, such volume would still be
a valid shipment because it is well within the 10% allowable shortage. Note that Mr.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Sarmiento himself mentioned that the supplier has the option to "ship the cargo plus
or minus ten percent of the quantity."30
Notably also, the genuineness and the due execution of the Packing List, the Berth
Term Grain Bill of Lading, and the Proforma Invoice, were not established.
Wallem Philippines Shipping, Inc.,31 is instructive on this matter:
We find that the Court of Appeals erred in finding that a shortage had taken place.
Josephine Suarez, Prudential’s claims processor, merely identified the papers
submitted to her in connection with GMC’s claim (Bill of Lading BEDI/1 (Exh. "B"),
Commercial Invoice No. 1401 issued by Toepfer International Asia Pte, Ltd. (Exh. "C"),
SGS Certificate of Quality (Exh. "F-1"), and SGS Certificate of Weight (Exh. "F-3")). Ms.
Suarez had no personal knowledge of the contents of the said documents and could
only surmise as to the actual weight of the cargo loaded on M/V Gao Yang x x x.
xxxx
Ms. Suarez’s testimony regarding the contents of the documents is thus hearsay,
based as it is on the knowledge of another person not presented on the witness stand.
Nor has the genuineness and due execution of these documents been established. In
the absence of clear, convincing, and competent evidence to prove that the shipment
indeed weighed 4,415.35 metric tons at the port of origin when it was loaded on the
M/V Gao Yang, it cannot be determined whether there was a shortage of the
shipment upon its arrival in Batangas. (Emphasis supplied)
As in the present case, Mr. Sarmiento merely identified the three above-mentioned
exhibits, but he had no personal knowledge of the weight of the subject shipment
when it was loaded onto the M/V "Tern" at the port of origin. His testimony as
regards the weight of the subject shipment as described in Exhibits "A," "B," and "C"
must then be considered as hearsay,32 for it was based on the knowledge of a person
who was not presented during the trial in the RTC.
The presumption that the Berth Term Grain Bill of Lading serves as prima facie
evidence of the weight of the cargo has been rebutted, there being doubt as to the
weight of the cargo at the time it was loaded at the port of origin. Further, the fact
that the cargo was shipped with the arrangement "Shipper’s weight, quantity and
quality unknown," indeed means that the weight of the cargo could not be
determined using as basis the figures written on the Berth Term Grain Bill of Lading.
This is in line with Malayan Insurance Co., Inc. v. Jardine Davies Transport Services,
Inc.,33 where we said:
The presumption that the bill of lading, which petitioner relies upon to support its
claim for restitution, constitutes prima facie evidence of the goods therein described
was correctly deemed by the appellate court to have been rebutted in light of
abundant evidence casting doubts on its veracity.
That MV Hoegh undertook, under the bill of lading, to transport 6,599.23 MT of
yellow crude sulphur on a "said to weigh" basis is not disputed. Under such clause,
the shipper is solely responsible for the loading of the cargo while the carrier is
oblivious of the contents of the shipment. Nobody really knows the actual weight of
the cargo inasmuch as what is written on the bill of lading, as well as on the manifest,
is based solely on the shipper’s declaration.
The bill of lading carried an added clause – the shipment’s weight, measure, quantity,
quality, condition, contents and value unknown. Evidently, the weight of the cargo
could not be gauged from the bill of lading. (Italics in the original; emphasis supplied)
The respondent having failed to present evidence to prove the actual weight of the
subject shipment when it was loaded onto the M/V "Tern," its cause of action must
then fail because it cannot prove the shortage that it was alleging. Indeed, if the
claimant cannot definitively establish the weight of the subject shipment at the point
of origin, the fact of shortage or loss cannot be ascertained. The claimant then has
no basis for claiming damages resulting from an alleged shortage. Again, Malayan
Insurance Co., Inc.,34 provides jurisprudential basis:
In the absence of clear, convincing and competent evidence to prove that the cargo
indeed weighed, albeit the Bill of Lading qualified it by the phrase "said to weigh,"
6,599.23 MT at the port of origin when it was loaded onto the MV Hoegh, the fact of
loss or shortage in the cargo upon its arrival in Manila cannot be definitively
established. The legal basis for attributing liability to either of the respondents is thus
sorely wanting. (Emphasis supplied)
Second, as correctly asserted by petitioner ATI, the shortage, if any, may have been
due to the inherent nature of the subject shipment or its packaging since the subject
cargo was shipped in bulk and had a moisture content of 12.5%.
It should be noted that the shortage being claimed by the respondent is minimal, and
is an indication that it could be due to consolidation or settlement of the subject
shipment, as accurately observed by the petitioner. A Kansas State University study
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
on the handling and storage of soybeans and soybean meal35 is instructive on this
matter. Pertinent portions of the study reads:
Soybean meal is difficult to handle because of poor flow ability and bridging
characteristics. Soybean meal tends to settle or consolidate over time. This
phenomenon occurs in most granular materials and becomes more severe with
increased moisture, time and small particle size x x x.
xxxx
Moisture is perhaps the most important single factor affecting storage of soybeans
and soybean meal. Soybeans contain moisture ranging from 12% to 15% (wet basis)
at harvest time x x x.
xxxx
Soybeans and soybean meal are hygroscopic materials and will either lose (desorb)
or gain (adsorb) moisture from the surrounding air. The moisture level reached by a
product at a given constant temperature and equilibrium relative humidity (ERH) is
its equilibrium moisture content (EMC) x x x. (Emphasis supplied)
As indicated in the Proforma Invoice mentioned above, the moisture content of the
subject shipment was 12.5%. Taking into consideration the phenomena of desorption,
the change in temperature surrounding the Soybean Meal from the time it left
wintertime Darrow, Louisiana, U.S.A. and the time it arrived in Manila, and the fact
that the voyage of the subject cargo from the point of loading to the point of
unloading was 36 days, the shipment could have definitely lost weight, corresponding
to the amount of moisture it lost during transit.
The conclusion that the subject shipment lost weight in transit is bolstered by the
testimony of Mr. Fernando Perez, a Cargo Surveyor of L.J. Del Pan. The services of Mr.
Perez were requested by respondent.36 Mr. Perez testified that it was possible for
the subject shipment to have lost weight during the 36-day voyage, as it was
wintertime when M/V "Tern" left the United States and the climate was warmer
when it reached the Philippines; hence the moisture level of the Soybean Meal could
have changed.37 Moreover, Mr. Perez himself confirmed, by answering a question
propounded by the RTC, that loss of weight of the subject cargo cannot be avoided
because of the shift in temperature from the colder United States weather to the
warmer Philippine climate.38
More importantly, the 199.863 metric-ton shortage that respondent alleges is a
minimal 6.05% of the weight of the entire Soy Bean Meal shipment. Taking into
consideration the previously mentioned option of the shipper to ship 10% more or
less than the contracted shipment, and the fact that the alleged shortage is only
6.05% of the total quantity of 3,300 metric tons, the alleged percentage loss clearly
does not exceed the allowable 10% allowance for loss, as correctly argued by
petitioner. The alleged loss, if any, not having exceeded the allowable percentage of
shortage, the respondent then has no cause of action to claim for shortages.
Third, we agree with the petitioner ATI that respondent has not proven any
negligence on the part of the former.
As petitioner ATI pointed out, a reading of the Survey Report of Del Pan Surveyors39
(Exhibits "D" to "D-4" of respondent) would not show any untoward incident or
negligence on the part of petitioner ATI during the discharging operations.
Also, a reading of Exhibits "D", "D-1", and "D-2" would show that the methods used
in determining whether there was a shortage are not accurate.
Respondent relied on the Survey Reports of Del Pan Surveyors to prove that the
subject shipment suffered loss. The conclusion that there was a shortage arose from
an evaluation of the weight of the cargo using the barge displacement method. This
is a type of draught survey, which is a method of cargo weight determination by ship’s
displacement calculations.40 The basic principle upon which the draught survey
methodology is based is the Principle of Archimedes, i.e., a vessel when floating in
water, will displace a weight of water equal to its own weight.41 It then follows that
if a weight of cargo is loaded on (or unloaded from) a vessel freely floating in water,
then the vessel will sink (or float) into the water until the total weight of water
displaced is equal to the original weight of the vessel, plus (or minus) the cargo which
has been loaded (or unloaded) and plus (or minus) density variation of the water
between the starting survey (first measurement) and the finishing survey (second
measurement).42 It can be seen that this method does not entail the weighing of the
cargo itself, but as correctly stated by the petitioner, the weight of the shipment is
being measured by mere estimation of the water displaced by the barges before and
after the cargo is unloaded from the said barges.
In addition, the fact that the measurements were done by Del Pan Surveyors in
prevailing slight to slightly rough sea condition43 supports the conclusion that the
resulting measurement may not be accurate. A United Nations study on draught
surveys44 in fact states that the accuracy of draught surveys will be dependent upon
several factors, one of which is the weather and seas condition in the harbor.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Also, it can be seen in respondent’s own Exhibit "D-1" that the actual weight of the
cargo was established by weighing 20% of the cargo. Though we recognize the
practicality of establishing cargo weight through random sampling, we note the
discrepancy in the weights used in the determination of the alleged shortage.
Exhibit "D-1" of respondent states that the average weight of each bag is 52 kilos. A
total of 63,391 bags45 were discharged from the barges, and the tare weight46 was
established at 0.0950 kilos.47 Therefore, if one were to multiply 52 kilos per bag by
63,391 bags and deduct the tare weight of 0.0950 kilos multiplied by 63,391 bags, the
result would be 3,290,309.65 kilos, or 3,290.310 metric tons. This would mean that
the shortage was only 9.69 metric tons, if we suppose that respondent was able to
establish that the shipment actually weighed 3,300 metric tons at the port of loading.
However, the computation in Exhibit "D-2" would show that Del Pan Surveyors
inexplicably used 49 kilos as the weight per bag, instead of 52 kilos, therefore
resulting in the total net weight of 3,100,137 kilos or 3,100.137 metric tons. This was
the figure used as basis for respondent's conclusion that there is a shortage of
199.863 metric tons.48
These discrepancies only lend credence to petitioner ATI's assertion that the
weighing methods respondent used as bases are unreliable and should not be
completely relied upon.
Considering that respondent was not able to establish conclusively that the subject
shipment weighed 3,300 metric tons at the port of loading, and that it cannot
therefore be concluded that there was a shortage for which petitioner should be
responsible; bearing in mind that the subject shipment most likely lost weight in
transit due to the inherent nature of Soya Bean Meal; assuming that the shipment
lost weight in transit due to desorption, the shortage of 199.863 metric tons that
respondent alleges is a minimal 6.05% of the weight of the entire shipment, which is
within the allowable 10% allowance for loss; and noting that the respondent was not
able to show negligence on the part of the petitioner and that the weighing methods
which respondent relied upon to establish the shortage it alleges is inaccurate,
respondent cannot fairly claim damages against petitioner for the subject shipment's
alleged shortage.
WHEREFORE, the petition for review on certiorari is GRANTED. The Decision dated
November 27, 2006 and Resolution dated March 23, 2007 of the Court of Appeals in
CA-G.R. CV No. 71210 are REVERSED AND SET ASIDE insofar as petitioner Asian
Terminals, Inc. is concerned. Needless to add, the complaint against petitioner
docketed as RTC Manila Civil Case No. 96-81101 is ordered DISMISSED.
No pronouncement as to costs.
SO ORDERED.
7.
G.R. No. 119706 March 14, 1996
PHILIPPINE AIRLINES, INC., petitioner,
vs.
COURT OF APPEALS and GILDA C. MEJIA, respondents.
REGALADO, J.:p
This is definitely not a case of first impression. The incident which eventuated in the
present controversy is a drama of common contentious occurrence between
passengers and carriers whenever loss is sustained by the former. Withal, the
exposition of the factual ambience and the legal precepts in this adjudication may
hopefully channel the assertiveness of passengers and the intransigence of carriers
into the realization that at times a bad extrajudicial compromise could be better than
a good judicial victory.
Assailed in this petition for review is the decision of respondent Court of Appeals in
CA-G.R. CV No. 427441 which affirmed the decision of the lower court 2 finding
petitioner Philippine Air Lines, Inc. (PAL) liable as follows:
ACCORDINGLY, judgment is hereby rendered ordering defendant Philippine Air Lines,
Inc., to pay plaintiff Gilda C. Mejia:
(1) P30,000.00 by way of actual damages of the microwave oven;
(2) P10,000.00 by way of moral damages;
(3) P20,000.00 by way of exemplary damages;
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
(4) P10,000.00 as attorney's fee;
all in addition to the costs of the suit.
Defendant's counterclaim is hereby dismissed for lack of merit.3
The facts as found by respondent Court of Appeals are as follows:
On January 27, 1990, plaintiff Gilda C. Mejia shipped thru defendant, Philippine
Airlines, one (1) unit microwave oven, with a gross weight of 33 kilograms from San
Francisco, U.S.A. to Manila, Philippines. Upon arrival, however, of said article in
Manila, Philippines, plaintiff discovered that its front glass door was broken and the
damage rendered it unserviceable. Demands both oral and written were made by
plaintiff against the defendant for the reimbursement of the value of the damaged
microwave oven, and transportation charges paid by plaintiff to defendant company.
But these demands fell on deaf ears.
On September 25, 1990, plaintiff Gilda C. Mejia filed the instant action for damages
against defendant in the lower court.
In its answer, defendant Airlines alleged inter alia, by way of special and affirmative
defenses, that the court has no jurisdiction over the case; that plaintiff has no valid
cause of action against defendant since it acted only in good faith and in compliance
with the requirements of the law, regulations, conventions and contractual
commitments; and that defendant had always exercised the required diligence in the
selection, hiring and supervision of its employees.4
What had theretofore transpired at the trial in the court a quo is narrated as follows:
Plaintiff Gilda Mejia testified that sometime on January 27, 1990, she took
defendant's plane from San Francisco, U.S.A. for Manila, Philippines (Exh. "F").
Amongst her baggages (sic) was a slightly used microwave oven with the brand name
"Sharp" under PAL Air Waybill No. 0-79-1013008-3 (Exh. "A"). When shipped,
defendant's office at San Francisco inspected it. It was in good condition with its front
glass intact. She did not declare its value upon the advice of defendant's personnel
at San Francisco.
When she arrived in Manila, she gave her sister Concepcion C. Diño authority to claim
her baggag(e) (Exh. "G") and took a connecting flight for Bacolod City.
When Concepcion C. Diño claimed the baggag(e) (Exh. "B") with defendant, then with
the Bureau of Customs, the front glass of the microwave oven was already broken
and cannot be repaired because of the danger of radiation. They demanded from
defendant thru Atty. Paco P30,000.00 for the damages although a brand new one
costs P40,000.00, but defendant refused to pay.
Hence, plaintiff engaged the services of counsel. Despite demand (Exh. "E") by
counsel, defendant still refused to pay.
The damaged oven is still with defendant. Plaintiff is engaged in (the) catering and
restaurant business. Hence, the necessity of the oven. Plaintiff suffered sleepless
nights when defendant refused to pay her (for) the broken oven and claims
P10,000.00 moral damages, P20,000.00 exemplary damages, P10,000.00 attorney's
fees plus P300.00 per court appearance and P15,000.00 monthly loss of income in
her business beginning February, 1990.
Defendant Philippine Airlines thru its employees Rodolfo Pandes and Vicente Villaruz
posited that plaintiff's claim was not investigated until after the filing of the formal
claim on August 13, 1990 (Exh. "6" also Exh. "E"). During the investigations, plaintiff
failed to submit positive proof of the value of the cargo. Hence her claim was denied.
Also plaintiff's claim was filed out of time under paragraph 12, a (1) of the Air Waybill
(Exh. "A", also Exh. "1") which provides: "(a) the person entitled to delivery must
make a complaint to the carrier in writing in case: (1) of visible damage to the goods,
immediately after discovery of the damage and at the latest within 14 days from the
receipt of the goods. 5
As stated at the outset, respondent Court of Appeals similarly ruled in favor of private
respondent by affirming in full the trial court's judgment in Civil Case No. 6210, with
costs against petitioner.6 Consequently, petitioner now impugns respondent
appellate court's ruling insofar as it agrees with (1) the conclusions of the trial court
that since the air waybill is a contract of adhesion, its provisions should be strictly
construed against herein petitioner; (2) the finding of the trial court that herein
petitioner's liability is not limited by the provisions of the air waybill; and (3) the
award by the trial court to private respondent of moral and exemplary damages,
attorney's fees and litigation expenses.
The trial court relied on the ruling in the case of Fieldmen's Insurance Co., Inc. vs. Vda.
De Songco, et al.7 in finding that the provisions of the air waybill should be strictly
construed against petitioner. More particularly, the court below stated its findings
thus:
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
In this case, it is seriously doubted whether plaintiff had read the printed conditions
at the back of the Air Waybill (Exh. "1"), or even if she had, if she was given a chance
to negotiate on the conditions for loading her microwave oven. Instead she was
advised by defendant's employee at San Francisco, U.S.A., that there is no need to
declare the value of her oven since it is not brand new. Further, plaintiff testified that
she immediately submitted a formal claim for P30,000.00 with defendant. But their
claim was referred from one employee to another th(e)n told to come back the next
day, and the next day, until she was referred to a certain Atty. Paco. When they got
tired and frustrated of coming without a settlement of their claim in sight, they
consulted a lawyer who demanded from defendant on August 13, 1990 (Exh. "E",
an[d] Exh. "6").
The conclusion that inescapably emerges from the above findings of fact is to
concede it with credence. . . . .8
Respondent appellate court approved said findings of the trial court in this manner:
We cannot agree with defendant-appellant's above contention. Under our
jurisprudence, the Air Waybill is a contract of adhesion considering that all the
provisions thereof are prepared and drafted only by the carrier (Sweet Lines v. Teves,
83 SCRA 361). The only participation left of the other party is to affix his signature
thereto (BPI Credit Corporation vs. Court of Appeals, 204 SCRA 601; Saludo, Jr. vs.
C.A., 207 SCRA 498; Maersk vs. Court of Appeals, 222 SCRA 108, among the recent
cases). In the earlier case of Angeles v. Calasanz, 135 SCRA 323, the Supreme Court
ruled that "the terms of a contract [of adhesion] must be interpreted against the
party who drafted the same." . . . .9
Petitioner airlines argues that the legal principle enunciated in Fieldmen's Insurance
does not apply to the present case because the provisions of the contract involved
here are neither ambiguous nor obscure. The front portion of the air waybill contains
a simple warning that the shipment is subject to the conditions of the contract on the
dorsal portion thereof regarding the limited liability of the carrier unless a higher
valuation is declared, as well as the reglementary period within which to submit a
written claim to the carrier in case of damage or loss to the cargo. Granting that the
air waybill is a contract of adhesion, it has been ruled by the Court that such contracts
are not entirely prohibited and are in fact binding regardless of whether or not
respondent herein read the provisions thereof. Having contracted the services of
petitioner carrier instead of other airlines, private respondent in effect negotiated
the terms of the contract and thus became bound thereby. 10
Counsel for private respondent refutes these arguments by saying that due to her
eagerness to ship the microwave oven to Manila, private respondent assented to the
terms and conditions of the contract without any opportunity to question or change
its terms which are practically on a "take-it-or-leave-it" basis, her only participation
therein being the affixation of her signature. Further, reliance on the Fieldmen's
Insurance case is misplaced since it is not the ambiguity or obscurity of the stipulation
that renders necessary the strict interpretation of a contract of adhesion against the
drafter, but the peculiarity of the transaction wherein one party, normally a
corporation, drafts all the provisions of the contract without any participation
whatsoever on the part of the other party other than affixment of signature. 11
A review of jurisprudence on the matter reveals the consistent holding of the Court
that contracts of adhesion are not invalid per se and that it has on numerous
occasions upheld the binding effect thereof. 12 As explained in Ong Yiu vs. Court of
Appeals, et al., supra:
. . . . Such provisions have been held to be a part of the contract of carriage, and valid
and binding upon the passenger regardless of the latter's lack of knowledge or assent
to the regulation. It is what is known as a contract of "adhesion," in regards which it
has been said that contracts of adhesion wherein one party imposes a ready-made
form of contract on the other, as the plane ticket in the case at bar, are contracts not
entirely prohibited. The one who adheres to the contract is in reality free to reject it
entirely; if he adheres, he gives his consent. . . , 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.
As rationalized in Saludo, Jr. vs. Court of Appeals, et al., supra:
. . . , it should be borne in mind that a contract of adhesion may be struck down as
void and unenforceable, for being subversive of public policy, only when the weaker
party is imposed upon in dealing with the dominant bargaining party and is reduced
to the alternative of taking it or leaving it, completely deprived of the opportunity to
bargain on equal footing. . . . .
but subject to the caveat that —
. . . . Just because we have said that Condition No. 5 of the airway bill is binding upon
the parties to and fully operative in this transaction, it does not mean, and let this
serve as fair warning to respondent carriers, that they can at all times whimsical seek
refuge from liability in the exculpatory sanctuary of said Condition No. 5 . . . .
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
The peculiar nature of such contracts behooves the Court to closely scrutinize the
factual milieu to which the provisions are intended to apply. Thus, just as consistently
and unhesitatingly, but without categorically invalidating such contracts, the Court
has construed obscurities and ambiguities in the restrictive provisions of contracts of
adhesion strictly albeit not unreasonably against the drafter thereof when justified in
light of the operative facts and surrounding circumstances. 13
We find nothing objectionable about the lower court's reliance upon the Fieldmen's
Insurance case, the principles wherein squarely apply to the present petition. The
parallelism between the aforementioned case and this one is readily apparent for,
just as in the instant case, it is the binding effect of the provisions in a contract of
adhesion (an insurance policy in Fieldmen's Insurance) that is put to test.
A judicious reading of the case reveals that what was pivotal in the judgment of
liability against petitioner insurance company therein, and necessarily interpreting
the provisions of the insurance policy as ineffective, was the finding that the
representations made by the agent of the insurance company rendered it impossible
to comply with the conditions of the contract in question, rather than the mere
ambiguity of its terms. The extended pronouncements regarding strict construction
of ambiguous provisions in an adhesion contract against its drafter, which although
made by the Court as an aside but has perforce evolved into a judicial tenet over time,
was actually an incidental statement intended to emphasize the duty of the court to
protect the weaker, as against the more dominant, party to a contract, as well as to
prevent the iniquitous situation wherein the will of one party is imposed upon the
other in the course of negotiation.
Thus, there can be no further question as to the validity of the terms of the air waybill,
even if the same constitutes a contract of adhesion. Whether or not the provisions
thereof particularly on the limited liability of the carrier are binding on private
respondent in this instance must be determined from the facts and circumstances
involved vis-a-vis the nature of the provisions sought to be enforced, taking care that
equity and fair play should characterize the transaction under review.
On petitioner's insistence that its liability for the damage to private respondent's
microwave oven, if any, should be limited by the provisions of the air waybill, the
lower court had this to say:
By and large, defendant's evidence is anchored principally on plaintiff's alleged failure
to comply with paragraph 12, a(1) (Exh. "1-C-2") of the Air waybill (Exh. "A," also Exh.
"1"), by filing a formal claim immediately after discovery of the damage. Plaintiff filed
her formal claim only on August 13, 1990 (Exh. "6", also Exh. "E"). And, failed to
present positive proof on the value of the damaged microwave oven. Hence, the
denial of her claim.
This Court has misgivings about these pretensions of defendant.
xxx xxx xxx
Finally, the Court finds no merit to defendant's contention that under the Warsaw
Convention, its liability if any, cannot exceed U.S. $20.00 based on weight as plaintiff
did not declare the contents of her baggage nor pay additional charges before the
flight. 14
The appellate court declared correct the non-application by the trial court of the
limited liability of therein defendant-appellant under the "Conditions of the
Contract" contained in the air waybill, based on the ruling in Cathay Pacific Airways,
Ltd. vs. Court of Appeals, et al., 15 which substantially enunciates the rule that while
the Warsaw Convention has the force and effect of law in the Philippines, being a
treaty commitment by the government and as a signatory thereto, the same does not
operate as an exclusive enumeration of the instances when a carrier shall be liable
for breach of contract or as an absolute limit of the extent of liability, nor does it
preclude the operation of the Civil Code or other pertinent laws.
Petitioner insists that both respondent court and the trial court erred in finding that
petitioner's liability, if any, is not limited by the provisions of the air waybill, for, as
evidence of the contract of carriage between petitioner and private respondent, it
substantially states that the shipper certifies to the correctness of the entries
contained therein and accepts that the carrier's liability is limited to US $20 per
kilogram of goods lost, damaged or destroyed unless a value is declared and a
supplementary charge paid. Inasmuch as no such declaration was made by private
respondent, as she admitted during cross-examination, the liability of petitioner, if
any, should be limited to 28 kilograms multiplied by US $20, or $560. Moreover, the
validity of these conditions has been upheld in the leading case of Ong Yiu vs. Court
of Appeals, et al., supra, and subsequent cases, for being a mere reiteration of the
limitation of liability under the Warsaw Convention, which treaty has the force and
effect of law. 16
It is additionally averred that since private respondent was merely advised, not
ordered, that she need not declare a higher value for her cargo, the final decision of
refraining from making such a declaration fell on private respondent and should not
put the petitioner in estoppel from invoking its limited liability.17
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754

In refutation, private respondent explains that the reason for the absence of a PAL's Acceptance Personnel based on information supplied by the shipper, 23 and to
declaration of a higher value was precisely because petitioner's personnel in San reject the cargo if the contents or the packing did not meet the company's required
Francisco, U.S.A. advised her not to declare the value of her cargo, which testimony specifications. Certainly, PAL could not have been otherwise prevailed upon to
has not at all been rebutted by petitioner. This being so, petitioner is estopped from merely accept the cargo.
faulting private respondent for her failure to declare the value of the microwave oven.
18 While Vicente Villaruz, officer-in-charge of the PAL Import Section at the time of
incident, posited that there may have been inadequate and improper packing of the
The validity of provisions limiting the liability of carriers contained in bills of lading cargo, 24 which by itself could be a ground for refusing carriage of the goods
have been consistently upheld for the following reason: presented for shipment, he nonetheless admitted on cross-examination that private
respondent's cargo was accepted by PAL in its San Francisco office:
. . . . The stipulation in the bill of lading limiting the common carrier's liability to the
value of goods appearing in the bill, unless the shipper or owner declares a greater ATTY. VINCO
value, is valid and binding. The limitation of the carrier's liability is sanctioned by the
freedom of the contracting parties to establish such stipulations, clauses, terms, or So that, be that as it may, my particular concern is that, it is the PAL personnel that
conditions as they may deem convenient, provided they are not contrary to law, accepts the baggage?
morals, good customs and public policy. . . . . 19
WITNESS
However, the Court has likewise cautioned against blind reliance on adhesion
contracts where the facts and circumstances warrant that they should be disregarded. Yes, sir.
20
ATTY. VINCO
In the case at bar, it will be noted that private respondent signified an intention to
declare the value of the microwave oven prior to shipment, but was explicitly advised Also, if he comes from abroad like in this particular case, it is the PAL personnel who
against doing so by PAL's personnel in San Francisco, U.S.A., as borne out by her accepts the baggage?
testimony in court:
WITNESS
xxx xxx xxx
Yes, sir.
Q Did you declare the value of the shipment?
ATTY. VINCO
A No. I was advised not to.
And the PAL personnel may or may not accept the baggage?
Q Who advised you?
WITNESS
A At the PAL Air Cargo. 21
Yes, sir.
It cannot be denied that the attention of PAL through its personnel in San Francisco
was sufficiently called to the fact that private respondent's cargo was highly ATTY. VINCO
susceptible to breakage as would necessitate the declaration of its actual value.
Petitioner had all the opportunity to check the condition and manner of packing prior
to acceptance for shipment, 22 as well as during the preparation of the air waybill by
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754

According to what is stated as in the acceptance of the cargo, it is to the best interest for carriage. He further opined that the microwave oven was only a general, not a
of the airlines, that is, he want(s) also that the airlines would be free from any liability. fragile, cargo which did not require any special handling. 26
Could that be one of the grounds for not admitting a baggage?
There is no absolute obligation on the part of a carrier to accept a cargo. Where a
WITNESS common carrier accepts a cargo for shipment for valuable consideration, it takes the
risk of delivering it in good condition as when it was loaded. And if the fact of
Safety is number one (1) improper packing is known to the carrier or its personnel, or apparent upon
observation but it accepts the goods notwithstanding such condition, it is not relieved
xxx xxx xxx of liability for loss or injury resulting therefrom. 27

ATTY. VINCO The acceptance in due course by PAL of private respondent's cargo as packed and its
advice against the need for declaration of its actual value operated as an assurance
So, this baggage was accepted and admitted in San Francisco? to private respondent that in fact there was no need for such a declaration. Petitioner
can hardly be faulted for relying on the representations of PAL's own personnel.
WITNESS
In other words, private respondent Mejia could and would have complied with the
Yes, sir. conditions stated in the air waybill, i.e., declaration of a higher value and payment of
supplemental transportation charges, entitling her to recovery of damages beyond
ATTY. VINCO the stipulated limit of US $20 per kilogram of cargo in the event of loss or damage,
had she not been effectively prevented from doing so upon the advice of PAL's
And you could not show any document to the Court that would suggest that this personnel for reasons best known to themselves.
baggage was denied admittance by your office at San Francisco?
As pointed out by private respondent, the aforestated facts were not denied by PAL
WITNESS in any of its pleadings nor rebutted by way of evidence presented in the course of the
trial, and thus in effect it judicially admitted that such an advice was given by its
No, I cannot show. personnel in San Francisco, U.S.A. Petitioner, therefore, is estopped from blaming
private respondent for not declaring the value of the cargo shipped and which would
ATTY. VINCO have otherwise entitled her to recover a higher amount of damages. The Court's
bidding in the Fieldmen's Insurance case once again rings true:
Now, can you show any document that would suggest that there was insufficient
pac(k)aging on this particular baggage from abroad? . . . As estoppel is primarily based on the doctrine of good faith and the avoidance of
harm that will befall an innocent party due to its injurious reliance, the failure to apply
WITNESS it in this case would result in gross travesty of justice.

No, sir. 25
In response to the trial court's questions during the trial, he also stated that while the
passenger's declaration regarding the general or fragile character of the cargo is to a
certain extent determinative of its classification, PAL nevertheless has and exercises
discretion as to the manner of handling required by the nature of the cargo it accepts
We likewise uphold the lower court's finding that private respondent complied with
the requirement for the immediate filing of a formal claim for damages as required
in the air waybill or, at least, we find that there was substantial compliance therewith.
Private respondent testified that she authorized her sister, Concepcion Diño, to claim
her cargo consisting of a microwave oven since the former had to take a connecting
flight to Bacolod City on the very same afternoon of the day of her arrival. 28 As
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754

instructed, Concepcion Diño promptly proceeded to PAL's Import Section the next
day to claim the oven. Upon discovering that the glass door was broken, she ATTY. VINCO
immediately filed a claim by way of the baggage freight claim 29 on which was duly
annotated the damage sustained by the oven. 30 Were you able to see Atty. Paco?

Her testimony relates what took place thereafter: WITNESS

ATTY. VINCO Yes, sir. I personally visited Atty. Paco together with my auntie who was a former PAL
employee.
So, after that inspection, what did you do?
xxx xxx xxx
WITNESS
ATTY. VINCO
After that annotation placed by Mr. Villaruz, I went home and I followed it up the
next day with the Clerk of PAL cargo office. So, what did you do, did you make a report or did you tell Atty. Paco of your scouting
around for a possible replacement?
ATTY. VINCO
WITNESS
What did the clerk tell you?
I did call him back at his office. I made a telephone call.
WITNESS
ATTY. VINCO
She told me that the claim was being processed and I made several phone calls after
that. I started my follow-ups February up to June 1990. And what answer did Atty. Paco make after you have reported back to him?

ATTY. VINCO WITNESS

And what results did those follow-ups produce?
WITNESS
All they said (was) that the document was being processed, that they were waiting
for Atty. Paco to report to the office and they could refer the matter to Atty. Paco.
They told me that they were going to process the claim based on the price that I gave
them but there was no definite result.
ATTY. VINCO
How many times did you go and see Atty. Paco regarding the claim of your sister?

ATTY. VINCO WITNESS

Who is this Atty. Paco? I made one personal visit and several follow-up calls. With Atty. Paco, I made one
phone call but I made several phone calls with his secretary or the clerk at PAL cargo
WITNESS office and I was trying to locate him but unfortunately, he was always out of his office.
31
He was the one in-charge of approving our claim.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754

PAL claims processor, Rodolfo Pandes, * confirmed having received the baggage
freight claim on January 30, 1990 32 and the referral to and extended pendency of
the private respondent's claim with the office of Atty. Paco, to wit:
ATTY. VINCO:
ATTY. VINCO:
Q You know this fact because a personnel saw you in one of the pre-trial here when
this case was heard before the sala of Judge Moscardon, is that correct?

Q And you did instruct the claimant to see the Claim Officer of the company, right? WITNESS:

WITNESS: A Yes.

A Yes, sir. ATTY. VINCO:

ATTY. VINCO: Q In other words, the plaintiff rather had never stop(ped) in her desire for your
company to settle this claim, right?
Q And the Claim Officer happened to be Atty. Paco?
WITNESS:
WITNESS:
A Yes, sir. 33
A Yes, sir.
Considering the abovementioned incidents and private respondent Mejia's own
ATTY. VINCO: zealous efforts in following up the claim, 34 it was clearly not her fault that the letter
of demand for damages could only be filed, after months of exasperating follow-up
Q And you know that the plaintiff thru her authorized representative Concepcion of the claim, on August 13, 1990. 35 If there was any failure at all to file the formal
Diño, who is her sister had many times gone to Atty. Paco, in connection with this claim within the prescriptive period contemplated in the air waybill, this was largely
claim of her sister? because of PAL's own doing, the consequences of which cannot, in all fairness, be
attributed to private respondent.
WITNESS:
Even if the claim for damages was conditioned on the timely filing of a formal claim,
A Yes, sir. under Article 1186 of the Civil Code that condition was deemed fulfilled, considering
that the collective action of PAL's personnel in tossing around the claim and leaving
ATTY. VINCO: it unresolved for an indefinite period of time was tantamount to "voluntarily
preventing its fulfillment." On grounds of equity, the filing of the baggage freight
Q As a matter of fact even when the complaint was already filed here in Court the claim, which sufficiently informed PAL of the damage sustained by private
claimant had continued to call about the settlement of her claim with Atty. Paco, is respondent's cargo, constituted substantial compliance with the requirement in the
that correct? contract for the filing of a formal claim.

xxx xxx xxx All told, therefore, respondent appellate court did not err in ruling that the provision
on limited liability is not applicable in this case. We, however, note in passing that
WITNESS: while the facts and circumstances of this case do not call for the direct application of
the provisions of the Warsaw Convention, it should be stressed that, indeed,
A Yes, sir. recognition of the Warsaw Convention does not preclude the operation of the Civil
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Code and other pertinent laws in the determination of the extent of liability of the
common carrier. 36
The Warsaw Convention, being a treaty to which the Philippines is a signatory, is as
much a part of Philippine law as the Civil Code, Code of Commerce and other
municipal special laws. 3 7 The provisions therein contained, specifically on the
limitation of carrier's liability, are operative in the Philippines but only in appropriate
situations.
Petitioner ascribes ultimate error in the award of moral and exemplary damages and
attorney's fees in favor of private respondent in that other than the statement of the
trial court that petitioner acted in bad faith in denying private respondent's claim,
which was affirmed by the Court of Appeals, there is no evidence on record that the
same is true. The denial of private respondent's claim was supposedly in the honest
belief that the same had prescribed, there being no timely formal claim filed; and
despite having been given an opportunity to submit positive proof of the value of the
damaged microwave oven, no such proof was submitted. Petitioner insists that its
failure to deliver the oven in the condition in which it was shipped could hardly be
considered as amounting to bad faith. 38
Private respondent counters that petitioner's failure to deliver the microwave oven
in the condition in which it was received can be described as gross negligence
amounting to bad faith, on the further consideration that it failed to prove that it
exercised the extraordinary diligence required by law, and that no explanation
whatsoever was given as to why the front glass of the oven was broken. 39
The trial court justified its award of actual, moral and exemplary damages, and
attorney's fees in favor of private respondent in this wise:
Since the plaintiff's baggage destination was the Philippines, Philippine law governs
the liability of the defendant for damages for the microwave oven.
The provisions of the New Civil Code on common carriers are Article(s) 1733, 1735
and 1753 . . . .
xxx xxx xxx
In this case, defendant failed to overcome, not only the presumption but more
importantly, plaintiff's evidence that defendant's negligence was the proximate
cause of the damages of the microwave oven. Further plaintiff has established that
defendant acted in bad faith when it denied the former's claim on the ground that
the formal claim was filed beyond the period as provided in paragraph 12 (a-1) (Exh.
"1-C-2") of the Air Waybill (Exh. "1", also Exh. "A"), when actually, Concepcion Diño,
sister of plaintiff has immediately filed the formal claim upon discovery of the
damage. 40
Respondent appellate court was in full agreement with the trial court's finding of bad
faith on the part of petitioner as a basis for the award of the aforestated damages,
declaring that:
As to the last assigned error, a perusal of the facts and law of the case reveals that
the lower court's award of moral and exemplary damages, attorney's fees and costs
of suit to plaintiff-appellee is in accordance with current laws and jurisprudence on
the matter. Indeed, aside from the fact that defendant-appellant acted in bad faith
in breaching the contract and in denying plaintiff's valid claim for damages, plaintiff-
appellee underwent profound distress, sleepless nights, and anxiety upon knowledge
of her damaged microwave oven in possession of defendant-appellant, entitling her
to the award of moral and exemplary damages (Cathay Pacific Airways, Ltd. vs. C.A.,
supra; Arts. 2219 & 2221, New Civil Code), and certainly plaintiff-appellant's unjust
refusal to comply with her valid demand for payment, thereby also entitling her to
reasonable attorney's fees [Art. 2208 (2) and (11), id.]. 41
It will be noted that petitioner never denied that the damage to the microwave oven
was sustained while the same was in its custody. The possibility that said damage was
due to causes beyond the control of PAL has effectively been ruled out since the
entire process in handling of the cargo — from the unloading thereof from the plane,
the towing and transfer to the PAL warehouse, the transfer to the Customs
examination area, and its release thereafter to the shipper — was done almost
exclusively by, and with the intervention or, at the very least, under the direct
supervision of a responsible PAL personnel. 42
The very admissions of PAL, through Vicente Villaruz of its Import Section, as follows:
ATTY. VINCO
So that, you now claim, Mr. Witness, that from the time the cargo was unloaded from
the plane until the time it reaches the Customs counter where it was inspected, all
the way, it was the PAL personnel who did all these things?
WITNESS
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Yes, however, there is also what we call the Customs storekeeper and the Customs
guard along with the cargo.
ATTY. VINCO
You made mention about a locator?
WITNESS
Yes, sir.
ATTY. VINCO
This locator, is he an employee of the PAL or the Customs?
WITNESS
He is a PAL employee. 43
lead to the inevitable conclusion that whatever damage may have been sustained by
the cargo is due to causes attributable to PAL's personnel or, at all events, under their
responsibility.
Moreover, the trial court underscored the fact that petitioner was not able to
overcome the statutory presumption of negligence in Article 1735 which, as a
common carrier, it was laboring under in case of loss, destruction or deterioration of
goods, through proper showing of the exercise of extraordinary diligence. Neither did
it prove that the damage to the microwave oven was because of any of the excepting
causes under Article 1734, all of the same Code. Inasmuch as the subject item was
received in apparent good condition, no contrary notation or exception having been
made on the air waybill upon its acceptance for shipment, the fact that it was
delivered with a broken glass door raises the presumption that PAL's personnel were
negligent in the carriage and handling of the cargo. 44
Furthermore, there was glaringly no attempt whatsoever on the part of petitioner to
explain the cause of the damage to the oven. The unexplained cause of damage to
private respondent's cargo constitutes gross carelessness or negligence which by
itself justifies the present award of damages. 45 The equally unexplained and
inordinate delay in acting on the claim upon referral thereof to the claims officer,
Atty. Paco, and the noncommittal responses to private respondent's entreaties for
settlement of her claim for damages belies petitioner's pretension that there was no
bad faith on its part. This unprofessional indifference of PAL's personnel despite full
and actual knowledge of the damage to private respondent's cargo, just to be
exculpated from liability on pure technicality and bureaucratic subterfuge, smacks of
willful misconduct and insensitivity to a passenger's plight tantamount to bad faith
46 and renders unquestionable petitioner's liability for damages. In sum, there is no
reason to disturb the findings of the trial court in this case, especially with its full
affirmance by respondent Court of Appeals.
On this note, the case at bar goes into the annals of our jurisprudence after six years
and recedes into the memories of our legal experience as just another inexplicable
inevitability. We will never know exactly how many man-hours went into the
preparation, litigation and adjudication of this simple dispute over an oven, which
the parties will no doubt insist they contested as a matter of principle. One thing,
however, is certain. As long as the first letter in "principle" is somehow outplaced by
the peso sign, the courts will always have to resolve similar controversies although
mutual goodwill could have dispensed with judicial recourse.
IN VIEW OF ALL OF THE FOREGOING, the assailed judgment of respondent Court of
Appeals is AFFIRMED in toto.
SO ORDERED.
8.
G.R. No. 165647 March 26, 2009
PHILIPPINES FIRST INSURANCE CO., INC., Petitioner,
vs.
WALLEM PHILS. SHIPPING, INC., UNKNOWN OWNER AND/OR UNKNOWN
CHARTERER OF THE VESSEL M/S "OFFSHORE MASTER" AND "SHANGHAI FAREAST
SHIP BUSINESS COMPANY," Respondents.
DECISION
TINGA, J.:
Before us is a Rule 45 petition1 which seeks the reversal of the Decision2 and
Resolution3 of the Court of Appeals in CA-G.R. No. 61885. The Court of Appeals
reversed the Decision4 of the Regional Trial Court (RTC) of Manila, Branch 55 in Civil
Case No. 96-80298, dismissing the complaint for sum of money.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
The facts of the case follow.5
On or about 2 October 1995, Anhui Chemicals Import & Export Corporation loaded
on board M/S Offshore Master a shipment consisting of 10,000 bags of sodium
sulphate anhydrous 99 PCT Min. (shipment), complete and in good order for
transportation to and delivery at the port of Manila for consignee, L.G. Atkimson
Import-Export, Inc. (consignee), covered by a Clean Bill of Lading. The Bill of Lading
reflects the gross weight of the total cargo at 500,200 kilograms.6 The Owner and/or
Charterer of M/V Offshore Master is unknown while the shipper of the shipment is
Shanghai Fareast Ship Business Company. Both are foreign firms doing business in
the Philippines, thru its local ship agent, respondent Wallem Philippines Shipping, Inc.
(Wallem).7
On or about 16 October 1995, the shipment arrived at the port of Manila on board
the vessel M/S Offshore Master from which it was subsequently discharged. It was
disclosed during the discharge of the shipment from the carrier that 2,426 poly bags
(bags) were in bad order and condition, having sustained various degrees of spillages
and losses. This is evidenced by the Turn Over Survey of Bad Order Cargoes (turn-
over survey) of the arrastre operator, Asian Terminals, Inc. (arrastre operator).8 The
bad state of the bags is also evinced by the arrastre operator’s Request for Bad Order
Survey.9
Asia Star Freight Services, Inc. undertook the delivery of the subject shipment from
the pier to the consignee’s warehouse in Quezon City,10 while the final inspection
was conducted jointly by the consignee’s representative and the cargo surveyor.
During the unloading, it was found and noted that the bags had been discharged in
damaged and bad order condition. Upon inspection, it was discovered that 63,065.00
kilograms of the shipment had sustained unrecovered spillages, while 58,235.00
kilograms had been exposed and contaminated, resulting in losses due to
depreciation and downgrading.11
On 29 April 1996, the consignee filed a formal claim with Wallem for the value of the
damaged shipment, to no avail. Since the shipment was insured with petitioner
Philippines First Insurance Co., Inc. against all risks in the amount of ₱2,470,213.50,12
the consignee filed a formal claim13 with petitioner for the damage and losses
sustained by the shipment. After evaluating the invoices, the turn-over survey, the
bad order certificate and other documents,14 petitioner found the claim to be in
order and compensable under the marine insurance policy. Consequently, petitioner
paid the consignee the sum of ₱397,879.69 and the latter signed a subrogation
receipt.
Petitioner, in the exercise of its right of subrogation, sent a demand letter to Wallem
for the recovery of the amount paid by petitioner to the consignee. However, despite
receipt of the letter, Wallem did not settle nor even send a response to petitioner’s
claim.15
Consequently, petitioner instituted an action before the RTC for damages against
respondents for the recovery of ₱397,879.69 representing the actual damages
suffered by petitioner plus legal interest thereon computed from the time of the filing
of the complaint until fully paid and attorney’s fees equivalent to 25% of the principal
claim plus costs of suit.
In a decision16 dated 3 November 1998, the RTC ordered respondents to pay
petitioner ₱397,879.69 with 6% interest plus attorney’s fees and costs of the suit. It
attributed the damage and losses sustained by the shipment to the arrastre
operator’s mishandling in the discharge of the shipment. Citing Eastern Shipping
Lines, Inc. v. Court of Appeals,17 the RTC held the shipping company and the arrastre
operator solidarily liable since both the arrastre operator and the carrier are charged
with and obligated to deliver the goods in good order condition to the consignee. It
also ruled that the ship functioned as a common carrier and was obliged to observe
the degree of care required of a common carrier in handling cargoes. Further, it held
that a notice of loss or damage in writing is not required in this case because said
goods already underwent a joint inspection or survey at the time of receipt thereof
by the consignee, which dispensed with the notice requirement.
The Court of Appeals reversed and set aside the RTC’s decision.18 According to the
appellate court, there is no solidary liability between the carrier and the arrastre
operator because it was clearly established by the court a quo that the damage and
losses of the shipment were attributed to the mishandling by the arrastre operator
in the discharge of the shipment. The appellate court ruled that the instant case falls
under an exception recognized in Eastern
Shipping Lines.19 Hence, the arrastre operator was held solely liable to the consignee.
Petitioner raises the following issues:
1. Whether or not the Court of Appeals erred in not holding that as a common carrier,
the carrier’s 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;
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
3. Whether or not Wallem’s failure to answer the extra judicial demand by petitioner
for the cost of the lost/damaged shipment is an implied admission of the former’s
liability for said goods;
4. Whether or not the courts below erred in giving credence to the testimony of Mr.
Talens.
It is beyond question that respondent’s vessel is a common carrier.20 Thus, the
standards for determining the existence or absence of the respondent’s liability will
be gauged on the degree of diligence required of a common carrier. Moreover, as the
shipment was an exercise of international trade, the provisions of the Carriage of
Goods
by Sea Act21 (COGSA), together with the Civil Code and the Code of Commerce, shall
apply.22
The first and second issues raised in the petition will be resolved concurrently since
they are interrelated.
It is undisputed that the shipment was damaged prior to its receipt by the insured
consignee. The damage to the shipment was documented by the turn-over survey23
and Request for Bad Order Survey.24 The turn-over survey, in particular, expressly
stipulates that 2,426 bags of the shipment were received by the arrastre operator in
damaged condition. With these documents, petitioner insists that the shipment
incurred damage or losses while still in the care and responsibility of Wallem and
before it was turned over and delivered to the arrastre operator.
The trial court, however, found through the testimony of Mr. Maximino Velasquez
Talens, a cargo surveyor of Oceanica Cargo Marine Surveyors Corporation, that the
losses and damage to the cargo were caused by the mishandling of the arrastre
operator. Specifically, that the torn cargo bags resulted from the use of steel
hooks/spikes in piling the cargo bags to the pallet board and in pushing the bags by
the stevedores of the arrastre operator to the tug boats then to the ports.25 The
appellate court affirmed the finding of mishandling in the discharge of cargo and it
served as its basis for exculpating respondents from liability, rationalizing that with
the fault of the arrastre operator in the unloading of the cargo established it should
bear sole liability for the cost of the damaged/lost cargo.
While it is established that damage or losses were incurred by the shipment during
the unloading, it is disputed who should be liable for the damage incurred at that
point of transport. To address this issue, the pertinent laws and jurisprudence are
examined.
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
transported by them.26 Subject to certain exceptions enumerated under Article
173427 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.28
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. In
Standard Oil Co. of New York v. Lopez Castelo,29 the Court interpreted the ship
captain’s liability as ultimately that of the shipowner by regarding the captain as the
representative of the ship owner.
Lastly, Section 2 of the 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.30 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.
The above doctrines are in fact expressly incorporated in the bill of lading between
the shipper Shanghai Fareast Business Co., and the consignee, to wit:
4. PERIOD OF RESPONSIBILITY. The responsibility of the carrier shall commence from
the time when the goods are loaded on board the vessel and shall cease when they
are discharged from the vessel.
The Carrier shall not be liable of loss of or damage to the goods before loading and
after discharging from the vessel, howsoever such loss or damage arises.31
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.32 Being the custodian of the goods discharged from a vessel,
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
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.33
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.34
In Fireman’s Fund Insurance Co. v. Metro Port Service, Inc.35 the Court explained the
relationship and responsibility of an arrastre operator to a consignee of a cargo, to
quote:
The legal relationship between the consignee and the arrastre operator is akin to that
of a depositor and 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 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.(Emphasis
supplied) (Citations omitted)
The liability of the arrastre operator was reiterated in Eastern Shipping Lines, Inc. v.
Court of Appeals36 with the clarification that the arrastre operator and the carrier
are not always and necessarily solidarily liable as the facts of a case may vary the rule.
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 aforementioned Section 3(2) of the COGSA states that among the carriers’
responsibilities are to properly and carefully load, care for and discharge the goods
carried. The bill of lading covering the subject shipment likewise stipulates that the
carrier’s liability for loss or damage to the goods ceases after its discharge from the
vessel. Article 619 of the Code of Commerce holds a ship captain liable for the cargo
from the time it is turned over to him until its delivery at the port of unloading.
In a case decided by a U.S. Circuit Court, Nichimen Company v. M./V. Farland,37 it
was ruled that like the duty of seaworthiness, the duty of care of the cargo is non-
delegable,38 and the carrier is accordingly responsible for the acts of the master, the
crew, the stevedore, and his other agents. It has also been held that it is ordinarily
the duty of the master of a vessel to unload the cargo and place it in readiness for
delivery to the consignee, and there is an implied obligation that this shall be
accomplished with sound machinery, competent hands, and in such manner that no
unnecessary injury shall be done thereto.39 And the fact that a consignee is required
to furnish persons to assist in unloading a shipment may not relieve the carrier of its
duty as to such unloading.40
The exercise of the carrier’s custody and responsibility over the subject shipment
during the unloading actually transpired in the instant case during the unloading of
the shipment as testified by Mr. Talens, the cargo surveyor, to quote:
Atty. Repol:
- Do you agree with me that Wallem Philippines is a shipping [company]?
A Yes, sir.
Q And, who hired the services of the stevedores?
A The checker of the vessel of Wallem, sir.41
xxx
Q Mr. Witness, during the discharging operation of this cargo, where was the master
of the vessel?
A On board the vessel, supervising, sir.
Q And, observed the discharging operation?
A Yes, sir.
Q And, what did the master of the vessel do when the cargo was being unloaded from
the vessel?
A He would report to the head checker, sir.
Q He did not send the stevedores to what manner in the discharging of the cargo
from the vessel?
A And head checker po and siyang nagpapatakbo ng trabaho sa loob ng barko, sir.42
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
xxx
Q Is he [the head checker] an employee of the company?
A He is a contractor/checker of Wallem Philippines, sir.43
Moreover, the liability of Wallem is highlighted by Mr. Talen’s notes in the Bad Order
Inspection, to wit:
"The bad order torn bags, was due to stevedores[‘] utilizing steel hooks/spikes in
piling the cargo to [the] pallet board at the vessel’s cargo holds and at the pier
designated area before and after discharged that cause the bags to torn [sic]."44
(Emphasis supplied)
The records are replete with evidence which show that the damage to the bags
happened before and after their discharge45 and it was caused by the stevedores of
the arrastre operator who were then under the supervision of Wallem.1awphi1.net
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 court’s finding of actual damages in the amount of
₱397,879.69 has to be sustained.
On the credibility of Mr. Talens which is the fourth issue, the general rule in assessing
credibility of witnesses is well-settled:
x x x the trial court's evaluation as to the credibility of witnesses is viewed as correct
and entitled to the highest respect because it is more competent to so conclude,
having had the opportunity to observe the witnesses' demeanor and deportment on
the stand, and the manner in which they gave their testimonies. The trial judge
therefore can better determine if such witnesses were telling the truth, being in the
ideal position to weigh conflicting testimonies. Therefore, unless the trial judge
plainly overlooked certain facts of substance and value which, if considered, might
affect the result of the case, his assessment on credibility must be respected.46
Contrary to petitioner’s stance on the third issue, Wallem’s failure to respond to its
demand letter does not constitute an implied admission of liability. To borrow the
words of Mr. Justice Oliver Wendell Holmes, thus:
A man cannot make evidence for himself by writing a letter containing the statements
that he wishes to prove. He does not make the letter evidence by sending it to the
party against whom he wishes to prove the facts [stated therein]. He no more can
impose a duty to answer a charge than he can impose a duty to pay by sending goods.
Therefore a failure to answer such adverse assertions in the absence of further
circumstances making an answer requisite or natural has no effect as an admission.47
With respect to the attorney’s fees, it is evident that petitioner was compelled to
litigate this matter to protect its interest. The RTC’s award of ₱20,000.00 as attorney’s
fees is reasonable.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated 22
June 2004 and its Resolution dated 11 October 2004 are REVERSED and SET ASIDE.
Wallem is ordered to pay petitioner the sum of ₱397,879.69, with interest thereon
at 6% per annum from the filing of the complaint on 7 October 1996 until the
judgment becomes final and executory. Thereafter, an interest rate of 12% per
annum shall be imposed.48 Respondents are also ordered to pay petitioner the
amount of ₱20,000.00 for and as attorney’s fees, together with the costs of the suit.
SO ORDERED.
9.
G.R. No. 125524 August 25, 1999
BENITO MACAM doing business under the name and style BEN-MAC ENTERPRISES,
petitioner,
vs.
COURT OF APPEALS, CHINA OCEAN SHIPPING CO., and/or WALLEM PHILIPPINES
SHIPPING, INC., respondents.
BELLOSILLO, J.:
On 4 April 1989 petitioner Benito Macam, doing business under the name and style
Ben-Mac Enterprises, shipped on board the vessel Nen Jiang, owned and operated by
respondent China Ocean Shipping Co., through local agent respondent Wallem
Philippines Shipping, Inc. (hereinafter WALLEM), 3,500 boxes of watermelons valued
at US$5,950.00 covered by Bill of Lading No. HKG 99012 and exported through Letter
of Credit No. HK 1031/30 issued by National Bank of Pakistan, Hongkong (hereinafter
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
PAKISTAN BANK) and 1,611 boxes of fresh mangoes with a value of US$14,273.46
covered by Bill of Lading No. HKG 99013 and exported through Letter of Credit No.
HK 1032/30 also issued by PAKISTAN BANK. The Bills of Lading contained the
following pertinent provision: "One of the Bills of Lading must be surrendered duly
endorsed in exchange for the goods or delivery order.1 The shipment was bound for
Hongkong with PAKISTAN BANK as consignee and Great Prospect Company of
Kowloon, Hongkong (hereinafter GPC) as notify party.
On 6 April 1989, per letter of credit requirement, copies of the bills of lading and
commercial invoices were submitted to petitioner's depository bank, Consolidated
Banking Corporation (hereinafter SOLIDBANK), which paid petitioner in advance the
total value of the shipment of US$20,223.46.1âwphi1.nêt
Upon arrival in Hongkong, the shipment was delivered by respondent WALLEM
directly to GPC, not to PAKISTAN BANK, and without the required bill of lading having
been surrendered. Subsequently, GPC failed to pay PAKISTAN BANK such that the
latter, still in possession of the original bills of lading, refused to pay petitioner
through SOLIDBANK. Since SOLIDBANK already pre-paid petitioner the value of the
shipment, it demanded payment from respondent WALLEM through five (5) letters
but was refused. Petitioner was thus allegedly constrained to return the amount
involved to SOLIDBANK, then demanded payment from respondent WALLEM in
writing but to no avail.
On 25 September 1991 petitioner sought collection of the value of the shipment of
US$20,223.46 or its equivalent of P546,033.42 from respondents before the Regional
Trial Court of Manila, based on delivery of the shipment to GPC without presentation
of the bills of lading and bank guarantee.
Respondents contended that the shipment was delivered to GPC without
presentation of the bills of lading and bank guarantee per request of petitioner
himself because the shipment consisted of perishable goods. The telex dated 5 April
1989 conveying such request read —
AS PER SHPR'S REQUEST KINDLY ARRANGE DELIVERY OF A/M SHIPT TO RESPECTIVE
CNEES WITHOUT PRESENTATION OF OB/L2 and bank guarantee since for prepaid
shipt ofrt charges already fully paid our end . . . .3
Respondents explained that it is a standard maritime practice, when immediate
delivery is of the essence, for the shipper to request or instruct the carrier to deliver
the goods to the buyer upon arrival at the port of destination without requiring
presentation of the bill of lading as that usually takes time. As proof thereof,
respondents apprised the trial court that for the duration of their two-year business
relationship with petitioner concerning similar shipments to GPC deliveries were
effected without presentation of the bills of lading.4 Respondents advanced next that
the refusal of PAKISTAN BANK to pay the letters of credit to SOLIDBANK was due to
the latter's failure to submit a Certificate of Quantity and Quality. Respondents
counterclaimed for attorney's fees and costs of suit.
On 14 May 1993 the trial court ordered respondents to pay, jointly and severally, the
following amounts: (1) P546,033.42 plus legal interest from 6 April 1989 until full
payment; (2) P10,000.00 as attorney's fees; and, (3) the costs. The counterclaims
were dismissed for lack of merit.5 The trial court opined that respondents breached
the provision in the bill of lading requiring that "one of the Bills of Lading must be
surrendered duly endorsed in exchange for the goods or delivery order," when they
released the shipment to GPC without presentation of the bills of lading and the bank
guarantee that should have been issued by PAKISTAN BANK in lieu of the bills of
lading. The trial court added that the shipment should not have been released to GPC
at all since the instruction contained in the telex was to arrange delivery to the
respective consignees and not to any party. The trial court observed that the only
role of GPC in the transaction as notify party was precisely to be notified of the arrival
of the cargoes in Hongkong so it could in turn duly advise the consignee.
Respondent Court of Appeals appreciated the evidence in a different manner.
According to it, as established by previous similar transactions between the parties,
shipped cargoes were sometimes actually delivered not to the consignee but to notify
party GPC without need of the bills of lading or bank guarantee.6 Moreover, the bills
of lading were viewed by respondent court to have been properly superseded by the
telex instruction and to implement the instruction, the delivery of the shipment must
be to GPC, the real importer/buyer of the goods as shown by the export invoices,7
and not to PAKISTAN BANK since the latter could very well present the bills of lading
in its possession; likewise, if it were the PAKISTAN BANK to which the cargoes were
to be strictly delivered it would no longer be proper to require a bank guarantee.
Respondent court noted that besides, GPC was listed as a consignee in the telex. It
observed further that the demand letter of petitioner to respondents never
complained of misdelivery of goods. Lastly, respondent court found that petitioner's
claim of having reimbursed the amount involved to SOLIDBANK was unsubstantiated.
Thus, on 13 March 1996 respondent court set aside the decision of the trial court and
dismissed the complaint together with the counterclaims.8 On 5 July 1996
reconsideration was denied.9
Petitioner submits that the fact that the shipment was not delivered to the consignee
as stated in the bill of lading or to a party designated or named by the consignee
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
constitutes a misdelivery thereof. Moreover, petitioner argues that from the text of
the telex, assuming there was such an instruction, the delivery of the shipment
without the required bill of lading or bank guarantee should be made only to the
designated consignee, referring to PAKISTAN BANK.
We are not persuaded. The submission of petitioner that "the fact that the shipment
was not delivered to the consignee as stated in the Bill of Lading or to a party
designated or named by the consignee constitutes a misdelivery thereof" is a
deviation from his cause of action before the trial court. It is clear from the allegation
in his complaint that it does not deal with misdelivery of the cargoes but of delivery
to GPC without the required bills of lading and bank guarantee —
6. The goods arrived in Hongkong and were released by the defendant Wallem
directly to the buyer/notify party, Great Prospect Company and not to the consignee,
the National Bank of Pakistan, Hongkong, without the required bills of lading and
bank guarantee for the release of the shipment issued by the consignee of the
goods . . . .10
Even going back to an event that transpired prior to the filing of the present case or
when petitioner wrote respondent WALLEM demanding payment of the value of the
cargoes, misdelivery of the cargoes did not come into the picture —
We are writing you on behalf of our client, Ben-Mac Enterprises who informed us
that Bills of Lading No. 99012 and 99013 with a total value of US$20,223.46 were
released to Great Prospect, Hongkong without the necessary bank guarantee. We
were further informed that the consignee of the goods, National Bank of Pakistan,
Hongkong, did not release or endorse the original bills of lading. As a result thereof,
neither the consignee, National Bank of Pakistan, Hongkong, nor the importer, Great
Prospect Company, Hongkong, paid our client for the goods . . . .11
At any rate, we shall dwell on petitioner's submission only as a prelude to our
discussion on the imputed liability of respondents concerning the shipped goods.
Article 1736 of the Civil Code provides —
Art. 1736. The extraordinary responsibility of the common carriers lasts from the time
the goods are unconditionally placed in the possession of, and received by the carrier
for transportation until the same are delivered, actually or constructively, by the
carrier to the consignee, or to the person who has a right to receive them, without
prejudice to the provisions of article 1738.12
We emphasize that the extraordinary responsibility of the common carriers lasts until
actual or constructive delivery of the cargoes to the consignee or to the person who
has a right to receive them. PAKISTAN BANK was indicated in the bills of lading as
consignee whereas GPC was the notify party. However, in the export invoices GPC
was clearly named as buyer/importer. Petitioner also referred to GPC as such in his
demand letter to respondent WALLEM and in his complaint before the trial court.
This premise draws us to conclude that the delivery of the cargoes to GPC as
buyer/importer which, conformably with Art. 1736 had, other than the consignee,
the right to receive them14 was proper.
The real issue is whether respondents are liable to petitioner for releasing the goods
to GPC without the bills of lading or bank guarantee.
Respondents submitted in evidence a telex dated 5 April 1989 as basis for delivering
the cargoes to GPC without the bills of lading and bank guarantee. The telex
instructed delivery of various shipments to the respective consignees without need
of presenting the bill of lading and bank guarantee per the respective shipper's
request since "for prepaid shipt ofrt charges already fully paid." Petitioner was named
therein as shipper and GPC as consignee with respect to Bill of Lading Nos. HKG 99012
and HKG 99013. Petitioner disputes the existence of such instruction and claims that
this evidence is self-serving.
From the testimony of petitioner, we gather that he has been transacting with GPC
as buyer/importer for around two (2) or three (3) years already. When mangoes and
watermelons are in season, his shipment to GPC using the facilities of respondents is
twice or thrice a week. The goods are released to GPC. It has been the practice of
petitioner to request the shipping lines to immediately release perishable cargoes
such as watermelons and fresh mangoes through telephone calls by himself or his
"people." In transactions covered by a letter of credit, bank guarantee is normally
required by the shipping lines prior to releasing the goods. But for buyers using
telegraphic transfers, petitioner dispenses with the bank guarantee because the
goods are already fully paid. In his several years of business relationship with GPC
and respondents, there was not a single instance when the bill of lading was first
presented before the release of the cargoes. He admitted the existence of the telex
of 3 July 1989 containing his request to deliver the shipment to the consignee without
presentation of the bill of lading15 but not the telex of 5 April 1989 because he could
not remember having made such request.
Consider pertinent portions of petitioner's testimony —
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Q: Are you aware of any document which would indicate or show that your request
to the defendant Wallem for the immediate release of your fresh fruits, perishable
goods, to Great Prospect without the presentation of the original Bill of Lading?
A: Yes, by telegraphic transfer, which means that it is fully paid. And I requested
immediate release of the cargo because there was immediate payment.
Q: And you are referring, therefore, to this copy Telex release that you mentioned
where your Company's name appears Ben-Mac?
Atty. Hernandez: Just for the record, Your Honor, the witness is showing a Bill of
Lading referring to SKG (sic) 93023 and 93026 with Great Prospect Company.
Atty. Ventura:
Q: Is that the telegraphic transfer?
A: Yes, actually, all the shippers partially request for the immediate release of the
goods when they are perishable. I thought Wallem Shipping Lines is not neophyte in
the business. As far as LC is concerned, Bank guarantee is needed for the immediate
release of the goods . . . .15
Q: Mr. Witness, you testified that if is the practice of the shipper of the perishable
goods to ask the shipping lines to release immediately the shipment. Is that correct?
A: Yes, sir.
Q: Now, it is also the practice of the shipper to allow the shipping lines to release the
perishable goods to the importer of goods without a Bill of Lading or Bank guarantee?
A: No, it cannot be without the Bank Guarantee.
Atty. Hernandez:
Q: Can you tell us an instance when you will allow the release of the perishable goods
by the shipping lines to the importer without the Bank guarantee and without the Bill
of Lading?
A: As far as telegraphic transfer is concerned.
Q: Can you explain (to) this Honorable Court what telegraphic transfer is?
A: Telegraphic transfer, it means advance payment that I am already fully paid . . . .
Q: Mr. Macam, with regard to Wallem and to Great Prospect, would you know and
can you recall that any of your shipment was released to Great Prospect by Wallem
through telegraphic transfer?
A: I could not recall but there were so many instances sir.
Q: Mr. Witness, do you confirm before this Court that in previous shipments of your
goods through Wallem, you requested Wallem to release immediately your
perishable goods to the buyer?
A: Yes, that is the request of the shippers of the perishable goods . . . .16
Q: Now, Mr. Macam, if you request the Shipping Lines for the release of your goods
immediately even without the presentation of OBL, how do you course it?
A: Usually, I call up the Shipping Lines, sir . . . .17
Q: You also testified you made this request through phone calls. Who of you talked
whenever you made such phone call?
A: Mostly I let my people to call, sir. (sic)
Q: So everytime you made a shipment on perishable goods you let your people to
call? (sic)
A: Not everytime, sir.
Q: You did not make this request in writing?
A: No, sir. I think I have no written request with Wallem . . . .18
Against petitioner's claim of "not remembering" having made a request for delivery
of subject cargoes to GPC without presentation of the bills of lading and bank
guarantee as reflected in the telex of 5 April 1989 are damaging disclosures in his
testimony. He declared that it was his practice to ask the shipping lines to
immediately release shipment of perishable goods through telephone calls by himself
or his "people." He no longer required presentation of a bill of lading nor of a bank
guarantee as a condition to releasing the goods in case he was already fully paid. Thus,
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
taking into account that subject shipment consisted of perishable goods and
SOLIDBANK pre-paid the full amount of the value thereof, it is not hard to believe the
claim of respondent WALLEM that petitioner indeed requested the release of the
goods to GPC without presentation of the bills of lading and bank guarantee.
The instruction in the telex of 5 April 1989 was "to deliver the shipment to respective
consignees." And so petitioner argues that, assuming there was such an instruction,
the consignee referred to was PAKISTAN BANK. We find the argument too simplistic.
Respondent court analyzed the telex in its entirety and correctly arrived at the
conclusion that the consignee referred to was not PAKISTAN BANK but GPC —
There is no mistake that the originals of the two (2) subject Bills of Lading are still in
the possession of the Pakistani Bank. The appealed decision affirms this fact.
Conformably, to implement the said telex instruction, the delivery of the shipment
must be to GPC, the notify party or real importer/buyer of the goods and not the
Pakistani Bank since the latter can very well present the original Bills of Lading in its
possession. Likewise, if it were the Pakistani Bank to whom the cargoes were to be
strictly delivered, it will no longer be proper to require a bank guarantee as a
substitute for the Bill of Lading. To construe otherwise will render meaningless the
telex instruction. After all, the cargoes consist of perishable fresh fruits and
immediate delivery thereof to the buyer/importer is essentially a factor to reckon
with. Besides, GPC is listed as one among the several consignees in the telex (Exhibit
5-B) and the instruction in the telex was to arrange delivery of A/M shipment (not
any party) to respective consignees without presentation of OB/L and bank
guarantee . . . .20
Apart from the foregoing obstacles to the success of petitioner's cause, petitioner
failed to substantiate his claim that he returned to SOLIDBANK the full amount of the
value of the cargoes. It is not far-fetched to entertain the notion, as did respondent
court, that he merely accommodated SOLIDBANK in order to recover the cost of the
shipped cargoes from respondents. We note that it was SOLIDBANK which initially
demanded payment from respondents through five (5) letters. SOLIDBANK must have
realized the absence of privity of contract between itself and respondents. That is
why petitioner conveniently took the cudgels for the bank.
In view of petitioner's utter failure to establish the liability of respondents over the
cargoes, no reversible error was committed by respondent court in ruling against him.
WHEREFORE, the petition is DENIED. The decision of respondent Court of Appeals of
13 March 1996 dismissing the complaint of petitioner Benito Macam and the
counterclaims of respondents China Ocean Shipping Co. and/or Wallem Philippines
Shipping, Inc., as well as its resolution of 5 July 1996 denying reconsideration, is
AFFIRMED.1âwphi1.nêt
SO ORDERED.
10.
G.R. No. L-28673 October 23, 1984
SAMAR MINING COMPANY, INC., plaintiff-appellee,
vs.
NORDEUTSCHER LLOYD and C.F. SHARP & COMPANY, INC., defendants-appellants.
CUEVAS, J.:ñé+.£ªwph!1
This is an appeal taken directly to Us on certiorari from the decision of the defunct
Court of First Instance of Manila, finding defendants carrier and agent, liable for the
value of goods never delivered to plaintiff consignee. The issue raised is a pure
question of law, which is, the liability of the defendants, now appellants, under the
bill of lading covering the subject shipment.
The case arose from an importation made by plaintiff, now appellee, SAMAR MINING
COMPANY, INC., of one (1) crate Optima welded wedge wire sieves through the M/S
SCHWABENSTEIN a vessel owned by defendant-appellant NORDEUTSCHER LLOYD,
(represented in the Philippines by its agent, C.F. SHARP & CO., INC.), which shipment
is covered by Bill of Lading No. 18 duly issued to consignee SAMAR MINING COMPANY,
INC. Upon arrival of the aforesaid vessel at the port of Manila, the aforementioned
importation was unloaded and delivered in good order and condition to the bonded
warehouse of AMCYL. 1 The goods were however never delivered to, nor received by,
the consignee at the port of destination — Davao.
When the letters of complaint sent to defendants failed to elicit the desired response,
consignee herein appellee, filed a formal claim for P1,691.93, the equivalent of
$424.00 at the prevailing rate of exchange at that time, against the former, but
neither paid. Hence, the filing of the instant suit to enforce payment. Defendants-
appellants brought in AMCYL as third party defendant.
The trial court rendered judgment in favor of plaintiff, ordering defendants to pay the
amount of P1,691.93 plus attorney's fees and costs. However, the Court stated that
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
defendants may recoup whatever they may pay plaintiff by enforcing the judgment
against third party defendant AMCYL which had earlier been declared in default. Only
the defendants appealed from said decision.
The issue at hand demands a close scrutiny of Bill of Lading No. 18 and its various
clauses and stipulations which should be examined in the light of pertinent legal
provisions and settled jurisprudence. This undertaking is not only proper but
necessary as well because of the nature of the bill of lading which operates both as a
receipt for the goods; and more importantly, as a contract to transport and deliver
the same as stipulated therein. 2 Being a contract, it is the law between the parties
thereto 3 who are bound by its terms and conditions 4 provided that these are not
contrary to law, morals, good customs, public order and public policy. 5
Bill of Lading No. 18 sets forth in page 2 thereof 6 that one (1) crate of Optima welded
wedge wire sieves was received by the carrier NORDEUTSCHER LLOYD at the "port of
loading" which is Bremen, Germany, while the freight had been prepaid up to the
port of destination or the "port of discharge of goods in this case, Davao, the carrier
undertook to transport the goods in its vessel, M/S SCHWABENSTEIN only up to the
"port of discharge from ship-Manila. Thereafter, the goods were to be transshipped
by the carrier to the port of destination or "port of discharge of goods The stipulation
is plainly indicated on the face of the bill which contains the following phrase printed
below the space provided for the port of discharge from ship", thus: têñ.£îhqwâ£
if goods are to be transshipped at port of discharge, show destination under the
column for "description of contents" 7
As instructed above, the following words appeared typewritten under the column for
"description of contents": têñ.£îhqwâ£
PORT OF DISCHARGE OF GOODS: DAVAO
FREIGHT PREPAID 8
It is clear, then, that in discharging the goods from the ship at the port of Manila, and
delivering the same into the custody of AMCYL, the bonded warehouse, appellants
were acting in full accord with the contractual stipulations contained in Bill of Lading
No. 18. The delivery of the goods to AMCYL was part of appellants' duty to transship
the goods from Manila to their port of destination-Davao. The word "transship"
means: têñ.£îhqwâ£
to transfer for further transportation from one ship or conveyance to another 9
The extent of appellant carrier's responsibility and/or liability in the transshipment of
the goods in question are spelled out and delineated under Section 1, paragraph 3 of
Bill of Lading No. 18, to wit: têñ.£îhqwâ£
The carrier shall not be liable in any capacity whatsoever for any delay, loss or
damage occurring before the goods enter ship's tackle to be loaded or after the goods
leave ship's tackle to be discharged, transshipped or forwarded ... (Emphasis
supplied)
and in Section 11 of the same Bill, which provides: têñ.£îhqwâ£
Whenever the carrier or m aster may deem it advisable or in any case where the
goods are placed at carrier's disposal at or consigned to a point where the ship does
not expect to load or discharge, the carrier or master may, without notice, forward
the whole or any part of the goods before or after loading at the original port of
shipment, ... This carrier, in making arrangements for any transshipping or forwarding
vessels or means of transportation not operated by this carrier shall be considered
solely the forwarding agent of the shipper and without any other responsibility
whatsoever even though the freight for the whole transport has been collected by
him. ... Pending or during forwarding or transshipping the carrier may store the goods
ashore or afloat solely as agent of the shipper and at risk and expense of the goods
and the carrier shall not be liable for detention nor responsible for the acts, neglect,
delay or failure to act of anyone to whom the goods are entrusted or delivered for
storage, handling or any service incidental thereto (Emphasis supplied) 10
Defendants-appellants now shirk liability for the loss of the subject goods by claiming
that they have discharged the same in full and good condition unto the custody of
AMCYL at the port of discharge from ship — Manila, and therefore, pursuant to the
aforequoted stipulation (Sec. 11) in the bill of lading, their responsibility for the cargo
had ceased. 11
We find merit in appellants' stand. The validity of stipulations in bills of lading
exempting the carrier from liability for loss or damage to the goods when the same
are not in its actual custody has been upheld by Us in PHOENIX ASSURANCE CO., LTD.
vs. UNITED STATES LINES, 22 SCRA 674 (1968). Said case matches the present
controversy not only as to the material facts but more importantly, as to the
stipulations contained in the bill of lading concerned. As if to underline their
awesome likeness, the goods in question in both cases were destined for Davao, but
were discharged from ship in Manila, in accordance with their respective bills of
lading.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
The stipulations in the bill of lading in the PHOENIX case which are substantially the
same as the subject stipulations before Us, provides: têñ.£îhqwâ£
The carrier shall not be liable in any capacity whatsoever for any loss or damage to
the goods while the goods are not in its actual custody. (Par. 2, last subpar.)
xxx xxx xxx
The carrier or master, in making arrangements with any person for or in connection
with all transshipping or forwarding of the goods or the use of any means of
transportation or forwarding of goods not used or operated by the carrier, shall be
considered solely the agent of the shipper and consignee and without any other
responsibility whatsoever or for the cost thereof ... (Par. 16). 12
Finding the above stipulations not contrary to law, morals, good customs, public
order or public policy, We sustained their validity 13 Applying said stipulations as the
law between the parties in the aforecited case, the Court concluded that:
têñ.£îhqwâ£
... The short form Bill of Lading ( ) states in no uncertain terms that the port of
discharge of the cargo is Manila, but that the same was to be transshipped beyond
the port of discharge to Davao City. Pursuant to the terms of the long form Bill of
Lading ( ), appellee's responsibility as a common carrier ceased the moment the
goods were unloaded in Manila and in the matter of transshipment, appellee acted
merely as an agent of the shipper and consignee. ... (Emphasis supplied) 14
Coming now to the case before Us, We hold, that by the authority of the above
pronouncements, and in conformity with the pertinent provisions of the New Civil
Code, Section 11 of Bill of Lading No. 18 and the third paragraph of Section 1 thereof
are valid stipulations between the parties insofar as they exempt the carrier from
liability for loss or damage to the goods while the same are not in the latter's actual
custody.
The liability of the common carrier for the loss, destruction or deterioration of goods
transported from a foreign country to the Philippines is governed primarily by the
New Civil Code. 15 In all matters not regulated by said Code, the rights and obligations
of common carriers shall be governed by the Code of Commerce and by special laws.
16 A careful perusal of the provisions of the New Civil Code on common carriers
(Section 4, Title VIII, Book IV) directs our attention to Article 1736 thereof, which
reads: têñ.£îhqwâ£
Article 1736. The extraordinary responsibility of the common carrier lasts from the
time the goods are unconditionally placed in the possession of, and received by the
carrier for transportation until the same are delivered, actually or constructively, by
the carrier to the consignee, or to the person who has a right to receive them, without
prejudice to the provisions of article 1738.
Article 1738 referred to in the foregoing provision runs thus: têñ.£îhqwâ£
Article 1738. The extraordinary liability of the common carrier continues to be
operative even during the time the goods are stored in a warehouse of the carrier at
the place of destination, until the consignee has been advised of the arrival of the
goods and has had reasonable opportunity thereafter to remove them or otherwise
dispose of them.
There is no doubt that Art. 1738 finds no applicability to the instant case. The said
article contemplates a situation where the goods had already reached their place of
destination and are stored in the warehouse of the carrier. The subject goods were
still awaiting transshipment to their port of destination, and were stored in the
warehouse of a third party when last seen and/or heard of. However, Article 1736 is
applicable to the instant suit. Under said article, the carrier may be relieved of the
responsibility for loss or damage to the goods upon actual or constructive delivery of
the same by the carrier to the consignee, or to the person who has a right to receive
them. In sales, actual delivery has been defined as the ceding of corporeal possession
by the seller, and the actual apprehension of corporeal possession by the buyer or by
some person authorized by him to receive the goods as his representative for the
purpose of custody or disposal. 17 By the same token, there is actual delivery in
contracts for the transport of goods when possession has been turned over to the
consignee or to his duly authorized agent and a reasonable time is given him to
remove the goods. 18 The court a quo found that there was actual delivery to the
consignee through its duly authorized agent, the carrier.
It becomes necessary at this point to dissect the complex relationship that had
developed between appellant and appellee in the course of the transactions that
gave birth to the present suit. Two undertakings appeared embodied and/or
provided for in the Bill of Lading 19 in question. The first is FOR THE TRANSPORT OF
GOODS from Bremen, Germany to Manila. The second, THE TRANSSHIPMENT OF THE
SAME GOODS from Manila to Davao, with appellant acting as agent of the consignee.
20 At the hiatus between these two undertakings of appellant which is the moment
when the subject goods are discharged in Manila, its personality changes from that
of carrier to that of agent of the consignee. Thus, the character of appellant's
possession also changes, from possession in its own name as carrier, into possession
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
in the name of consignee as the latter's agent. Such being the case, there was, in
effect, actual delivery of the goods from appellant as carrier to the same appellant as
agent of the consignee. Upon such delivery, the appellant, as erstwhile carrier, ceases
to be responsible for any loss or damage that may befall the goods from that point
onwards. This is the full import of Article 1736, as applied to the case before Us.
But even as agent of the consignee, the appellant cannot be made answerable for
the value of the missing goods, It is true that the transshipment of the goods, which
was the object of the agency, was not fully performed. However, appellant had
commenced said performance, the completion of which was aborted by
circumstances beyond its control. An agent who carries out the orders and
instructions of the principal without being guilty of negligence, deceit or fraud,
cannot be held responsible for the failure of the principal to accomplish the object of
the agency, 21 This can be gleaned from the following provisions of the New Civil
Code on the obligations of the agent: têñ.£îhqwâ£
Article 1884. The agent is bound by his acceptance to carry out the agency, and is
liable for the damages which, through his non-performance, the principal may suffer.
xxx xxx xxx
Article 1889. The agent shall be liable for damages if, there being a conflict between
his interests and those of the principal, he should prefer his own.
Article 1892. The agent may appoint a substitute if the principal has not prohibited
him from doing so; but he shall be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power but without designating the person and the
person appointed was notoriously incompetent or insolvent.
xxx xxx xxx
Article 1909. The agent is responsible not only for fraud, but also for negligence which
shall be judged with more or less rigor by the courts, according to whether the agency
was or was not for a compensation.
The records fail to reveal proof of negligence, deceit or fraud committed by appellant
or by its representative in the Philippines. Neither is there any showing of notorious
incompetence or insolvency on the part of AMCYT, which acted as appellant's
substitute in storing the goods awaiting transshipment.
The actions of appellant carrier and of its representative in the Philippines being in
full faith with the lawful stipulations of Bill of Lading No. 18 and in conformity with
the provisions of the New Civil Code on common carriers, agency and contracts, they
incur no liability for the loss of the goods in question.
WHEREFORE, the appealed decision is hereby REVERSED. Plaintiff-appellee's
complaint is hereby DISMISSED.
No costs.
SO ORDERED.
11.
G.R. No. 156330 November 19, 2014
NEDLLOYD LIJNEN B.V. ROTTERDAM and THE EAST ASIATIC CO., LTD., Petitioners,
vs.
GLOW LAKS ENTERPRISES, LTD., Respondent.
DECISION
PEREZ, J.:
This is a Petition for Review on Certiorari1 filed pursuant to Ruic 45 of the Revised
Rules of Comi, primarily assailing the 11 December 2002 Resolution rendered by the
Special Former Sixteenth Division of the Court of Appeals in CA-G.R. CV No. 48277,2
the decretal portion of which states:
WHEREFORE, the appeal is GRANTED and the April 29. 1994 Decision of the Regional
Trial Court of Manila, Branch 52 thereof' in Civil Case No. 88-45595, SET ASIDE.
Nedlloyd Lijncn B.V. Rotterdam and The East Asiatic Co., Ltd arc ordered to pay Glow
l ,aks Enterprises, I ,td. the following:
1. The invoice value of the goodslost worth $53,640.00, or its equivalent in Philippine
currency;
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
2. Attorney’s fees of ₱50,000.00; and
3. Costs.3
The Facts
Petitioner Nedlloyd Lijnen B.V. Rotterdam (Nedlloyd) is a foreign corporation
engaged in the business of carrying goods by sea, whose vessels regularly call at the
port of Manila. It is doing business in the Philippines thru its local ship agent, co-
petitioner East Asiatic Co., Ltd. (East Asiatic).
Respondent Glow Laks Enterprises,Ltd., is likewise a foreign corporation organized
and existing under the laws of Hong Kong. It is not licensed to do, and it is not doing
business in, the Philippines.
On or about 14 September 1987, respondent loaded on board M/S Scandutch at the
Port of Manila a total 343 cartoons of garments, complete and in good order for pre-
carriage tothe Port of Hong Kong. The goods covered by Bills of Lading Nos. MHONX-
2 and MHONX-34 arrived in good condition in Hong Kong and were transferred to
M/S Amethyst for final carriage to Colon, Free Zone, Panama. Both vessels, M/S
Scandutch and M/S Amethyst, are owned by Nedlloyd represented in the Phlippines
by its agent, East Asiatic. The goods which were valued at US$53,640.00 was agreed
to be released to the consignee, Pierre Kasem, International, S.A., upon presentation
of the original copies of the covering bills of lading.5 Upon arrival of the vessel at the
Port of Colon on 23 October 1987, petitioners purportedly notified the consignee of
the arrival of the shipments, and its custody was turned over tothe National Ports
Authority in accordance with the laws, customs regulations and practice of trade in
Panama. By an unfortunate turn ofevents, however, unauthorized persons managed
to forge the covering bills of lading and on the basis of the falsified documents, the
ports authority released the goods.
On 16 July 1988, respondent filed a formal claim with Nedlloyd for the recovery of
the amount of US$53,640.00 representing the invoice value of the shipment but to
no avail.6 Claiming that petitioners are liable for the misdelivery of the goods,
respondent initiated Civil Case No. 88-45595 before the Regional Trial Court (RTC) of
Manila, Branch 52, seeking for the recovery of the amount of US$53,640.00, including
the legal interest from the date of the first demand.7
In disclaiming liability for the misdelivery of the shipments, petitioners asserted in
their Answer8 that they were never remiss in their obligation as a common carrier
and the goods were discharged in good order and condition into the custody of the
National Ports Authority of Panama in accordance with the Panamanian law. They
averred that they cannot be faulted for the release of the goods to unauthorized
persons, their extraordinary responsibility as a common carrier having ceased at the
time the possession of the goods were turned over to the possession of the port
authorities.
After the Pre-Trial Conference, trial on the merits ensued. Both parties offered
testimonial and documentary evidence to support their respective causes. On 29
April 2004, the RTC rendered a Decision9 ordering the dismissal of the complaint but
granted petitioners’ counterclaims. In effect, respondent was directed to pay
petitioners the amount of ₱120,000.00 as indemnification for the litigation expenses
incurred by the latter. In releasing the common carrier from liability for the
misdelivery of the goods, the RTC ruled that Panama law was duly proven during the
trial and pursuant to the said statute, carriers of goods destined to any Panama port
of entry have to discharge their loads into the custody of Panama Ports Authority to
make effective government collection of port dues, customs duties and taxes. The
subsequent withdrawal effected by unauthorized persons on the strength of falsified
bills of lading does not constitute misdelivery arising from the fault of the common
carrier. The decretal part of the RTC Decision reads: WHEREFORE, judgment is
renderedfor [petitioners] and against [Respondent], ordering the dismissal of the
complaint and ordering the latter to pay [petitioners] the amount of ONE HUNDRED
TWENTY THOUSAND PESOS (₱120,000.00) on their counterclaims.
Cost against [Respondent].10
On appeal, the Court of Appeals reversed the findings of the RTC and held that foreign
laws were not proven in the manner provided by Section 24, Rule 132 of the Revised
Rules of Court, and therefore, it cannot be given full faith and credit.11 For failure to
prove the foreign law and custom, it is presumed that foreign laws are the sameas
our local or domestic or internal law under the doctrine of processual presumption.
Under the New Civil Code, the discharge of the goods intothe custody of the ports
authority therefore does not relieve the commoncarrier from liability because the
extraordinary responsibility of the common carriers lasts until actual or constructive
delivery of the cargoes tothe consignee or to the person who has the right to receive
them. Absent any proof that the notify party or the consignee was informed of the
arrival of the goods, the appellate court held that the extraordinary responsibility of
common carriers remains. Accordingly, the Court of Appeals directed petitioners to
pay respondent the value of the misdelivered goods in the amount of US$53,640.00.
The Issues
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Dissatisfied with the foregoing disquisition, petitioners impugned the adverse Court
of Appeals Decision before the Court on the following grounds:
I.
THERE IS ABSOLUTELY NO NEED TO PROVE PANAMANIAN LAWS BECAUSE THEYHAD
BEEN JUDICIALLY ADMITTED. AN ADMISSION BY A PARTY IN THE COURSE OF THE
PROCEEDINGS DOES NOT REQUIRE PROOF.
II.
BY PRESENTING AS EVIDENCE THE [GACETA] OFFICIAL OF REPUBLICA DE PANAMA NO.
17.596 WHERE THE APPLICABLE PANAMANIAN LAWS WERE OFFICIALLY PUBLISHED,
AND THE TESTIMONY OF EXPERT WITNESSES, PETITIONERS WERE ABLE TO PROVE
THE LAWS OF PANAMA.
III.
IF WE HAVE TO CONCEDE TO THE COURT OF APPEALS’ FINDING THAT THERE WAS
FAILURE OF PROOF, THE LEGAL QUESTION PRESENTED TO THE HONORABLE COURT
SHOULD BE RESOLVED FAVORABLY BECAUSE THE CARRIER DISCHARGED ITS DUTY
WHETHER UNDER THE PANAMANIAN LAW OR UNDER PHILIPPINE LAW.12
The Court’s Ruling
We find the petition bereft of merit.
It is well settled that foreign laws do not prove themselves in our jurisdiction and our
courts are not authorized to take judicial notice of them. Like any other fact, they
must be alleged and proved.13 To prove a foreign law, the party invoking it must
present a copy thereof and comply with Sections 24 and 25 of Rule 132 of the Revised
Rules of Court14 which read: SEC. 24. Proof of official record. — The record of public
documents referred to in paragraph (a) of Section 19, when admissible for any
purpose, may be evidenced by an official publication thereof or by a copy attested by
the officer having the legal custody of the record, or by his deputy, and accompanied,
if the record is not kept in the Philippines, with a certificate that such officer has the
custody. If the office in which the record is kept is in a foreigncountry, the certificate
may be made by a secretary of the embassy or legation, consul general, consul, vice-
consul, or consular agent or by any officer in the foreign service of the Philippines
stationed in the foreign country in which the record is kept, and authenticated by the
seal of his office.
SEC. 25. What attestation of copy must state. — Whenever a copy of a document or
record is attested for the purpose of the evidence, the attestation must state,in
substance, that the copy is a correct copy of the original, or a specific part thereof, as
the case may be. The attestation must be under the official seal of the attesting
officer, if there be any, or if he be the clerk of a court having a seal, under the seal of
such court.
For a copy of a foreign public document to be admissible, the following requisites are
mandatory: (1) itmust be attested by the officer having legal custody of the records
or by his deputy; and (2) it must be accompanied by a certificate by a secretary of the
embassy or legation, consul general, consul, vice-consular or consular agent or
foreign service officer, and with the seal of his office.15 Such official publication or
copy must be accompanied, if the record is not kept in the Philippines, with a
certificate that the attesting officer has the legal custody thereof.16 The certificate
may be issued by any of the authorized Philippine embassy or consular officials
stationed in the foreign country in which the record is kept, and authenticated by the
seal of his office.17 The attestation must state, in substance, that the copy is a correct
copy of the original, or a specific part thereof, as the case may be, and mustbe under
the official seal of the attesting officer.18
Contrary to the contention of the petitioners, the Panamanian laws, particularly Law
42 and its Implementing Order No. 7, were not duly proven in accordance with Rules
of Evidence and as such, it cannot govern the rights and obligations of the parties in
the case at bar. While a photocopy of the Gaceta Official of the Republica de Panama
No. 17.596, the Spanish text of Law 42 which is theforeign statute relied upon by the
court a quoto relieve the common carrier from liability, was presented as evidence
during the trial of the case below, the same however was not accompanied by the
required attestation and certification.
It is explicitly required by Section 24, Rule 132 of the Revised Rules of Court that a
copy of the statute must be accompanied by a certificate of the officer who has legal
custody of the records and a certificate made by the secretary of the embassy or
legation, consul general, consul, vice-consular or by any officer in the foreign service
of the Philippines stationed in the foreign country, and authenticated by the seal of
his office. The latter requirement is not merely a technicality but is intended to justify
the giving of full faith and credit to the genuineness of the document in a foreign
country.19 Certainly, the deposition of Mr. Enrique Cajigas, a maritime law
practitioner in the Republic of Panama, before the Philippine Consulate in Panama, is
not the certificate contemplated by law. At best, the deposition can be considered as
an opinion of an expert witness who possess the required special knowledge on the
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Panamanian laws but could not be recognized as proof of a foreign law, the deponent
not being the custodian of the statute who can guarantee the genuineness of the
document from a foreign country. To admit the deposition as proof of a foreign law
is, likewise, a disavowal of the rationaleof Section 24, Rule 132 of the Revised Rules
of Court, which isto ensure authenticity of a foreign law and its existence so as to
justify its import and legal consequence on the event or transaction in issue. The
above rule, however, admits exceptions, and the Court in certain cases recognized
that Section 25, Rule132 of the Revised Rules of Court does not exclude the
presentation of other competent evidence to prove the existence of foreign law. In
Willamete Iron and Steel Works v. Muzzal20 for instance, we allowed the foreign law
tobe established on the basis of the testimony in open court during the trial in the
Philippines of an attorney-atlaw in San Francisco, California, who quoted the
particular foreign law sought to be established.21 The ruling is peculiar to the facts.
Petitioners cannot invoke the Willamete ruling to secure affirmative relief since their
so called expert witness never appeared during the trial below and his deposition,
that was supposed to establish the existence of the foreign law, was obtained ex-
parte.
It is worth reiterating at this point that under the rules of private international law, a
foreign law must be properly pleaded and proved as a fact. In the absence of pleading
and proof, the laws of the foreign country or state will be presumed to be the same
as our local or domestic law. This is known as processual presumption.22 While the
foreign law was properly pleaded in the case at bar, it was,however, proven not in
the manner provided by Section 24, Rule 132 of the Revised Rules of Court. The
decision of the RTC, which proceeds from a disregard of specific rules cannot be
recognized.
Having settled the issue on the applicable Rule, we now resolve the issue of whether
or not petitioners are liable for the misdelivery of goods under Philippine laws.
Under the New Civil Code, common carriers, from the nature of their business and
for reasons of public policy, are bound to observe extraordinary diligencein the
vigilance over goods, according to the circumstances of each case.23 Common
carriers are responsible for loss, destruction or deterioration of the goods unless the
same is due to flood, storm, earthquake or other natural disaster or calamity.24
Extraordinary diligence is that extreme care and caution which persons of unusual
prudence and circumspection use for securing or preserving their own property or
rights.25 This expecting standardimposed on common carriers in contract of carrier
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 the shipment.26 Hence, in
case of loss of goods in transit, the common carrier is presumed under the law to
have been in fault or negligent.27
While petitioners concede that, as a common carrier, they are bound to observe
extraordinary diligence in the care and custody of the goods in their possession, they
insist that they cannot be held liable for the loss of the shipments, their extraordinary
responsibility having ceased at the time the goods were discharged into the custody
of the customs arrastreoperator, who in turn took complete responsibility over the
care, storage and delivery of the cargoes.28
In contrast, respondent, submits that the fact that the shipments were not delivered
to the consignee as statedin the bill of lading or to the party designated or named by
the consignee, constitutes misdelivery thereof, and under the law it is presumed that
the common carrier is at fault or negligent if the goods they transported, as in this
case, fell into the hands of persons who have no right to receive them.
We sustain the position of the respondent.
Article 1736 and Article 1738 are the provisions in the New Civil Code which define
the period when the common carrier is required to exercise diligence lasts, viz:
Article 1736. The extraordinary responsibility of the common carrier lasts from the
time the goodsare unconditionally placed in the possession of, and received by the
carrier for transportation until the same are delivered, actually or constructively, by
the carrier to the consignee, or to the person who has a right to receive them, without
prejudice to the provisions of article 1738.
Article 1738. 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.
Explicit is the rule under Article 1736 of the Civil Code that the extraordinary
responsibility of the common carrier begins from the time the goods are delivered to
the carrier.29 This responsibility remains in full force and effect even when they are
temporarily unloaded or stored in transit, unless the shipper or owner exercises the
right of stop page in transitu, and terminates only after the lapse of a reasonable time
for the acceptance, of the goods by the consignee or such other person entitled to
receive them.30
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
It was further provided in the samestatute that the carrier may be relieved from 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 the right to receive
them.31 In sales, actual delivery has been defined as the ceding of the corporeal
possession by the seller, and the actual apprehension of the corporeal possession by
the buyer or by some person authorized by him to receive the goods as his
representative for the purpose of custody or disposal.32 By the same token, there is
actual delivery in contracts for the transport of goods when possession has been
turned over to the consignee or to his duly authorized agent and a reasonable time
is given him to remove the goods.33
In this case, there is no dispute that the custody of the goods was never turned over
to the consignee or his agents but was lost into the hands of unauthorized persons
who secured possession thereof on the strength of falsified documents. The loss or
the misdelivery of the goods in the instant case gave rise to the presumption that the
common carrier is at fault or negligent.
A common carrier is presumed to have been negligent if it fails to prove that it
exercised extraordinary vigilance over the goods it transported.34 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.35 To overcome the presumption of negligence,
the common carrier must establish by adequateproof that it exercised extraordinary
diligence over the goods.36 It must do more than merely show that some other party
could be responsible for the damage.37
In the present case, petitioners failed to prove that they did exercise the degree of
diligence required by law over the goods they transported. Indeed, aside from their
persistent disavowal of liability by conveniently posing an excuse that their
extraordinary responsibility isterminated upon release of the goods to the
Panamanian Ports Authority, petitioners failed to adduce sufficient evidence they
exercised extraordinary care to prevent unauthorized withdrawal of the shipments.
Nothing in the New Civil Code, however, suggests, even remotely, that the common
carriers’ responsibility over the goods ceased upon delivery thereof to the custom
authorities. To the mind of this Court, the contract of carriage remains in full force
and effect even after the delivery of the goods to the port authorities; the only
delivery that releases it from their obligation to observe extraordinary care is the
delivery to the consignee or his agents. Even more telling of petitioners’ continuing
liability for the goods transported to the fact that the original bills of lading up to this
time, remains in the possession of the notify party or consignee. Explicit on this point
is the provision of Article 353 of the Code of Commerce which provides:
Article 353. The legal evidence of the contract between the shipper and the carrier
shall be the bills of lading, by the contents of which the disputes which may arise
regarding their execution and performance shall be decided, no exceptions being
admissible other than those of falsity and material error in the drafting.
After the contract has been complied with, the bill of lading which the carrier has
issued shall be returned to him, and by virtue of the exchange of this title with the
thing transported, the respective obligations and actions shall be considered
cancelled, unless in the same act the claim which the parties may wish to reserve be
reduced to writing, with the exception of that provided for in Article 366.
In case the consignee, upon receiving the goods, cannot return the bill of lading
subscribed by the carrier, because of its loss or of any other cause, he must give the
latter a receiptfor the goods delivered, this receipt producing the same effects as the
return of the bill of lading.
While surrender of the original bill of lading is not a condition precedent for the
common carrier to bedischarged from its contractual obligation, there must be, at
the very least, an acknowledgement of the delivery by signing the delivery receipt, if
surrender of the original of the bill of lading is not possible.38 There was neither
surrender of the original copies of the bills of lading nor was there acknowledgment
of the delivery in the present case. This leads to the conclusion that the contract of
carriage still subsists and petitioners could be held liable for the breach thereof.
Petitioners could have offered evidence before the trial court to show that they
exercised the highest degree of care and caution even after the goods was turned
over to the custom authorities, by promptly notifying the consignee of its arrival at
the P01i of Cristobal in order to afford them ample opportunity to remove the
cargoes from the port of discharge. We have scoured the records and found that
neither the consignee nor the notify paiiy was informed by the petitioners of the
arrival of the goods, a crucial fact indicative of petitioners' failure to observe
extraordinary diligence in handling the goods entrusted to their custody for transport.
They could have presented proof to show that they exercised extraordinary care but
they chose in vain, full reliance to their cause on applicability of Panamanian law to
local jurisdiction. It is for this reason that we find petitioners liable for the misdelivery
of the goods. It is evident from the review of the records and by the evidence adduced
by the respondent that petitioners failed to rebut the prima facie presumption of
negligence. We find no compelling reason to depa1i from the ruling of the Court of
Appeals that under the contract of carriage, petitioners are liable for the value of the
misdelivcred goods.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
WHEREFORE, premises considered, the petition is hereby DENIED. The assailed
Resolution of the Court of Appeals is hereby AFFIRMED.
SO ORDERED.
12.
G.R. No. L-36481-2 October 23, 1982
AMPARO C. SERVANDO, CLARA UY BICO, plaintiffs-appellees,
vs.
PHILIPPINE STEAM NAVIGATION CO., defendant-appellant.
Zoilo de la Cruz, Jr. & Associate for plaintiff-appellee Amparo Servando.
Benedicto, Sumbingco & Associate for appellee Clara Uy Bico.
Ross, Salcedo, del Rosario, Bito & Misa for defendant-appellant.
ESCOLIN, J.:
This appeal, originally brought to the Court of Appeals, seeks to set aside the decision
of the Court of First Instance of Negros Occidental in Civil Cases Nos. 7354 and 7428,
declaring appellant Philippine Steam Navigation liable for damages for the loss of the
appellees' cargoes as a result of a fire which gutted the Bureau of Customs'
warehouse in Pulupandan, Negros Occidental.
The Court of Appeals certified the case to Us because only pure questions of law are
raised therein.
The facts culled from the pleadings and the stipulations submitted by the parties are
as follows:
On November 6, 1963, appellees Clara Uy Bico and Amparo Servando loaded on
board the appellant's vessel, FS-176, for carriage from Manila to Pulupandan, Negros
Occidental, the following cargoes, to wit:
Clara Uy Bico —
1,528 cavans of rice valued
at P40,907.50;
Amparo Servando —
44 cartons of colored paper,
toys and general merchandise valued at P1,070.50;
as evidenced by the corresponding bills of lading issued by the appellant. 1
Upon arrival of the vessel at Pulupandan, in the morning of November 18, 1963, the
cargoes were discharged, complete and in good order, unto the warehouse of the
Bureau of Customs. At about 2:00 in the afternoon of the same day, said warehouse
was razed by a fire of unknown origin, destroying appellees' cargoes. Before the fire,
however, appellee Uy Bico was able to take delivery of 907 cavans of rice 2 Appellees'
claims for the value of said goods were rejected by the appellant.
On the bases of the foregoing facts, the lower court rendered a decision, the decretal
portion of which reads as follows:
WHEREFORE, judgment is rendered as follows:
1. In case No. 7354, the defendant is hereby ordered to pay the plaintiff Amparo C.
Servando the aggregate sum of P1,070.50 with legal interest thereon from the date
of the filing of the complaint until fully paid, and to pay the costs.
2. In case No. 7428, the defendant is hereby ordered to pay to plaintiff Clara Uy Bico
the aggregate sum of P16,625.00 with legal interest thereon from the date of the
filing of the complaint until fully paid, and to pay the costs.
Article 1736 of the Civil Code imposes upon common carriers the duty to observe
extraordinary diligence from the moment the goods are unconditionally placed in
their possession "until the same are delivered, actually or constructively, by the
carrier to the consignee or to the person who has a right to receive them, without
prejudice to the provisions of Article 1738. "
The court a quo held that the delivery of the shipment in question to the warehouse
of the Bureau of Customs is not the delivery contemplated by Article 1736; and since
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
the burning of the warehouse occurred before actual or constructive delivery of the
goods to the appellees, the loss is chargeable against the appellant.
It should be pointed out, however, that in the bills of lading issued for the cargoes in
question, the parties agreed to limit the responsibility of the carrier for the loss or
damage that may be caused to the shipment by inserting therein the following
stipulation:
Clause 14. Carrier shall not be responsible for loss or damage to shipments billed
'owner's risk' unless such loss or damage is due to negligence of carrier. Nor shall
carrier be responsible for loss or damage caused by force majeure, dangers or
accidents of the sea or other waters; war; public enemies; . . . fire . ...
We sustain the validity of the above stipulation; there is nothing therein that is
contrary to law, morals or public policy.
Appellees would contend that the above stipulation does not bind them because it
was printed in fine letters on the back-of the bills of lading; and that they did not sign
the same. This argument overlooks the pronouncement of this Court in Ong Yiu vs.
Court of Appeals, promulgated June 29, 1979, 3 where the same issue was resolved
in this wise:
While it may be true that petitioner had not signed the plane ticket (Exh. '12'), he is
nevertheless bound by the provisions thereof. 'Such provisions have been held to be
a part of the contract of carriage, and valid and binding upon the passenger
regardless of the latter's lack of knowledge or assent to the regulation'. It is what is
known as a contract of 'adhesion', in regards which it has been said that contracts of
adhesion wherein one party imposes a ready made form of contract on the other, as
the plane ticket in the case at bar, are contracts not entirely prohibited. The one who
adheres to the contract is in reality free to reject it entirely; if he adheres, he gives
his consent." (Tolentino, Civil Code, Vol. IV, 1962 Ed., p. 462, citing Mr. Justice J.B.L.
Reyes, Lawyer's Journal, Jan. 31, 1951, p. 49).
Besides, the agreement contained in the above quoted Clause 14 is a mere iteration
of the basic principle of law written in Article 1 1 7 4 of the Civil Code:
Article 1174. Except in cases expressly specified by the law, or when it is otherwise
declared by stipulation, or when the nature of the obligation requires the assumption
of risk, no person shall be responsible for those events which could not be foreseen,
or which, though foreseen, were inevitable.
Thus, where fortuitous event or force majeure is the immediate and proximate cause
of the loss, the obligor is exempt from liability for non-performance. The Partidas, 4
the antecedent of Article 1174 of the Civil Code, defines 'caso fortuito' as 'an event
that takes place by accident and could not have been foreseen. Examples of this are
destruction of houses, unexpected fire, shipwreck, violence of robbers.'
In its dissertation of the phrase 'caso fortuito' the Enciclopedia Juridicada Espanola 5
says: "In a legal sense and, consequently, also in relation to contracts, a 'caso fortuito'
presents the following essential characteristics: (1) the cause of the unforeseen and
unexpected occurrence, or of the failure of the debtor to comply with his obligation,
must be independent of the human will; (2) it must be impossible to foresee the event
which constitutes the 'caso fortuito', or if it can be foreseen, it must be impossible to
avoid; (3) the occurrence must be such as to render it impossible for the debtor to
fulfill his obligation in a normal manner; and (4) the obligor must be free from any
participation in the aggravation of the injury resulting to the creditor." In the case at
bar, the burning of the customs warehouse was an extraordinary event which
happened independently of the will of the appellant. The latter could not have
foreseen the event.
There is nothing in the record to show that appellant carrier ,incurred in delay in the
performance of its obligation. It appears that appellant had not only notified
appellees of the arrival of their shipment, but had demanded that the same be
withdrawn. In fact, pursuant to such demand, appellee Uy Bico had taken delivery of
907 cavans of rice before the burning of the warehouse.
Nor can the appellant or its employees be charged with negligence. The storage of
the goods in the Customs warehouse pending withdrawal thereof by the appellees
was undoubtedly made with their knowledge and consent. Since the warehouse
belonged to and was maintained by the government, it would be unfair to impute
negligence to the appellant, the latter having no control whatsoever over the same.
The lower court in its decision relied on the ruling laid down in Yu Biao Sontua vs.
Ossorio 6, where this Court held the defendant liable for damages arising from a fire
caused by the negligence of the defendant's employees while loading cases of
gasoline and petroleon products. But unlike in the said case, there is not a shred of
proof in the present case that the cause of the fire that broke out in the Custom's
warehouse was in any way attributable to the negligence of the appellant or its
employees. Under the circumstances, the appellant is plainly not responsible.
WHEREFORE, the judgment appealed from is hereby set aside. No costs.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
SO ORDERED.
13.
G.R. No. L-3678 February 29, 1952
JOSE MENDOZA, plaintiff-appellant,
vs.
PHILIPPINE AIR LINES, INC., defendant-appellee.
Manuel O. Chan, Reyes and Dy-Liaco for appellant.
Daniel Me. Gomez and Emigdio Tanjuatco for appellee.
MONTEMAYOR, J.:
The present appeal by plaintiff Jose Mendoza from the decision of the Court of First
Instance of Camarines Sur, has come directly to this Tribunal for the reason that both
parties, appellant and appellee, accepted the findings of fact made by the trial court
and here raise only questions of law. On our part, we must also accept said findings
of fact of the lower court.
In the year 1948, appellant Jose Mendoza was the owner of the Cita Theater located
in the City of Naga, Camarines Sur, where he used to exhibit movie pictures booked
from movie producers or film owners in Manila. The fiesta or town holiday of the City
of Naga, held on September 17 and 18, yearly, was usually attended by a great many
people, mostly from the Bicol region, especially since the Patron Saint Virgin of Peña
Francia was believed by many to be miraculous. As a good businessman, appellant,
taking advantage of these circumstances, decided to exhibit a film which would fit
the occasion and have a special attraction and significance to the people attending
said fiesta. A month before the holiday, that is to say, August 1948, he contracted
with the LVN pictures, Inc., a movie producer in Manila for him to show during the
town fiesta the Tagalog film entitled "Himala ng Birhen" or Miracle of the Virgin. He
made extensive preparations; he had two thousand posters printed and later
distributed not only in the City of Naga but also in the neighboring towns. He also
advertised in a weekly of general circulation in the province. The posters and
advertisement stated that the film would be shown in the Cita theater on the 17th
and 18th of September, corresponding to the eve and day of the fiesta itself.
In pursuance of the agreement between the LVN Pictures Inc. and Mendoza, the
former on September 17th, 1948, delivered to the defendant Philippine Airlines (PAL)
whose planes carried passengers and cargo and made regular trips from Manila to
the Pili Air Port near Naga, Camarines Sur, a can containing the film "Himala ng
Birhen" consigned to the Cita Theater. For this shipment the defendant issued its Air
Way Bill No. 317133 marked Exhibit "1". This can of films was loaded on flight 113 of
the defendant, the plane arriving at the Air Port at Pili a little after four o'clock in the
afternoon of the same day, September 17th. For reasons not explained by the
defendant, but which would appear to be the fault of its employees or agents, this
can of film was not unloaded at Pili Air Port and it was brought ba to Manila. Mendoza
who had completed all arrangements for the exhibition of the film beginning in the
evening of September 17th, to exploit the presence of the big crowd that came to
attend the town fiesta, went to the Air Port and inquired from the defendant's station
master there about the can of film. Said station master could not explain why the film
was not unloaded and sent several radiograms to his principal in Manila making
inquiries and asking that the film be sent to Naga immediately. After investigation
and search in the Manila office, the film was finally located the following day,
September 18th, and then shipped to the Pili Air Port on September 20th. Mendoza
received it and exhibited the film but he had missed his opportunity to realize a large
profit as he expected for the people after the fiesta had already left for their towns.
To recoup his losses, Mendoza brought this action against the PAL. After trial, the
lower court found that because of his failure to exhibit the film "Himala ng Birhen"
during the town fiesta, Mendoza suffered damages or rather failed to earn profits in
the amount of P3,000.00, but finding the PAL not liable for said damages, dismissed
the complaint.
To avoid liability, defendant-appellee, called the attention of the trial court to the
terms and conditions of paragraph 6 of the Way Bill printed on the back thereof which
paragraph reads as follows:
6. The Carrier does not obligate itself to carry the Goods by any specified aircraft or
on a specified time. Said Carrier being hereby authorized to deviate from the route
of the shipment without any liability therefor.
It claimed that since there was no obligation on its part to carry the film in question
on any specified time, it could not be held accountable for the delay of about three
days. The trial court, however, found and held that although the defendant was not
obligated to load the film on any specified plane or on any particular day, once said
can film was loaded and shipped on one of its planes making trip to Camarines, then
it assumed the obligation to unload it at its point of destination and deliver it to the
consignee, and its unexplained failure to comply with this duty constituted
negligence. If however found that fraud was not involved and that the defendant was
a debtor in good faith.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
The trial court presided over by Judge Jose N. Leuterio in a well-considered decision
citing authorities, particularly the case of Daywalt vs. Corporacion de PP. Agustinos
Recoletos, 39 Phil. 587, held that not because plaintiff failed to realize profits in the
sum of P3,000.00 due to the negligence of the defendant, should the latter be made
to reimburse him said sum. Applying provisions of Art. 1107 of the Civil Code which
provides that losses and those foreseen, or which might have been foreseen, at the
time of constituting the obligation, and which are a necessary consequence of the
failure to perform it, the trial court held that inasmuch as these damages suffered by
Mendoza were not foreseen or could not have been foreseen at the time that the
defendant accepted the can of film for shipment, for the reason that neither the
shipper LVN Pictures Inc. nor the consignee Mendoza had called its attention to the
special circumstances attending the shipment and the showing of the film during the
town fiesta of Naga, plaintiff may not recover the damages sought.
Counsel for appellant insists that the articles of the Code of Commerce rather than
those of the Civil Code should have been applied in deciding this case for the reason
that the shipment of the can of film is an act of commerce; that the contract of
transportation in this case should be considered commercial under Art. 349 of the
Code of Commerce because it only involves merchandise or an object of commerce
but also the transportation company, the defendant herein, was a common carrier,
that is to say, customarily engaged in transportation for the public, and that although
the contract of transportation was not by land or waterways as defined in said Art.
349, nevertheless, air transportation being analogous to land and water
transportation, should be considered as included, especially in view of the second
paragraph of Art. 2 of the same Code which says that transactions covered by the
Code of Commerce and all others of analogous character shall be deemed acts of
commerce. The trial court, however, disagreed to this contention and opined that air
transportation not being expressly covered by the Code of Commerce, cannot be
governed by its provisions.
We believe that whether or not transportation by air should be regarded as a
commercial contract under Art. 349, would be immaterial in the present case, as will
be explained later. Without making a definite ruling on the civil or commercial nature
of transportation by air, it being unnecessary, we are inclined to believe and to hold
that a contract of transportation by air may be regarded as commercial. The reason
is that at least in the present case the transportation company (PAL) is a common
carrier; besides, air transportation is clearly similar or analogous to land and water
transportation. The obvious reason for its non-inclusion in the Code of Commerce
was that at the time of its promulgation, transportation by air on a commercial basis
was not yet known. In the United Sates where air transportation has reached its
highest development, an airline company engaged in the transportation business is
regarded as a common carrier.
The principles which govern carriers by other means, such as by railroad or motor
bus, govern carriers by aircraft. 6 Am. Jur., Aviation, Sec. 56, p. 33.
When Aircraft Operator is Common Carrier. — That aircraft and the industry of
carriage by aircraft are new is no reason why one in fact employing aircraft as
common-carrier vehicles should not be classified as a common carrier and charged
with liability as such. There can be no doubt, under the general law of common
carriers, that those air lines and aircraft owners engaged in the passenger service on
regular schedules on definite routes, who solicit the patronage of the traveling public,
advertise schedules for routes, time of leaving, and rates of fare, and make the usual
stipulation as to baggage, are common carriers by air. A flying service company which,
according to its printed advertising, will take anyone anywhere at any time, though
not operating on regular routes or schedules, and basing its charges not on the
number of passengers, but on the operating cost of the plane per mile, has been held
to be a common carrier. It is not necessary, in order to make one carrying passengers
by aircraft a common carrier of passengers that the passengers can be carried from
one point to another; the status and the liability as a common carrier may exist
notwithstanding the passenger's ticket issued by an airplane carrier of passengers for
hire contains a statement that it is not a common carrier, etc., or a stipulation that it
is to be held only for its proven negligence. But an airplane owner cannot be classed
as a common carrier of passengers unless he undertakes, for hire, to carry all persons
who apply for passage indiscriminately as long as there is room and no legal excuse
for refusing. . . . 6 Am. Jur., Aviation, Sec. 58, pp. 34-35.
The rules governing the business of a common carrier by airship or flying machine
may be readily assimilated to those applied to other common carriers. 2 C.J.S., 1951,
Cumulative Pocket Part, Aerial Navigation, Sec. 38, p. 99.
The test of whether one is a common carrier by air is whether he holds out that he
will carry for hire, so long as he has room, goods for everyone bringing goods to him
for carriage, not whether he is carrying as a public employment or whether he carries
to a fixed place. (Ibid., Sec. 39, p. 99.)
Appellant contends that Art. 358 of the Code of Commerce should govern the award
of the damages in his favor. Said article provides that if there is no period fixed for
the delivery of the goods, the carrier shall be bound to forward them in the first
shipment of the same or similar merchandise which he may make to the point of
delivery, and that upon failure to do so, the damages caused by the delay should be
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
suffered by the carrier. This is a general provision for ordinary damages and is no
different from the provisions of the Civil Code, particularly Art. 1101 thereof,
providing for the payment of damages caused by the negligence or delay in the
fulfillment of one's obligation. Even applying the provisions of the Code of Commerce,
as already stated, the pertinent provisions regarding damages only treats of ordinary
damages or damages in general, not special damages like those suffered by the
plaintiff herein. Article 2 of the Code of Commerce provides that commercial
transactions are to be governed by the provisions of the Code of Commerce, but in
the absence of applicable provisions, they will be governed by the usages of
commerce generally observed in each place; and in default of both, by those of the
Civil Law. So that assuming that the present case involved a commercial transaction,
still inasmuch as the special damages herein claimed finds no applicable provision in
the Code of Commerce, neither has it been shown that there are any commercial
usages applicable thereto, then in the last analysis, the rules of the civil law would
have to come into play. 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 the transportation was entered
into. The trial court correctly found that the defendant company could not have
foreseen the damages that would be suffered by Mendoza upon failure to deliver the
can of film on the 17th of September, 1948 for the reason that the plans of Mendoza
to exhibit that film during the town fiesta and his preparations, specially the
announcement of said exhibition by posters and advertisement in the newspaper,
were not called to the defendant's attention.
In our research for authorities we have found a case very similar to the one under
consideration. In the case of Chapman vs. Fargo, L.R.A. (1918 F) p. 1049, the plaintiff
in Troy, New York, delivered picture films to the defendant Fargo, an express
company, consigned and to be delivered to him in Utica. At the time of the shipment
the attention of the express company was called to the fact that the shipment
involved motion picture films to be exhibited in Utica, and that they should be sent
to their destination, rush. There was delay in their delivery and it was found that the
plaintiff because of his failure to exhibit the film in Utica due to the delay suffered
damages or loss of profits. But the highest court in the State of New York refused to
award him special damages. Said appellate court observed:
But 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 probably would lead to such special loss if he defaulted. Or,
as the rule has been stated in another form, in order to impose 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 a 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.
As may be seen, that New York case is a stronger one than the present case for the
reason that the attention of the common carrier in said case was called to the nature
of the articles shipped, the purpose of shipment, and the desire to rush the shipment,
circumstances and facts absent in the present case.
But appellants now contends that he is not suing on a breach of contract but on a
tort as provided for in Art. 1902 of the Civil Code. We are a little perplexed as to this
new theory of the appellant. First, he insists that the articles of the Code of
Commerce should be applied; that he invokes the provisions of said Code governing
the obligations of a common carrier to make prompt delivery of goods given to it
under a contract of transportation. Later, as already said, he says that he was never
a party to the contract of transportation and was a complete stranger to it, and that
he is now suing on a tort or violation of his rights as a stranger (culpa aquiliana). If he
does not invoke the contract of carriage entered into with the defendant company,
then he would hardly have any leg to stand on. His right to prompt delivery of the can
of film at the Pili Air Port stems and is derived from the contract of carriage under
which contract, the PAL undertook to carry the can of film safely and to deliver it to
him promptly. Take away or ignore that contract and the obligation to carry and to
deliver and the right to prompt delivery disappear. Common carriers are not
obligated by law to carry and to deliver merchandise, and persons are not vested with
the right of prompt delivery, unless such common carriers previously assume the
obligation. Said rights and obligations are created by a specific contract entered into
by the parties. In the present case, the findings of the trial court which as already
stated, are accepted by the parties and which we must accept are to the effect that
the LVN Pictures Inc. and Jose Mendoza on one side, and the defendant company on
the other, entered into a contract of transportation. (p. 29, Rec. on Appeal). One
interpretation of said finding is that the LVN Pictures Inc. through previous
agreement with Mendoza acted as the latter's agent. When he negotiated with the
LVN Pictures Inc. to rent the film "Himala ng Birhen" and show it during the Naga
town fiesta, he most probably authorized and enjoined the Picture Company to ship
the film for him on the PAL on September 17th. Another interpretation is that even
if the LVN Pictures Inc. as consignor of its own initiative, and acting independently of
Mendoza for the time being, made Mendoza as consignee, a stranger to the contract
if that is possible, nevertheless when he, Mendoza, appeared at the Pili Air Port
armed with the copy of the Air Way Bill (Exh. 1) demanding the delivery of the
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
shipment to him, he thereby made himself a party to the contract of the
transportation. The very citation made by appellant in his memorandum supports
this view. Speaking of the possibility of a conflict between the order of the shipper
on the one hand and the order of the consignee on the other, as when the shipper
orders the shipping company to return or retain the goods shipped while the
consignee demands their delivery, Malagarriga in his book Codigo de Comercio
Comentado, Vol. I, p. 400, citing a decision of Argentina Court of Appeals on
commercial matters, cited by Tolentino in Vol. II of his book entitled "Commentaries
and Jurisprudence on the Commercial Laws of the Philippines" p. 209, says that the
right of the shipper to countermand the shipment terminates when the consignee or
legitimate holder of the bill of lading appears with such bill of lading before the carrier
and makes himself a party to the contract. Prior to that time, he is stranger to the
contract.
Still another view of this phase of the case is that contemplated in Art. 1257,
paragraph 2, of the old Civil Code which reads thus:
Should the contract contain any stipulation in favor of a third person, he may demand
its fulfillment, provided he has given notice of his acceptance to the person bound
before the stipulation has been revoked.
Here, the contract of carriage between the LVN Pictures Inc. and the defendant
carrier contains the stipulations of the delivery to Mendoza as consignee. His 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, such demand being one of the fulfillment of 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.
One can readily sympathize with the appellant herein for his loss of profits which he
expected to realize. But he overlooked the legal angle. In situations like the present
where failure to exhibit films on a certain day would spell substantial damages or
considerable loss of profits, including waste of efforts on preparations and expenses
incurred in advertisements, exhibitors, for their security, may either get hold of the
films well ahead of the time of exhibition in order to make allowance for any hitch in
the delivery, or else enter into a special contract or make a suitable arrangement with
the common carrier for the prompt delivery of the films, calling the attention of the
carrier to the circumstances surrounding the case and the approximate amount of
damages to be suffered in case of delay.
Finding no reversible error in the decision appealed from, the same is hereby
affirmed. No pronouncement as to costs. So ordered.
14.
G.R. No. 94761 May 17, 1993
MAERSK LINE, petitioner,
vs.
COURT OF APPEALS AND EFREN V. CASTILLO, doing business under the name and
style of Ethegal Laboratories, respondents.
Bito, Lozada, Ortega & Castillo for petitioner.
Humberto A. Jambora for private respondent.
BIDIN, J.:
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 (Exh. "B"; AC GR CV No.10340, Folder of
Exhibits, pp. 5-6), 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 goods
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
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 the subject
merchandise was due solely to the gross negligence of petitioner Maersk Line.
The issues having been joined, private respondent moved for the dismissal of the
complaint against Eli Lilly, Inc.on the ground that the evidence on record shows that
the delay in the delivery of the shipment was attributable solely to petitioner.
Acting on private respondent's motion, the trial court dismissed the complaint
against Eli Lilly, Inc. Correspondingly, the latter withdraw its cross-claim against
petitioner in a joint motion dated December 3, 1979.
After trial held between respondent and petitioner, the court a quo rendered
judgment dated January 8, 1982 in favor of respondent Castillo, the dispositive
portion of which reads:
IN VIEW OF THE FOREGOING, this Court believe (sic) and so hold (sic) 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.
Considering that the only evidence presented by the defendant Maersk line thru its
agent the Compania de Tabacos de Filipinas is the testimony of Rolando Ramirez who
testified on Exhs. "1" to "5" which this Court believe (sic) did not change the findings
of this Court in its decision rendered on September 4, 1980, this Court hereby renders
judgment in favor of the plaintiff Efren Castillo as against the defendant Maersk Line
thru its agent, the COMPANIA GENERAL DE TABACOS DE FILIPINAS and ordering:
(a) Defendant to pay the plaintiff Efren V. Castillo the amount of THREE HUNDRED
SIXTY NINE THOUSAND PESOS, (P369,000.00) as unrealized profit;.
(b) Defendant to pay plaintiff the sum of TWO HUNDRED THOUSAND PESOS
(P200,000.00), as moral damages;
(c) Defendant to pay plaintiff the sum of TEN THOUSAND PESOS (P10,000.00) as
exemplary damages;
(d) Defendant to pay plaintiff the sum of ELEVEN THOUSAND SIX HUNDRED EIGHTY
PESOS AND NINETY SEVEN CENTAVOS (P11,680.97) as cost of credit line; and
(e) Defendant to pay plaintiff the sum of FIFTY THOUSAND PESOS (P50,000.00), as
attorney's fees and to pay the costs of suit.
That the above sums due to the plaintiff will bear the legal rate of interest until they
are fully paid from the time the case was filed.
SO ORDERED. (AC-GR CV No. 10340, Rollo, p. 15).
On appeal, respondent court rendered its decision dated August 1, 1990 affirming
with modifications the lower court's decision as follows:
WHEREFORE, the decision appealed from is affirmed with a modification, and, as
modified, the judgment in this case should read as follows:
Judgment is hereby rendered ordering defendant-appellant Maersk Line to pay
plaintiff-appellee (1) compensatory damages of P11,680.97 at 6% annual interest
from filing of the complaint until fully paid, (2) moral damages of P50,000.00, (3)
exemplary damages of P20,000,00, (3) attorney's fees, per appearance fees, and
litigation expenses of P30,000.00, (4) 30% of the total damages awarded except item
(3) above, and the costs of suit.
SO ORDERED. (Rollo, p. 50)
In its Memorandum, petitioner submits the following "issues" for resolution of the
court :
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
I xxx xxx xxx
Whether or not the respondent Court of Appeals committed an error when it ruled
that a defendant's cross-claim against a co-defendant survives or subsists even after
the dismissal of the complaint against defendant-cross claimant.
II
Whether or not respondent Castillo is entitled to damages resulting from delay in the
delivery of the shipment in the absence in the bill of lading of a stipulation on the
period of delivery.
III
Whether or not the respondent appellate court erred in awarding actual, moral and
exemplary damages and attorney's fees despite the absence of factual findings
and/or legal bases in the text of the decision as support for such awards.
IV
Whether or not the respondent Court of Appeals committed an error when it
rendered an ambiguous and unexplained award in the dispositive portion of the
decision which is not supported by the body or the text of the decision. (Rollo, pp.94-
95).
With regard to the first issue raised by petitioner on whether or not a defendant's
cross-claim against co-defendant (petitioner herein) survives or subsists even after
the dismissal of the complaint against defendant-cross-claimant (petitioner herein),
we rule in the negative.
Apparently this issue was raised by reason of the declaration made by respondent
court in its questioned decision, as follows:
Re the first assigned error: What should be rescinded in this case is not the
"Memorandum of Shipment" but the contract between appellee and defendant Eli
Lilly (embodied in three documents, namely: Exhs. A, A-1 and A-2) whereby the
former agreed to buy and the latter to sell those six drums of gelatin capsules. It is by
virtue of the cross-claim by appellant Eli Lilly against defendant Maersk Line for the
latter's gross negligence in diverting the shipment thus causing the delay and damage
to appellee that the trial court found appellant Maersk Line liable. . . .
Re the fourth assigned error: Appellant Maersk Line's insistence that appellee has no
cause of action against it and appellant Eli Lilly because the shipment was delivered
in good order and condition, and the bill of lading in question contains "stipulations,
exceptions and conditions" Maersk Line's liability only to the "loss, destruction or
deterioration," indeed, this issue of lack of cause of action has already been
considered in our foregoing discussion on the second assigned error, and our
resolution here is still that appellee has a cause of action against appellant Eli Lilly.
Since the latter had filed a cross-claim against appellant Maersk Line, the trial court
committed no error, therefore, in holding the latter appellant ultimately liable to
appellee. (Rollo, pp. 47-50; Emphasis supplied)
Reacting to the foregoing declaration, petitioner submits that its liability is predicated
on the cross-claim filed its co-defendant Eli Lilly, Inc. which cross-claim has been
dismissed, the original complaint against it should likewise be dismissed. We disagree.
It should be recalled that the complaint was filed originally against Eli Lilly, Inc. as
shipper-supplier and petitioner as carrier. Petitioner being an original party
defendant upon whom the delayed shipment is imputed cannot claim that the
dismissal of the complaint against Eli Lilly, Inc. inured to its benefit.
Respondent court, erred in declaring that the trial court based petitioner's liability on
the cross-claim of Eli Lilly, Inc. As borne out by the record, the trial court anchored its
decision on petitioner's delay or negligence to deliver the six (6) drums of gelatin
capsules within a reasonable time on the basis of which petitioner was held liable for
damages under Article 1170 of the New Civil Code which provides that those who in
the performance of their obligations are guilty of fraud, negligence, or delay and
those who in any manner contravene the tenor thereof, are liable for damages.
Nonetheless, 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 (Rollo, p. 103).
On the other hand, private respondent claims that during the period before the
specified date of arrival of the goods, he had made several commitments and
contract of adhesion. Therefore, petitioner can be held liable for the damages
suffered by private respondent for the cancellation of the contracts he entered into.
We have carefully reviewed the decisions of respondent court and the trial court and
both of them show that, in finding petitioner liable for damages for the delay in the
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
delivery of goods, reliance was made on the rule that contracts of adhesion are void.
Added to this, the lower court stated that the exemption against liability for delay is
against public policy and is thus, void. Besides, private respondent's action is
anchored on Article 1170 of the New Civil Code and not under the law on Admiralty
(AC-GR CV No. 10340, Rollo, p. 14).
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. (Exh. "1-A"; AC-G.R.
CV No. 10340, Folder of Exhibits, p. 41)
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 (Sweet Lines v. Teves, 83 SCRA 361
[1978]). The only participation left of the other party in such a contract is the affixing
of his signature thereto, hence the term "Adhesion" (BPI Credit Corporation v. Court
of Appeals, 204 SCRA 601 [1991]; Angeles v. Calasanz, 135 SCRA 323 [1985]).
Nonetheless, settled is the rule that bills of lading are contracts not entirely
prohibited (Ong Yiu v. Court of Appeals, et al., 91 SCRA 223 [1979]; Servando, et al. v.
Philippine Steam Navigation Co., 117 SCRA 832 [1982]). 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]).
In Magellan, (supra), we ruled:
It is a long standing jurisprudential rule that a bill of lading operates both as a receipt
and as contract to transport and deliver the same a therein stipulated. As a contract,
it names the parties, which includes the consignee, fixes the route, destination, and
freight rates or charges, and stipulates the rights and obligations assumed by the
parties. Being a contract, it is the law between the parties who are bound by its terms
and conditions provided that these are not contrary to law, morals, good customs,
public order and public policy. A bill of lading usually becomes effective upon its
delivery to and acceptance by the shipper. It is presumed that the stipulations of the
bill were, in the absence of fraud, concealment or improper conduct, known to the
shipper, and he is generally bound by his acceptance whether he reads the bill or not.
(Emphasis supplied)
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 (Mendoza v. Philippine Air Lines, Inc., 90 Phil. 836 [1952]), 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 (Exh. "1"; AC GR CV No. 10340, Folder of
Exhibits, p. 41) 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
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
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.
Petition maintains that the award of actual, moral and exemplary dames and
attorney's fees are not valid since there are no factual findings or legal bases stated
in the text of the trial court's decision to support the award thereof.
Indeed, it is settled that actual and compensataory damages requires substantial
proof (Capco v. Macasaet. 189 SCRA 561 [1990]). In the case at bar, private
respondent was able to sufficiently prove through an invoice (Exh. 'A-1'), certification
from the issuer of the letter of credit (Exh.'A-2') and the Memorandum of Shipment
(Exh. "B"), the amount he paid as costs of the credit line for the subject goods.
Therefore, respondent court acted correctly in affirming the award of eleven
thousand six hundred eighty pesos and ninety seven centavos (P11,680.97) as costs
of said credit line.
As to the propriety of the award of moral damages, Article 2220 of the Civil Code
provides that moral damages may be awarded in "breaches of contract where the
defendant acted fraudulently or in bad faith" (Pan American World Airways v.
Intermediate Appellate Court, 186 SCRA 687 [1990]).
In the case before us, we that the only evidence presented by petitioner was the
testimony of Mr. Rolando Ramirez, a claims manager of its agent Compania General
de Tabacos de Filipinas, who merely testified on Exhs. '1' to '5' (AC-GR CV No. 10340,
p. 2) and nothing else. Petitioner never even bothered to explain the course for the
delay, i.e. more than two (2) months, in the delivery of subject shipment. Under the
circumstances of the case, we hold that petitioner is liable for breach of contract of
carriage through gross negligence amounting to bad faith. Thus, the award of moral
damages if therefore proper in this case.
In line with this pronouncement, we hold that exemplary damages may be awarded
to the private respondent. In contracts, exemplary damages may be awarded if the
defendant acted in a wanton, fraudulent, reckless, oppresive or malevolent manner.
There was gross negligence on the part of the petitioner in mishiping the subject
goods destined for Manila but was inexplicably shipped to Richmond, Virginia, U.S.A.
Gross carelessness or negligence contitutes wanton misconduct, hence, exemplary
damages may be awarded to the aggrieved party (Radio Communication of the Phils.,
Inc. v. Court of Appeals, 195 SCRA 147 [1991]).
Although attorney's fees are generally not recoverable, a party can be held lible for
such if exemplary damages are awarded (Artice 2208, New Civil Code). In the case at
bar, we hold that private respondent is entitled to reasonable attorney`s fees since
petitioner acte with gross negligence amounting to bad faith.
However, we find item 4 in the dispositive portion of respondent court`s decision
which awarded thirty (30) percent of the total damages awarded except item 3
regarding attorney`s fees and litigation expenses in favor of private respondent, to
be unconsionable, the same should be deleted.
WHEREFORE, with the modification regarding the deletion of item 4 of respondent
court`s decision, the appealed decision is is hereby AFFIRMED in all respects.
SO ORDERED.
15.
G.R. No. 119197 May 16, 1997
TABACALERA INSURANCE CO., PRUDENTIAL GUARANTEE & ASSURANCE, INC., and
NEW ZEALAND INSURANCE CO., LTD., petitioners,
vs.
NORTH FRONT SHIPPING SERVICES, INC., and COURT OF APPEALS, respondents.
BELLOSILLO, J.:
TABACALERA INSURANCE CO., Prudential Guarantee & Assurance, Inc., and New
Zealand Insurance Co., Ltd., in this petition for review on certiorari, assail the 22
December 1994 decision of the Court of Appeals and its Resolution of 16 February
1995 which affirmed the 1 June 1993 decision of the Regional Trial Court dismissing
their complaint for damages against North Front Shipping Services, Inc.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
On 2 August 1990, 20,234 sacks of corn grains valued at P3,500,640.00 were shipped
on board North Front 777, a vessel owned by North Front Shipping Services, Inc. The
cargo was consigned to Republic Flour Mills Corporation in Manila under Bill of Lading
No. 001 1 and insured with the herein mentioned insurance companies. The vessel
was inspected prior to actual loading by representatives of the shipper and was found
fit to carry the merchandise. The cargo was covered with tarpaulins and wooden
boards. The hatches were sealed and could only be opened by representatives of
Republic Flour Mills Corporation.
The vessel left Cagayan de Oro City on 2 August 1990 and arrived Manila on 16 August
1990. Republic Flour Mills Corporation was advised of its arrival but it did not
immediately commence the unloading operations. There were days when unloading
had to be stopped due to variable weather conditions and sometimes for no apparent
reason at all. When the cargo was eventually unloaded there was a shortage of
26.333 metric tons. The remaining merchandise was already moldy, rancid and
deteriorating. The unloading operations were completed on 5 September 1990 or
twenty (20) days after the arrival of the barge at the wharf of Republic Flour Mills
Corporation in Pasig City.
Precision Analytical Services, Inc., was hired to examine the corn grains and
determine the cause of deterioration. A Certificate of Analysis was issued indicating
that the corn grains had 18.56% moisture content and the wetting was due to contact
with salt water. The mold growth was only incipient and not sufficient to make the
corn grains toxic and unfit for consumption. In fact the mold growth could still be
arrested by drying.
Republic Flour Mills Corporation rejected the entire cargo and formally demanded
from North Front Shipping Services, Inc., payment for the damages suffered by it. The
demands however were unheeded. The insurance companies were perforce obliged
to pay Republic Flour Mills Corporation P2,189,433.40.
By virtue of the payment made by the insurance companies they were subrogated to
the rights of Republic Flour Mills Corporation. Thusly, they lodged a complaint for
damages against North Front Shipping Services, Inc., claiming that the loss was
exclusively attributable to the fault and negligence of the carrier. The Marine Cargo
Adjusters hired by the insurance companies conducted a survey and found cracks in
the bodega of the barge and heavy concentration of molds on the tarpaulins and
wooden boards. They did not notice any seals in the hatches. The tarpaulins were not
brand new as there were patches on them, contrary to the claim of North Front
Shipping Services, Inc., thus making it possible for water to seep in. They also
discovered that the bulkhead of the barge was rusty.
North Front Shipping Services, Inc., averred in refutation that it could not be made
culpable for the loss and deterioration of the cargo as it was never negligent. Captain
Solomon Villanueva, master of the vessel, reiterated that the barge was inspected
prior to the actual loading and was found adequate and seaworthy. In addition, they
were issued a permit to sail by the Coast Guard. The tarpaulins were doubled and
brand new and the hatches were properly sealed. They did not encounter big waves
hence it was not possible for water to seep in. He further averred that the corn grains
were farm wet and not properly dried when loaded.
The court below dismissed the complaint and ruled that the contract entered into
between North Front Shipping Services, Inc., and Republic Flour Mills Corporation
was a charter-party agreement. As such, only ordinary diligence in the care of goods
was required of North Front Shipping Services, Inc. The inspection of the barge by the
shipper and the representatives of the shipping company before actual loading,
coupled with the Permit to Sail issued by the Coast Guard, sufficed to meet the
degree of diligence required of the carrier.
On the other hand, the Court of Appeals ruled that as a common carrier required to
observe a higher degree of diligence North Front 777 satisfactorily complied with all
the requirements hence was issued a Permit to Sail after proper inspection.
Consequently, the complaint was dismissed and the motion for reconsideration
rejected.
The charter-party agreement between North Front Shipping Services, Inc., and
Republic Flour Mills Corporation did not in any way convert the common carrier into
a private carrier. We have already resolved this issue with finality in Planters Products,
Inc. v. Court of Appeals 2 thus —
A "charter-party" is defined as a contract by which an entire ship, or some principal
part thereof, is let by the owner to another person for a specified time or use; a
contract of affreightment by which the owner of a ship or other vessel lets the whole
or a part of her to a merchant or other person for the conveyance of goods, on a
particular voyage, in consideration of the payment of freight . . . Contract of
affreightment may either be time charter, wherein the vessel is leased to the
charterer for a fixed period of time, or voyage charter, wherein the ship is leased for
a single voyage. In both cases, the charter-party provides for the hire of the vessel
only, either for a determinate period of time or for a single or consecutive voyage,
the ship owner to supply the ship's store, pay for the wages of the master of the crew,
and defray the expenses for the maintenance of the ship.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of
the Civil Code. The definition extends to carriers either by land, air or water which
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 . . .
It is therefore imperative that a public carrier shall remain as such, notwithstanding
the charter of the whole or portion of a vessel by one or more persons, provided the
charter is limited to the shin only, as in the case of a time-charter or voyage-charter
(emphasis supplied).
North Front Shipping Services, Inc., is a corporation engaged in the business of
transporting cargo and offers its services indiscriminately to the public. It is without
doubt a common carrier. As such it is required to observe extraordinary diligence in
its vigilance over the goods it transports. 3 When goods placed in its care are lost or
damaged, the carrier is presumed to have been at fault or to have acted negligently.
4 North Front Shipping Services, Inc., therefore has the burden of proving that it
observed extraordinary diligence in order to avoid responsibility for the lost cargo.
North Front Shipping Services, Inc., proved that the vessel was inspected prior to
actual loading by representatives of the shipper and was found fit to take a load of
corn grains. They were also issued Permit to Sail by the Coast Guard. The master of
the vessel testified that the corn grains were farm wet when loaded. However, this
testimony was disproved by the clean bill of lading issued by North Front Shipping
Services, Inc., which did not contain a notation that the corn grains were wet and
improperly dried. Having been in the service since 1968, the master of the vessel
would have known at the outset that corn grains that were farm wet and not properly
dried would eventually deteriorate when stored in sealed and hot compartments as
in hatches of a ship. Equipped with this knowledge, the master of the vessel and his
crew should have undertaken precautionary measures to avoid or lessen the cargo's
possible deterioration as they were presumed knowledgeable about the nature of
such cargo. But none of such measures was taken.
In Compania Maritima v. Court of Appeals 5 we ruled —
. . . 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 . . .
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" (emphasis 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
Shipping Services, Inc., were insufficient to rebut the prima facie presumption of
private respondent's negligence, more so if we consider the evidence adduced by
petitioners.
It is not denied by the insurance companies that the vessel was indeed inspected
before actual loading and that North Front 777 was issued a Permit to Sail. They
proved the fact of shipment and its consequent loss or damage while in the actual
possession of the carrier. Notably, the carrier failed to volunteer any explanation why
there was spoilage and how it occurred. On the other hand, it was shown during the
trial that the vessel had rusty bulkheads and the wooden boards and tarpaulins bore
heavy concentration of molds. The tarpaulins used were not new, contrary to the
claim of North Front Shipping Services, Inc., as there were already several patches on
them, hence, making it highly probable for water to enter.
Laboratory analysis revealed that the corn grains were contaminated with salt water.
North Front Shipping Services, Inc., failed to rebut all these arguments. It did not even
endeavor to establish that the loss, destruction or deterioration of the goods was due
to the following: (a) flood, storm, earthquake, lightning, or other natural disaster or
calamity; (b) act of the public enemy in war, whether international or civil; (c) act or
omission of the shipper or owner of the goods; (d) the character of the goods or
defects in the packing or in the containers; (e) order or act of competent public
authority. 6 This is a closed list. If the cause of destruction, loss or deterioration is
other than the enumerated circumstances, then the carrier is rightly liable therefor.
However, we cannot attribute the destruction, loss or deterioration of the cargo
solely to the carrier. We find the consignee Republic Flour Mills Corporation guilty of
contributory negligence. It was seasonably notified of the arrival of the barge but did
not immediately start the unloading operations. No explanation was proffered by the
consignee as to why there was a delay of six (6) days. Had the unloading been
commenced immediately the loss could have been completely avoided or at least
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
minimized. As testified to by the chemist who analyzed the corn samples, the mold
growth was only at its incipient stage and could still be arrested by drying. The corn
grains were not yet toxic or unfit for consumption. For its contributory negligence,
Republic Flour Mills Corporation should share at least 40% of the loss. 7
WHEREFORE, the Decision of the Court of Appeals of 22 December 1994 and its
Resolution of 16 February 1995 are REVERSED and SET ASIDE. Respondent North
Front Shipping Services, Inc., is ordered to pay petitioners Tabacalera Insurance Co.,
Prudential Guarantee & Assurance, Inc., and New Zealand Insurance Co. Ltd.,
P1,313,660.00 which is 60% of the amount paid by the insurance companies to
Republic Flour Mills Corporation, plus interest at the rate of 12% per annum from the
time this judgment becomes final until full payment.
SO ORDERED.
16.
G.R. No. 161833. July 8, 2005
PHILIPPINE CHARTER INSURANCE CORPORATION, Petitioners,
vs.
UNKNOWN OWNER OF THE VESSEL M/V "NATIONAL HONOR," NATIONAL SHIPPING
CORPORATION OF THE PHILIPPINES and INTERNATIONAL CONTAINER SERVICES, INC.,
Respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review under Rule 45 of the 1997 Revised Rules of Civil Procedure
assailing the Decision1 dated January 19, 2004 of the Court of Appeals (CA) in CA-G.R.
CV No. 57357 which affirmed the Decision dated February 17, 1997 of the Regional
Trial Court (RTC) of Manila, Branch 37, in Civil Case No. 95-73338.
The Antecedent
On November 5, 1995, J. Trading Co. Ltd. of Seoul, Korea, loaded a shipment of four
units of parts and accessories in the port of Pusan, Korea, on board the vessel M/V
"National Honor," represented in the Philippines by its agent, National Shipping
Corporation of the Philippines (NSCP). The shipment was for delivery to Manila,
Philippines. Freight forwarder, Samhwa Inter-Trans Co., Ltd., issued Bill of Lading No.
SH94103062 in the name of the shipper consigned to the order of Metropolitan Bank
and Trust Company with arrival notice in Manila to ultimate consignee Blue Mono
International Company, Incorporated (BMICI), Binondo, Manila.
NSCP, for its part, issued Bill of Lading No. NSGPBSML5125653 in the name of the
freight forwarder, as shipper, consigned to the order of Stamm International Inc.,
Makati, Philippines. It is provided therein that:
12. This Bill of Lading shall be prima facie evidence of the receipt of the Carrier in
apparent good order and condition except as, otherwise, noted of the total number
of Containers or other packages or units enumerated overleaf. Proof to the contrary
shall be admissible when this Bill of Lading has been transferred to a third party acting
in good faith. No representation is made by the Carrier as to the weight, contents,
measure, quantity, quality, description, condition, marks, numbers, or value of the
Goods and the Carrier shall be under no responsibility whatsoever in respect of such
description or particulars.
13. The shipper, whether principal or agent, represents and warrants that the goods
are properly described, marked, secured, and packed and may be handled in ordinary
course without damage to the goods, ship, or property or persons and guarantees
the correctness of the particulars, weight or each piece or package and description
of the goods and agrees to ascertain and to disclose in writing on shipment, any
condition, nature, quality, ingredient or characteristic that may cause damage, injury
or detriment to the goods, other property, the ship or to persons, and for the failure
to do so the shipper agrees to be liable for and fully indemnify the carrier and hold it
harmless in respect of any injury or death of any person and loss or damage to cargo
or property. The carrier shall be responsible as to the correctness of any such mark,
descriptions or representations.4
The shipment was contained in two wooden crates, namely, Crate No. 1 and Crate
No. 2, complete and in good order condition, covered by Commercial Invoice No. YJ-
73564 DTD5 and a Packing List.6 There were no markings on the outer portion of the
crates except the name of the consignee.7 Crate No. 1 measured 24 cubic meters and
weighed 3,620 kgs. It contained the following articles: one (1) unit Lathe Machine
complete with parts and accessories; one (1) unit Surface Grinder complete with
parts and accessories; and one (1) unit Milling Machine complete with parts and
accessories. On the flooring of the wooden crates were three wooden battens placed
side by side to support the weight of the cargo. Crate No. 2, on the other hand,
measured 10 cubic meters and weighed 2,060 kgs. The Lathe Machine was stuffed in
the crate. The shipment had a total invoice value of US$90,000.00 C&F Manila.8 It
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
was insured for ₱2,547,270.00 with the Philippine Charter Insurance Corporation
(PCIC) thru its general agent, Family Insurance and Investment Corporation,9 under
Marine Risk Note No. 68043 dated October 24, 1994.10
The M/V "National Honor" arrived at the Manila International Container Terminal
(MICT) on November 14, 1995. The International Container Terminal Services,
Incorporated (ICTSI) was furnished with a copy of the crate cargo list and bill of lading,
and it knew the contents of the crate.11 The following day, the vessel started
discharging its cargoes using its winch crane. The crane was operated by Olegario
Balsa, a winchman from the ICTSI,12 the exclusive arrastre operator of MICT.
Denasto Dauz, Jr., the checker-inspector of the NSCP, along with the crew and the
surveyor of the ICTSI, conducted an inspection of the cargo.13 They inspected the
hatches, checked the cargo and found it in apparent good condition.14 Claudio
Cansino, the stevedore of the ICTSI, placed two sling cables on each end of Crate No.
1.15 No sling cable was fastened on the mid-portion of the crate. In Dauz’s experience,
this was a normal procedure.16 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,17
resulting in extensive damage to the shipment.
BMICI’s customs broker, JRM Incorporated, took delivery of the cargo in such
damaged condition.18 Upon receipt of the damaged shipment, BMICI found that the
same could no longer be used for the intended purpose. The Mariners’ Adjustment
Corporation hired by PCIC conducted a survey and declared that the packing of the
shipment was considered insufficient. It ruled out the possibility of taxes due to
insufficiency of packing. It opined that three to four pieces of cable or wire rope slings,
held in all equal setting, never by-passing the center of the crate, should have been
used, considering that the crate contained heavy machinery.19
BMICI subsequently filed separate claims against the NSCP,20 the ICTSI,21 and its
insurer, the PCIC,22 for US$61,500.00. When the other companies denied liability,
PCIC paid the claim and was issued a Subrogation Receipt23 for ₱1,740,634.50.
On March 22, 1995, PCIC, as subrogee, filed with the RTC of Manila, Branch 35, a
Complaint for Damages24 against the "Unknown owner of the vessel M/V National
Honor," NSCP and ICTSI, as defendants.
PCIC alleged that the loss was due to the fault and negligence of the defendants. It
prayed, among others –
WHEREFORE, it is respectfully prayed of this Honorable Court that judgment be
rendered ordering defendants to pay plaintiff, jointly or in the alternative, the
following:
1. Actual damages in the amount of ₱1,740,634.50 plus legal interest at the time of
the filing of this complaint until fully paid;
2. Attorney’s fees in the amount of ₱100,000.00;
3. Cost of suit.25
ICTSI, for its part, filed its Answer with Counterclaim and Cross-claim against its co-
defendant NSCP, claiming that the loss/damage of the shipment was caused
exclusively by the defective material of the wooden battens of the shipment,
insufficient packing or acts of the shipper.
At the trial, Anthony Abarquez, the safety inspector of ICTSI, testified that the
wooden battens placed on the wooden flooring of the crate was of good material but
was not strong enough to support the weight of the machines inside the crate. He
averred that most stevedores did not know how to read and write; hence, he placed
the sling cables only on those portions of the crate where the arrow signs were placed,
as in the case of fragile cargo. He said that unless otherwise indicated by arrow signs,
the ICTSI used only two cable slings on each side of the crate and would not place a
sling cable in the mid-section.26 He declared that the crate fell from the cranes
because the wooden batten in the mid-portion was broken as it was being lifted.27
He concluded that the loss/damage was caused by the failure of the shipper or its
packer to place wooden battens of strong materials under the flooring of the crate,
and to place a sign in its mid-term section where the sling cables would be placed.
The ICTSI adduced in evidence the report of the R.J. Del Pan & Co., Inc. that the
damage to the cargo could be attributed to insufficient packing and unbalanced
weight distribution of the cargo inside the crate as evidenced by the types and shapes
of items found.28
The trial court rendered judgment for PCIC and ordered the complaint dismissed,
thus:
WHEREFORE, the complaint of the plaintiff, and the respective counterclaims of the
two defendants are dismissed, with costs against the plaintiff.
SO ORDERED.29
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
According to the trial court, the loss of the shipment contained in Crate No. 1 was
due to the internal defect and weakness of the materials used in the fabrication of
the crates. The middle wooden batten had a hole (bukong-bukong). The trial court
rejected the certification30 of the shipper, stating that the shipment was properly
packed and secured, as mere hearsay and devoid of any evidentiary weight, the
affiant not having testified.
Not satisfied, PCIC appealed31 to the CA which rendered judgment on January 19,
2004 affirming in toto the appealed decision, with this fallo –
WHEREFORE, the decision of the Regional Trial Court of Manila, Branch 35, dated
February 17, 1997, is AFFIRMED.
SO ORDERED.32
The appellate court held, inter alia, that it was bound by the finding of facts of the
RTC, especially so where the evidence in support thereof is more than substantial. It
ratiocinated that the loss of the shipment was due to an excepted cause – "[t]he
character of the goods or defects in the packing or in the containers" and the failure
of the shipper to indicate signs to notify the stevedores that extra care should be
employed in handling the shipment.33 It blamed the shipper for its failure to use
materials of stronger quality to support the heavy machines and to indicate an arrow
in the middle portion of the cargo where additional slings should be attached.34 The
CA concluded that common carriers are not absolute insurers against all risks in the
transport of the goods.35
Hence, this petition by the PCIC, where it alleges that:
I.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN NOT HOLDING
THAT RESPONDENT COMMON CARRIER IS LIABLE FOR THE DAMAGE SUSTAINED BY
THE SHIPMENT IN THE POSSESSION OF THE ARRASTRE OPERATOR.
II.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN NOT APPLYING THE
STATUTORY PRESUMPTION OF FAULT AND NEGLIGENCE IN THE CASE AT BAR.
III.
THE COURT OF APPEALS GROSSLY MISCOMPREHENDED THE FACTS IN FINDING THAT
THE DAMAGE SUSTAINED BY THE [SHIPMENT] WAS DUE TO ITS DEFECTIVE PACKING
AND NOT TO THE FAULT AND NEGLIGENCE OF THE RESPONDENTS.36
The petitioner asserts that the mere proof of receipt of the shipment by the common
carrier (to the carrier) in good order, and their arrival at the place of destination in
bad order makes out a prima facie case against it; in such case, it is liable for the loss
or damage to the cargo absent satisfactory explanation given by the carrier as to the
exercise of extraordinary diligence. The petitioner avers that the shipment was
sufficiently packed in wooden boxes, as shown by the fact that it was accepted on
board the vessel and arrived in Manila safely. It emphasizes that the respondents did
not contest the contents of the bill of lading, and that the respondents knew that the
manner and condition of the packing of the cargo was normal and barren of defects.
It maintains that it behooved the respondent ICTSI to place three to four cables or
wire slings in equal settings, including the center portion of the crate to prevent
damage to the cargo:
… [A] simple look at the manifesto of the cargo and the bill of lading would have
alerted respondents of the nature of the cargo consisting of thick and heavy
machinery. Extra-care should have been made and extended in the discharge of the
subject shipment. Had the respondent only bothered to check the list of its contents,
they would have been nervous enough to place additional slings and cables to
support those massive machines, which were composed almost entirely of thick steel,
clearly intended for heavy industries. As indicated in the list, the boxes contained one
lat[h]e machine, one milling machine and one grinding machine-all coming with
complete parts and accessories. Yet, not one among the respondents were cautious
enough. Here lies the utter failure of the respondents to observed extraordinary
diligence in the handling of the cargo in their custody and possession, which the Court
of Appeals should have readily observed in its appreciation of the pertinent facts.37
The petitioner posits that the loss/damage was caused by the mishandling of the
shipment by therein respondent ICTSI, the arrastre operator, and not by its
negligence.
The petitioner insists that the respondents did not observe extraordinary diligence in
the care of the goods. It argues that in the performance of its obligations, the
respondent ICTSI should observe the same degree of diligence as that required of a
common carrier under the New Civil Code of the Philippines. Citing Eastern Shipping
Lines, Inc. v. Court of Appeals,38 it posits that respondents are liable in solidum to it,
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
inasmuch as both are charged with the obligation to deliver the goods in good
condition to its consignee, BMICI.
Respondent NSCP counters that if ever respondent ICTSI is adjudged liable, it is not
solidarily liable with it. It further avers that the "carrier cannot discharge directly to
the consignee because cargo discharging is the monopoly of the arrastre." Liability,
therefore, falls solely upon the shoulder of respondent ICTSI, inasmuch as the
discharging of cargoes from the vessel was its exclusive responsibility. Besides, the
petitioner is raising questions of facts, improper in a petition for review on
certiorari.39
Respondent ICTSI avers that the issues raised are factual, hence, improper under Rule
45 of the Rules of Court. It claims that it is merely a depository and not a common
carrier; hence, it is not obliged to exercise extraordinary diligence. It reiterates that
the loss/damage was caused by the failure of the shipper or his packer to place a sign
on the sides and middle portion of the crate that extra care should be employed in
handling the shipment, and that the middle wooden batten on the flooring of the
crate had a hole. The respondent asserts that the testimony of Anthony Abarquez,
who conducted his investigation at the site of the incident, should prevail over that
of Rolando Balatbat. As an alternative, it argues that if ever adjudged liable, its
liability is limited only to ₱3,500.00 as expressed in the liability clause of Gate Pass
CFS-BR-GP No. 319773.
The petition has no merit.
The well-entrenched rule in our jurisdiction is that only questions of law may be
entertained by this Court in a petition for review on certiorari. This rule, however, is
not ironclad and admits certain exceptions, such as when (1) the conclusion is
grounded on speculations, surmises or conjectures; (2) the inference is manifestly
mistaken, absurd or impossible; (3) there is grave abuse of discretion; (4) the
judgment is based on a misapprehension of facts; (5) the findings of fact are
conflicting; (6) there is no citation of specific evidence on which the factual findings
are based; (7) the findings of absence of facts are contradicted by the presence of
evidence on record; (8) the findings of the Court of Appeals are contrary to those of
the trial court; (9) the Court of Appeals manifestly overlooked certain relevant and
undisputed facts that, if properly considered, would justify a different conclusion;
(10) the findings of the Court of Appeals are beyond the issues of the case; and (11)
such findings are contrary to the admissions of both parties.40
We have reviewed the records and find no justification to warrant the application of
any exception to the general rule.
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.41
The 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."42
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.43 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.44
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.45
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.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
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.46 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.47
"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.48 On the other hand, inferior means of poor quality, mediocre, or second
rate.49 A thing may be of inferior quality but not necessarily defective. In other words,
"defectiveness" is not synonymous with "inferiority."
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.
However, in the case of the crate in dispute, although there were three wooden
battens placed side by side on its flooring, the middle wooden batten, which carried
substantial volume of the weight of the crate’s contents, had a knot hole or "bukong-
bukong," which considerably affected, reduced and weakened its strength. Because
of the enormous weight of the machineries inside this crate, the middle wooden
batten gave way and collapsed. As the combined strength of the other two wooden
battens were not sufficient to hold and carry the load, they too simultaneously with
the middle wooden battens gave way and collapsed (TSN, Sept. 26, 1996, pp. 20-24).
Crate No. 1 was provided by the shipper of the machineries in Seoul, Korea. There is
nothing in the record which would indicate that defendant ICTSI had any role in the
choice of the materials used in fabricating this crate. Said defendant, therefore,
cannot be held as blame worthy for the loss of the machineries contained in Crate
No. 1.50
The CA affirmed the ruling of the RTC, thus:
The case at bar falls under one of the exceptions mentioned in Article 1734 of the
Civil Code, particularly number (4) thereof, i.e., the character of the goods or defects
in the packing or in the containers. The trial court found that the breakage of the
crate was not due to the fault or negligence of ICTSI, but to the inherent defect and
weakness of the materials used in the fabrication of the said crate.
Upon examination of the records, We find no compelling reason to depart from the
factual findings of the trial court.
It appears that the wooden batten used as support for the flooring was not made of
good materials, which caused the middle portion thereof to give way when it was
lifted. The shipper also failed to indicate signs to notify the stevedores that extra care
should be employed in handling the shipment.
Claudio Cansino, a stevedore of ICTSI, testified before the court their duties and
responsibilities:
"Q: With regard to crates, what do you do with the crates?
A: Everyday with the crates, there is an arrow drawn where the sling is placed, Ma’am.
Q: When the crates have arrows drawn and where you placed the slings, what do you
do with these crates?
A: A sling is placed on it, Ma’am.
Q: After you placed the slings, what do you do with the crates?
A: After I have placed a sling properly, I ask the crane (sic) to haul it, Ma’am.
…
Q: Now, what, if any, were written or were marked on the crate?
A: The thing that was marked on the cargo is an arrow just like of a chain, Ma’am.
Q: And where did you see or what parts of the crate did you see those arrows?
A: At the corner of the crate, Ma’am.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Q: How many arrows did you see?
A: Four (4) on both sides, Ma’am.
… the other hand, under Bill of Lading No. NSGPBSML512565 issued by the respondent
Q: What did you do with the arrows?
A: When I saw the arrows, that’s where I placed the slings, Ma’am.
…
Q: Now, did you find any other marks on the crate?
A: Nothing more, Ma’am.
Q: Now, Mr. Witness, if there are no arrows, would you place slings on the parts
where there are no arrows?
A: You can not place slings if there are no arrows, Ma’am."
Appellant’s allegation that since the cargo arrived safely from the port of [P]usan,
Korea without defect, the fault should be attributed to the arrastre operator who
mishandled the cargo, is without merit. The cargo fell while it was being carried only
at about five (5) feet high above the ground. It would not have so easily collapsed had
the cargo been properly packed. The shipper should have used materials of stronger
quality to support the heavy machines. Not only did the shipper fail to properly pack
the cargo, it also failed to indicate an arrow in the middle portion of the cargo where
additional slings should be attached. At any rate, the issue of negligence is factual in
nature and in this regard, it is settled that factual findings of the lower courts are
entitled to great weight and respect on appeal, and, in fact, accorded finality when
supported by substantial evidence.51
We agree with the trial and appellate courts.
The petitioner failed to adduce any evidence to counter that of respondent ICTSI. The
petitioner failed to rebut the testimony of Dauz, that the crates were sealed and that
the contents thereof could not be seen from the outside.52 While it is true that the
crate contained machineries and spare parts, it cannot thereby be concluded that the
respondents knew or should have known that the middle wooden batten had a hole,
or that it was not strong enough to bear the weight of the shipment.
There is no showing in the Bill of Lading that the shipment was in good order or
condition when the carrier received the cargo, or that the three wooden battens
under the flooring of the cargo were not defective or insufficient or inadequate. On
NSCP and accepted by the petitioner, the latter represented and warranted that the
goods were properly packed, and disclosed in writing the "condition, nature, quality
or characteristic that may cause damage, injury or detriment to the goods." Absent
any signs on the shipment requiring the placement of a sling cable in the mid-portion
of the crate, the respondent ICTSI was not obliged to do so.
The statement in the Bill of Lading, that the shipment was in apparent good condition,
is sufficient to sustain a finding of absence of defects in the merchandise. Case law
has it that such statement will create a prima facie presumption only as to the
external condition and not to that not open to inspection.53
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit.
SO ORDERED.
17.
G.R. No. 148496 March 19, 2002
VIRGINES CALVO doing business under the name and style TRANSORIENT CONTAINER
TERMINAL SERVICES, INC., petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC. (formerly Allied Guarantee Ins. Co., Inc.)
respondent.
MENDOZA, J.:
This is a petition for review of the decision,1 dated May 31, 2001, of the Court of
Appeals, affirming the decision2 of the Regional Trial Court, Makati City, Branch 148,
which ordered petitioner to pay respondent, as subrogee, the amount of P93,112.00
with legal interest, representing the value of damaged cargo handled by petitioner,
25% thereof as attorney's fees, and the cost of the suit.1âwphi1.nêt
The facts are as follows:
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc.
(TCTSI), a sole proprietorship customs broker. At the time material to this case,
petitioner entered into a contract with San Miguel Corporation (SMC) for the transfer
of 114 reels of semi-chemical fluting paper and 124 reels of kraft liner board from the
Port Area in Manila to SMC's warehouse at the Tabacalera Compound, Romualdez St.,
Ermita, Manila. The cargo was insured by respondent UCPB General Insurance Co.,
Inc.
On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in
Manila on board "M/V Hayakawa Maru" and, after 24 hours, were unloaded from the
vessel to the custody of the arrastre operator, Manila Port Services, Inc. From July 23
to July 25, 1990, petitioner, pursuant to her contract with SMC, withdrew the cargo
from the arrastre operator and delivered it to SMC's warehouse in Ermita, Manila.
On July 25, 1990, the goods were inspected by Marine Cargo Surveyors, who found
that 15 reels of the semi-chemical fluting paper were "wet/stained/torn" and 3 reels
of kraft liner board were likewise torn. The damage was placed at P93,112.00.
SMC collected payment from respondent UCPB under its insurance contract for the
aforementioned amount. In turn, respondent, as subrogee of SMC, brought suit
against petitioner in the Regional Trial Court, Branch 148, Makati City, which, on
December 20, 1995, rendered judgment finding petitioner liable to respondent for
the damage to the shipment.
The trial court held:
It cannot be denied . . . that the subject cargoes sustained damage while in the
custody of defendants. Evidence such as the Warehouse Entry Slip (Exh. "E"); the
Damage Report (Exh. "F") with entries appearing therein, classified as "TED" and
"TSN", which the claims processor, Ms. Agrifina De Luna, claimed to be tearrage at
the end and tearrage at the middle of the subject damaged cargoes respectively,
coupled with the Marine Cargo Survey Report (Exh. "H" - "H-4-A") confirms the fact
of the damaged condition of the subject cargoes. The surveyor[s'] report (Exh. "H-4-
A") in particular, which provides among others that:
" . . . we opine that damages sustained by shipment is attributable to improper
handling in transit presumably whilst in the custody of the broker . . . ."
is a finding which cannot be traversed and overturned.
The evidence adduced by the defendants is not enough to sustain [her] defense that
[she is] are not liable. Defendant by reason of the nature of [her] business should
have devised ways and means in order to prevent the damage to the cargoes which
it is under obligation to take custody of and to forthwith deliver to the consignee.
Defendant did not present any evidence on what precaution [she] performed to
prevent [the] said incident, hence the presumption is that the moment the defendant
accepts the cargo [she] shall perform such extraordinary diligence because of the
nature of the cargo.
....
Generally speaking under Article 1735 of the Civil Code, if the goods are proved to
have been lost, destroyed or deteriorated, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they have observed
the extraordinary diligence required by law. The burden of the plaintiff, therefore, is
to prove merely that the goods he transported have been lost, destroyed or
deteriorated. Thereafter, the burden is shifted to the carrier to prove that he has
exercised the extraordinary diligence required by law. Thus, it has been held that the
mere proof of delivery of goods in good order to a carrier, and of their arrival at the
place of destination in bad order, makes out a prima facie case against the carrier, so
that if no explanation is given as to how the injury occurred, the carrier must be held
responsible. It is incumbent upon the carrier to prove that the loss was due to
accident or some other circumstances inconsistent with its liability." (cited in
Commercial Laws of the Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.)
Defendant, being a customs brother, warehouseman and at the same time a common
carrier is supposed [to] exercise [the] extraordinary diligence required by law, hence
the extraordinary responsibility lasts from the time the goods are unconditionally
placed in the possession of and received by the carrier for transportation until the
same are delivered actually or constructively by the carrier to the consignee or to the
person who has the right to receive the same.3
Accordingly, the trial court ordered petitioner to pay the following amounts --
1. The sum of P93,112.00 plus interest;
2. 25% thereof as lawyer's fee;
3. Costs of suit.4
The decision was affirmed by the Court of Appeals on appeal. Hence this petition for
review on certiorari.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR [IN]
DECIDING THE CASE NOT ON THE EVIDENCE PRESENTED BUT ON PURE SURMISES,
SPECULATIONS AND MANIFESTLY MISTAKEN INFERENCE.
II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN
CLASSIFYING THE PETITIONER AS A COMMON CARRIER AND NOT AS PRIVATE OR
SPECIAL CARRIER WHO DID NOT HOLD ITS SERVICES TO THE PUBLIC.5
It will be convenient to deal with these contentions in the inverse order, for if
petitioner is not a common carrier, although both the trial court and the Court of
Appeals held otherwise, then she is indeed not liable beyond what ordinary diligence
in the vigilance over the goods transported by her, would require.6 Consequently,
any damage to the cargo she agrees to transport cannot be presumed to have been
due to her fault or negligence.
Petitioner contends that contrary to the findings of the trial court and the Court of
Appeals, she is not a common carrier but a private carrier because, as a customs
broker and warehouseman, she does not indiscriminately hold her services out to the
public but only offers the same to select parties with whom she may contract in the
conduct of her business.
The contention has no merit. In De Guzman v. Court of Appeals,7 the Court dismissed
a similar contention and held the party to be a common carrier, thus -
The Civil Code defines "common carriers" in the following terms:
"Article 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air for compensation, offering their services to the public."
The above article makes no distinction between one whose principal business activity
is the carrying of persons or goods or both, and one who does such carrying only as
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. We think that Article 1732 deliberately refrained from making
such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to
coincide neatly with the notion of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements the
law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b)
of the Public Service Act, "public service" includes:
" x x x every person that now or hereafter may own, operate, manage, or control in
the Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without fixed route and whatever
may be its classification, freight or carrier service of any class, express service,
steamboat, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, wharf
or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light,
heat and power, water supply and power petroleum, sewerage system, wire or
wireless communications systems, wire or wireless broadcasting stations and other
similar public services. x x x" 8
There is greater reason for holding petitioner to be a common carrier because the
transportation of goods is an integral part of her business. To uphold petitioner's
contention would be to deprive those with whom she contracts the protection which
the law affords them notwithstanding the fact that the obligation to carry goods for
her customers, as already noted, is part and parcel of petitioner's business.
Now, as to petitioner's liability, Art. 1733 of the Civil Code provides:
Common carriers, from the nature of their business and for reasons of public policy,
are bound to observe extraordinary diligence in the vigilance over the goods and for
the safety of the passengers transported by them, according to all the circumstances
of each case. . . .
In Compania Maritima v. Court of Appeals,9 the meaning of "extraordinary diligence
in the vigilance over goods" was explained thus:
The extraordinary diligence in the vigilance over the goods tendered for shipment
requires the common carrier to know and to follow the required precaution for
avoiding damage to, or destruction of the goods entrusted to it for sale, carriage and
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
delivery. It requires common carriers to render service with the greatest skill and
foresight and "to use all reasonable means to ascertain the nature and characteristic
of goods tendered for shipment, and to exercise due care in the handling and
stowage, including such methods as their nature requires."
In the case at bar, petitioner denies liability for the damage to the cargo. She claims
that the "spoilage or wettage" took place while the goods were in the custody of
either the carrying vessel "M/V Hayakawa Maru," which transported the cargo to
Manila, or the arrastre operator, to whom the goods were unloaded and who
allegedly kept them in open air for nine days from July 14 to July 23, 1998
notwithstanding the fact that some of the containers were deformed, cracked, or
otherwise damaged, as noted in the Marine Survey Report (Exh. H), to wit:
MAXU-2062880 - rain gutter deformed/cracked
ICSU-363461-3 - left side rubber gasket on door distorted/partly loose
PERU-204209-4 - with pinholes on roof panel right portion
TOLU-213674-3 - wood flooring we[t] and/or with signs of water soaked
MAXU-201406-0 - with dent/crack on roof panel
ICSU-412105-0 - rubber gasket on left side/door panel partly detached
loosened.10
In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino testified
that he has no personal knowledge on whether the container vans were first stored
in petitioner's warehouse prior to their delivery to the consignee. She likewise claims
that after withdrawing the container vans from the arrastre operator, her driver,
Ricardo Nazarro, immediately delivered the cargo to SMC's warehouse in Ermita,
Manila, which is a mere thirty-minute drive from the Port Area where the cargo came
from. Thus, the damage to the cargo could not have taken place while these were in
her custody.11
Contrary to petitioner's assertion, the Survey Report (Exh. H) of the Marine Cargo
Surveyors indicates that when the shipper transferred the cargo in question to the
arrastre operator, these were covered by clean Equipment Interchange Report (EIR)
and, when petitioner's employees withdrew the cargo from the arrastre operator,
they did so without exception or protest either with regard to the condition of
container vans or their contents. The Survey Report pertinently reads --
Details of Discharge:
Shipment, provided with our protective supervision was noted discharged ex vessel
to dock of Pier #13 South Harbor, Manila on 14 July 1990, containerized onto 30' x
20' secure metal vans, covered by clean EIRs. Except for slight dents and paint
scratches on side and roof panels, these containers were deemed to have [been]
received in good condition.
....
Transfer/Delivery:
On July 23, 1990, shipment housed onto 30' x 20' cargo containers was [withdrawn]
by Transorient Container Services, Inc. . . . without exception.
[The cargo] was finally delivered to the consignee's storage warehouse located at
Tabacalera Compound, Romualdez Street, Ermita, Manila from July 23/25, 1990.12
As found by the Court of Appeals:
From the [Survey Report], it [is] clear that the shipment was discharged from the
vessel to the arrastre, Marina Port Services Inc., in good order and condition as
evidenced by clean Equipment Interchange Reports (EIRs). Had there been any
damage to the shipment, there would have been a report to that effect made by the
arrastre operator. The cargoes were withdrawn by the defendant-appellant from the
arrastre still in good order and condition as the same were received by the former
without exception, that is, without any report of damage or loss. Surely, if the
container vans were deformed, cracked, distorted or dented, the defendant-
appellant would report it immediately to the consignee or make an exception on the
delivery receipt or note the same in the Warehouse Entry Slip (WES). None of these
took place. To put it simply, the defendant-appellant received the shipment in good
order and condition and delivered the same to the consignee damaged. We can only
conclude that the damages to the cargo occurred while it was in the possession of
the defendant-appellant. Whenever the thing is lost (or damaged) in the possession
of the debtor (or obligor), it shall be presumed that the loss (or damage) was due to
his fault, unless there is proof to the contrary. No proof was proffered to rebut this
legal presumption and the presumption of negligence attached to a common carrier
in case of loss or damage to the goods.13
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Anent petitioner's insistence that the cargo could not have been damaged while in
her custody as she immediately delivered the containers to SMC's compound, suffice
it to say that to prove the exercise of extraordinary diligence, petitioner must do
more than merely show the possibility that some other party could be responsible
for the damage. It must prove that it used "all reasonable means to ascertain the
nature and characteristic of goods tendered for [transport] and that [it] exercise[d]
due care in the handling [thereof]." Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability under Art. 1734(4), which
provides --
Common carriers are responsible for the loss, destruction, or deterioration of the
goods, unless the same is due to any of the following causes only:
....
(4) The character of the goods or defects in the packing or in the containers.
....
For this provision to apply, the rule is that if the improper packing or, in this case, the
defect/s in the container, is/are known to the carrier or his employees or apparent
upon ordinary observation, but he nevertheless accepts the same without protest or
exception notwithstanding such condition, he is not relieved of liability for damage
resulting therefrom.14 In this case, petitioner accepted the cargo without exception
despite the apparent defects in some of the container vans. Hence, for failure of
petitioner to prove that she exercised extraordinary diligence in the carriage of goods
in this case or that she is exempt from liability, the presumption of negligence as
provided under Art. 173515 holds.
WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is
AFFIRMED.1âwphi1.nêt
SO ORDERED.
18.
G.R. No. 143133 June 5, 2002
BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES
TRANSPORT SERVICES, INC., petitioners,
vs.
PHILIPPINE FIRST INSURANCE CO., INC., respondents.
PANGANIBAN, J.:
Proof of the delivery of goods in good order to a common carrier and of their arrival
in bad order at their destination constitutes prima facie fault or negligence on the
part of the carrier. If no adequate explanation is given as to how the loss, the
destruction or the deterioration of the goods happened, the carrier shall be held
liable therefor.
Statement of the Case
Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the
July 15, 1998 Decision1 and the May 2, 2000 Resolution2 of the Court of Appeals3
(CA) in CA-GR CV No. 53571. The decretal portion of the Decision reads as follows:
"WHEREFORE, in the light of the foregoing disquisition, the decision appealed from is
hereby REVERSED and SET ASIDE. Defendants-appellees are ORDERED to jointly and
severally pay plaintiffs-appellants the following:
'1) FOUR Hundred Fifty One Thousand Twenty-Seven Pesos and 32/100
(P451,027.32) as actual damages, representing the value of the damaged cargo, plus
interest at the legal rate from the time of filing of the complaint on July 25, 1991,
until fully paid;
'2) Attorney's fees amounting to 20% of the claim; and
'3) Costs of suit.'"4
The assailed Resolution denied petitioner's Motion for Reconsideration.
The CA reversed the Decision of the Regional Trial Court (RTC) of Makati City (Branch
134), which had disposed as follows:
"WHEREFORE, in view of the foregoing, judgment is hereby rendered, dismissing the
complaint, as well as defendant's counterclaim."5
The Facts
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
The factual antecedents of the case are summarized by the Court of Appeals in this
wise:
"On June 13, 1990, CMC Trading A.G. shipped on board the M/V 'Anangel Sky' at
Hamburg, Germany 242 coils of various Prime Cold Rolled Steel sheets for
transportation to Manila consigned to the Philippine Steel Trading Corporation. On
July 28, 1990, M/V Anangel Sky arrived at the port of Manila and, within the
subsequent days, discharged the subject cargo. 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.1âwphi1.nêt
"Despite receipt of a formal demand, defendants-appellees refused to submit to the
consignee's claim. Consequently, plaintiff-appellant paid the consignee five hundred
six thousand eighty six & 50/100 pesos (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."6
Ruling of the Trial Court
The RTC dismissed the Complaint because respondent had failed to prove its claims
with the quantum of proof required by law.7
It likewise debunked petitioners' counterclaim, because respondent's suit was not
manifestly frivolous or primarily intended to harass them.8
Ruling of the Court of Appeals
In reversing the trial court, the CA ruled that petitioners were liable for the loss or
the damage of the goods shipped, because they had failed to overcome the
presumption of negligence imposed on common carriers.
The CA further held as inadequately proven petitioners' claim that the loss or the
deterioration of the goods was due to pre-shipment damage.9 It likewise opined that
the notation "metal envelopes rust stained and slightly dented" placed on the Bill of
Lading had not been the proximate cause of the damage to the four (4) coils.10
As to the extent of petitioners' liability, the CA held that the package limitation under
COGSA was not applicable, because the words "L/C No. 90/02447" indicated that a
higher valuation of the cargo had been declared by the shipper. The CA, however,
affirmed the award of attorney's fees.
Hence, this Petition.11
Issues
In their Memorandum, petitioners raise the following issues for the Court's
consideration:
I
"Whether or not plaintiff by presenting only one witness who has never seen the
subject shipment and whose testimony is purely hearsay is sufficient to pave the way
for the applicability of Article 1735 of the Civil Code;
II
"Whether or not the consignee/plaintiff filed the required notice of loss within the
time required by law;
III
"Whether or not a notation in the bill of lading at the time of loading is sufficient to
show pre-shipment damage and to exempt herein defendants from liability;
IV
"Whether or not the "PACKAGE LIMITATION" of liability under Section 4 (5) of COGSA
is applicable to the case at bar."12
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
In sum, the issues boil down to three:
1. Whether petitioners have overcome the presumption of negligence of a common
carrier
2. Whether the notice of loss was timely filed
3. Whether the package limitation of liability is applicable
This Court's Ruling
The Petition is partly meritorious.
First Issue:
Proof of Negligence
Petitioners contend that the presumption of fault imposed on common carriers
should not be applied on the basis of the lone testimony offered by private
respondent. The contention is untenable.
Well-settled is the rule that common carriers, from the nature of their business and
for reasons of public policy, are bound to observe extraordinary diligence and
vigilance with respect to the safety of the goods and the passengers they transport.13
Thus, common carriers are required to render service with the greatest skill and
foresight and "to use all reason[a]ble means to ascertain the nature and
characteristics of the goods tendered for shipment, and to exercise due care in the
handling and stowage, including such methods as their nature requires."14 The
extraordinary responsibility lasts from the time the goods are unconditionally placed
in the possession of and received for transportation by the carrier until they are
delivered, actually or constructively, to the consignee or to the person who has a right
to receive them.15
This strict requirement is justified by the fact that, without a hand or a voice in the
preparation of such contract, the riding public enters into a contract of transportation
with common carriers.16 Even if it wants to, it cannot submit its own stipulations for
their approval.17 Hence, it merely adheres to the agreement prepared by them.
Owing to this high degree of diligence required of them, common carriers, as a
general rule, are presumed to have been at fault or negligent if the goods they
transported deteriorated or got lost or destroyed.18 That is, unless they prove that
they exercised extraordinary diligence in transporting the goods.19 In order to avoid
responsibility for any loss or damage, therefore, they have the burden of proving that
they observed such diligence.20
However, the presumption of fault or negligence will not arise21 if the loss is due to
any of the following causes: (1) flood, storm, earthquake, lightning, or other natural
disaster or calamity; (2) an act of the public enemy in war, whether international or
civil; (3) an act or omission of the shipper or owner of the goods; (4) the character of
the goods or defects in the packing or the container; or (5) an order or act of
competent public authority.22 This is a closed list. If the cause of destruction, loss or
deterioration is other than the enumerated circumstances, then the carrier is liable
therefor.23
Corollary to the foregoing, mere proof of delivery of the goods in good order to a
common carrier and of their arrival in bad order at their destination constitutes a
prima facie case of fault or negligence against the carrier. If no adequate explanation
is given as to how the deterioration, the loss or the destruction of the goods
happened, the transporter shall be held responsible.24
That petitioners failed to rebut the prima facie presumption of negligence is revealed
in the case at bar by a review of the records and more so by the evidence adduced
by respondent.25
First, as stated in the Bill of Lading, petitioners received the subject shipment in good
order and condition in Hamburg, Germany.26
Second, prior to the unloading of the cargo, an Inspection Report27 prepared and
signed by representatives of both parties showed the steel bands broken, the metal
envelopes rust-stained and heavily buckled, and the contents thereof exposed and
rusty.
Third, Bad Order Tally Sheet No. 15497928 issued by Jardine Davies Transport
Services, Inc., stated that the four coils were in bad order and condition. Normally, a
request for a bad order survey is made in case there is an apparent or a presumed
loss or damage.29
Fourth, the Certificate of Analysis30 stated that, based on the sample submitted and
tested, the steel sheets found in bad order were wet with fresh water.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754

Fifth, petitioners -- in a letter31 addressed to the Philippine Steel Coating Corporation ATTY. MACAMAY:
and dated October 12, 1990 -- admitted that they were aware of the condition of the
four coils found in bad order and condition. Objection, Your Honor, I think the document itself reflects the condition of the cold
steel sheets and the best evidence is the document itself, Your Honor that shows the
These facts were confirmed by Ruperto Esmerio, head checker of BM Santos condition of the steel sheets.
Checkers Agency. Pertinent portions of his testimony are reproduce hereunder:
COURT:
"Q. Mr. Esmerio, you mentioned that you are a Head Checker. Will you inform the
Honorable Court with what company you are connected? Let the witness answer.

A. BM Santos Checkers Agency, sir. A. The scrap of the cargoes is broken already and the rope is loosen and the
cargoes are dent on the sides."32
Q. How is BM Santos checkers Agency related or connected with defendant Jardine
Davies Transport Services? All these conclusively prove the fact of shipment in good order and condition and the
consequent damage to the four coils while in the possession of petitioner,33 who
A. It is the company who contracts the checkers, sir. notably failed to explain why.34

Q. You mentioned that you are a Head Checker, will you inform this Honorable Further, petitioners failed to prove that they observed the extraordinary diligence
Court your duties and responsibilities? and precaution which the law requires a common carrier to know and to follow to
avoid damage to or destruction of the goods entrusted to it for safe carriage and
A. I am the representative of BM Santos on board the vessel, sir, to supervise the delivery.35
discharge of cargoes.
True, the words "metal envelopes rust stained and slightly dented" were noted on
xxx xxx xxx the Bill of Lading; however, there is no showing that petitioners exercised due
diligence to forestall or lessen the loss.36 Having been in the service for several years,
Q. On or about August 1, 1990, were you still connected or employed with BM the master of the vessel should have known at the outset that metal envelopes in the
Santos as a Head Checker? said state would eventually deteriorate when not properly stored while in transit.37
Equipped with the proper knowledge of the nature of steel sheets in coils and of the
A. Yes, sir. proper way of transporting them, the master of the vessel and his crew should have
undertaken precautionary measures to avoid possible deterioration of the cargo. But
Q. And, on or about that date, do you recall having attended the discharging and none of these measures was taken.38 Having failed to discharge the burden of
inspection of cold steel sheets in coil on board the MV/AN ANGEL SKY? proving that they have exercised the extraordinary diligence required by law,
petitioners cannot escape liability for the damage to the four coils.39
A. Yes, sir, I was there.
In their attempt to escape liability, petitioners further contend that they are
xxx xxx xxx exempted from liability under Article 1734(4) of the Civil Code. They cite the notation
"metal envelopes rust stained and slightly dented" printed on the Bill of Lading as
Q. Based on your inspection since you were also present at that time, will you evidence that the character of the goods or defect in the packing or the containers
inform this Honorable Court the condition or the appearance of the bad order was the proximate cause of the damage. We are not convinced.
cargoes that were unloaded from the MV/ANANGEL SKY?
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
From the evidence on record, it cannot be reasonably concluded that the damage to
the four coils was due to the condition noted on the Bill of Lading.40 The aforecited
exception refers to cases when goods are lost or damaged while in transit as a result
of the natural decay of perishable goods or the fermentation or evaporation of
substances liable therefor, the necessary and natural wear of goods in transport,
defects in packages in which they are shipped, or the natural propensities of
animals.41 None of these is present in the instant case.
Further, even if the fact of improper packing was known to the carrier or its crew or
was apparent upon ordinary observation, it is not relieved of liability for loss or injury
resulting therefrom, once it accepts the goods notwithstanding such condition.42
Thus, petitioners have not successfully proven the application of any of the aforecited
exceptions in the present case.43
Second Issue:
Notice of Loss
Petitioners claim that pursuant to Section 3, paragraph 6 of the Carriage of Goods by
Sea Act44 (COGSA), respondent should have filed its Notice of Loss within three days
from delivery. They assert that the cargo was discharged on July 31, 1990, but that
respondent filed its Notice of Claim only on September 18, 1990.45
We are not persuaded. First, the above-cited provision of COGSA provides that the
notice of claim need not be given if the state of the goods, at the time of their receipt,
has been the subject of a joint inspection or survey. As stated earlier, prior to
unloading the cargo, an Inspection Report46 as to the condition of the goods was
prepared and signed by representatives of both parties.47
Second, as stated in the same provision, a failure to file a notice of claim within three
days will not bar recovery if it is nonetheless filed within one year.48 This one-year
prescriptive period also applies to the shipper, the consignee, the insurer of the goods
or any legal holder of the bill of lading.49
In Loadstar Shipping Co., Inc, v. Court of Appeals,50 we ruled that a claim is not barred
by prescription as long as the one-year period has not lapsed. Thus, in the words of
the ponente, Chief Justice Hilario G. Davide Jr.:
"Inasmuch as the neither the Civil Code nor the Code of Commerce states a specific
prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA)--which
provides for a one-year period of limitation on claims for loss of, or damage to,
cargoes sustained during transit--may be applied suppletorily to the case at bar."
In the present case, the cargo was discharged on July 31, 1990, while the Complaint51
was filed by respondent on July 25, 1991, within the one-year prescriptive period.
Third Issue:
Package Limitation
Assuming arguendo they are liable for respondent's claims, petitioners contend that
their liability should be limited to US$500 per package as provided in the Bill of Lading
and by Section 4(5)52 of COGSA.53
On the other hand, respondent argues that Section 4(5) of COGSA is inapplicable,
because the value of the subject shipment was declared by petitioners beforehand,
as evidenced by the reference to and the insertion of the Letter of Credit or "L/C No.
90/02447" in the said Bill of Lading.54
A bill of lading serves two functions. First, it is a receipt for the goods shipped.53
Second, it is a contract by which three parties -- namely, the shipper, the carrier, and
the consignee -- undertake specific responsibilities and assume stipulated
obligations.56 In a nutshell, the acceptance of the bill of lading by the shipper and
the consignee, with full knowledge of its contents, gives rise to the presumption that
it constituted a perfected and binding contract.57
Further, a stipulation in the bill of lading limiting to a certain sum the common
carrier's liability for loss or destruction of a cargo -- unless the shipper or owner
declares a greater value58 -- is sanctioned by law.59 There are, however, two
conditions to be satisfied: (1) the contract is reasonable and just under the
circumstances, and (2) it has been fairly and freely agreed upon by the parties.60 The
rationale for this rule is to bind the shippers by their agreement to the value
(maximum valuation) of their goods.61
It is to be noted, however, that the Civil Code does not limit the liability of the
common carrier to a fixed amount per package.62 In all matters not regulated by the
Civil Code, the right and the obligations of common carriers shall be governed by the
Code of Commerce and special laws.63 Thus, the COGSA, which is suppletory to the
provisions of the Civil Code, supplements the latter by establishing a statutory
provision limiting the carrier's liability in the absence of a shipper's declaration of a
higher value in the bill of lading.64 The provisions on limited liability are as much a
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
part of the bill of lading as though physically in it and as though placed there by
agreement of the parties.65
In the case before us, there was no stipulation in the Bill of Lading66 limiting the
carrier's liability. Neither did the shipper declare a higher valuation of the goods to
be shipped. This fact notwithstanding, the insertion of the words "L/C No. 90/02447
cannot be the basis for petitioners' liability.
First, a notation in the Bill of Lading which indicated the amount of the Letter of Credit
obtained by the shipper for the importation of steel sheets did not effect a
declaration of the value of the goods as required by the bill.67 That notation was
made only for the convenience of the shipper and the bank processing the Letter of
Credit.68
Second, in Keng Hua Paper Products v. Court of Appeals,69 we held that a bill of lading
was separate from the Other Letter of Credit arrangements. We ruled thus:
"(T)he contract of carriage, as stipulated in the bill of lading in the present case, must
be treated independently of the contract of sale between the seller and the buyer,
and the contract of issuance of a letter of credit between the amount of goods
described in the commercial invoice in the contract of sale and the amount allowed
in the letter of credit will not affect the validity and enforceability of the contract of
carriage as embodied in the bill of lading. As the bank cannot be expected to look
beyond the documents presented to it by the seller pursuant to the letter of credit,
neither can the carrier be expected to go beyond the representations of the shipper
in the bill of lading and to verify their accuracy vis-à-vis the commercial invoice and
the letter of credit. Thus, the discrepancy between the amount of goods indicated in
the invoice and the amount in the bill of lading cannot negate petitioner's obligation
to private respondent arising from the contract of transportation."70
In the light of the foregoing, petitioners' liability should be computed based on
US$500 per package and not on the per metric ton price declared in the Letter of
Credit.71 In Eastern Shipping Lines, Inc. v. Intermediate Appellate Court,72 we
explained the meaning of packages:
"When what would ordinarily be considered packages are shipped in a container
supplied by the carrier and the number of such units is disclosed in the shipping
documents, each of those units and not the container constitutes the 'package'
referred to in the liability limitation provision of Carriage of Goods by Sea Act."
Considering, therefore, the ruling in Eastern Shipping Lines and the fact that the Bill
of Lading clearly disclosed the contents of the containers, the number of units, as
well as the nature of the steel sheets, the four damaged coils should be considered
as the shipping unit subject to the US$500 limitation.1âwphi1.nêt
WHEREFORE, the Petition is partly granted and the assailed Decision MODIFIED.
Petitioners' liability is reduced to US$2,000 plus interest at the legal rate of six
percent from the time of the filing of the Complaint on July 25, 1991 until the finality
of this Decision, and 12 percent thereafter until fully paid. No pronouncement as to
costs.
SO ORDERED.
G.R. No. 136960 December 8, 2003
IRON BULK SHIPPING PHILIPPINES, CO., LTD., petitioner,
vs.
REMINGTON INDUSTRIAL SALES CORPORATION, respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the August 28, 1998 Decision1 and the December 24, 1998 Resolution of the
Court of Appeals in CA-G.R. CV No. 49725,2 affirming in toto the decision of the
Regional Trial Court of Manila (Branch 9).
The factual background of the case is summarized by the appellate court, thus:
Sometime in the latter part of 1991, plaintiff Remington Industrial Sales Corporation
(hereafter Remington for short) ordered from defendant Wangs Company, Inc.
(hereafter Wangs for short) 194 packages of hot rolled steel sheets, weighing 686.565
metric tons, with a total value of $219,380.00, then equivalent to ₱6,469,759.17.
Wangs forwarded the order to its supplier, Burwill (Agencies) Ltd., in Hongkong. On
or about November 26, 1991, the 194 packages were loaded on board the vessel MV
‘Indian Reliance’ at the Port of Gdynia, Poland, for transportation to the Philippines,
under Bill of Lading No. 27 (Exh. ‘C’). The vessel’s owner/charterer is represented in
the Philippines by defendant Iron Bulk Shipping Phils., Inc. (hereafter Iron Bulk for
short).
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Remington had the cargo insured for ₱6,469,759.17 during the voyage by Marine
Insurance Policy No. 7741 issued by defendant Pioneer Asia Insurance Corporation
(hereafter Pioneer for short).
On or about January 3, 1992, the MV ‘Indian Reliance’ arrived in the Port of Manila,
and the 194 packages of hot rolled steel sheets were discharged from the vessel. The
cargo was inspected twice by SGS Far East Ltd. and found to be wet (with slight trace
of salt) and rusty, extending from 50% to 80% of each plate. Plaintiff filed formal
claims for loss amounting to ₱544,875.17 with Pioneer, Iron Bulk, Manila Port
Services, Inc. (MPS) and ESE Brokerage Corporation (ESE). No one honored such
claims.
Thus, plaintiff filed an action for collection, plus attorney’s fees, against Wangs,
Pioneer and Iron Bulk. . . ."3
and affirmed in toto the following findings of the trial court, on February 1, 1995, to
wit:
… Nevertheless, since Iron Bulk’s own evidence shows that there was water inside the
The evidence on record shows that the direct and immediate cause of the rusting of
the goods imported by the plaintiff was the water found inside the cargo hold of M/V
‘Indian Reliance’ wherein those goods were stored during the voyage, particularly the
water found on the surface of the merchandise and on the floor of the vessel hatch.
And even at the time the cargoes were being unloaded by crane at the Pier of Manila,
Iron Bulk’s witnesses noticed that water was dripping from the cargoes. (TSN dated
July 20, 1993, pp. 13-14; TSN dated May 30, 1994, pp. 8-9, 14, 24-25; TSN dated June
3, 1994, pp. 31-32; TSN dated July 14, 1994, pp. 10-11).
SGS Far East Limited, an inspection agency hired by defendant Wangs, issued
Certificate of Inspection and Analysis No 6401/35071 stating the following findings:
Results of tests indicated that a very slight trace of salt was present in the sample as
confirmed by the test of Sodium. The results however does not necessarily indicate
that the rusty condition of the material was caused by seawater.
Tan-Gatue Adjustment Co., Inc., a claims adjustment firm hired by defendant Pioneer,
submitted a Report (Exh. 10-Pioneer) dated February 20, 1992 to Pioneer which
pertinently reads as follows:
All the above 3,971 sheets were heavily rusty at sides/ends/edges/surfaces. Pieces of
cotton were rubbed by us on different rusty steel sheets and submitted to Precision
Analytical Services, Inc. to determine the cause of wetting. Result thereof as per
Laboratory Report No. 077-92 of this firm showed that: ‘The sample was
wetted/contaminated by fresh water.
After considering the foregoing test results and the other evidence on record, the
Court found no clear and sufficient proof showing that the water which stayed in the
cargo hold of the vessel and which contaminated the merchandise was seawater. The
Court, however, is convinced that the subject goods were exposed to salt conditions
as evidenced by the presence of about 17% Sodium on the rust sample tested by SGS.
As to the source of the water found in the cargo hold, there is also no concrete and
competent evidence on record establishing that such water leaked from the pipe
installed in Hatch No. 1 of M/V ‘Indian Reliance’, as claimed by plaintiff. Indeed, the
plaintiff based such claim only from information it allegedly received from its supplier,
as stated in its letter to defendant Iron Bulk dated March 28, 1992 (Exh. K-3). And no
one took the witness stand to confirm or establish the alleged leakage.
cargo hold of the vessel and that the goods stored therein were wet and full of rust,
without sufficient explanation on its part as to when and how water found its way
into the vessel holds, the Court finds and so holds that Iron Bulk failed to exercise the
extraordinary diligence required by law in the handling and transporting of the goods.
.....
Iron Bulk did not even exercise due diligence because admittedly, water was dripping
from the cargoes at the time they were being discharged from the vessel. Had Iron
Bulk done so, it could have discovered by ordinary inspection that the cargo holds
and the cargoes themselves were affected by water and it could have provided some
remedial measures to prevent or minimize the damage to the cargoes. But it did not,
showing its lack of care and diligence over the goods.
Besides, since the goods were undoubtedly damaged, and as Iron Bulk failed to
establish by any clear and convincing evidence any of the exempting causes provided
for in Article 1734 of the Civil Code, it is presumed to have been at fault or to have
acted negligently.
.....
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
WHEREFORE, the Court finding preponderance of evidence for the plaintiff hereby
renders judgment in favor of it and against all the defendants herein as follows:
1. Ordering defendant Pioneer Asia Insurance Corporation to pay plaintiff the
following amounts:
a) ₱544,875.17 representing the loss allowance for the goods insured, plus interest
at the legal rate (6% p.a.) reckoned from the time of filing of this case until full
payment is made;
b) ₱50,000.00 for and as attorney’s fees; and
c) the cost of suit.
2. Ordering defendant Iron Bulk Shipping Co. Inc. immediately upon payment by
defendant Pioneer of the foregoing award to the plaintiff, to reimburse defendant
Pioneer the total amount it paid to the plaintiff, in respect to its right of subrogation.
3. Denying the counterclaims of all the defendants and the cross-claim of defendant
Wangs Company, Incorporated and Iron Bulk Shipping Co., Inc. for lack of merit.
4. Granting the cross-claim of defendant Pioneer Asia Insurance Corporation against
defendant Iron Bulk by virtue of its right of subrogation.
5. Dismissing the case against defendant Wangs Company, Inc.
SO ORDERED.4
Only Iron Bulk filed the present petition raising the following Assignment of Errors:
FIRSTLY, the Court of Appeals erred in its insistent reliance on the pro forma Bills of
Lading to establish the condition of the cargo upon loading;
SECONDLY, the Court of Appeals erred in not exculpating petitioner since the cargo
was not contaminated during the time the same was in possession of the vessel, as
evidenced by the express finding of the lower court that the contamination and
rusting was chemically established to have been caused by fresh water;
THRIDLY, the Court of Appeals erred in making a sweeping finding that the petitioner
as carrier failed to exercise the requisite diligence under the law, which is contrary to
what is demonstrated by the evidence adduced; and
FINALLY, the Court of Appeals erred in affirming the amount of damages adjudicated
by the Court below, which is at best speculative and not supported by damages.5
The general rule is that only questions of law are entertained in petitions for review
by certiorari under Rule 45 of the Rules of Court. The trial court’s findings of fact,
which the Court of Appeals affirmed, are generally binding and conclusive upon this
court.6 There are recognized exceptions to this rule, among which are: (1) the
conclusion is grounded on speculations, surmises or conjectures; (2) the inference is
manifestly mistaken, absurd or impossible; (3) there is grave abuse of discretion; (4)
the judgment is based on a misapprehension of facts; (5) the findings of facts are
conflicting; (6) there is no citation of specific evidence on which the factual findings
are based; (7) the finding of absence of facts is contradicted by the presence of
evidence on record; (8) the findings of the CA are contrary to the findings of the trial
court; (9) the CA manifestly overlooked certain relevant and undisputed facts that, if
properly considered, would justify a different conclusion; (10) the findings of the CA
are beyond the issues of the case; and (11) such findings are contrary to the
admissions of both parties.7 Petitioner failed to demonstrate that its petition falls
under any one of the above exceptions, except as to damages which will be discussed
forthwith.
Anent the first assigned error: That the Court of Appeals erred in relying on the pro
forma Bills of Lading to establish the condition of the cargo upon landing.
There is no merit to petitioner’s contention that the Bill of Lading covering the subject
cargo cannot be relied upon to indicate the condition of the cargo upon loading. It is
settled that a bill of lading has a two-fold character. In Phoenix Assurance Co., Ltd. vs.
United States Lines, we held that:
[A] bill of lading operates both as a receipt and as a contract. It is a receipt for the
goods shipped and a contract to transport and deliver the same as therein stipulated.
As a receipt, it recites the date and place of shipment, describes the goods as to
quantity, weight, dimensions, identification marks and condition, quality and value.
As a contract, it names the contracting parties, which include the consignee, fixes the
route, destination, and freight rate or charges, and stipulates the rights and
obligations assumed by the parties.8
We find no error in the findings of the appellate court that the questioned bill of
lading is a clean bill of lading, i.e., it does not indicate any defect in the goods covered
by it, as shown by the notation, "CLEAN ON BOARD"9 and "Shipped at the Port of
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Loading in apparent good condition on board the vessel for carriage to Port of
Discharge".10
Petitioner presented evidence to prove that, contrary to the recitals contained in the
subject bill of lading, the cargo therein described as clean on board is actually wet
and covered with rust. Indeed, having the nature of a receipt, or an
acknowledgement of the quantity and condition of the goods delivered, the bill of
lading, like any other receipts, may be explained, varied or even contradicted.11
However, we agree with the Court of Appeals that far from contradicting the recitals
contained in the said bill, petitioner’s own evidence shows that the cargo covered by
the subject bill of lading, although it was partially wet and covered with rust was,
nevertheless, found to be in a "fair, usually accepted condition" when it was accepted
for shipment.12
The fact that the issued bill of lading is pro forma is of no moment. If the bill of lading
is not truly reflective of the true condition of the cargo at the time of loading to the
effect that the said cargo was indeed in a damaged state, the carrier could have
refused to accept it, or at the least, made a marginal note in the bill of lading
indicating the true condition of the merchandise. But it did not. On the contrary, it
accepted the subject cargo and even agreed to the issuance of a clean bill of lading
without taking any exceptions with respect to the recitals contained therein. Since
the carrier failed to annotate in the bill of lading the alleged damaged condition of
the cargo when it was loaded, said carrier and the petitioner, as its representative,
are bound by the description appearing therein and they are now estopped from
denying the contents of the said bill.
Petitioner presented in evidence the Mate’s Receipts13 and a Survey Report14 to
prove the damaged condition of the cargo. However, contrary to the asseveration of
petitioner, the Mate’s Receipts and the Survey Report which were both dated
November 6, 1991, are unreliable evidence of the true condition of the shipment at
the time of loading since said receipts and report were issued twenty days prior to
loading and before the issuance of the clean bill of lading covering the subject cargo
on November 26, 1991. Moreover, while the surveyor, commissioned by the carrier
to inspect the subject cargo, found the inspected steel goods to be contaminated
with rust he, nonetheless, estimated the merchandise to be in a fair and usually
accepted condition.
Anent the second and third assigned errors: That the Court of Appeals erred in not
finding that the contamination and rusting was chemically to have been caused by
fresh water; and that the appellate court erred in finding that petitioner failed to
exercise the requisite diligence under the law.
Petitioner’s arguments in support of the assigned errors are not plausible. Even
granting, for the sake of argument, that the subject 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.
It is settled that 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.15 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.16 Under
Article 1742 of the Civil Code, even if the loss, destruction, or deterioration of the
goods should be caused, among others, by the character of the goods, the common
carrier must exercise due diligence to forestall or lessen the loss. This extraordinary
responsibility lasts from the time the goods are unconditionally placed in the
possession of, and received by the carrier for transportation until the same are
delivered, actually or constructively, by the carrier to the consignee, or to the person
who has a right to receive them.17 In the instant case, if the carrier indeed found the
steel sheets to have been covered by rust at the time that it accepted the same for
transportation, such finding should have prompted it to apply additional safety
measures to make sure that the cargo is protected from corrosion. This, the carrier
failed to do.
Article 1734 of the Civil Code states that:
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.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754

Except in the cases mentioned under Article 1734, if the goods are lost, destroyed or Remington claims that 70% of the twenty-foot length steel sheets were damaged.
deteriorated, common carriers are presumed to have been at fault or to have acted Remington’s general manager, Rowina Tan Saban, testified that the "70%" figure was
negligently, unless they prove that they observed extraordinary diligence as required based on the reports submitted by SGS and Tan-Gatue and Remington’s independent
under the law.18 The Court of Appeals did not err in finding that no competent survey to confirm these reports.22 Saban further testified that on the basis of these
evidence was presented to prove that the deterioration of the subject cargo was reports, Remington came up with a summary of the amount of damages sustained
brought about by any of the causes enumerated under the aforequoted Article 1734 by the subject cargo, to wit:
of the said Code. We likewise agree with appellate court’s finding that the carrier
failed to present proof that it exercised extraordinary diligence in its vigilance over Plates 8 ft lengths 491.540 MT - US$157,292.80
the goods. The presumption that the carrier was at fault or that it acted negligently Quantity Damaged 25%
was not overcome by any countervailing evidence. Loss Allowance 13%
Total Plates 8 ft lengths US$ 15,211.56
Anent the last assigned error: That the Court of Appeals erred in affirming the amount Plates 20 ft lengths 194.025 MT - US$ 62,088.00
of damages awarded by the trial court. Quantity Damaged 70%
Loss Allowance 35%
We agree with the contention of the petitioner in its last assigned error that the Total Plates 20 ft lengths ₱544,875.71
amount of damages adjudicated by the trial court and affirmed by the appellate court with the following detailed computation:
is not in consonance with the evidence presented by the parties. The judgments of
both lower courts are based on misapprehension of facts as we find no competent Plates under 8 ft lengths 491.540 MT @ $320./MT
evidence to prove the actual damages sustained by respondent. US $157,292.80
Multiply by 25% Qty. damaged $ 39,323.20
Based on the Packing List issued by Burwill (Agencies) Limited, the supplier of the 13% Loss allowance $ 5,112.02
steel sheets, the cargo consigned to Remington consisted of hot rolled steel sheets Plates under 20 ft. lengths 194.025 MT @ $320./MT
with lengths of eight feet and twenty feet. The eight-foot length steel sheets US $ 62,088.00
contained in 142 packages had a weight of 491.54 metric tons while the twenty-foot Multiple 70% Qty. damaged US $ 43,461.60
steel sheets which were contained in 52 packages weighed 194.25 metric tons.19 The 35% Loss allowance $ 15,211.56
goods were valued at $320.00 per metric ton.20 Total claim US $ 5,112.02
$15,211.56
It is not disputed that at the time of inspection of the subject merchandise conducted US $20,323.58 @ $26.81 = ₱544,875.17
by SGS Far East Limited on January 21-24, 1992 and January 27-28, 1992, only 30% of and which the trial court based the actual damages awarded in favor of Remington.
said goods originally consigned to Remington was available for examination at
Remington’s warehouse in Manila and that Remington had already disposed of the However, after a careful examination of the reports submitted by SGS and Tan-Gatue,
remaining 70%. In the Certificate of Inspection issued by SGS, dated February 18, we find nothing in the said reports and computation to justify the claim of Remington
1992, it was reported that the surface of the steel sheets with length of twenty feet that 70% of the twenty-foot length steel sheets were damaged. Neither does the
were found to be rusty "extending from 60% to 80% per plate".21 However, there alleged survey conducted by Remington consisting only of photographs,23 prove the
was no proof to show how many metric tons of twenty-foot and eight-foot length quantity of the damaged cargo.
steel sheets, respectively, comprise the remaining 30% of the cargo. No competent
evidence was presented to prove the weight of the remaining twenty-foot length As to the eight-foot length steel sheets, SGS reported that they were found oiled all
steel sheets, on the basis of which the amount of actual damages could have been over which makes it hard to determine the rust condition on its surface.24 On the
ascertained. other hand, the report issued by Tan-Gatue did not specify the extent of damage
done to the said merchandise.25 There is also no proof of the weight of the remaining
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
eight-foot length steel sheets. From the foregoing, it is evident that the extent of
actual damage to the subject cargo is likewise not satisfactorily proven.
It is settled that actual or compensatory damages are not presumed and should be
proven before they are awarded. In Spouses Quisumbing vs. Meralco26 , we held that
Actual damages are compensation for an injury that will put the injured party in the
position where it was before it was injured. They pertain to such injuries or losses
that are actually sustained and susceptible of measurement. Except as provided by
law or stipulation, a party is entitled to an adequate compensation only for such
pecuniary loss as it has duly proven.
Hence, for failure of Remington to present sufficient evidence which is susceptible of
measurement, it is not entitled to actual damages.
Nonetheless, since it was established that the subject steel sheets sustained damage
by reason of the negligence of the carrier, albeit no competent proof was presented
to justify the award of actual damages, we find that Remington is entitled to
temperate damages in accordance with Articles 2216, 2224 and 2225 of the Civil Code,
to wit:
Art. 2216. No proof of pecuniary loss is necessary in order that moral, nominal,
temperate, liquidated or exemplary damages may be adjudicated. The assessment of
such damages, except liquidated ones, is left to the discretion of the court, according
to the circumstances of each case.
Art. 2224. Temperate or moderate damages, which are more than nominal but less
than compensatory damages, may be recovered when the court finds that some
pecuniary loss has been suffered but its amount cannot, from the nature of the case,
be proved with certainty.
Art. 2225. Temperate damages must be reasonable under the
circumstances.1âwphi1
Thirty percent of the alleged cost of damages, i.e., ₱544, 875.17 or ₱165,000.00 is
reasonable enough for temperate damages.
We likewise agree with petitioner’s claim that it should not be held liable for the
payment of attorney’s fees because it was always willing to settle its liability by
offering to pay 30% of Remington’s claim and that it is only Remington’s unwarranted
refusal to accept such offer that led to the filing of the instant case. As found earlier,
there is no evidence that the 70% of the 20-foot length steel sheets which had been
disposed of had been damaged. Neither is there competent evidence proving the
actual extent of damage sustained by the eight-foot length steel sheets. Petitioner
was therefore justified in refusing to satisfy the full amount of Remington’s claims.
WHEREFORE, the assailed Decision of the Court of Appeals dated August 28, 1998
and the Resolution dated December 24, 1998, in CA-G.R. CV No. 49725 are MODIFIED
as follows: The award of actual damages and attorney’s fees are deleted. Respondent
is awarded temperate damages in the amount of ₱165,000.00. In all other respects,
the appealed decision and resolution are affirmed.
No pronouncement as to costs.
SO ORDERED.
20.
G.R. No. L-48757 May 30, 1988
MAURO GANZON, petitioner,
vs.
COURT OF APPEALS and GELACIO E. TUMAMBING, respondents.
Antonio B. Abinoja for petitioner.
Quijano, Arroyo & Padilla Law Office for respondents.
SARMIENTO, J.:
The private respondent instituted in the Court of First Instance of Manila 1 an action
against the petitioner for damages based on culpa contractual. The antecedent facts,
as found by the respondent Court, 2 are undisputed:
On November 28, 1956, Gelacio Tumambing contracted the services of Mauro B.
Ganzon to haul 305 tons of scrap iron from Mariveles, Bataan, to the port of Manila
on board the lighter LCT "Batman" (Exhibit 1, Stipulation of Facts, Amended Record
on Appeal, p. 38). Pursuant to that agreement, Mauro B. Ganzon sent his lighter
"Batman" to Mariveles where it docked in three feet of water (t.s.n., September 28,
1972, p. 31). On December 1, 1956, Gelacio Tumambing delivered the scrap iron to
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
defendant Filomeno Niza, captain of the lighter, for loading which was actually begun
on the same date by the crew of the lighter under the captain's supervision. When
about half of the scrap iron was already loaded (t.s.n., December 14, 1972, p. 20),
Mayor Jose Advincula of Mariveles, Bataan, arrived and demanded P5,000.00 from
Gelacio Tumambing. The latter resisted the shakedown and after a heated argument
between them, Mayor Jose Advincula drew his gun and fired at Gelacio Tumambing
(t.s.n., March 19, 1971, p. 9; September 28, 1972, pp. 6-7).<äre||anº•1àw> The
gunshot was not fatal but Tumambing had to be taken to a hospital in Balanga, Bataan,
for treatment (t.s.n., March 19, 1971, p. 13; September 28, 1972, p. 15).
After sometime, the loading of the scrap iron was resumed. But on December 4, 1956,
Acting Mayor Basilio Rub, accompanied by three policemen, ordered captain
Filomeno Niza and his crew to dump the scrap iron (t.s.n., June 16, 1972, pp. 8-9)
where the lighter was docked (t.s.n., September 28, 1972, p. 31). The rest was
brought to the compound of NASSCO (Record on Appeal, pp. 20-22). Later on Acting
Mayor Rub issued a receipt stating that the Municipality of Mariveles had taken
custody of the scrap iron (Stipulation of Facts, Record on Appeal, p. 40; t.s.n.,
September 28, 1972, p. 10.)
On the basis of the above findings, the respondent Court rendered a decision, the
dispositive portion of which states:
WHEREFORE, the decision appealed from is hereby reversed and set aside and a new
one entered ordering defendant-appellee Mauro Ganzon to pay plaintiff-appellant
Gelacio E. Tumambimg the sum of P5,895.00 as actual damages, the sum of
P5,000.00 as exemplary damages, and the amount of P2,000.00 as attorney's fees.
Costs against defendant-appellee Ganzon. 3
In this petition for review on certiorari, the alleged errors in the decision of the Court
of Appeals are:
I
THE COURT OF APPEALS FINDING THE HEREIN PETITIONER GUILTY OF BREACH OF
THE CONTRACT OF TRANSPORTATION AND IN IMPOSING A LIABILITY AGAINST HIM
COMMENCING FROM THE TIME THE SCRAP WAS PLACED IN HIS CUSTODY AND
CONTROL HAVE NO BASIS IN FACT AND IN LAW.
II
THE APPELLATE COURT ERRED IN CONDEMNING THE PETITIONER FOR THE ACTS OF
HIS EMPLOYEES IN DUMPING THE SCRAP INTO THE SEA DESPITE THAT IT WAS
ORDERED BY THE LOCAL GOVERNMENT OFFICIAL WITHOUT HIS PARTICIPATION.
III
THE APPELLATE COURT FAILED TO CONSIDER THAT THE LOSS OF THE SCRAP WAS DUE
TO A FORTUITOUS EVENT AND THE PETITIONER IS THEREFORE NOT LIABLE FOR
LOSSES AS A CONSEQUENCE THEREOF. 4
The petitioner, in his first assignment of error, insists that the scrap iron had not been
unconditionally placed under his custody and control to make him liable. However,
he completely agrees with the respondent Court's finding that on December 1, 1956,
the private respondent delivered the scraps to Captain Filomeno Niza for loading in
the lighter "Batman," That the petitioner, thru his employees, actually received the
scraps is freely admitted. Significantly, there is not the slightest allegation or showing
of any condition, qualification, or restriction accompanying the delivery by the
private respondent-shipper of the scraps, or the receipt of the same by the petitioner.
On the contrary, soon after the scraps were delivered to, and received by the
petitioner-common carrier, loading was commenced.
By the said act of delivery, the scraps were unconditionally placed in the possession
and control of the common carrier, and upon their receipt by the carrier for
transportation, the contract of carriage was deemed perfected. Consequently, the
petitioner-carrier's extraordinary responsibility for the loss, destruction or
deterioration of the goods commenced. Pursuant to Art. 1736, such extraordinary
responsibility would cease only upon the delivery, actual or constructive, by the
carrier to the consignee, or to the person who has a right to receive them. 5 The fact
that part of the shipment had not been loaded on board the lighter did not impair
the said contract of transportation as the goods remained in the custody and control
of the carrier, albeit still unloaded.
The petitioner has failed to show that the loss of the scraps was due to any of the
following causes enumerated in Article 1734 of the Civil Code, namely:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
(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.
6 By reason of this presumption, the court is not even required to make an express
finding of fault or negligence before it could hold the petitioner answerable for the
breach of the contract of carriage. Still, the petitioner could have been exempted
from any liability had he been able to prove that he observed extraordinary diligence
in the vigilance over the goods in his custody, according to all the circumstances of
the case, or that the loss was due to an unforeseen event or to force majeure. As it
was, there was hardly any attempt on the part of the petitioner to prove that he
exercised such extraordinary diligence.
It is in the second and third assignments of error where the petitioner maintains that
he is exempt from any liability because the loss of the scraps was due mainly to the
intervention of the municipal officials of Mariveles which constitutes a caso fortuito
as defined in Article 1174 of the Civil Code. 7
We cannot sustain the theory of caso fortuito. In the courts below, the petitioner's
defense was that the loss of the scraps was due to an "order or act of competent
public authority," and this contention was correctly passed upon by the Court of
Appeals which ruled that:
... In the second place, before the appellee Ganzon could be absolved from
responsibility on the ground that he was ordered by competent public authority to
unload the scrap iron, it must be shown that Acting Mayor Basilio Rub had the power
to issue the disputed order, or that it was lawful, or that it was issued under legal
process of authority. The appellee failed to establish this. Indeed, no authority or
power of the acting mayor to issue such an order was given in evidence. Neither has
it been shown that the cargo of scrap iron belonged to the Municipality of Mariveles.
What we have in the record is the stipulation of the parties that the cargo of scrap
iron was accilmillated by the appellant through separate purchases here and there
from private individuals (Record on Appeal, pp. 38-39). The fact remains that the
order given by the acting mayor to dump the scrap iron into the sea was part of the
pressure applied by Mayor Jose Advincula to shakedown the appellant for P5,000.00.
The order of the acting mayor did not constitute valid authority for appellee Mauro
Ganzon and his representatives to carry out.
Now the petitioner is changing his theory to caso fortuito. Such a change of theory
on appeal we cannot, however, allow. In any case, the intervention of the municipal
officials was not In any case, of a character that would render impossible the
fulfillment by the carrier of its obligation. The petitioner was not duty bound to obey
the illegal order to dump into the sea the scrap iron. Moreover, there is absence of
sufficient proof that the issuance of the same order was attended with such force or
intimidation as to completely overpower the will of the petitioner's employees. The
mere difficulty in the fullfilment of the obligation is not considered force majeure.
We agree with the private respondent that the scraps could have been properly
unloaded at the shore or at the NASSCO compound, so that after the dispute with
the local officials concerned was settled, the scraps could then be delivered in
accordance with the contract of carriage.
There is no incompatibility between the Civil Code provisions on common carriers
and Articles 361 8 and 362 9 of the Code of Commerce which were the basis for this
Court's ruling in Government of the Philippine Islands vs. Ynchausti & Co.10 and
which the petitioner invokes in tills petition. For Art. 1735 of the Civil Code,
conversely stated, means that the shipper will suffer the losses and deterioration
arising from the causes enumerated in Art. 1734; and in these instances, the burden
of proving that damages were caused by the fault or negligence of the carrier rests
upon him. However, the carrier must first establish that the loss or deterioration was
occasioned by one of the excepted causes or was due to an unforeseen event or to
force majeure. Be that as it may, insofar as Art. 362 appears to require of the carrier
only ordinary diligence, the same is .deemed to have been modified by Art. 1733 of
the Civil Code.
Finding the award of actual and exemplary damages to be proper, the same will not
be disturbed by us. Besides, these were not sufficiently controverted by the
petitioner.
WHEREFORE, the petition is DENIED; the assailed decision of the Court of Appeals is
hereby AFFIRMED. Costs against the petitioner.
This decision is IMMEDIATELY EXECUTORY.
21.
G.R. No. 131621 September 28, 1999
LOADSTAR SHIPPING CO., INC., petitioner,
vs.
COURT OF APPEALS and THE MANILA INSURANCE CO., INC., respondents.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
DAVIDE, JR., C.J.:
Petitioner Loadstar Shipping Co., Inc. (hereafter LOADSTAR), in this petition for
review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, seeks to
reverse and set aside the following: (a) the 30 January 1997 decision 1 of the Court
of Appeals in CA-G.R. CV No. 36401, which affirmed the decision of 4 October 1991 2
of the Regional Trial Court of Manila, Branch 16, in Civil Case No. 85-29110, ordering
LOADSTAR to pay private respondent Manila Insurance Co. (hereafter MIC) the
amount of P6,067,178, with legal interest from the filing of the compliant until fully
paid, P8,000 as attorney's fees, and the costs of the suit; and (b) its resolution of 19
November 1997, 3 denying LOADSTAR's motion for reconsideration of said decision.
The facts are undisputed.1âwphi1.nêt
On 19 November 1984, LOADSTAR received on board its M/V "Cherokee" (hereafter,
the vessel) the following goods for shipment:
a) 705 bales of lawanit hardwood;
b) 27 boxes and crates of tilewood assemblies and the others ;and
c) 49 bundles of mouldings R & W (3) Apitong Bolidenized.
The goods, amounting to P6,067,178, were insured for the same amount with MIC
against various risks including "TOTAL LOSS BY TOTAL OF THE LOSS THE VESSEL." The
vessel, in turn, was insured by Prudential Guarantee & Assurance, Inc. (hereafter
PGAI) for P4 million. On 20 November 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 P6,075,000
to the insured in full settlement of its claim, and the latter executed a subrogation
receipt therefor.
On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI, alleging that
the sinking of the vessel was due to the fault and negligence of LOADSTAR and its
employees. It also prayed that PGAI be ordered to pay the insurance proceeds from
the loss the vessel directly to MIC, said amount to be deducted from MIC's claim from
LOADSTAR.
In its answer, LOADSTAR denied any liability for the loss of the shipper's goods and
claimed that sinking of its vessel was due to force majeure. PGAI, on the other hand,
averred that MIC had no cause of action against it, LOADSTAR being the party insured.
In any event, PGAI was later dropped as a party defendant after it paid the insurance
proceeds to LOADSTAR.
As stated at the outset, 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.
In dismissing LOADSTAR's appeal, the appellate court made the following
observations:
1) LOADSTAR cannot be considered a private carrier on the sole ground that there
was a single shipper on that fateful voyage. The court noted that the charter of the
vessel was limited to the ship, but LOADSTAR retained control over its crew. 4
2) As a common carrier, it is the Code of Commerce, not the Civil Code, which should
be applied in determining the rights and liabilities of the parties.
3) The vessel was not seaworthy because it was undermanned on the day of the
voyage. If it had been seaworthy, it could have withstood the "natural and inevitable
action of the sea" on 20 November 1984, when the condition of the sea was
moderate. The vessel sank, not because of force majeure, but because it was not
seaworthy. LOADSTAR'S allegation that the sinking was probably due to the
"convergence of the winds," as stated by a PAGASA expert, was not duly proven at
the trial. The "limited liability" rule, therefore, is not applicable considering that, in
this case, there was an actual finding of negligence on the part of the carrier.5
4) Between MIC and LOADSTAR, the provisions of the Bill of Lading do not apply
because said provisions bind only the shipper/consignee and the carrier. When MIC
paid the shipper for the goods insured, it was subrogated to the latter's rights as
against the carrier, LOADSTAR. 6
5) There was a clear breach of the contract of carriage when the shipper's goods
never reached their destination. LOADSTAR's defense of "diligence of a good father
of a family" in the training and selection of its crew is unavailing because this is not a
proper or complete defense in culpa contractual.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
6) "Art. 361 (of the Code of Commerce) has been judicially construed to mean that
when goods are delivered on board a 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
reason of some fact which legally exempts him from liability." Transportation of the
merchandise at the risk and venture of the shipper means that the latter bears the
risk of loss or deterioration of his goods arising from fortuitous events, force majeure,
or the inherent nature and defects of the goods, but not those caused by the
presumed negligence or fault of the carrier, unless otherwise proved. 7
The errors assigned by LOADSTAR boil down to a determination of the following
issues:
(1) Is the M/V "Cherokee" a private or a common carrier?
(2) Did LOADSTAR observe due and/or ordinary diligence in these premises.
Regarding the first issue, LOADSTAR submits that the vessel was a private carrier
because it was not issued 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 cargo."
In refutation, MIC argues that the issue as to the classification of the M/V "Cherokee"
was not timely raised below; hence, it is barred by estoppel. While it is true that the
vessel had on board only the cargo of wood products for delivery to one consignee,
it was also carrying passengers as part of its regular business. Moreover, the bills of
lading in this case made no mention of any charter party but only a statement that
the vessel was a "general cargo carrier." Neither was there any "special arrangement"
between LOADSTAR and the shipper regarding the shipment of the cargo. The
singular fact that the vessel was carrying a particular type of cargo for one shipper is
not sufficient to convert the vessel into a private carrier.
As regards the second error, LOADSTAR argues that as a private carrier, it cannot be
presumed to have been negligent, and the burden of proving otherwise devolved
upon MIC. 8
LOADSTAR also maintains that the vessel was seaworthy. Before the fateful voyage
on 19 November 1984, the vessel was allegedly dry docked at Keppel Philippines
Shipyard and was duly inspected by the maritime safety engineers of the Philippine
Coast Guard, who certified that the ship was fit to undertake a voyage. Its crew at the
time was experienced, licensed and unquestionably competent. With all these
precautions, there could be no other conclusion except that LOADSTAR exercised the
diligence of a good father of a family in ensuring the vessel's seaworthiness.
LOADSTAR further claims that it was not responsible for the loss of the cargo, such
loss being due to force majeure. It points out that when the vessel left Nasipit, Agusan
del Norte, on 19 November 1984, the weather was fine until the next day when the
vessel sank due to strong waves. MCI's witness, Gracelia Tapel, fully established the
existence of two typhoons, "WELFRING" and "YOLING," inside the Philippine area of
responsibility. In fact, on 20 November 1984, signal no. 1 was declared over Eastern
Visayas, which includes Limasawa Island. Tapel also testified that the convergence of
winds brought about by these two typhoons strengthened wind velocity in the area,
naturally producing strong waves and winds, in turn, causing the vessel to list and
eventually sink.
LOADSTAR goes on to argue that, being a private carrier, any agreement limiting its
liability, such as what transpired in this case, is valid. Since the cargo was being
shipped at "owner's risk," LOADSTAR was not liable for any loss or damage to the
same. Therefore, the Court of Appeals erred in holding that the provisions of the bills
of lading apply only to the shipper and the carrier, and not to the insurer of the goods,
which conclusion runs counter to the Supreme Court's ruling in the case of St. Paul
Fire & Marine Co. v. Macondray & Co., Inc., 9 and National Union Fire Insurance
Company of Pittsburgh v. Stolt-Nielsen Phils., Inc. 10
Finally, LOADSTAR avers that MIC's claim had already prescribed, the case having
been instituted beyond the period stated in the bills of lading for instituting the same
— suits based upon claims arising from shortage, damage, or non-delivery of
shipment shall be instituted within sixty days from the accrual of the right of action.
The vessel sank on 20 November 1984; yet, the case for recovery was filed only on 4
February 1985.
MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding that the
loss of the cargo was due to force majeure, because the same concurred with
LOADSTAR's fault or negligence.
Secondly, LOADSTAR did not raise the issue of prescription in the court below; hence,
the same must be deemed waived.
Thirdly, the " limited liability " theory is not applicable in the case at bar because
LOADSTAR was at fault or negligent, and because it failed to maintain a seaworthy
vessel. Authorizing the voyage notwithstanding its knowledge of a typhoon is
tantamount to negligence.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
We find no merit in this petition.
Anent the first assigned error, we hold 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.
In support of its position, LOADSTAR relied on the 1968 case of Home Insurance Co.
v. American Steamship Agencies, Inc., 11 where this Court held that a common carrier
transporting special cargo or chartering the vessel to a special person becomes a
private carrier that is not subject to the provisions of the Civil Code. Any stipulation
in the charter party absolving the owner from liability for loss due to the negligence
of its agent is void only if the strict policy governing common carriers is upheld. Such
policy has no force where the public at is not involved, as in the case of a ship totally
chartered for the use of a single party. LOADSTAR also cited Valenzuela Hardwood
and Industrial Supply, Inc. v. Court of Appeals 12 and National Steel Corp. v. Court of
Appeals, 13 both of which upheld the Home Insurance doctrine.
These cases invoked by LOADSTAR are not applicable in the case at bar for the simple
reason that the factual settings are different. The records do not disclose that the
M/V "Cherokee," on the date in question, undertook to carry a special cargo or was
chartered to a special person only. There was no charter party. The bills of lading
failed to show any special arrangement, but only a general provision to the effect
that the M/V"Cherokee" was a "general cargo carrier." 14 Further, the bare fact that
the vessel was carrying a particular type of cargo for one shipper, which appears to
be purely coincidental, is not 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.
Under the facts and circumstances obtaining in this case, LOADSTAR fits the definition
of a common carrier under Article 1732 of the Civil Code. In the case of De Guzman
v. Court of Appeals,15 the Court juxtaposed the statutory definition of "common
carriers" with the peculiar circumstances of that case, viz.:
The Civil Code defines "common carriers" in the following terms:
Art. 1732. Common carriers are persons, corporations, firms or associations engaged
in the business of carrying or transporting passengers or goods or both, by land, water,
or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity
is the carrying of persons or goods or both, and one who does such carrying only as
ancillary activity (in local idiom, as "a sideline". Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguish between a
carrier offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow
segment of the general population. We think that Article 1733 deliberately refrained
from making such distinctions.
xxx xxx xxx
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 eventhough 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.
The Court of Appeals referred to the fact that private respondent held no certificate
of public convenience, and concluded he was not a common carrier. This is palpable
error. A certificate of public convenience is not a requisite for the incurring of liability
under the Civil Code provisions governing common carriers. That liability arises the
moment a person or firm acts as a common carrier, without regard to whether or not
such carrier has also complied with the requirements of the applicable regulatory
statute and implementing regulations and has been granted a certificate of public
convenience or other franchise. To exempt private respondent from the liabilities of
a common carrier because he has not secured the necessary certificate of public
convenience, would be offensive to sound public policy; that would be to reward
private respondent precisely for failing to comply with applicable statutory
requirements The business of a common carrier impinges directly and intimately
upon the safety and well being and property of those members of the general
community who happen to deal with such carrier. The law imposes duties and
liabilities upon common carriers for the safety and protection of those who utilize
their services and the law cannot allow a common carrier to render such duties and
liabilities merely facultative by simply failing to obtain the necessary permits and
authorizations.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Moving on to the second assigned error, we find that the M/V "Cherokee" was not
seaworthy when it embarked on its voyage on 19 November 1984. The vessel was
not even sufficiently manned at the time. "For a vessel to be seaworthy, it must be
adequately equipped for the voyage and manned with a sufficient number of
competent officers and crew. The failure of a common carrier to maintain in
seaworthy condition its vessel involved in a contract of carriage is a clear breach of
its duty prescribed in Article 1755 of the Civil Code." 16
Neither do we agree with LOADSTAR's argument that the "limited liability" theory
should be applied in this case. The doctrine of limited liability does not apply where
there was negligence on the part of the vessel owner or agent. 17 LOADSTAR was at
fault or negligent in not maintaining a seaworthy vessel and in having allowed its
vessel to sail despite knowledge of an approaching typhoon. In any event, it did not
sink because of any storm that may be deemed as force majeure, inasmuch as the
wind condition in the performance of its duties, LOADSTAR cannot hide behind the
"limited liability" doctrine to escape responsibility for the loss of the vessel and its
cargo.
LOADSTAR also claims that the Court of Appeals erred in holding it liable for the loss
of the goods, in utter disregard of this Court's pronouncements in St. Paul Fire &
Marine Ins. Co. v. Macondray & Co., Inc., 18 and National Union Fire Insurance v.
Stolt-Nielsen Phils., Inc. 19 It was ruled in these two cases that after paying the claim
of the insured for damages under the insurance policy, the insurer is subrogated
merely to the rights of the assured, that is, it can recover only the amount that may,
in turn, be recovered by the latter. Since the right of the assured in case of loss or
damage to the goods is limited or restricted by the provisions in the bills of lading, a
suit by the insurer as subrogee is necessarily subject to the same limitations and
restrictions. We do not agree. In the first place, the cases relied on by LOADSTAR
involved a limitation on the carrier's liability to an amount fixed in the bill of lading
which the parties may enter into, provided that the same was freely and fairly agreed
upon (Articles 1749-1750). On the other hand, the stipulation in the case at bar
effectively reduces the common carrier's liability for the loss or destruction of the
goods to a degree less than extraordinary (Articles 1744 and 1745), that is, the carrier
is not liable for any loss or damage to shipments made at "owner's risk." Such
stipulation is obviously null and void for being contrary to public policy." 20 It has
been said:
Three kinds of stipulations have often been made in a bill of lading. The first 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. 21
Since the stipulation in question is null and void, it follows that when MIC paid the
shipper, it was subrogated to all the rights which the latter has against the common
carrier, LOADSTAR.
Neither is there merit to the contention that the claim in this case was barred by
prescription. MIC's cause of action had not yet prescribed at the time it was
concerned. Inasmuch as neither the Civil Code nor the Code of Commerce states a
specific prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA)
— which provides for a one-year period of limitation on claims for loss of, or damage
to, cargoes sustained during transit — may be applied suppletorily to the case at bar.
This one-year prescriptive period also applies to the insurer of the goods. 22 In this
case, the period for filing the action for recovery has not yet elapsed. Moreover, a
stipulation reducing the one-year period is null and void; 23 it must, accordingly, be
struck down.
WHEREFORE, the instant petition is DENIED and the challenged decision of 30 January
1997 of the Court of Appeals in CA-G.R. CV No. 36401 is AFFIRMED. Costs against
petitioner.1âwphi1.nêt
SO ORDERED.
22.
G.R. No. L-47822 December 22, 1988
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.
Vicente D. Millora for petitioner.
Jacinto Callanta for private respondent.
FELICIANO, J.:
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Respondent Ernesto Cendana, 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: 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 P 22,150.00, the
claimed value of the lost merchandise, plus damages and attorney's fees. Petitioner
argued that private respondent, being a common carrier, and having failed to
exercise the extraordinary diligence required of him by the law, should be held liable
for the value of the undelivered goods.
In his Answer, private respondent denied that he was a common carrier and argued
that he could not be held responsible for the value of the lost goods, such loss having
been due to force majeure.
On 10 December 1975, the trial court rendered a Decision 1 finding private
respondent to be a common carrier and holding him liable for the value of the
undelivered goods (P 22,150.00) as well as for P 4,000.00 as damages and P 2,000.00
as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the trial court had
erred in considering him a common carrier; in finding that he had habitually offered
trucking services to the public; in not exempting him from liability on the ground of
force majeure; and in ordering him to pay damages and 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.
Petitioner came to this Court by way of a Petition for Review assigning as errors the
following conclusions of the Court of Appeals:
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force majeure; and
3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p.
111)
We consider first the issue of whether or not private respondent Ernesto Cendana
may, under the facts earlier set forth, be properly characterized as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity
is the carrying of persons or goods or both, and one who does such carrying only as
an ancillary activity (in local Idiom as "a sideline"). Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguish between a
carrier offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow
segment of the general population. We think that Article 1733 deliberaom making
such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to
coincide neatly with the notion of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements the
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b)
of the Public Service Act, "public service" includes:
... 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. ... (Emphasis supplied)
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 back-hauling 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.
The Court of Appeals referred to the fact that private respondent held no certificate
of public convenience, and concluded he was not a common carrier. This is palpable
error. A certificate of public convenience is not a requisite for the incurring of liability
under the Civil Code provisions governing common carriers. That liability arises the
moment a person or firm acts as a common carrier, without regard to whether or not
such carrier has also complied with the requirements of the applicable regulatory
statute and implementing regulations and has been granted a certificate of public
convenience or other franchise. To exempt private respondent from the liabilities of
a common carrier because he has not secured the necessary certificate of public
convenience, would be offensive to sound public policy; that would be to reward
private respondent precisely for failing to comply with applicable statutory
requirements. The business of a common carrier impinges directly and intimately
upon the safety and well being and property of those members of the general
community who happen to deal with such carrier. The law imposes duties and
liabilities upon common carriers for the safety and protection of those who utilize
their services and the law cannot allow a common carrier to render such duties and
liabilities merely facultative by simply failing to obtain the necessary permits and
authorizations.
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for reasons of public policy" 2
are held to a very high degree of care and diligence ("extraordinary diligence") in the
carriage of goods as well as of passengers. The specific import of extraordinary
diligence in the care of goods transported by a common carrier is, according to Article
1733, "further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7" of the
Civil Code.
Article 1734 establishes the general rule that common carriers are responsible for the
loss, destruction or deterioration of the goods which they carry, "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; and
(5) Order or act of competent public authority.
It is important to point out that the above list of causes of loss, destruction or
deterioration which exempt the common carrier for responsibility therefor, is a
closed list. Causes falling outside the foregoing list, even if they appear to constitute
a species of force majeure fall within the scope of Article 1735, which provides as
follows:
In all cases other than those mentioned in numbers 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. (Emphasis
supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific
cause alleged in the instant case — the hijacking of the carrier's truck — does not fall
within any of the five (5) categories of exempting causes listed in Article 1734. It
would follow, therefore, that the hijacking of the carrier's vehicle must be dealt with
under the provisions of Article 1735, in other words, that the private respondent as
common carrier is presumed to have been at fault or to have acted negligently. This
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
presumption, however, may be overthrown by proof of extraordinary diligence on
the part of private respondent.
Petitioner insists that private respondent had not observed extraordinary diligence
in the care of petitioner's goods. Petitioner argues that in the circumstances of this
case, private respondent should have hired a security guard presumably to ride with
the truck carrying the 600 cartons of Liberty filled milk. We do not believe, however,
that in the instant case, the standard of extraordinary diligence required private
respondent to retain a security guard to ride with the truck and to engage brigands
in a firelight at the risk of his own life and the lives of the driver and his helper.
The precise issue that we address here relates to the specific requirements of the
duty of extraordinary diligence in the vigilance over the goods carried in the specific
context of hijacking or armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods is,
under Article 1733, given additional specification not only by Articles 1734 and 1735
but also by Article 1745, numbers 4, 5 and 6, Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be considered unreasonable, unjust
and contrary to public policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible for the acts or omissions of his
or its employees;
(6) that the common carrier's liability for acts committed by thieves, or of robbers
who do not act with grave or irresistible threat, violence or force, is dispensed with
or diminished; and
(7) that the common carrier shall not responsible for the loss, destruction or
deterioration of goods on account of the defective condition of the car vehicle, ship,
airplane or other equipment used in the contract of carriage. (Emphasis supplied)
Under Article 1745 (6) above, a common carrier is held responsible — and will not be
allowed to divest or to diminish such responsibility — even for acts of strangers like
thieves or robbers, except where such thieves or robbers in fact acted "with grave or
irresistible threat, violence or force." We believe and so hold that the limits of the
duty of extraordinary diligence in the vigilance over the goods carried are reached
where the goods are lost as a result of a robbery which is attended by "grave or
irresistible threat, violence or force."
In the instant case, armed men held up the second truck owned by private
respondent which carried petitioner's cargo. The record shows that an information
for robbery in band was filed in the Court of First Instance of Tarlac, Branch 2, in
Criminal Case No. 198 entitled "People of the Philippines v. Felipe Boncorno,
Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe." There, the
accused were charged with willfully and unlawfully taking and carrying away with
them the second truck, driven by Manuel Estrada and loaded with the 600 cartons of
Liberty filled milk destined for delivery at petitioner's store in Urdaneta, Pangasinan.
The decision of the trial court shows that the accused acted with grave, if not
irresistible, threat, violence or force.3 Three (3) of the five (5) hold-uppers were
armed with firearms. The robbers not only took away the truck and its cargo but also
kidnapped the driver and his helper, detaining them for several days and later
releasing them in another province (in Zambales). The hijacked truck was
subsequently found by the police in Quezon City. The Court of First Instance
convicted all the accused of robbery, though not of robbery in band. 4
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.
We, therefore, agree with the result reached by the Court of Appeals that private
respondent Cendana is not liable for the value of the undelivered merchandise which
was lost because of an event entirely beyond private respondent's control.
ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the
Decision of the Court of Appeals dated 3 August 1977 is AFFIRMED. No
pronouncement as to costs.
SO ORDERED.
23.
G.R. No. 101089. April 7, 1993.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
ESTRELLITA M. BASCOS, petitioners,
vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.
Modesto S. Bascos for petitioner.
Pelaez, Adriano & Gregorio for private respondent.
SYLLABUS
1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON
CARRIER. — Article 1732 of the Civil Code defines a common carrier as "(a) person,
corporation or firm, or association engaged in the business of carrying or transporting
passengers or goods or both, by land, water or air, for compensation, offering their
services to the public." The test to determine a common carrier is "whether the given
undertaking is a part of the business engaged in by the carrier which he has held out
to the general public as his occupation rather than the quantity or extent of the
business transacted." . . . The holding of the Court in De Guzman vs. Court of Appeals
is instructive. In referring to Article 1732 of the Civil Code, it held thus: "The above
article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an
ancillary activity (in local idiom, as a "sideline"). Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguished between a
carrier offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow
segment of the general population. We think that Article 1732 deliberately refrained
from making such distinctions."
2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED; WHEN
PRESUMPTION OF NEGLIGENCE ARISES; HOW PRESUMPTION OVERCAME; WHEN
PRESUMPTION MADE ABSOLUTE. — Common carriers are obliged to observe
extraordinary diligence in the vigilance over the goods transported by them.
Accordingly, they are presumed to have been at fault or to have acted negligently if
the goods are lost, destroyed or deteriorated. There are very few instances when the
presumption of negligence does not attach and these instances are enumerated in
Article 1734. In those cases where the presumption is applied, the common carrier
must prove that it exercised extraordinary diligence in order to overcome the
presumption . . . The presumption of negligence was raised against petitioner. It was
petitioner's burden to overcome it. Thus, contrary to her assertion, private
respondent need not introduce any evidence to prove her negligence. Her own
failure to adduce sufficient proof of extraordinary diligence made the presumption
conclusive against her.
3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; HOW CARRIER
ABSOLVED FROM LIABILITY. — In De Guzman vs. Court of Appeals, the Court held that
hijacking, not being included in the provisions of Article 1734, must be dealt with
under the provisions of Article 1735 and thus, the common carrier is presumed to
have been at fault or negligent. To exculpate the carrier from liability arising from
hijacking, he must prove that the robbers or the hijackers acted with grave or
irresistible threat, violence, or force. This is in accordance with Article 1745 of the
Civil Code which provides: "Art. 1745. Any of the following or similar stipulations shall
be considered unreasonable, unjust and contrary to public policy . . . (6) That the
common carrier's liability for acts committed by thieves, or of robbers who do not
act with grave or irresistible threat, violences or force, is dispensed with or
diminished"; In the same case, the Supreme Court also held that: "Under Article 1745
(6) above, a common carrier is held responsible — and will not be allowed to divest
or to diminish such responsibility — even for acts of strangers like thieves or robbers,
except where such thieves or robbers in fact acted "with grave of irresistible threat,
violence of force," We believe and so hold that the limits of the duty of extraordinary
diligence in the vigilance over the goods carried are reached where the goods are lost
as a result of a robbery which is attended by "grave or irresistible threat, violence or
force."
4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE. — In this case,
petitioner herself has made the admission that she was in the trucking business,
offering her trucks to those with cargo to move. Judicial admissions are conclusive
and no evidence is required to prove the same.
5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A FACT. — Petitioner
presented no other proof of the existence of the contract of lease. He who alleges a
fact has the burden of proving it.
6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF AFFIANTS AVAILABLE AS
WITNESSES. — While the affidavit of Juanito Morden, the truck helper in the hijacked
truck, was presented as evidence in court, he himself was a witness as could be
gleaned from the contents of the petition. Affidavits are not considered the best
evidence if the affiants are available as witnesses.
7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT LAW DEFINES IT
TO BE. — Granting that the said evidence were not self-serving, the same were not
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
sufficient to prove that the contract was one of lease. It must be understood that a
contract is what the law defines it to be and not what it is called by the contracting
parties.
DECISION
CAMPOS, JR., J p:
This is a petition for review on certiorari of the decision ** of the Court of Appeals in
"RODOLFO A. CIPRIANO, doing business under the name CIPRIANO TRADING
ENTERPRISES plaintiff-appellee, vs. ESTRELLITA M. BASCOS, doing business under the
name of BASCOS TRUCKING, defendant-appellant," C.A.-G.R. CV No. 25216, the
dispositive portion of which is quoted hereunder:
"PREMISES considered, We find no reversible error in the decision appealed from,
which is hereby affirmed in toto. Costs against appellant." 1
The facts, as gathered by this Court, are as follows:
Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short)
entered into a hauling contract 2 with Jibfair Shipping Agency Corporation whereby
the former bound itself to haul the latter's 2,000 m/tons of soya bean meal from
Magallanes Drive, Del Pan, Manila to the warehouse of Purefoods Corporation in
Calamba, Laguna. To carry out its obligation, CIPTRADE, through Rodolfo Cipriano,
subcontracted with Estrellita Bascos (petitioner) to transport and to deliver 400 sacks
of soya bean meal worth P156,404.00 from the Manila Port Area to Calamba, Laguna
at the rate of P50.00 per metric ton. Petitioner failed to deliver the said cargo. As a
consequence of that failure, Cipriano paid Jibfair Shipping Agency the amount of the
lost goods in accordance with the contract which stated that:
"1. CIPTRADE shall be held liable and answerable for any loss in bags due to theft,
hijacking and non-delivery or damages to the cargo during transport at market
value, . . ." 3
Cipriano demanded reimbursement from petitioner but the latter refused to pay.
Eventually, Cipriano filed a complaint for a sum of money and damages with writ of
preliminary attachment 4 for breach of a contract of carriage. The prayer for a Writ
of Preliminary Attachment was supported by an affidavit 5 which contained the
following allegations:
"4. That this action is one of those specifically mentioned in Sec. 1, Rule 57 the Rules
of Court, whereby a writ of preliminary attachment may lawfully issue, namely:
"(e) in an action against a party who has removed or disposed of his property, or is
about to do so, with intent to defraud his creditors;"
5. That there is no sufficient security for the claim sought to be enforced by the
present action;
6. That the amount due to the plaintiff in the above-entitled case is above all legal
counterclaims;"
The trial court granted the writ of preliminary attachment on February 17, 1987.
In her answer, petitioner interposed the following defenses: that there was no
contract of carriage since CIPTRADE leased her cargo truck to load the cargo from
Manila Port Area to Laguna; that CIPTRADE was liable to petitioner in the amount of
P11,000.00 for loading the cargo; that the truck carrying the cargo was hijacked along
Canonigo St., Paco, Manila on the night of October 21, 1988; that the hijacking was
immediately reported to CIPTRADE and that petitioner and the police exerted all
efforts to locate the hijacked properties; that after preliminary investigation, an
information for robbery and carnapping were filed against Jose Opriano, et al.; and
that hijacking, being a force majeure, exculpated petitioner from any liability to
CIPTRADE.
After trial, the trial court rendered a decision *** the dispositive portion of which
reads as follows:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against
defendant ordering the latter to pay the former:
1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED FOUR PESOS
(P156,404.00) as an (sic) for actual damages with legal interest of 12% per cent per
annum to be counted from December 4, 1986 until fully paid;
2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's fees; and
3. The costs of the suit.
The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March 10, 1987
filed by defendant is DENIED for being moot and academic.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
SO ORDERED." 6
Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial
court's judgment.
Consequently, petitioner filed this petition where she makes the following
assignment of errors; to wit:
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL
RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF
GOODS AND NOT LEASE OF CARGO TRUCK.
II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE RESPONDENT
COURT THAT THE CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND PRIVATE
RESPONDENT WAS CARRIAGE OF GOODS IS CORRECT, NEVERTHELESS, IT ERRED IN
FINDING PETITIONER LIABLE THEREUNDER BECAUSE THE LOSS OF THE CARGO WAS
DUE TO FORCE MAJEURE, NAMELY, HIJACKING.
III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF THE TRIAL
COURT THAT PETITIONER'S MOTION TO DISSOLVE/LIFT THE WRIT OF PRELIMINARY
ATTACHMENT HAS BEEN RENDERED MOOT AND ACADEMIC BY THE DECISION OF THE
MERITS OF THE CASE." 7
The petition presents the following issues for resolution: (1) was petitioner a common
carrier?; and (2) was the hijacking referred to a force majeure?
The Court of Appeals, in holding that petitioner was a common carrier, found that
she admitted in her answer that she did business under the name A.M. Bascos
Trucking and that said admission dispensed with the presentation by private
respondent, Rodolfo Cipriano, of proofs that petitioner was a common carrier. The
respondent Court also adopted in toto the trial court's decision that petitioner was a
common carrier, Moreover, both courts appreciated the following pieces of evidence
as indicators that petitioner was a common carrier: the fact that the truck driver of
petitioner, Maximo Sanglay, received the cargo consisting of 400 bags of soya bean
meal as evidenced by a cargo receipt signed by Maximo Sanglay; the fact that the
truck helper, Juanito Morden, was also an employee of petitioner; and the fact that
control of the cargo was placed in petitioner's care.
In disputing the conclusion of the trial and appellate courts that petitioner was a
common carrier, she alleged in this petition that the contract between her and
Rodolfo A. Cipriano, representing CIPTRADE, was lease of the truck. She cited as
evidence certain affidavits which referred to the contract as "lease". These affidavits
were made by Jesus Bascos 8 and by petitioner herself. 9 She further averred that
Jesus Bascos confirmed in his testimony his statement that the contract was a lease
contract. 10 She also stated that: she was not catering to the general public. Thus, in
her answer to the amended complaint, she said that she does business under the
same style of A.M. Bascos Trucking, offering her trucks for lease to those who have
cargo to move, not to the general public but to a few customers only in view of the
fact that it is only a small business. 11
We agree with the respondent Court in its finding that petitioner is a common carrier.
Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or
firm, or association engaged in the business of carrying or transporting passengers or
goods or both, by land, water or air, for compensation, offering their services to the
public." The test to determine a common carrier is "whether the given undertaking is
a part of the business engaged in by the carrier which he has held out to the general
public as his occupation rather than the quantity or extent of the business
transacted." 12 In this case, petitioner herself has made the admission that she was
in the trucking business, offering her trucks to those with cargo to move. Judicial
admissions are conclusive and no evidence is required to prove the same. 13
But petitioner argues that there was only a contract of lease because they offer their
services only to a select group of people and because the private respondents,
plaintiffs in the lower court, did not object to the presentation of affidavits by
petitioner where the transaction was referred to as a lease contract.
Regarding the first contention, the holding of the Court in De Guzman vs. Court of
Appeals 14 is instructive. In referring to Article 1732 of the Civil Code, it held thus:
"The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such carrying
only as an ancillary activity (in local idiom, as a "sideline"). Article 1732 also carefully
avoids making any distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguish between a
carrier offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow
segment of the general population. We think that Article 1732 deliberately refrained
from making such distinctions."
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Regarding the affidavits presented by petitioner to the court, both the trial and
appellate courts have dismissed them as self-serving and petitioner contests the
conclusion. We are bound by the appellate court's factual conclusions. Yet, granting
that the said evidence were not self-serving, the same were not sufficient to prove
that the contract was one of lease. It must be understood that a contract is what the
law defines it to be and not what it is called by the contracting parties. 15
Furthermore, petitioner presented no other proof of the existence of the contract of
lease. He who alleges a fact has the burden of proving it. 16
Likewise, We affirm the holding of the respondent court that the loss of the goods
was not due to force majeure.
Common carriers are obliged to observe extraordinary diligence in the vigilance over
the goods transported by them. 17 Accordingly, they are presumed to have been at
fault or to have acted negligently if the goods are lost, destroyed or deteriorated. 18
There are very few instances when the presumption of negligence does not attach
and these instances are enumerated in Article 1734. 19 In those cases where the
presumption is applied, the common carrier must prove that it exercised
extraordinary diligence in order to overcome the presumption.
In this case, petitioner alleged that hijacking constituted force majeure which
exculpated her from liability for the loss of the cargo. In De Guzman vs. Court of
Appeals, 20 the Court held that hijacking, not being included in the provisions of
Article 1734, must be dealt with under the provisions of Article 1735 and thus, the
common carrier is presumed to have been at fault or negligent. To exculpate the
carrier from liability arising from hijacking, he must prove that the robbers or the
hijackers acted with grave or irresistible threat, violence, or force. This is in
accordance with Article 1745 of the Civil Code which provides:
"Art. 1745. Any of the following or similar stipulations shall be considered
unreasonable, unjust and contrary to public policy;
xxx xxx xxx
(6) That the common carrier's liability for acts committed by thieves, or of robbers
who do not act with grave or irresistible threat, violences or force, is dispensed with
or diminished;"
In the same case, 21 the Supreme Court also held that:
"Under Article 1745 (6) above, a common carrier is held responsible — and will not
be allowed to divest or to diminish such responsibility — even for acts of strangers
like thieves or robbers except where such thieves or robbers in fact acted with grave
or irresistible threat, violence or force. We believe and so hold that the limits of the
duty of extraordinary diligence in the vigilance over the goods carried are reached
where the goods are lost as a result of a robbery which is attended by "grave or
irresistible threat, violence or force."
To establish grave and irresistible force, petitioner presented her accusatory affidavit,
22 Jesus Bascos' affidavit, 23 and Juanito Morden's 24 "Salaysay". However, both the
trial court and the Court of Appeals have concluded that these affidavits were not
enough to overcome the presumption. Petitioner's affidavit about the hijacking was
based on what had been told her by Juanito Morden. It was not a first-hand account.
While it had been admitted in court for lack of objection on the part of private
respondent, the respondent Court had discretion in assigning weight to such
evidence. We are bound by the conclusion of the appellate court. In a petition for
review on certiorari, We are not to determine the probative value of evidence but to
resolve questions of law. Secondly, the affidavit of Jesus Bascos did not dwell on how
the hijacking took place. Thirdly, while the affidavit of Juanito Morden, the truck
helper in the hijacked truck, was presented as evidence in court, he himself was a
witness as could be gleaned from the contents of the petition. Affidavits are not
considered the best evidence if the affiants are available as witnesses. 25 The
subsequent filing of the information for carnapping and robbery against the accused
named in said affidavits did not necessarily mean that the contents of the affidavits
were true because they were yet to be determined in the trial of the criminal cases.
The presumption of negligence was raised against petitioner. It was petitioner's
burden to overcome it. Thus, contrary to her assertion, private respondent need not
introduce any evidence to prove her negligence. Her own failure to adduce sufficient
proof of extraordinary diligence made the presumption conclusive against her.
Having affirmed the findings of the respondent Court on the substantial issues
involved, We find no reason to disturb the conclusion that the motion to lift/dissolve
the writ of preliminary attachment has been rendered moot and academic by the
decision on the merits.
In the light of the foregoing analysis, it is Our opinion that the petitioner's claim
cannot be sustained. The petition is DISMISSED and the decision of the Court of
Appeals is hereby AFFIRMED.
SO ORDERED.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
24.
G.R. No. L-10605 June 30, 1958
PRECILLANO NECESITO, ETC., plaintiff-appellant,
vs.
NATIVIDAD PARAS, ET AL., defendants-appellees.
x---------------------------------------------------------x
G.R. No. L-10606 June 30, 1958
GERMAN NECESITO, ET AL., plaintiffs-appellants,
vs.
NATIVIDAD PARAS, ET AL., defendants-appellees.
Tomas Besa and Federico Agrava for appellants.
Jose W. Diokno for appellees.
REYES, J. B. L., J.:
These cases involve ex contractu against the owners and operators of the common
carrier known as Philippine Rabbit Bus Lines, filed by one passenger, and the heirs of
another, who injured as a result of the fall into a river of the vehicle in which they
were riding.
In the morning of January 28, 1964, Severina Garces and her one-year old son,
Precillano Necesito, carrying vegetables, boarded passenger auto truck or bus No.
199 of the Philippine Rabbit Bus Lines at Agno, Pangasinan. The passenger truck,
driven by Francisco Bandonell, then proceeded on its regular run from Agno to Manila.
After passing Mangatarem, Pangasinan truck No. 199 entered a wooden bridge, but
the front wheels swerved to the right; the driver lost control, and after wrecking the
bridge's wooden rails, the truck fell on its right side into a creek where water was
breast deep. The mother, Severina Garces, was drowned; the son, Precillano Necesito,
was injured, suffering abrasions and fracture of the left femur. He was brought to the
Provincial Hospital at Dagupan, where the fracture was set but with fragments one
centimeter out of line. The money, wrist watch and cargo of vegetables were lost.
Two actions for damages and attorney's fees totalling over P85,000 having been filed
in the Court of First Instance of Tarlac (Cases Nos. 908 and 909) against the carrier,
the latter pleaded that the accident was due to "engine or mechanical trouble"
independent or beyond the control of the defendants or of the driver Bandonell.
After joint trial, the Court of First Instance found that the bus was proceeding slowly
due to the bad condition of the road; that the accident was caused by the fracture of
the right steering knuckle, which was defective in that its center or core was not
compact but "bubbled and cellulous", a condition that could not be known or
ascertained by the carrier despite the fact that regular thirty-day inspections were
made of the steering knuckle, since the steel exterior was smooth and shiny to the
depth of 3/16 of an inch all around; that the knuckles are designed and manufactured
for heavy duty and may last up to ten years; that the knuckle of bus No. 199 that
broke on January 28, 1954, was last inspected on January 5, 1954, and was due to be
inspected again on February 5th. Hence, the trial court, holding that the accident was
exclusively due to fortuitous event, dismissed both actions. Plaintiffs appealed
directly to this Court in view of the amount in controversy.
We are inclined to agree with the trial court that it is not likely that bus No. 199 of
the Philippine Rabbit Lines was driven over the deeply rutted road leading to the
bridge at a speed of 50 miles per hour, as testified for the plaintiffs. Such conduct on
the part of the driver would have provoked instant and vehement protest on the part
of the passengers because of the attendant discomfort, and there is no trace of any
such complaint in the records. We are thus forced to assume that the proximate
cause of the accident was the reduced strength of the steering knuckle of the vehicle
caused by defects in casting it. While appellants hint that the broken knuckle
exhibited in court was not the real fitting attached to the truck at the time of the
accident, the records they registered no objection on that ground at the trial below.
The issue is thus reduced to the question whether or not the carrier is liable for the
manufacturing defect of the steering knuckle, and whether the evidence discloses
that in regard thereto the carrier exercised the diligence required by law (Art. 1755,
new Civil Code).
ART. 1755. A common carrier is bound to carry the passengers safely as far as human
care and foresight can provide, using the utmost diligence of very cautious persons,
with a due regard for the all the circumstances.
It is clear that the carrier is not an insurer of the passengers' safety. His liability rests
upon negligence, his failure to exercise the "utmost" degree of diligence that the law
requires, and by Art. 1756, in case of a passenger's death or injury the carrier bears
the burden of satisfying the court that he has duly discharged the duty of prudence
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
required. In the American law, where the carrier is held to the same degree of
diligence as under the new Civil Code, the rule on the liability of carriers for defects
of equipment is thus expressed: "The preponderance of authority is in favor of the
doctrine that a passenger is entitled to recover damages from a carrier for an injury
resulting from a defect in an appliance purchased from a manufacturer, whenever it
appears that the defect would have been discovered by the carrier if it had exercised
the degree of care which under the circumstances was incumbent upon it, with
regard to inspection and application of the necessary tests. For the purposes of this
doctrine, the manufacturer is considered as being in law the agent or servant of the
carrier, as far as regards the work of constructing the appliance. According to this
theory, the good repute of the manufacturer will not relieve the carrier from liability"
(10 Am. Jur. 205, s, 1324; see also Pennsylvania R. Co. vs. Roy, 102 U. S. 451; 20 L. Ed.
141; Southern R. Co. vs. Hussey, 74 ALR 1172; 42 Fed. 2d 70; and Ed Note, 29 ALR
788; Ann. Cas. 1916E 929).
The rationale of the carrier's liability is the fact that the passenger has neither choice
nor control over the carrier in the selection and use of the equipment and appliances
in use by the carrier. Having no privity whatever with the manufacturer or vendor of
the defective equipment, the passenger has no remedy against him, while the carrier
usually has. It is but logical, therefore, that the carrier, while not in insurer of the
safety of his passengers, should nevertheless be held to answer for the flaws of his
equipment if such flaws were at all discoverable. Thus Hannen, J., in Francis vs.
Cockrell, LR 5 Q. B. 184, said:
In the ordinary course of things, the passenger does not know whether the carrier
has himself manufactured the means of carriage, or contracted with someone else
for its manufacture. If the carrier has contracted with someone else the passenger
does not usually know who that person is, and in no case has he any share in the
selection. The liability of the manufacturer must depend on the terms of the contract
between him and the carrier, of which the passenger has no knowledge, and over
which he can have no control, while the carrier can introduce what stipulations and
take what securities he may think proper. For injury resulting to the carrier himself
by the manufacturer's want of care, the carrier has a remedy against the
manufacturer; but the passenger has no remedy against the manufacturer for
damage arising from a mere breach of contract with the carrier . . . . Unless, therefore,
the presumed intention of the parties be that the passenger should, in the event of
his being injured by the breach of the manufacturer's contract, of which he has no
knowledge, be without remedy, the only way in which effect can be given to a
different intention is by supposing that the carrier is to be responsible to the
passenger, and to look for his indemnity to the person whom he selected and whose
breach of contract has caused the mischief. (29 ALR 789)
And in the leading case of Morgan vs. Chesapeake & O. R. Co. 15 LRA (NS) 790, 16
Ann. Cas. 608, the Court, in holding the carrier responsible for damages caused by
the fracture of a car axle, due to a "sand hole" in the course of moulding the axle,
made the following observations.
The carrier, in consideration of certain well-known and highly valuable rights granted
to it by the public, undertakes certain duties toward the public, among them being
to provide itself with suitable and safe cars and vehicles in which carry the traveling
public. There is no such duty on the manufacturer of the cars. There is no reciprocal
legal relation between him and the public in this respect. When the carrier elects to
have another build its cars, it ought not to be absolved by that facts from its duty to
the public to furnish safe cars. The carrier cannot lessen its responsibility by shifting
its undertaking to another's shoulders. Its duty to furnish safe cars is side by side with
its duty to furnish safe track, and to operate them in a safe manner. None of its duties
in these respects can be sublet so as to relieve it from the full measure primarily
exacted of it by law. The carrier selects the manufacturer of its cars, if it does not
itself construct them, precisely as it does those who grade its road, and lay its tracks,
and operate its trains. That it does not exercise control over the former is because it
elects to place that matter in the hands of the manufacturer, instead of retaining the
supervising control itself. The manufacturer should be deemed the agent of the
carrier as respects its duty to select the material out of which its cars and locomotive
are built, as well as in inspecting each step of their construction. If there be tests
known to the crafts of car builders, or iron moulders, by which such defects might be
discovered before the part was incorporated into the car, then the failure of the
manufacturer to make the test will be deemed a failure by the carrier to make it. This
is not a vicarious responsibility. It extends, as the necessity of this business demands,
the rule of respondeat superior to a situation which falls clearly within its scope and
spirit. Where an injury is inflicted upon a passenger by the breaking or wrecking of a
part of the train on which he is riding, it is presumably the result of negligence at
some point by the carrier. As stated by Judge Story, in Story on Bailments, sec. 601a:
"When the injury or damage happens to the passenger by the breaking down or
overturning of the coach, or by any other accident occurring on the ground, the
presumption prima facie is that it occurred by the negligence of the coachmen, and
onus probandi is on the proprietors of the coach to establish that there has been no
negligence whatever, and that the damage or injury has been occasioned by
inevitable casualty, or by some cause which human care and foresight could not
prevent; for the law will, in tenderness to human life and limb, hold the proprietors
liable for the slightest negligence, and will compel them to repel by satisfactory
proofs every imputation thereof." When the passenger has proved his injury as the
result of a breakage in the car or the wrecking of the train on which he was being
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
carried, whether the defect was in the particular car in which he was riding or not,
the burden is then cast upon the carrier to show that it was due to a cause or causes
which the exercise of the utmost human skill and foresight could not prevent. And
the carrier in this connection must show, if the accident was due to a latent defect in
the material or construction of the car, that not only could it not have discovered the
defect by the exercise of such care, but that the builders could not by the exercise of
the same care have discovered the defect or foreseen the result. This rule applies the
same whether the defective car belonged to the carrier or not.
In the case now before us, the record is to the effect that the only test applied to the
steering knuckle in question was a purely visual inspection every thirty days, to see if
any cracks developed. It nowhere appears that either the manufacturer or the carrier
at any time tested the steering knuckle to ascertain whether its strength was up to
standard, or that it had no hidden flaws would impair that strength. And yet the
carrier must have been aware of the critical importance of the knuckle's resistance;
that its failure or breakage would result in loss of balance and steering control of the
bus, with disastrous effects upon the passengers. No argument is required to
establish that a visual inspection could not directly determine whether the resistance
of this critically important part was not impaired. Nor has it been shown that the
weakening of the knuckle was impossible to detect by any known test; on the
contrary, there is testimony that it could be detected. We are satisfied that the
periodical visual inspection of the steering knuckle as practiced by the carrier's agents
did not measure up to the required legal standard of "utmost diligence of very
cautious persons" — "as far as human care and foresight can provide", and therefore
that the knuckle's failure can not be considered a fortuitous event that exempts the
carrier from responsibility (Lasam vs. Smith, 45 Phil. 657; Son vs. Cebu Autobus Co.,
94 Phil., 892.)
It may be impracticable, as appellee argues, to require of carriers to test the strength
of each and every part of its vehicles before each trip; but we are of the opinion that
a due regard for the carrier's obligations toward the traveling public demands
adequate periodical tests to determine the condition and strength of those vehicle
portions the failure of which may endanger the safe of the passengers.
As to the damages suffered by the plaintiffs, we agree with appellee that no
allowance may be made for moral damages, since under Article 2220 of the new Civil
Code, in case of suits for breach of contract, moral damages are recoverable only
where the defendant acted fraudulently or in bad faith, and there is none in the case
before us. As to exemplary damages, the carrier has not acted in a "wanton,
fraudulent, reckless, oppressive or malevolent manner" to warrant their award.
Hence, we believe that for the minor Precillano Necesito (G. R. No. L-10605), an
indemnity of P5,000 would be adequate for the abrasions and fracture of the femur,
including medical and hospitalization expenses, there being no evidence that there
would be any permanent impairment of his faculties or bodily functions, beyond the
lack of anatomical symmetry. As for the death of Severina Garces (G. R. No. L-10606)
who was 33 years old, with seven minor children when she died, her heirs are
obviously entitled to indemnity not only for the incidental loses of property (cash,
wrist watch and merchandise) worth P394 that she carried at the time of the accident
and for the burial expenses of P490, but also for the loss of her earnings (shown to
average P120 a month) and for the deprivation of her protection, guidance and
company. In our judgment, an award of P15,000 would be adequate (cf Alcantara vs.
Surro, 49 Off. Gaz. 2769; 93 Phil., 472).
The low income of the plaintiffs-appellants makes an award for attorney's fees just
and equitable (Civil Code, Art. 2208, par. 11). Considering that he two cases filed were
tried jointly, a fee of P3,500 would be reasonable.
In view of the foregoing, the decision appealed from is reversed, and the defendants-
appellees are sentenced to indemnify the plaintiffs-appellants in the following
amounts: P5,000 to Precillano Necesito, and P15,000 to the heirs of the deceased
Severina Garces, plus P3,500 by way of attorney's fees and litigation expenses. Costs
against defendants-appellees. So ordered.
Paras, C. J., Bengzon, Reyes, A., Bautista Angelo, Concepcion, and Endencia, JJ.,
concur.
Felix, J., concurs in the result.
RESOLUTION
September 11, 1958
REYES, J. B. L., J.:
Defendants-appellees have Submitted a motion asking this Court to reconsider its
decision of June 30, 1958, and that the same be modified with respect to (1) its
holding the carrier liable for the breakage of the steering knuckle that caused the
autobus No. 199 to overturn, whereby the passengers riding in it were injured; (2)
the damages awarded, that appellees argue to be excessive; and (3) the award of
attorneys' fees.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
(1) The rule prevailing in this jurisdiction as established in previous decisions of this
Court, cited in our main opinion, is that a carrier is liable to its passengers for damages
caused by mechanical defects of the conveyance. As early as 1924, in Lasam vs. Smith,
45 Phil. 659 this Court ruled:
As far as the record shows, the accident was caused either by defects in the
automobile or else through the negligence of its driver. That is not caso fortuito.
And in Son vs. Cebu Autobus Company, 94 Phil., 892, this Court held a common carrier
liable in damages to passenger for injuries cause by an accident due to the breakage
of a faulty drag-link spring.
It can be seen that while the courts of the United States are at variance on the
question of a carrier's liability for latent mechanical defects, the rule in this
jurisdiction has been consistent in holding the carrier responsible. This Court has
quoted from American and English decisions, not because it felt bound to follow the
same, but merely in approval of the rationale of the rule as expressed therein, since
the previous Philippine cases did not enlarge on the ideas underlying the doctrine
established thereby.
The new evidence sought to be introduced do not warrant the grant of a new trial,
since the proposed proof available when the original trial was held. Said evidence is
not newly discovered.
(2) With regard to the indemnity awarded to the child Precilliano Necesito, the
injuries suffered by him are incapable of accurate pecuniary estimation, particularly
because the full effect of the injury is not ascertainable immediately. This uncertainty,
however, does not preclude the right to an indemnity, since the injury is patent and
not denied (Civil Code, Art. 2224). The reasons behind this award are expounded by
the Code Commission in its report:
There are cases where from the nature of the case, definite proof of pecuniary loss
cannot be offered, although the court is convinced that there has been such loss. For
instance, injury to one's commercial credit or to the goodwill of a business firm is
often hard to show with certainty in terms of money. Should damages be denied for
that reason? The judge should be empowered to calculate moderate damages in such
cases, rather than that the plaintiff should suffer, without redress, from the
defendant's wrongful act." (Report of the Code Commission, p. 75)
In awarding to the heirs of the deceased Severina Garces an indemnity for the loss of
her "guidance, protection and company," although it is but moral damage, the Court
took into account that the case of a passenger who dies in the course of an accident,
due to the carrier's negligence constitutes an exception to the general rule. While, as
pointed out in the main decision, under Article 2220 of the new Civil Code there can
be no recovery of moral damages for a breach of contract in the absence of fraud
malice or bad faith, the case of a violation of the contract of carriage leading to a
passenger's death escapes this general rule, in view of Article 1764 in connection with
Article 2206, No. 3 of the new Civil Code.
ART. 1764. Damages in cases comprised in this Section shall be awarded in
accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall also
apply to the death of a passenger caused by the breach of contract by a comman
carrier. ART. 2206. . . .
(3) The spouse, legitimate and eligimate descendants and ascendants of the
deceased may demand moral damages for mental anguish by reason of the death of
the deceased.
Being a special rule limited to cases of fatal injuries, these articles prevail over the
general rule of Art. 2220. Special provisions control general ones (Lichauco & Co. vs.
Apostol, 44 Phil. 138; Sancio vs. Lizarraga, 55 Phil. 601).
It thus appears that under the new Civil Code, in case of accident due to a carrier's
negligence, the heirs of a deceased passenger may recover moral damages, even
though a passenger who is injured, but manages to survive, is not entitled to them.
There is, therefore, no conflict between our main decision in the instant case and that
of Cachero vs. Manila Yellow Taxi Cab Co., 101 Phil., 523, where the passenger
suffered injuries, but did not lose his life.
(3) In the Cachero case this Court disallowed attorneys' fees to the injured plaintiff
because the litigation arose out of his exaggerated and unreasonable deeds for an
indemnity that was out of proportion with the compensatory damages to which he
was solely entitled. But in the present case, plaintiffs' original claims can not be
deemed a priori wholly unreasonable, since they had a right to indemnity for moral
damages besides compensatory ones, and moral damages are not determined by set
and invariable bounds.
Neither does the fact that the contract between the passengers and their counsel
was on a contingent basis affect the former's right to counsel fees. As pointed out for
appellants, the Court's award is an party and not to counsel. A litigant who
improvidently stipulate higher counsel fees than those to which he is lawfully entitled,
does not for that reason earn the right to a larger indemnity; but, by parity of
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
reasoning, he should not be deprived of counsel fees if by law he is entitled to recover
them.
We find no reason to alter the main decision heretofore rendered. Ultimately, the
position taken by this Court is that a common carrier's contract is not to be regarded
as a game of chance wherein the passenger stakes his limb and life against the
carrier's property and profits.
Wherefore, the motion for reconsideration is hereby denied. So ordered.
25.
G.R. No. 160219 July 21, 2008
VECTOR SHIPPING CORPORATION and FRANCISCO SORIANO, Petitioners,
vs.
ADELFO B. MACASA, EMELIA B. MACASA, TIMOTEO B. MACASA, CORNELIO B.
MACASA, JR., and ROSARIO C. MACASA, SULPICIO LINES, INC., GO GUIOC SO,
ENRIQUE S. GO, EUSEBIO S. GO, RICARDO S. GO, VICTORIANO S. GO, EDWARD S. GO,
ARTURO S. GO, EDGAR S. GO and EDMUNDO S. GO, Respondents.
DECISION
NACHURA, J.:
Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of
Civil Procedure seeking the reversal of the Court of Appeals (CA) Decision2 dated
September 24, 2003, which affirmed with modification the Decision3 of the Regional
Trial Court (RTC), Branch 17 of Davao City, dated May 5, 1995.
The Facts
On December 19, 1987, spouses Cornelio (Cornelio) and Anacleta Macasa (Anacleta),
together with their eight-year-old grandson, Ritchie Macasa, (Ritchie) boarded the
MV Doña Paz, owned and operated by respondent Sulpicio Lines, Inc. (Sulpicio Lines),
at Tacloban, Leyte bound for Manila. On the fateful evening of December 20, 1987,
MV Doña Paz collided with the MT Vector, an oil tanker owned and operated by
petitioners Vector Shipping Corporation (Vector Shipping) and Francisco Soriano
(Soriano), which at the time was loaded with 860,000 gallons of gasoline and other
petroleum products, in the vicinity of Dumali Point, Tablas Strait, between
Marinduque and Oriental Mindoro. Only twenty-six persons survived: 24 passengers
of MV Doña Paz and 2 crew members of MT Vector. Both vessels were never
retrieved. Worse, only a few of the victims’ bodies, who either drowned or were
burned alive, were recovered. Cornelio, Anacleta and Ritchie were among the victims
whose bodies have yet to be recovered up to this day.
Respondents Adelfo, Emilia, Timoteo, and Cornelio, Jr., all surnamed Macasa, are the
children of Cornelio and Anacleta. On the other hand, Timoteo and his wife,
respondent Rosario Macasa, are the parents of Ritchie (the Macasas). Some of the
Macasas went to the North Harbor in Manila to await the arrival of Cornelio, Anacleta
and Ritchie. When they heard the news that MV Doña Paz was rammed at sea by
another vessel, bewildered, the Macasas went to the office of Sulpicio Lines to check
on the veracity of the news, but the latter denied that such an incident occurred.
According to the Macasas, Sulpicio Lines was uncooperative and was reluctant to
entertain their inquiries. Later, they were forced to rely on their own efforts to search
for the bodies of their loved ones, but to no avail.
The Macasas manifested that before they filed a case in court, Sulpicio Lines, through
counsel, intimated its intention to settle, and offered the amount of ₱250,000.00 for
the death of Cornelio, Anacleta and Ritchie. The Macasas rejected the said offer. Thus,
on October 2, 1991, the Macasas filed a Complaint for Damages arising out of breach
of contract of carriage against Sulpicio Lines before the RTC. The complaint imputed
negligence to Sulpicio Lines because it was remiss in its obligations as a common
carrier. The Macasas prayed for civil indemnity in the amount of ₱800,000.00 for the
death of Cornelio, Anacleta and Ritchie, as well as for Cornelio’s and Anacleta’s
alleged unearned income since they were both working as vocational instructors
before their demise. The Macasas also claimed ₱100,000.00 as actual and
compensatory damages for the lost cash, checks, jewelries and other personal
belongings of the latter, ₱600,000.00 in moral damages, ₱100,000.00 by way of
exemplary damages, and ₱100,000.00 as costs and attorney’s fees.
Sulpicio Lines traversed the complaint, alleging, among others that (1) MV Doña Paz
was seaworthy in all aspects; (2) it exercised extraordinary diligence in transporting
their passengers and goods; (3) it acted in good faith as it gave immediate assistance
to the survivors and kin of the victims; (4) the sinking of MV Doña Paz was without
contributory negligence on its part; and (5) the collision was MT Vector’s fault since
it was allowed to sail with an expired coastwise license, expired certificate of
inspection and it was manned by unqualified and incompetent crew members per
findings of the Board of Marine Inquiry (BMI) in BMI Case No. 653-87 which had
exonerated Sulpicio Lines from liability. Thus, Sulpicio Lines filed a Third-Party
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Complaint against Vector Shipping, Soriano and Caltex Philippines Inc. (Caltex), the
charterer of MT Vector.
Trial on the merits ensued.
The RTC’s Ruling
In its Decision4 dated May 5, 1995, the RTC awarded ₱200,000.00 as civil indemnity
for the death of Cornelio, Anacleta and Ritchie; ₱100,000.00 as actual damages;
₱500,000.00 as moral damages; ₱100,000.00 as exemplary damages; and ₱50,000.00
as attorney’s fees. The case was disposed of in this wise:
Accordingly, as a result of this decision, on plaintiffs’ complaint against third-party
(sic) defendant Sulpicio Lines Inc., third-party defendant Caltex Philippines, Inc. and
third-party defendant MT Vector Shipping Corporation and/or Francisco Soriano, are
liable against defendant third-party plaintiff, Sulpicio Lines, for reimbursement,
subrogation and indemnity on all amounts, defendant Sulpicio Lines was ordered
liable against plaintiffs, by way of actual, moral, exemplary damages and attorney’s
fee, MT Vector Shipping Lines and/or Francisco Soriano, third-party defendants, are
ordered jointly and severally, liable to pay third-party plaintiff, Sulpicio Lines, by way
of reimbursement, subrogation and indemnity, of all the above amounts, ordered
against defendant Sulpicio Lines, Inc., to pay in favor of plaintiff, with interest and
cost of suit.
SO ORDERED.5
Aggrieved, Sulpicio Lines, Caltex, Vector Shipping and Soriano appealed to the CA.
The CA’s Ruling
In the assailed Decision6 dated September 24, 2003, the CA held:
WHEREFORE, all premises considered, the assailed decision is hereby modified in that
third-party defendant-appellant Caltex Phils., Inc. is hereby exonerated from liability.
The ₱100,000 actual damages is deleted while the indemnity for (sic) is reduced to
₱150,000. All other aspects of the appealed judgment are perforce affirmed.
SO ORDERED.7
The Issues
Hence, this Petition raising the following issues:
1) May the decision of the Board Marine Inquiry (BMI) which, to date, is still pending
with the Department of National Defense (DND) and, therefore, deemed vacated as
it is not yet final and executory, be binding upon the court?
2) In the absence of clear, convincing, solid, and concrete proof of including, but not
limited to, absence of eyewitnesses on that tragic maritime incident on 20 December
1987, will it be in consonance with law, logic, principles of physics, and/or allied
science, to hold that MT VECTOR is the vessel solely at fault and responsible for the
collision? How about MV DOÑA PAZ, a bigger ship of 2,324.08 gross tonnage (5-deck
cargo passenger vessel, then cruising at 16.5 knots)? As compared to MT VECTOR of
629.82 gross tonner tanker, then cruising at 4.5 knots? May it be considered that, as
between the two vessels, MV DOÑA PAZ could ha[ve] avoid[ed] such collision had
there been an official on the bridge, and that MV DOÑA PAZ could had been earlier
alarmed by its radar for an approaching vessel?
3) May VECTOR and SORIANO be held liable to indemnify/reimburse SULPICIO the
amounts it is ordered to pay the MACASA’s because SULPICIO’s liability arises from
breach of contract of carriage, inasmuch as in "culpa contractual" it is sufficient to
prove the existence of the contract, because carrier is presumed to be at fault or to
have acted negligently it being its duty to exercise extraordinary diligence, and
cannot make the [safety] of its passengers dependent upon the diligence of VECTOR
and SORIANO?
4) Will it be in accord with existing law and/or jurisprudence that both vessels (MV
DOÑA PAZ and MT VECTOR) be declared mutually at fault and, therefore, each must
[bear] its own loss? In the absence of CLEAR and CONVINCING proof[,] who is solely
at fault?8
Petitioners posit that the factual findings of the BMI are not binding on the Court as
such is limited to administrative liabilities and does not absolve the common carrier
from its failure to observe extraordinary diligence; that this Court’s ruling in Caltex
(Philippines), Inc. v. Sulpicio Lines, Inc.9 is not res adjudicata to this case, since there
were several other cases which did not reach this Court but, however, attained
finality, previously holding that petitioners and Sulpicio Lines are jointly and severally
liable to the victims;10 that the collision was solely due to the fault of MV Doña Paz
as it was guilty of navigational fault and negligence; that due to the absence of the
ship captain and other competent officers who were not at the bridge at the time of
collision, and running at a speed of 16.5 knots, it was the MV Doña Paz which rammed
MT Vector; and that it was improbable for a slower vessel like MT Vector which, at
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
the time, was running at a speed of merely 4.5 knots to ram a much faster vessel like
the MV Doña Paz.11
On the other hand, Sulpicio Lines claims that this Court’s ruling in Caltex (Philippines),
Inc. v. Sulpicio Lines, Inc.12 is res adjudicata to this case being of similar factual milieu
and that the same is the law of the case on the matter; that the BMI proceedings are
administrative in nature and can proceed independently of any civil action filed with
the regular courts; that the BMI findings, as affirmed by the Philippine Coast Guard,
holding that MT Vector was solely at fault at the time of collision, were based on
substantial evidence and by reason of its special knowledge and technical expertise,
the BMI’s findings of facts are generally accorded respect by the courts; and that, as
such, said BMI factual findings cannot be the subject of the instant petition for review
asking this Court to look again into the pieces of evidence already presented. Thus,
Sulpicio Lines prays that the instant Petition be denied for lack of merit.13
In their memorandum, the Macasas manifest that they are basically concerned with
their claims against Sulpicio Lines for breach of contract of carriage. The Macasas
opine that the arguments raised by Sulpicio Lines in its attempt to avoid liability to
the Macasas are without basis in fact and in law because the RTC’s Decision is
supported by applicable provisions of law and settled jurisprudence on contract of
carriage. However, they disagree with the CA on the deletion of the RTC’s award of
₱100,000.00 actual damages. The CA’s simple justification that if indeed the victims
had such huge amount of money, they could have traveled by plane instead of taking
the MV Doña Paz, according to the Macasas, is unjust, misplaced and adds insult to
injury. They insist that the claim for actual damages was duly established in the
hearings before the RTC by ample proof that Cornelio and Anacleta were both
professionals; that they were in possession of personal effects and jewelries; and that
since it was the Christmas season, the spouses intended a vacation in Manila and buy
things to bring home as gifts. The Macasas also appeal that the reduction of the civil
indemnity for the death of Cornelio, Anacleta and Ritchie from ₱200,000.00 to
₱150,000.00 be reconsidered. Thus, the Macasas pray that the RTC Decision be
affirmed in toto and/or the CA Decision be modified with respect to the deleted
award of actual damages and the reduced civil indemnity for the death of the
victims.14
This Court’s Ruling
The instant Petition lacks merit.
It is a well-established doctrine that in petitions for review on certiorari under Rule
45 of the Rules of Civil Procedure, only questions of law may be raised by the parties
and passed upon by this Court. This Court defined a question of law, as distinguished
from a question of fact, to wit:
A question of law arises when there is doubt as to what the law is on a certain state
of facts, while there is a question of fact when the doubt arises as to the truth or
falsity of the alleged facts. For a question to be one of law, the same must not involve
an examination of the probative value of the evidence presented by the litigants or
any of them. The resolution of the issue must rest solely on what the law provides on
the given set of circumstances. Once it is clear that the issue invites a review of the
evidence presented, the question posed is one of fact. Thus, the test of whether a
question is one of law or of fact is not the appellation given to such question by the
party raising the same; rather, it is whether the appellate court can determine the
issue raised without reviewing or evaluating the evidence, in which case, it is a
question of law; otherwise it is a question of fact.15
Petitioners’ insistence that MV Doña Paz was at fault at the time of the collision will
entail this Court’s review and determination of the weight, credence, and probative
value of the evidence presented. This Court is being asked to evaluate the pieces of
evidence which were adequately passed upon by both the RTC and the CA. Without
doubt, this matter is essentially factual in character and, therefore, outside the ambit
of a petition for review on certiorari under Rule 45 of the Rules of Civil Procedure.
Petitioners ought to remember that this Court is not a trier of facts. It is not for this
Court to weigh these pieces of evidence all over again.16
Likewise, we take judicial notice17 of our decision in Caltex (Philippines), Inc. v.
Sulpicio Lines, Inc.18 In that case, while Caltex was exonerated from any third-party
liability, this Court sustained the CA ruling that Vector Shipping and Soriano are liable
to reimburse and indemnify Sulpicio Lines for whatever damages, attorney’s fees and
costs the latter is adjudged to pay the victims therein.
Petitioners’ invocation of the pendency before this Court of Francisco Soriano v.
Sulpicio Lines, Inc.19 along with Vector Shipping Corporation and Francisco Soriano
v. American Home Assurance Co. and Sulpicio Lines, Inc.20 is unavailing. It may be
noted that in a Resolution dated February 13, 2006, this Court denied the petition in
Francisco Soriano v. Sulpicio Lines, Inc. for its failure to sufficiently show that the CA
committed any reversible error in the challenged decision as to warrant the exercise
of this Court’s discretionary appellate jurisdiction. As a result, the CA decision21
dated November 17, 2003 holding that Sulpicio Lines has a right to reimbursement
and indemnification from the third-party defendants Soriano and Vector Shipping,
who are the same petitioners in this case, was sustained by this Court. Considering
that in the cases which have reached this Court, we have consistently upheld the
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
third-party liability of petitioners, we see no cogent reason to deviate from this
ruling.1avvphi1
Moreover, in Caltex (Philippines), Inc. v. Sulpicio Lines, Inc.,22 we held that MT Vector
fits the definition of a common carrier under Article 173223 of the New Civil Code.
Our ruling in that case is instructive:
Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship. For
a vessel to be seaworthy, it must be adequately equipped for the voyage and manned
with a sufficient number of competent officers and crew. The failure of a common
carrier to maintain in seaworthy condition the vessel involved in its contract of
carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code.
The provisions owed their conception to the nature of the business of common
carriers. This business is impressed with a special public duty. The public must of
necessity rely on the care and skill of common carriers in the vigilance over the goods
and safety of the passengers, especially because with the modern development of
science and invention, transportation has become more rapid, more complicated and
somehow more hazardous. For these reasons, a passenger or a shipper of goods is
under no obligation to conduct an inspection of the ship and its crew, the carrier
being obliged by law to impliedly warrant its seaworthiness.
Thus, we are disposed to agree with the findings of the CA when it aptly held:
We are not swayed by the lengthy disquisition of MT Vector and Francisco Soriano
urging this Court to absolve them from liability. All evidence points to the fact that it
was MT Vector’s negligent officers and crew which caused it to ram into MV Doña
Paz. More so, MT Vector was found to be carrying expired coastwise license and
permits and was not properly manned. As the records would also disclose, there is a
defect in the ignition system of the vessel, and it was not convincingly shown whether
the necessitated repairs were in fact undertaken before the said ship had set to sea.
In short, MT Vector was unseaworthy at the time of the mishap. That the said vessel
was allowed to set sail when it was, to everyone in the group’s knowledge, not fit to
do so translates into rashness and imprudence.24
We reiterate, anew, the rule that findings of fact of the CA are generally binding and
conclusive on this Court.25 While this Court has recognized several exceptions26 to
this rule, none of these exceptions finds application in this case. It bears emphasis
also that this Court accords respect to the factual findings of the trial court, especially
if affirmed by the CA on appeal. Unless the trial court overlooked substantial matters
that would alter the outcome of the case, this Court will not disturb such findings. In
any event, we have meticulously reviewed the records of the case and found no
reason to depart from the rule.27
Lastly, we cannot turn a blind eye to this gruesome maritime tragedy which is now a
dark page in our nation’s history. We commiserate with all the victims, particularly
with the Macasas who were denied justice for almost two decades in this case. To
accept petitioners’ submission that this Court, along with the RTC and the CA, should
await the review by the Department of National Defense of the BMI findings, would,
in effect, limit the courts’ jurisdiction to expeditiously try, hear and decide cases filed
before them. It would not only prolong the Macasas’ agony but would result in yet
another tragedy at the expense of speedy justice. This, we cannot allow.
WHEREFORE, the instant Petition is DENIED. The assailed Court of Appeals Decision
dated September 24, 2003 is hereby AFFIRMED. Costs against petitioners.
SO ORDERED.
26.
G.R. No. 95536 March 23, 1992
ANICETO G. SALUDO, JR., MARIA SALVACION SALUDO, LEOPOLDO G. SALUDO and
SATURNINO G. SALUDO, petitioners,
vs.
HON. COURT OF APPEALS, TRANS WORLD AIRLINES, INC., and PHILIPPINE AIRLINES,
INC., respondents.
REGALADO, J.:
Assailed in this petition for review on certiorari is the decision in CA-G.R. CV No.
20951 of respondent Court of Appeals1 which affirmed the decision of the trial court2
dismissing for lack of evidence herein petitioners' complaint in Civil Case No R-2101
of the then Court of First Instance of Southern Leyte, Branch I.
The facts, as recounted by the court a quo and adopted by respondent court after
"considering the evidence on record," are as follows:
After the death of plaintiffs' mother, Crispina Galdo Saludo, in Chicago Illinois, (on)
October 23, 1976 (Exh. A), Pomierski and Son Funeral Home of Chicago, made the
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
necessary preparations and arrangements for the shipment, of the remains from
Chicago to the Philippines. The funeral home had the remains embalmed (Exb. D) and
secured a permit for the disposition of dead human body on October 25, 1976 (Exh.
C), Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on
October 26, 1976 at the Pomierski & Son Funeral Home, sealed the shipping case
containing a hermetically sealed casket that is airtight and waterproof wherein was
contained the remains of Crispina Saludo Galdo (sic) (Exb. B). On the same date,
October 26, 1976, Pomierski brought the remains to C.M.A.S. (Continental Mortuary
Air Services) at the airport (Chicago) which made the necessary arrangements such
as flights, transfers, etc.; C.M.A.S. is a national service used by undertakers to
throughout the nation (U.S.A.), they furnish the air pouch which the casket is
enclosed in, and they see that the remains are taken to the proper air freight terminal
(Exh. 6-TWA). C.M.A.S. booked the shipment with PAL thru the carrier's agent Air
Care International, with Pomierski F.H. as the shipper and Mario (Maria) Saludo as
the consignee. PAL Airway Bill No. 079-01180454 Ordinary was issued wherein the
requested routing was from Chicago to San Francisco on board TWA Flight 131 of
October 27, 1976 and from San Francisco to Manila on board PAL Flight No. 107 of
the same date, and from Manila to Cebu on board PAL Flight 149 of October 29, 1976
(See Exh. E., Also Exh. 1-PAL).
In the meantime, plaintiffs Maria Salvacion Saludo and Saturnino Saludo, thru a travel
agent, were booked with United Airlines from Chicago to California, and with PAL
from California to Manila. She then went to the funeral director of Pomierski Funeral
Home who had her mother's remains and she told the director that they were booked
with United Airlines. But the director told her that the remains were booked with
TWA flight to California. This upset her, and she and her brother had to change
reservations from UA to the TWA flight after she confirmed by phone that her
mother's remains should be on that TWA flight. They went to the airport and watched
from the look-out area. She saw no body being brought. So, she went to the TWA
counter again, and she was told there was no body on that flight. Reluctantly, they
took the TWA flight upon assurance of her cousin, Ani Bantug, that he would look
into the matter and inform her about it on the plane or have it radioed to her. But no
confirmation from her cousin reached her that her mother was on the West Coast.
Upon arrival at San Francisco at about 5:00 p.m., she went to the TWA counter there
to inquire about her mother's remains. She was told they did not know anything
about it.
She then called Pomierski that her mother's remains were not at the West Coast
terminal, and Pomierski immediately called C.M.A.S., which in a matter of 10 minutes
informed him that the remains were on a plane to Mexico City, that there were two
bodies at the terminal, and somehow they were switched; he relayed this
information to Miss Saludo in California; later C.M.A.S. called and told him they were
sending the remains back to California via Texas (see Exh. 6-TWA).
It-turned out that TWA had carried a shipment under PAL Airway Bill No. 079-ORD-
01180454 on TWA Flight 603 of October 27, 1976, a flight earlier than TWA Flight 131
of the same date. TWA delivered or transferred the said shipment said to contain
human remains to PAL at 1400H or 2:00 p.m. of the same date, October 27, 1976
(Bee Exh. 1- TWA). "Due to a switch(ing) in Chicago", this shipment was withdrawn
from PAL by CMAS at 1805H (or 6:05 p.m.) of the same date, October 27 (Exh. 3-PAL,
see Exh. 3-a-PAL).
What transpired at the Chicago (A)irport is explained in a memo or incident report by
Pomierski (Exh. 6-TWA) to Pomierski's lawyers who in turn referred to said' memo
and enclosed it in their (Pomierski's lawyers) answer dated July 18, 1981 to herein
plaintiff's counsel (See Exh. 5-TWA). In that memo or incident report (Exh. 6-TWA), it
is stated that the remains (of Crispina Saludo) were taken to CMAS at the airport; that
there were two bodies at the (Chicago Airport) terminal, and somehow they were
switched, that the remains (of Crispina Saludo) were on a plane to Mexico City; that
CMAS is a national service used by undertakers throughout the nation (U.S.A.), makes
all the necessary arrangements, such as flights, transfers, etc., and see(s) to it that
the remains are taken to the proper air freight terminal.
The following day October 28, 1976, the shipment or remains of Crispina Saludo
arrived (in) San Francisco from Mexico on board American Airlines. This shipment was
transferred to or received by PAL at 1945H or 7:45 p.m. (Exh. 2-PAL, Exh. 2-a-PAL).
This casket bearing the remains of Crispina Saludo, which was mistakenly sent to
Mexico and was opened (there), was resealed by Crispin F. Patagas for shipment to
the Philippines (See Exh. B-1). The shipment was immediately loaded on PAL flight for
Manila that same evening and arrived (in) Manila on October 30, 1976, a day after its
expected arrival on October 29, 1976.3
In a letter dated December 15, 1976,4 petitioners' counsel informed private
respondent Trans World Airlines (TWA) of the misshipment and eventual delay in the
delivery of the cargo containing the remains of the late Crispin Saludo, and of the
discourtesy of its employees to petitioners Maria Salvacion Saludo and Saturnino
Saludo. In a separate letter on June 10, 1977 addressed to co-respondent Philippine
Airlines (PAL),5 petitioners stated that they were holding PAL liable for said delay in
delivery and would commence judicial action should no favorable explanation be
given.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Both private respondents denied liability. Thus, a damage suit6 was filed by
petitioners before the then Court of First Instance, Branch III, Leyte, praying for the
award of actual damages of P50,000.00, moral damages of P1,000,000.00, exemplary
damages, attorney's fees and costs of suit.
As earlier stated, the court below absolved the two respondent airlines companies of
liability. The Court of Appeals affirmed the decision of the lower court in toto, and in
a subsequent resolution,7 denied herein petitioners' motion for reconsideration for
lack of merit.
In predictable disagreement and dissatisfaction with the conclusions reached by
respondent appellate court, petitioners now urge this Court to review the appealed
decision and to resolve whether or not (1) the delay in the delivery of the casketed
remains of petitioners' mother was due to the fault of respondent airline companies,
(2) the one-day delay in the delivery of the same constitutes contractual breach as
would entitle petitioners to damages, (3) damages are recoverable by petitioners for
the humiliating, arrogant and indifferent acts of the employees of TWA and PAL, and
(4) private respondents should be held liable for actual, moral and exemplary
damages, aside from attorney's fees and litigation expenses.8
At the outset and in view of the spirited exchanges of the parties on this aspect, it is
to be stressed that only questions of law may be raised in a petition filed in this Court
to review on certiorari the decision of the Court of Appeals.9 This being so, the factual
findings of the Court of Appeals are final and conclusive and cannot be reviewed by
the Supreme Court. The rule, however, admits of established exceptions, to wit: (a)
where there is grave abuse of discretion; (b) when the finding is grounded entirely on
speculations, surmises or conjectures;(c) when the inference made is manifestly-
mistaken, absurd or impossible; (d) when the judgment of the Court of Appeals was
based on a misapprehension of facts; (e) when the factual findings are conflicting; (f)
when the Court of Appeals, in making its findings, went beyond the issues of the case
and the same are contrary to the admissions of both appellant and appellee; 10 (g)
when the Court of Appeals manifestly overlooked certain relevant facts not disputed
by the parties and which, if properly considered, would justify a different conclusion;
11 and (h) where the findings of fact of the Court of Appeals are contrary to those of
the trial court, or are mere conclusions without citation of specific evidence, or where
the facts of set forth by the petitioner are not disputed by the respondent, or where
the findings of fact of the Court of Appeals are premised on the absence of evidence
and are contradicted by the evidence on record. 12
To distinguish, a question of law is one which involves a doubt or controversy on what
the law is on a certain state of facts; and, a question of fact, contrarily, is one in which
there is a doubt or difference as to the truth or falsehood of the alleged facts. 13 One
test, it has been held, is whether the appellate court can determine the issue raised
without reviewing or evaluating the evidence, in which case it is a question of law,
otherwise it will be a question of fact.14
Respondent airline companies object to the present recourse of petitioners on the
ground that this petition raises only factual questions. 15 Petitioners maintain
otherwise or, alternatively, they are of the position that, assuming that the petition
raises factual questions, the same are within the recognized exceptions to the general
rule as would render the petition cognizable and worthy of review by the Court. 16
Since it is precisely the soundness of the inferences or conclusions that may be drawn
from the factual issues which are here being assayed, we find that the issues raised
in the instant petition indeed warrant a second look if this litigation is to come to a
reasonable denouement. A discussion seriatim of said issues will further reveal that
the sequence of the events involved is in effect disputed. Likewise to be settled is
whether or not the conclusions of the Court of Appeals subject of this review indeed
find evidentiary and legal support.
I. Petitioners fault respondent court for "not finding that private respondents failed
to exercise extraordinary diligence required by law which resulted in the switching
and/or misdelivery of the remains of Crispina Saludo to Mexico causing gross delay
in its shipment to the Philippines, and consequently, damages to petitioners." 17
Petitioner allege that private respondents received the casketed remains of
petitioners' mother on October 26, 1976, as evidenced by the issuance of PAL Air
Waybill No. 079-01180454 18 by Air Care International as carrier's agent; and from
said date, private respondents were charged with the responsibility to exercise
extraordinary diligence so much so that for the alleged switching of the caskets on
October 27, 1976, or one day after private respondents received the cargo, the latter
must necessarily be liable.
To support their assertion, petitioners rely on the jurisprudential dictum, both under
American and Philippine law, that "(t)he issuance of a bill of lading carries the
presumption that the goods were delivered to the carrier issuing the bill, for
immediate shipment, and it is nowhere questioned that a bill of lading is prima facie
evidence of the receipt of the goods by the carrier. . . . In the absence of convincing
testimony establishing mistake, recitals in the bill of lading showing that the carrier
received the goods for shipment on a specified date control (13 C.J.S. 235)." 19
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
A bill of lading is a written acknowledgment of the receipt of the goods and an
agreement to transport and deliver them at a specified place to a person named or
on his order. Such instrument may be called a shipping receipt, forwarder's receipt
and receipt for transportation. 20 The designation, however, is immaterial. It has
been hold that freight tickets for bus companies as well as receipts for cargo
transported by all forms of transportation, whether by sea or land, fall within the
definition. Under the Tariff and Customs Code, a bill of lading includes airway bills of
lading. 21 The two-fold character of a bill of lading is all too familiar; it is a receipt as
to the quantity and description of the goods shipped and a contract to transport the
goods to the consignee or other person therein designated, on the terms specified in
such instrument. 22
Logically, since a bill of lading acknowledges receipt of goods to be transported,
delivery of the goods to the carrier normally precedes the issuance of the bill; or, to
some extent, delivery of the goods and issuance of the bill are regarded in
commercial practice as simultaneous acts. 23 However, except as may be prohibited
by law, there is nothing to prevent an inverse order of events, that is, the execution
of the bill of lading even prior to actual possession and control by the carrier of the
cargo to be transported. There is no law which requires that the delivery of the goods
for carriage and the issuance of the covering bill of lading must coincide in point of
time or, for that matter, that the former should precede the latter.
Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier for
transportation but, when issued, is competent and prima facie, but not conclusive,
evidence of delivery to the carrier. A bill of lading, when properly executed and
delivered to a shipper, is evidence that the carrier has received the goods described
therein for shipment. Except as modified by statute, it is a general rule as to the
parties to a contract of carriage of goods in connection with which a bill of lading is
issued reciting that goods have been received for transportation, that the recital
being in essence a receipt alone, is not conclusive, but may be explained, varied or
contradicted by parol or other evidence. 24
While we agree with petitioners' statement that "an airway bill estops the carrier
from denying receipt of goods of the quantity and quality described in the bill," a
further reading and a more faithful quotation of the authority cited would reveal that
"(a) bill of lading may contain constituent elements of estoppel and thus become
something more than a contract between the shipper and the carrier. . . . (However),
as between the shipper and the carrier, when no goods have been delivered for
shipment no recitals in the bill can estop the carrier from showing the true facts . . .
Between the consignor of goods and receiving carrier, recitals in a bill of lading as to
the goods shipped raise only a rebuttable presumption that such goods were
delivered for shipment. As between the consignor and a receiving carrier, the fact
must outweigh the recital." 25 (Emphasis supplied)
For this reason, we must perforce allow explanation by private respondents why,
despite the issuance of the airway bill and the date thereof, they deny having
received the remains of Crispina Saludo on October 26, 1976 as alleged by petitioners.
The findings of the trial court, as favorably adopted by the Court of Appeals and which
we have earner quoted, provide us with the explanation that sufficiently over comes
the presumption relied on by petitioners in insisting that the remains of their mother
were delivered to and received by private respondents on October 26, 1976. Thus —
. . . Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on
October 26, 1976 at the Pomierski & Son Funeral Home, sealed the shipping case
containing a hermetically sealed casket that is airtight and waterproof wherein was
contained the remains of Crispina Saludo Galdo (sic) (Exh. B). On the same date
October 26, 1976, Pomierski brought the remains to C.M.A.S. (Continental Mortuary
Air Services) at the airport (Chicago) which made the necessary arrangements such
as flights, transfers, etc; C.M.A.S. is a national service used by undertakers
throughout the nation (U.S.A.), they furnish the air pouch which the casket is
enclosed in, and they see that the remains are taken to the proper air freight terminal
(Exh. G-TWA). C.M.A.S. booked the shipment with PAL thru the carrier's agent Air
Care International, with Pomierski F.H. as the shipper and Mario (Maria) Saludo as
the consignee. PAL Airway Bill No. 079- 01180454 Ordinary was issued wherein the
requested routing was from Chicago to San Francisco on board TWA Flight-131 of
October 27;1976, and from San Francisco to Manila on board PAL Flight No. 107 of
the same date, and from Manila to Cebu on board PAL Flight 149 of October 29, 1976
(See Exh. E, also Exh. 1-PAL).26 (Emphasis ours.)
Moreover, we are persuaded to believe private respondent PAL's account as to what
transpired October 26, 1976:
. . . Pursuant thereto, on 26 October 1976, CMAS acting upon the instruction of
Pomierski, F.H., the shipper requested booking of the casketed remains of Mrs.
Cristina (sic) Saludo on board PAL's San Francisco-Manila Flight No. PR 107 on
October 27, 1976.
2. To signify acceptance and confirmation of said booking, PAL issued to said
Pomierski F.H., PAL Airway Bill No. 079-01180454 dated October 27, 1976 (sic,
"10/26/76"). PAL confirmed the booking and transporting of the shipment on board
of its Flight PR 107 on October 27, 1976 on the basis of the representation of the
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
shipper and/or CMAS that the said cargo would arrive in San Francisco from Chicago
on board United Airlines Flight US 121 on 27 October 1976.27
In other words, on October 26, 1976 the cargo containing the casketed remains of
Crispina Saludo was booked for PAL Flight Number PR-107 leaving San Francisco for
Manila on October 27, 1976, PAL Airway Bill No. 079-01180454 was issued, not as
evidence of receipt of delivery of the cargo on October 26, 1976, but merely as a
confirmation of the booking thus made for the San Francisco-Manila flight scheduled
on October 27, 1976. Actually, it was not until October 28, 1976 that PAL received
physical delivery of the body at San Francisco, as duly evidenced by the Interline
Freight Transfer Manifest of the American Airline Freight System and signed for by
Virgilio Rosales at 1945H, or 7:45 P.M. on said date.28
Explicit is the rule under Article 1736 of the Civil Code that the extraordinary
responsibility of the common carrier begins from the time the goods are delivered to
the carrier. This responsibility remains in full force and effect even when they are
temporarily unloaded or stored in transit, unless the shipper or owner exercises the
right of stoppage in transitu, 29 and terminates only after the lapse of a reasonable
time for the acceptance, of the goods by the consignee or such other person entitled
to receive them. 30 And, there is delivery to the carrier when the goods are ready for
and have been placed in the exclusive possession, custody and control of the carrier
for the purpose of their immediate transportation and the carrier has accepted them.
31 Where such a delivery has thus been accepted by the carrier, the liability of the
common carrier commences eo instanti. 32
Hence, while we agree with petitioners that the extraordinary diligence statutorily
required to be observed by the carrier instantaneously commences upon delivery of
the goods thereto, for such duty to commence there must in fact have been delivery
of the cargo subject of the contract of carriage. Only when such fact of delivery has
been unequivocally established can the liability for loss, destruction or deterioration
of goods in the custody of the carrier, absent the excepting causes under Article 1734,
attach and the presumption of fault of the carrier under Article 1735 be invoked.
As already demonstrated, the facts in the case at bar belie the averment that there
was delivery of the cargo to the carrier on October 26, 1976. Rather, as earlier
explained, the body intended to be shipped as agreed upon was really placed in the
possession and control of PAL on October 28, 1976 and it was from that date that
private respondents became responsible for the agreed cargo under their
undertakings in PAL Airway Bill No. 079-01180454. Consequently, for the switching
of caskets prior thereto which was not caused by them, and subsequent events
caused thereby, private respondents cannot be held liable.
Petitioners, proceeding on the premise that there was delivery of the cargo to private
respondents on October 26,1976 and that the latter's extraordinary responsibility
had by then become operative, insist on foisting the blame on private respondents
for the switching of the two caskets which occurred on October 27, 1976. It is argued
that since there is no clear evidence establishing the fault Continental Mortuary Air
Services (CMAS) for the mix-up, private respondents are presumably negligent
pursuant to Article 1735 of the Civil Code and, for failure to rebut such presumption,
they must necessarily be held liable; or, assuming that CMAS was at fault, the same
does not absolve private respondents of liability because whoever brought the cargo
to the airport or loaded it on the plane did so as agent of private respondents.
This contention is without merit. As pithily explained by the Court of Appeals:
The airway bill expressly provides that "Carrier certifies goods described below were
received for carriage", and said cargo was "casketed human remains of Crispina
Saludo," with "Maria Saludo as Consignee; Pomierski F.H. as Shipper; Air Care
International as carrier's agent." On the face of the said airway bill, the specific flight
numbers, specific routes of shipment and dates of departure and arrival were
typewritten, to wit: Chicago TWA Flight 131/27 to San Francisco and from San
Francisco by PAL 107 on, October 27, 1976 to Philippines and to Cebu via PAL Flight
149 on October 29, 1976. The airway bill also contains the following typewritten
words, as follows: all documents have been examined (sic). Human remains of
Crispina Saludo. Please return back (sic) first available flight to SFO.
But, as it turned out and was discovered later the casketed human remains which
was issued PAL Airway Bill #079-1180454 was not the remains of Crispina Saludo, the
casket containing her remains having been shipped to Mexico City.
However, it should be noted that, Pomierski F.H., the shipper of Mrs. Saludo's
remains, hired Continental Mortuary Services (hereafter referred to as C.M.A.S.),
which is engaged in the business of transporting and forwarding human remains.
Thus, C.M.A.S. made all the necessary arrangements such as flights, transfers, etc. —
for shipment of the remains of Crispina Saludo.
The remains were taken on October 26th, 1976, to C.M.A.S. at the airport. These
people made all the necessary arrangements, such as flights, transfers, etc. This is a
national service used by undertakers throughout the nation. They furnished the air
pouch which the casket is enclosed in, and they see that the remains are taken to the
proper air frieght terminal. I was very surprised when Miss Saludo called me to say
that the remains were not at the west coast terminal. I immediately called C.M.A.S.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754

They called me back in a matter of ten minutes to inform me that the remains were MICHAEL GIOSSO:
on a plane to Mexico City. The man said that there were two bodies at the terminal,
and somehow they were switched. . . . (Exb. 6 — "TWA", which is the memo or Yes, I did.
incident report enclosed in the stationery of Walter Pomierski & Sons Ltd.)
ATTY. JUAN COLLAS, JR.:
Consequently, when the cargo was received from C.M.A.S. at the Chicago airport
terminal for shipment, which was supposed to contain the remains of Crispina Saludo, What was your participation with the transfer of the cargo?
Air Care International and/or TWA, had no way of determining its actual contents,
since the casket was hermetically sealed by the Philippine Vice-Consul in Chicago and MICHAEL GIOSSO:
in an air pouch of C.M.A.S., to the effect that Air Care International and/or TWA had
to rely on the information furnished by the shipper regarding the cargo's content. I manifested the freight on a transfer manifest and physically moved it to PAL and
Neither could Air Care International and/or TWA open the casket for further concluded the transfer by signing it off.
verification, since they were not only without authority to do so, but even prohibited.
ATTY. JUAN COLLAS, JR.:
Thus, under said circumstances, no fault and/or negligence can be attributed to PAL
(even if Air Care International should be considered as an agent of PAL) and/or TWA, You brought it there yourself?
the entire fault or negligence being exclusively with C.M.A.S.33 (Emphasis supplied.)
MICHAEL GIOSSO:
It can correctly and logically be concluded, therefore, that the switching occurred or,
more accurately, was discovered on October 27, 1976; and based on the above Yes sir.
findings of the Court of appeals, it happened while the cargo was still with CMAS, well
before the same was place in the custody of private respondents. ATTY. JUAN COLIAS, JR.:

Thus, while the Air Cargo Transfer Manifest of TWA of October 27, 197634 was signed Do you have anything to show that PAL received the cargo from TWA on October 27,
by Garry Marcial of PAL at 1400H, or 2:00 P.M., on the same date, thereby indicating 1976?
acknowledgment by PAL of the transfer to them by TWA of what was in truth the
erroneous cargo, said misshipped cargo was in fact withdrawn by CMAS from PAL as MICHAEL GIOSSO:
shown by the notation on another copy of said manifest35 stating "Received by CMAS
— Due to switch in Chicago 10/27-1805H," the authenticity of which was never Yes, I do.
challenged. This shows that said misshipped cargo was in fact withdrawn by CMAS
from PAL and the correct shipment containing the body of Crispina Saludo was (Witness presenting a document)
received by PAL only on October 28, 1976, at 1945H, or 7:45 P.M., per American
Airlines Interline Freight Transfer Manifest No. AA204312.36 ATTY. JUAN COLLAS, JR.:

Witness the deposition of TWA's ramp serviceman, Michael Giosso, on this matter: For purposes of clarity, Exhibit I is designated as Exhibit I-TWA.

ATTY. JUAN COLLAS, JR.: xxx xxx xxx

On that date, do (sic) you have occasion to handle or deal with the transfer of cargo ATTY. JUAN COLLAS, JR.:
from TWA Flight No. 603 to PAL San Francisco?
This Exhibit I-TWA, could you tell what it is, what it shows?
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754

MICHAEL GIOSSO: xxx xxx xxx

It shows transfer of manifest on 10-27-76 to PAL at 1400 and verified with two ATTY. CESAR P. MANALAYSAY:
signatures as it completed the transfer.
What is the result of your investigation?
ATTY. JUAN COLLAS, JR.:
ALBERTO A. LIM:
Very good,. Who was the PAL employee who received the cargo?
In the course of my investigation, I found that we received the body on October 28,
MICHAEL GIOSSO: 1976, from American Airlines.

The name is Garry Marcial." 37 ATTY. CESAR P. MANALAYSAY:

The deposition of Alberto A. Lim, PAL's cargo supervisor at San Francisco, as What body are you referring to?
deponent-witness for PAL, makes this further clarification:
xxx xxx xxx
ATTY. CESAR P. MANALAYSAY:
ALBERTO A. LIM:
You mentioned Airway Bill, Mr. Lim. I am showing to you a PAL Airway Bill Number
01180454 which for purposes of evidence, I would like to request that the same be The remains of Mrs. Cristina (sic) Saludo.
marked as evidence Exhibit I for PAL.
ATTY. CESAR P. MANALAYSAY:
xxx xxx xxx
Is that the same body mentioned in this Airway Bill?
In what circumstances did you encounter Exhibit I-PAL?
ALBERTO A. LIM:
ALBERTO A. LIM:
Yes.
If I recall correctly, I was queried by Manila, our Manila office with regard to a certain
complaint that a consignee filed that this shipment did not arrive on the day that the ATTY. CESAR P. MANALAYSAY:
consignee expects the shipment to arrive.
What time did you receive said body on October 28, 1976?
ATTY CESAR P. MANALAYSAY:
ALBERTO A. LIM:
Okay. Now, upon receipt of that query from your Manila office, did you conduct any
investigation to pinpoint the possible causes of mishandling? If I recall correctly, approximately 7:45 of October 28, 1976.

ALBERTO A. LIM: ATTY. CESAR P. MANALAYSAY:

Yes. Do you have any proof with you to back the statement?
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
ALBERTO A. LIM:
Yes. We have on our records a Transfer Manifest from American Airlines Number
204312 showing that we received a human remains shipment belong to Mrs. Cristina
(sic) Saludo or the human remains of Mrs. Cristina (sic) Saludo.
ATTY. CESAR P. MAIALAYSAY:
At this juncture, may I request that the Transfer Manifest referred to by the witness
be marked as an evidence as Exhibit II-PAL.
xxx xxx xxx
Mr. Lim, yesterday your co-defendant TWA presented as their Exhibit I evidence
tending to show that on October 27, 1976 at about 2:00 in the, afternoon they
delivered to you a cargo bearing human remains. Could you go over this Exhibit I and
please give us your comments as to that exhibit?
ATTY. ALBERTO C. MENDOZA:
That is a vague question. I would rather request that counsel propound specific
questions rather than asking for comments on Exhibit I-TWA.
ATTY. CESAR P. MANALAYSAY:
In that case, I will reform my question. Could you tell us whether TWA in fact
delivered to you the human remains as indicated in that Transfer Manifest?
ALBERTO A. LIM:
Yes, they did.
ATTY. CESAR P. MANALAYSAY:
I noticed that the Transfer Manifest of TWA marked as Exhibit I-TWA bears the same
numbers or the same entries as the Airway Bill marked as Exhibit I-A PAL tending to
show that this is the human remains of Mrs Cristina (sic) Saludo. Could you tell us
whether this is true?
ALBERTO A. LIM:
It is true that we received human remains shipment from TWA as indicated on this
Transfer Manifest. But in the course of investigation, it was found out that the human
remains transferred to us is not the remains of Mrs. Cristina (sic) Saludo this is the
reason why we did not board it on our flight. 38
Petitioners consider TWA's statement that "it had to rely on the information
furnished by the shipper" a lame excuse and that its failure to prove that its personnel
verified and identified the contents of the casket before loading the same constituted
negligence on the part of TWA.39
We upbold the favorable consideration by the Court of Appeals of the following
findings of the trial court:
It was not (to) TWA, but to C.M.A.S. that the Pomierski & Son Funeral Home delivered
the casket containing the remains of Crispina Saludo. TWA would have no knowledge
therefore that the remains of Crispina Saludo were not the ones inside the casket
that was being presented to it for shipment. TWA would have to rely on there
presentations of C.M.A.S. The casket was hermetically sealed and also sealed by the
Philippine Vice Consul in Chicago. TWA or any airline for that matter would not have
opened such a sealed casket just for the purpose of ascertaining whose body was
inside and to make sure that the remains inside were those of the particular person
indicated to be by C.M.A.S. TWA had to accept whatever information was being
furnished by the shipper or by the one presenting the casket for shipment. And so as
a matter of fact, TWA carried to San Francisco and transferred to defendant PAL a
shipment covered by or under PAL Airway Bill No. 079-ORD-01180454, the airway bill
for the shipment of the casketed remains of Crispina Saludo. Only, it turned out later,
while the casket was already with PAL, that what was inside the casket was not the
body of Crispina Saludo so much so that it had to be withdrawn by C.M.A.S. from PAL.
The body of Crispina Saludo had been shipped to Mexico. The casket containing the
remains of Crispina Saludo was transshipped from Mexico and arrived in San
Francisco the following day on board American Airlines. It was immediately loaded
by PAL on its flight for Manila.
The foregoing points at C.M.A.S., not defendant TWA much less defendant PAL, as
the ONE responsible for the switching or mix-up of the two bodies at the Chicago
Airport terminal, and started a chain reaction of the misshipment of the body of
Crispina Saludo and a one-day delay in the delivery thereof to its destination.40
Verily, no amount of inspection by respondent airline companies could have guarded
against the switching that had already taken place. Or, granting that they could have
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
opened the casket to inspect its contents, private respondents had no means of
ascertaining whether the body therein contained was indeed that of Crispina Saludo
except, possibly, if the body was that of a male person and such fact was visually
apparent upon opening the casket. However, to repeat, private respondents had no
authority to unseal and open the same nor did they have any reason or justification
to resort thereto.
It is the right of the carrier to require good faith on the part of those persons who
deliver goods to be carried, or enter into contracts with it, and inasmuch as the freight
may depend on the value of the article to be carried, the carrier ordinarily has the
right to inquire as to its value. Ordinarily, too, it is the duty of the carrier to make
inquiry as to the general nature of the articles shipped and of their value before it
consents to carry them; and its failure to do so cannot defeat the shipper's right to
recovery of the full value of the package if lost, in the absence of showing of fraud or
deceit on the part of the shipper. In the absence of more definite information, the
carrier has a the right to accept shipper's marks as to the contents of the package
offered for transportation and is not bound to inquire particularly about them in
order to take advantage of a false classification and where a shipper expressly
represents the contents of a package to be of a designated character, it is not the
duty of the carrier to ask for a repetition of the statement nor disbelieve it and open
the box and see for itself. 41 However, where a common carrier has reasonable
ground to suspect that the offered goods are of a dangerous or illegal character, the
carrier has the right to know the character of such goods and to insist on an
inspection, if reasonable and practical under the circumstances, as a condition of
receiving and transporting such goods.42
It can safely be said then that a common carrier is entitled to fair representation of
the nature and value of the goods to be carried, with the concomitant right to rely
thereon, and further noting at this juncture that a carrier has no obligation to inquire
into the correctness or sufficiency of such information. 43 The consequent duty to
conduct an inspection thereof arises in the event that there should be reason to
doubt the veracity of such representations. Therefore, to be subjected to unusual
search, other than the routinary inspection procedure customarily undertaken, there
must exist proof that would justify cause for apprehension that the baggage is
dangerous as to warrant exhaustive inspection, or even refusal to accept carriage of
the same; and it is the failure of the carrier to act accordingly in the face of such proof
that constitutes the basis of the common carrier's liability. 44
In the case at bar, private respondents had no reason whatsoever to doubt the truth
of the shipper's representations. The airway bill expressly providing that "carrier
certifies goods received below were received for carriage," and that the cargo
contained "casketed human remains of Crispina Saludo," was issued on the basis of
such representations. The reliance thereon by private respondents was reasonable
and, for so doing, they cannot be said to have acted negligently. Likewise, no
evidence was adduced to suggest even an iota of suspicion that the cargo presented
for transportation was anything other than what it was declared to be, as would
require more than routine inspection or call for the carrier to insist that the same be
opened for scrutiny of its contents per declaration.
Neither can private respondents be held accountable on the basis of petitioners'
preposterous proposition that whoever brought the cargo to the airport or loaded it
on the airplane did so as agent of private respondents, so that even if CMAS whose
services were engaged for the transit arrangements for the remains was indeed at
fault, the liability therefor would supposedly still be attributable to private
respondents.
While we agree that the actual participation of CMAS has been sufficiently and
correctly established, to hold that it acted as agent for private respondents would be
both an inaccurate appraisal and an unwarranted categorization of the legal position
it held in the entire transaction.
It bears repeating that CMAS was hired to handle all the necessary shipping
arrangements for the transportation of the human remains of Crispina Saludo to
Manila. Hence, it was to CMAS that the Pomierski & Son Funeral Home, as shipper,
brought the remains of petitioners' mother for shipment, with Maria Saludo as
consignee. Thereafter, CMAS booked the shipment with PAL through the carrier's
agent, Air Care International. 45 With its aforestated functions, CMAS may
accordingly be classified as a forwarder which, by accepted commercial practice, is
regarded as an agent of the shipper and not of the carrier. As such, it merely contracts
for the transportation of goods by carriers, and has no interest in the freight but
receives compensation from the shipper as his agent. 46
At this point, it can be categorically stated that, as culled from the findings of both
the trial court and appellate courts, the entire chain of events which culminated in
the present controversy was not due to the fault or negligence of private respondents.
Rather, the facts of the case would point to CMAS as the culprit. Equally telling of the
more likely possibility of CMAS' liability is petitioners' letter to and demanding an
explanation from CMAS regarding the statement of private respondents laying the
blame on CMAS for the incident, portions of which, reading as follows:
. . . we were informed that the unfortunate a mix-up occurred due to your
negligence. . . .
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Likewise, the two airlines pinpoint the responsibility upon your agents. Evidence
were presented to prove that allegation.
On the face of this overwhelming evidence we could and should have filed a case
against you. . . . 47
clearly allude to CMAS as the party at fault. This is tantamount to an admission by
petitioners that they consider private respondents without fault, or is at the very least
indicative of the fact that petitioners entertained serious doubts as to whether herein
private respondents were responsible for the unfortunate turn of events.
Undeniably, petitioners' grief over the death of their mother was aggravated by the
unnecessary inconvenience and anxiety that attended their efforts to bring her body
home for a decent burial. This is unfortunate and calls for sincere commiseration with
petitioners. But, much as we would like to give them consolation for their undeserved
distress, we are barred by the inequity of allowing recovery of the damages prayed
for by them at the expense of private respondents whose fault or negligence in the
very acts imputed to them has not been convincingly and legally demonstrated.
Neither are we prepared to delve into, much less definitively rule on, the possible
liability of CMAS as the evaluation and adjudication of the same is not what is
presently at issue here and is best deferred to another time and addressed to another
forum.
II. Petitioners further fault the Court of Appeals for ruling that there was no
contractual breach on the part of private respondents as would entitle petitioners to
damages.
Petitioners hold that respondent TWA, by agreeing to transport the remains of
petitioners' mother on its Flight 131 from Chicago to San Francisco on October 27,
1976, made itself a party to the contract of carriage and, therefore, was bound by the
terms of the issued airway bill. When TWA undertook to ship the remains on its Flight
603, ten hours earlier than scheduled, it supposedly violated the express agreement
embodied in the airway bill. It was allegedly this breach of obligation which
compounded, if not directly caused, the switching of the caskets.
In addition, petitioners maintain that since there is no evidence as to who placed the
body on board Flight 603, or that CMAS actually put the cargo on that flight, or that
the two caskets at the Chicago airport were to be transported by the same airline, or
that they came from the same funeral home, or that both caskets were received by
CMAS, then the employees or agents of TWA presumably caused the mix-up by
loading the wrong casket on the plane. For said error, they contend, TWA must
necessarily be presumed negligent and this presumption of negligence stands
undisturbed unless rebutting evidence is presented to show that the switching or
misdelivery was due to circumstances that would exempt the carrier from liability.
Private respondent TWA professes otherwise. Having duly delivered or transferred
the cargo to its co-respondent PAL on October 27, 1976 at 2:00 P.M., as supported
by the TWA Transfer Manifest, TWA faithfully complied with its obligation under the
airway bill. Said faithful compliance was not affected by the fact that the remains
were shipped on an earlier flight as there was no fixed time for completion of carriage
stipulated on. Moreover, the carrier did not undertake to carry the cargo aboard any
specified aircraft, in view of the condition on the back of the airway bill which
provides:
CONDITIONS OF CONTRACT
xxx xxx xxx
It is agreed that no time is fixed for the completion of carriage hereunder and that
Carrier may without notice substitute alternate carriers or aircraft. Carrier assumes
no obligation to carry the goods by any specified aircraft or over any particular route
or routes or to make connection at any point according to any particular schedule,
and Carrier is hereby authorized to select, or deviate from the route or routes of
shipment, notwithstanding that the same may be stated on the face hereof. The
shipper guarantees payment of all charges and advances.48
Hence, when respondent TWA shipped the body on earlier flight and on a different
aircraft, it was acting well within its rights. We find this argument tenable.
The contention that there was contractual breach on the part of private respondents
is founded on the postulation that there was ambiguity in the terms of the airway bill,
hence petitioners' insistence on the application of the rules on interpretation of
contracts and documents. We find no such ambiguity. The terms are clear enough as
to preclude the necessity to probe beyond the apparent intendment of the
contractual provisions.
The hornbook rule on interpretation of contracts consecrates the primacy of the
intention of the parties, the same having the force of law between them. When the
terms of the agreement are clear and explicit, that they do not justify an attempt to
read into any alleged intention of the parties, the terms are to be understood literally
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
just as they appear on the face of the contract.49 The various stipulations of a
contract shall be interpreted together50 and such a construction is to be adopted as
will give effect to all provisions thereof.51 A contract cannot be construed by parts,
but its clauses should be interpreted in relation to one another. The whole contract
must be interpreted or read together in order to arrive at its true meaning. Certain
stipulations cannot be segregated and then made to control; neither do particular
words or phrases necessarily determine the character of a contract. The legal effect
of the contract is not to be determined alone by any particular provision
disconnected from all others, but in the ruling intention of the parties as gathered
from all the language they have used and from their contemporaneous and
subsequent acts. 52
Turning to the terms of the contract at hand, as presented by PAL Air Waybill No.
079-01180454, respondent court approvingly quoted the trial court's disquisition on
the aforequoted condition appearing on the reverse side of the airway bill and its
disposition of this particular assigned error:
The foregoing stipulation fully answers plaintiffs' objections to the one-day delay and
the shipping of the remains in TWA Flight 603 instead of TWA Flight 131. Under the
stipulation, parties agreed that no time was fixed to complete the contract of carriage
and that the carrier may, without notice, substitute alternate carriers or aircraft. The
carrier did not assume the obligation to carry the shipment on any specified aircraft.
xxx xxx xxx
Furthermore, contrary to the claim of plaintiffs-appellants, the conditions of the Air
Waybill are big enough to be read and noticed. Also, the mere fact that the cargo in
question was shipped in TWA Flight 603, a flight earlier on the same day than TWA
Flight 131, did not in any way cause or add to the one-day delay complained of and/or
the switching or mix-up of the bodies.53
Indubitably, that private respondent can use substitute aircraft even without notice
and without the assumption of any obligation whatsoever to carry the goods on any
specified aircraft is clearly sanctioned by the contract of carriage as specifically
provided for under the conditions thereof.
Petitioners' invocation of the interpretative rule in the Rules of Court that written
words control printed words in documents, 54 to bolster their assertion that the
typewritten provisions regarding the routing and flight schedule prevail over the
printed conditions, is tenuous. Said rule may be considered only when there is
inconsistency between the written and printed words of the contract.
As previously stated, we find no ambiguity in the contract subject of this case that
would call for the application of said rule. In any event, the contract has provided for
such a situation by explicitly stating that the above condition remains effective
"notwithstanding that the same (fixed time for completion of carriage, specified
aircraft, or any particular route or schedule) may be stated on the face hereof." While
petitioners hinge private respondents' culpability on the fact that the carrier
"certifies goods described below were received for carriage," they may have
overlooked that the statement on the face of the airway bill properly and completely
reads —
Carrier certifies goods described below were received for carriage subject to the
Conditions on the reverse hereof the goods then being in apparent good order and
condition except as noted hereon. 55 (Emphasis ours.)
Private respondents further aptly observe that the carrier's certification regarding
receipt of the goods for carriage "was of a smaller print than the condition of the Air
Waybill, including Condition No. 5 — and thus if plaintiffs-appellants had recognized
the former, then with more reason they were aware of the latter. 56
In the same vein, it would also be incorrect to accede to the suggestion of petitioners
that the typewritten specifications of the flight, routes and dates of departures and
arrivals on the face of the airway bill constitute a special contract which modifies the
printed conditions at the back thereof. We reiterate that typewritten provisions of
the contract are to be read and understood subject to and in view of the printed
conditions, fully reconciling and giving effect to the manifest intention of the parties
to the agreement.
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. 57 But where a carrier has made an express
contract to transport and deliver property within a specified time, it is bound to fulfill
its contract and is liable for any delay, no matter from what cause it may have arisen.
58 This result logically follows from the well-settled rule that where the law creates
a duty or charge, and the party is disabled from performing it without any default in
himself, and has no remedy over, then the law will excuse him, but where the party
by his own contract creates a duty or charge upon himself, he is bound to make it
good notwithstanding any accident or delay by inevitable necessity because he might
have provided against it by contract. Whether or not there has been such an
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
undertaking on the part of the carrier to be determined from the circumstances
surrounding the case and by application of the ordinary rules for the interpretation
of contracts.59
Echoing the findings of the trial court, the respondent court correctly declared that
— with particular force where a shipper accepts a bill of lading with full knowledge of
In a similar case of delayed delivery of air cargo under a very similar stipulation
contained in the airway bill which reads: "The carrier does not obligate itself to carry
the goods by any specified aircraft or on a specified time. Said carrier being hereby
authorized to deviate from the route of the shipment without any liability therefor",
our Supreme Court ruled that common carriers are not obligated by law to carry and
to deliver merchandise, and persons are not vested with the right to prompt delivery,
unless such common carriers previously assume the obligation. Said rights and
obligations are created by a specific contract entered into by the parties (Mendoza
vs. PAL, 90 Phil. 836).
There is no showing by plaintiffs that such a special or specific contract had been
entered into between them and the defendant airline companies.
And this special contract for prompt delivery should call the attention of the carrier
to the circumstances surrounding the case and the approximate amount of damages
to be suffered in case of delay (See Mendoza vs. PAL, supra). There was no such
contract entered into in the instant case.60
Also, the theory of petitioners that the specification of the flights and dates of
departure and arrivals constitute a special contract that could prevail over the printed
stipulations at the back of the airway bill is vacuous. To countenance such a postulate
would unduly burden the common carrier for that would have the effect of
unilaterally transforming every single bill of lading or trip ticket into a special contract
by the simple expedient of filling it up with the particulars of the flight, trip or voyage,
and thereby imposing upon the carrier duties and/or obligations which it may not
have been ready or willing to assume had it been timely, advised thereof.
Neither does the fact that the challenged condition No. 5 was printed at the back of
the airway bill militate against its binding effect on petitioners as parties to the
contract, for there were sufficient indications on the face of said bill that would alert
them to the presence of such additional condition to put them on their guard.
Ordinary prudence on the part of any person entering or contemplating to enter into
a contract would prompt even a cursory examination of any such conditions, terms
and/or stipulations.
There is a holding in most jurisdictions that the acceptance of a bill of lading without
dissent raises a presumption that all terms therein were brought to the knowledge
of the shipper and agreed to by him, and in the absence of fraud or mistake, he is
estopped from thereafter denying that he assented to such terms. This rule applies
its contents, and acceptance under such circumstances makes it a binding contract.
In order that any presumption of assent to a stipulation in a bill of lading limiting the
liability of a carrier may arise, it must appear that the clause containing this
exemption from liability plainly formed a part of the contract contained in the bill of
lading. A stipulation printed on the back of a receipt or bill of lading or on papers
attached to such receipt will be quite as effective as if printed on its face, if it is shown
that the consignor knew of its terms. Thus, where a shipper accepts a receipt which
states that its conditions are to be found on the back, such receipt comes within the
general rule, and the shipper is held to have accepted and to be bound by the
conditions there to be found. 61
Granting arguendo that Condition No. 5 partakes of the nature of a contract of
adhesion and as such must be construed strictly against the party who drafted the
same or gave rise to any ambiguity therein, it should be borne in mind that a contract
of adhesion may be struck down as void and unenforceable, for being subversive of
public policy, only when the weaker party is imposed upon in dealing with the
dominant bargaining party and is reduced to the alternative of taking it or leaving it,
completely deprived of the opportunity to bargain on equal footing. 62 However, Ong
Yiu vs. Court of Appeals, et al 63 instructs us that contracts of adhesion are not
entirely prohibited. The one who adheres to the contract is in reality free to reject it
entirely; if he adheres, be gives his consent. Accordingly, petitioners, far from being
the weaker party in this situation, duly signified their presumed assent to all terms of
the contract through their acceptance of the airway bill and are consequently bound
thereby. It cannot be gainsaid that petitioners' were not without several choices as
to carriers in Chicago with its numerous airways and airliner servicing the same.
We wish to allay petitioners' apprehension that Condition No. 5 of the airway bill is
productive of mischief as it would validate delay in delivery, sanction violations of
contractual obligations with impunity or put a premium on breaches of contract.
Just because we have said that condition No. 5 of the airway bill is binding upon the
parties to and fully operative in this transaction, it does not mean, and let this serve
as fair warning to respondent carriers, that they can at all times whimsically seek
refuge from liability in the exculpatory sanctuary of said Condition No. 5 or arbitrarily
vary routes, flights and schedules to the prejudice of their customers. This condition
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
only serves to insulate the carrier from liability in those instances when changes in
routes, flights and schedules are clearly justified by the peculiar circumstances of a
particular case, or by general transportation practices, customs and usages, or by
contingencies or emergencies in aviation such as weather turbulence, mechanical
failure, requirements of national security and the like. And even as it is conceded that
specific routing and other navigational arrangements for a trip, flight or voyage, or
variations therein, generally lie within the discretion of the carrier in the absence of
specific routing instructions or directions by the shipper, it is plainly incumbent upon
the carrier to exercise its rights with due deference to the rights, interests and
convenience of its customers.
A common carrier undertaking to transport property has the implicit duty to carry
and deliver it within reasonable time, absent any particular stipulation regarding time
of delivery, and to guard against delay. In case of any unreasonable delay, the carrier
shall be liable for damages immediately and proximately resulting from such neglect
of duty. 64 As found by the trial court, the delay in the delivery of the remains of
Crispina Saludo, undeniable and regrettable as it was, cannot be attributed to the
fault, negligence or malice of private respondents,65 a conclusion concurred in by
respondent court and which we are not inclined to disturb.
We are further convinced that when TWA opted to ship the remains of Crispina
Saludo on an earlier flight, it did so in the exercise of sound discretion and with
reasonable prudence, as shown by the explanation of its counsel in his letter of
February 19, 1977 in response to petitioners' demand letter:
Investigation of TWA's handling of this matter reveals that although the shipment
was scheduled on TWA Flight 131 of October 27, 1976, it was actually boarded on
TWA Flight 603 of the same day, approximately 10 hours earlier, in order to assure
that the shipment would be received in San Francisco in sufficient time for transfer
to PAL. This transfer was effected in San Francisco at 2:00 P.M. on October 27, 1976.
66
Precisely, private respondent TWA knew of the urgency of the shipment by reason of
this notation on the lower portion of the airway bill: "All documents have been
certified. Human remains of Cristina (sic) Saludo. Please return bag first available
flight to SFO." Accordingly, TWA took it upon itself to carry the remains of Crispina
Saludo on an earlier flight, which we emphasize it could do under the terms of the
airway bill, to make sure that there would be enough time for loading said remains
on the transfer flight on board PAL.
III. Petitioners challenge the validity of respondent court's finding that private
respondents are not liable for tort on account of the humiliating, arrogant and
indifferent acts of their officers and personnel. They posit that since their mother's
remains were transported ten hours earlier than originally scheduled, there was no
reason for private respondents' personnel to disclaim knowledge of the arrival or
whereabouts of the same other than their sheer arrogance, indifference and extreme
insensitivity to the feelings of petitioners. Moreover, being passengers and not
merely consignors of goods, petitioners had the right to be treated with courtesy,
respect, kindness and due consideration.
In riposte, TWA claims that its employees have always dealt politely with all clients,
customers and the public in general. PAL, on the other hand, declares that in the
performance of its obligation to the riding public, other customers and clients, it has
always acted with justice, honesty, courtesy and good faith.
Respondent appellate court found merit in and reproduced the trial court's refutation
of this assigned error:
About the only evidence of plaintiffs that may have reference to the manner with
which the personnel of defendants treated the two plaintiffs at the San Francisco
Airport are the following pertinent portions of Maria Saludo's testimony:
Q When you arrived there, what did you do, if any?
A I immediately went to the TWA counter and I inquired about whether my mother
was there or if' they knew anything about it.
Q What was the answer?
A They said they do not know. So, we waited.
Q About what time was that when you reached San Francisco from Chicago?
A I think 5 o'clock. Somewhere around that in the afternoon.
Q You made inquiry it was immediately thereafter?
A Right after we got off the plane.
Q Up to what time did you stay in the airport to wait until the TWA people could tell
you the whereabouts?
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
A Sorry, Sir, but the TWA did not tell us anything. We stayed there until about 9
o'clock. They have not heard anything about it. They did not say anything.
Q Do you want to convey to the Court that from 5 up to 9 o'clock in the evening you
yourself went back to the TWA and they could not tell you where the remains of your
mother were?
A Yes sir.
Q And after nine o'clock, what did you do?
A I told my brother my Mom was supposed to be on the Philippine Airlines flight.
"Why don't" we check with PAL instead to see if she was there?" We tried to comfort
each other. I told him anyway that was a shortest flight from Chicago to California.
We will be with our mother on this longer flight. So, we checked with the PAL.
Q What did you find?
A We learned, Yes, my Mom would be on the flight.
Q Who was that brother?
A Saturnino Saludo.
Q And did you find what was your flight from San Francisco to the Philippines?
A I do not know the number. It was the evening flight of the Philippine Airline(s) from
San Francisco to Manila.
Q You took that flight with your mother?
A We were scheduled to, Sir.
Q Now, you could not locate the remains of your mother in San Francisco could you
tell us what did you feel?
A After we were told that my mother was not there?
Q After you learned that your mother could not fly with you from Chicago to
California?
A Well, I was very upset. Of course, I wanted the confirmation that my mother was
in the West Coast. The fliqht was about 5 hours from Chicago to California. We waited
anxiously all that time on the plane. I wanted to be assured about my mother's
remains. But there was nothing and we could not get any assurance from anyone
about it.
Q Your feeling when you reached San Francisco and you could not find out from the
TWA the whereabouts of the remains, what did you feel?
A Something nobody would be able to describe unless he experiences it himself. It is
a kind of panic. I think it's a feeling you are about to go crazy. It is something I do not
want to live through again. (Inting, t.s.n., Aug. 9, 1983, pp. 14-18).
The foregoing does not show any humiliating or arrogant manner with which the
personnel of both defendants treated the two plaintiffs. Even their alleged
indifference is not clearly established. The initial answer of the TWA personnel at the
counter that they did not know anything about the remains, and later, their answer
that they have not heard anything about the remains, and the inability of the TWA
counter personnel to inform the two plaintiffs of the whereabouts of the remains,
cannot be said to be total or complete indifference to the said plaintiffs. At any rate,
it is any rude or discourteous conduct, malfeasance or neglect, the use of abusive or
insulting language calculated to humiliate and shame passenger or had faith by or on
the part of the employees of the carrier that gives the passenger an action for
damages against the carrier (Zulueta vs. Pan American World Airways, 43 SCRA 397;
Air France vs. Carrascoso, et al., 18 SCRA 155; Lopez, et al. vs. Pan American World
Airways, 16 SCRA 431; Northwest Airlines, Inc. vs. Cuenca, 14 SCRA 1063), and none
of the above is obtaining in the instant case. 67
We stand by respondent court's findings on this point, but only to the extent where
it holds that the manner in which private respondent TWA's employees dealt with
petitioners was not grossly humiliating, arrogant or indifferent as would assume the
proportions of malice or bad faith and lay the basis for an award of the damages
claimed. It must however, be pointed out that the lamentable actuations of
respondent TWA's employees leave much to be desired, particularly so in the face of
petitioners' grief over the death of their mother, exacerbated by the tension and
anxiety wrought by the impasse and confusion over the failure to ascertain over an
appreciable period of time what happened to her remains.
Airline companies are hereby sternly admonished that it is their duty not only to
cursorily instruct but to strictly require their personnel to be more accommodating
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
towards customers, passengers and the general public. After all, common carriers
such as airline companies are in the business of rendering public service, which is the
primary reason for their enfranchisement and recognition in our law. Because the
passengers in a contract of carriage do not contract merely for transportation, they
have a right to be treated with kindness, respect, courtesy and consideration. 68 A
contract to transport passengers is quite different in kind and degree from any other
contractual relation, and generates a relation attended with public duty. The
operation of a common carrier is a business affected with public interest and must
be directed to serve the comfort and convenience of passengers. 69 Passengers are
human beings with human feelings and emotions; they should not be treated as mere
numbers or statistics for revenue.
The records reveal that petitioners, particularly Maria and Saturnino Saludo,
agonized for nearly five hours, over the possibility of losing their mother's mortal
remains, unattended to and without any assurance from the employees of TWA that
they were doing anything about the situation. This is not to say that petitioners were
to be regaled with extra special attention. They were, however, entitled to the
understanding and humane consideration called for by and commensurate with the
extraordinary diligence required of common carriers, and not the cold insensitivity to
their predicament. It is hard to believe that the airline's counter personnel were
totally helpless about the situation. Common sense would and should have dictated
that they exert a little extra effort in making a more extensive inquiry, by themselves
or through their superiors, rather than just shrug off the problem with a callous and
uncaring remark that they had no knowledge about it. With all the modern
communications equipment readily available to them, which could have easily
facilitated said inquiry and which are used as a matter of course by airline companies
in their daily operations, their apathetic stance while not legally reprehensible is
morally deplorable.
Losing a loved one, especially one's, parent, is a painful experience. Our culture
accords the tenderest human feelings toward and in reverence to the dead. That the
remains of the deceased were subsequently delivered, albeit belatedly, and
eventually laid in her final resting place is of little consolation. The imperviousness
displayed by the airline's personnel, even for just that fraction of time, was especially
condemnable particularly in the hour of bereavement of the family of Crispina Saludo,
intensified by anguish due to the uncertainty of the whereabouts of their mother's
remains. Hence, it is quite apparent that private respondents' personnel were remiss
in the observance of that genuine human concern and professional attentiveness
required and expected of them.
The foregoing observations, however, do not appear to be applicable or imputable
to respondent PAL or its employees. No attribution of discourtesy or indifference has
been made against PAL by petitioners and, in fact, petitioner Maria Saludo testified
that it was to PAL that they repaired after failing to receive proper attention from
TWA. It was from PAL that they received confirmation that their mother's remains
would be on the same flight to Manila with them.
We find the following substantiation on this particular episode from the deposition
of Alberto A. Lim, PAL's cargo supervisor earlier adverted to, regarding their
investigation of and the action taken on learning of petitioner's problem:
ATTY. ALBERTO C. MENDOZA:
Yes.
Mr. Lim, what exactly was your procedure adopted in your so called investigation?
ALBERTO A. LIM:
I called the lead agent on duty at that time and requested for a copy of airway bill,
transfer manifest and other documents concerning the shipment.
ATTY ALBERTO C. MENDOZA:
Then, what?
ALBERTO A. LIM:
They proceeded to analyze exactly where PAL failed, if any, in forwarding the human
remains of Mrs. Cristina (sic) Saludo. And I found out that there was not (sic) delay in
shipping the remains of Mrs. Saludo to Manila. Since we received the body from
American Airlines on 28 October at 7:45 and we expedited the shipment so that it
could have been loaded on our flight leaving at 9:00 in the evening or just barely one
hour and 15 minutes prior to the departure of the aircraft. That is so (sic) being the
case, I reported to Manila these circumstances. 70
IV. Finally, petitioners insist, as a consequence of the delay in the shipment of their
mother's remains allegedly caused by wilful contractual breach, on their entitlement
to actual, moral and exemplary damages as well as attorney's fees, litigation
expenses, and legal interest.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
The uniform decisional tenet in our jurisdiction bolds that moral damages may be
awarded for wilful or fraudulent breach of contract 71 or when such breach is
attended by malice or bad faith. 72 However, in the absence of strong and positive
evidence of fraud, malice or bad faith, said damages cannot be awarded.73 Neither
can there be an award of exemplary damages 74 nor of attorney's fees 75 as an item
of damages in the absence of proof that defendant acted with malice, fraud or bad
faith.
The censurable conduct of TWA's employees cannot, however, be said to have
approximated the dimensions of fraud, malice or bad faith. It can be said to be more
of a lethargic reaction produced and engrained in some people by the mechanically
routine nature of their work and a racial or societal culture which stultifies what
would have been their accustomed human response to a human need under a former
and different ambience.
Nonetheless, the facts show that petitioners' right to be treated with due courtesy in
accordance with the degree of diligence required by law to be exercised by every
common carrier was violated by TWA and this entitles them, at least, to nominal
damages from TWA alone. Articles 2221 and 2222 of the Civil Code make it clear that
nominal damages are not intended for indemnification of loss suffered but for the
vindication or recognition of a right violated of invaded. They are recoverable where
some injury has been done but the amount of which the evidence fails to show, the
assessment of damages being left to the discretion of the court according to the
circumstances of the case.76 In the exercise of our discretion, we find an award of
P40,000.00 as nominal damages in favor of, petitioners to be a reasonable amount
under the circumstances of this case.
WHEREFORE, with the modification that an award of P40,000.00 as and by way of
nominal damages is hereby granted in favor of petitioners to be paid by respondent
Trans World Airlines, the appealed decision is AFFIRMED in all other respects.
SO ORDERED.
27. *Repeated case. See #18
28.
G.R. No. 122494 October 8, 1998
EVERETT STEAMSHIP CORPORATION, petitioner,
vs.
COURT OF APPEALS and HERNANDEZ TRADING CO. INC., respondents.
MARTINEZ, J.:
Petitioner Everett Steamship Corporation, through this petition for review, seeks the
reversal of the decision1 of the Court of Appeals, dated June 14, 1995, in CA-G.R. No.
428093, which affirmed the decision of the Regional Trial Court of Kalookan City,
Branch 126, in Civil Case No. C-15532, finding petitioner liable to private respondent
Hernandez Trading Co., Inc. for the value of the lost cargo.
Private respondent imported three crates of bus spare parts marked as MARCO C/No.
12, MARCO C/No. 13 and MARCO C/No. 14, from its supplier, Maruman Trading
Company, Ltd. (Maruman Trading), a foreign corporation based in Inazawa, Aichi,
Japan. The crates were shipped from Nagoya, Japan to Manila on board
"ADELFAEVERETTE," a vessel owned by petitioner's principal, Everett Orient Lines.
The said crates were covered by Bill of Lading No. NGO53MN.
Upon arrival at the port of Manila, it was discovered that the crate marked MARCO
C/No. 14 was missing. This was confirmed and admitted by petitioner in its letter of
January 13, 1992 addressed to private respondent, which thereafter made a formal
claim upon petitioner for the value of the lost cargo amounting to One Million Five
Hundred Fifty Two Thousand Five Hundred (Y1,552,500.00) Yen, the amount shown
in an Invoice No. MTM-941, dated November 14, 1991. However, petitioner offered
to pay only One Hundred Thousand (Y100,000.00) Yen, the maximum amount
stipulated under Clause 18 of the covering bill of lading which limits the liability of
petitioner.
Private respondent rejected the offer and thereafter instituted a suit for collection
docketed as Civil Case No. C-15532, against petitioner before the Regional Trial Court
of Caloocan City, Branch 126.
At the pre-trial conference, both parties manifested that they have no testimonial
evidence to offer and agreed instead to file their respective memoranda.
On July 16, 1993, the trial court rendered judgment 2 in favor of private respondent,
ordering petitioner to pay: (a) Y1,552,500.00; (b) Y20,000.00 or its peso equivalent
representing the actual value of the lost cargo and the material and packaging cost;
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
(c) 10% of the total amount as an award for and as contingent attorney's fees; and
(d) to pay the cost of the suit. The trial court ruled:
Considering defendant's categorical admission of loss and its failure to overcome the
presumption of negligence and fault, the Court conclusively finds defendant liable to
the plaintiff. The next point of inquiry the Court wants to resolve is the extent of the
liability of the defendant. As stated earlier, plaintiff contends that defendant should
be held liable for the whole value for the loss of the goods in the amount of
Y1,552,500.00 because the terms appearing at the back of the bill of lading was so
written in fine prints and that the same was not signed by plaintiff or shipper thus,
they are not bound by clause stated in paragraph 18 of the bill of lading. On the other
hand, defendant merely admitted that it lost the shipment but shall be liable only up
to the amount of Y100,000.00.
The Court subscribes to the provisions of Article 1750 of the New Civil Code —
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."
It is required, however, that the contract must be reasonable and just under the
circumstances and has been fairly and freely agreed upon. The requirements
provided in Art. 1750 of the New Civil Code must be complied with before a common
carrier can claim a limitation of its pecuniary liability in case of loss, destruction or
deterioration of the goods it has undertaken to transport.
In the case at bar, the Court is of the view that the requirements of said article have
not been met. The fact that those conditions are printed at the back of the bill of
lading in letters so small that they are hard to read would not warrant the
presumption that the plaintiff or its supplier was aware of these conditions such that
he had "fairly and freely agreed" to these conditions. It can not be said that the
plaintiff had actually entered into a contract with the defendant, embodying the
conditions as printed at the back of the bill of lading that was issued by the defendant
to plaintiff.
On appeal, the Court of Appeals deleted the award of attorney's fees but affirmed
the trial court's findings with the additional observation that private respondent can
not be bound by the terms and conditions of the bill of lading because it was not privy
to the contract of carriage. It said:
As to the amount of liability, no evidence appears on record to show that the appellee
(Hernandez Trading Co.) consented to the terms of the Bill of Lading. The shipper
named in the Bill of Lading is Maruman Trading Co., Ltd. whom the appellant (Everett
Steamship Corp.) contracted with for the transportation of the lost goods.
Even assuming arguendo that the shipper Maruman Trading Co., Ltd. accepted the
terms of the bill of lading when it delivered the cargo to the appellant, still it does not
necessarily follow that appellee Hernandez Trading, Company as consignee is bound
thereby considering that the latter was never privy to the shipping contract.
xxx xxx xxx
Never having entered into a contract with the appellant, appellee should therefore
not be bound by any of the terms and conditions in the bill of lading.
Hence, it follows that the appellee may recover the full value of the shipment lost,
the basis of which is not the breach of contract as appellee was never a privy to the
any contract with the appellant, but is based on Article 1735 of the New Civil Code,
there being no evidence to prove satisfactorily that the appellant has overcome the
presumption of negligence provided for in the law.
Petitioner now comes to us arguing that the Court of Appeals erred (1) in ruling that
the consent of the consignee to the terms and conditions of the bill of lading is
necessary to make such stipulations binding upon it; (2) in holding that the carrier's
limited package liability as stipulated in the bill of lading does not apply in the instant
case; and (3) in allowing private respondent to fully recover the full alleged value of
its lost cargo.
We shall first resolve the validity of the limited liability clause in the bill of lading.
A stipulation in the bill of lading limiting the common carrier's liability for loss or
destruction of a cargo to a certain sum, unless the shipper or owner declares a greater
value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code which
provide:
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.
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper
for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and
just under the circumstances, and has been freely and fairly agreed upon.
Such limited-liability clause has also been consistently upheld by this Court in a
number of cases.3 Thus, in Sea Land Service, Inc. vs. Intermediate Appellate Court 4,
we ruled:
It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did
not exist, the validity and binding effect of the liability limitation clause in the bill of
lading here are nevertheless fully sustainable on the basis alone of the cited Civil Code
Provisions. That said stipulation is just and reasonable is arguable from the fact that
it echoes Art. 1750 itself in providing a limit to liability only if a greater value is not
declared for the shipment in the bill of lading. To hold otherwise would amount to
questioning the justness and fairness of the law itself, and this the private respondent
does not pretend to do. But over and above that consideration, the just and
reasonable character of such stipulation is implicit in it giving the shipper or owner
the option of avoiding accrual of liability limitation by the simple and surely far from
onerous expedient of declaring the nature and value of the shipment in the bill of
lading.
Pursuant to the afore-quoted provisions of law, it is required that the stipulation
limiting the common carrier's liability for loss must be "reasonable and just under the
circumstances, and has been freely and fairly agreed upon."
The bill of lading subject of the present controversy specifically provides, among
others:
18. All claims for which the carrier may be liable shall be adjusted and settled on the
basis of the 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)
The above stipulations are, to our mind, reasonable and just. In the bill of lading, the
carrier made it clear that its liability would only be up to One Hundred Thousand
(Y100,000.00) Yen. However, the shipper, Maruman Trading, had the option to
declare a higher valuation if the value of its cargo was higher than the limited liability
of the carrier. Considering that the shipper did not declare a higher valuation, it had
itself to blame for not complying with the stipulations.
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.
We ruled in PAL, Inc. vs. Court of Appeals5 that the "jurisprudence on the matter
reveals the consistent holding of the court that contracts of adhesion are not invalid
per se and that it has on numerous occasions upheld the binding effect thereof." Also,
in Philippine American General Insurance Co., Inc. vs. Sweet Lines, Inc. 6 this Court,
speaking through the learned Justice Florenz D. Regalado, held:
. . . Ong Yiu vs. Court of Appeals, et. al., instructs us that "contracts of adhesion
wherein one party imposes a ready-made form of contract on the other . . . are
contracts not entirely prohibited. The one who adheres to the contract is in reality
free to reject it entirely; if the adheres he gives his consent." In the present case, not
even an allegation of ignorance of a party excuses non-compliance with the
contractual stipulations since the responsibility for ensuring full comprehension of
the provisions of a contract of carriage devolves not on the carrier but on the owner,
shipper, or consignee as the case may be. (Emphasis supplied)
It was further explained in Ong Yiu vs. Court of Appeals 7 that stipulations in contracts
of adhesion are valid and binding.
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 what is known as a contract of "adhesion," in regards which it has been said that
contracts of adhesion wherein one party imposes a ready-made form of contract on
the other, as the plane ticket in the case at bar, are contracts not entirely prohibited.
The one who adheres to the contract is in reality free to reject it entirely; if he adheres,
he gives his consent. . . ., 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. (Emphasis supplied)
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
Greater vigilance, however, is required of the courts when dealing with contracts of
adhesion in that the said contracts must be carefully scrutinized "in order to shield
the unwary (or weaker party) from deceptive schemes contained in ready-made
covenants,"8 such as the bill of lading in question. The stringent requirement which
the courts are enjoined to observe is in recognition of Article 24 of the Civil Code
which mandates that "(i)n all contractual, property or other relations, when one of
the parties is at a disadvantage on account of his moral dependence, ignorance,
indigence, mental weakness, tender age or other handicap, the courts must be
vigilant for his protection."
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. In fact, it was not even impleaded in
this case.
The next issue to be resolved is whether or not private respondent, as consignee,
who is not a signatory to the bill of lading is bound by the stipulations thereof.
Again, in Sea-Land Service, Inc. vs. Intermediate Appellate Court (supra), we held that
even if the consignee was not a signatory to the contract of carriage between the
shipper and the carrier, the consignee can still be bound by the contract. Speaking
through Mr. Chief Justice Narvasa, we ruled:
To begin with, there is no question of the right, in principle, of a consignee in a bill of
lading to recover from the carrier or shipper for loss of, or damage to goods being
transported under said bill, although that document may have been-as in practice it
oftentimes is-drawn up only by the consignor and the carrier without the intervention
of the
onsignee. . . . .
. . . the right of a party in the same situation as respondent here, to recover for loss
of a shipment consigned to him under a bill of lading drawn up only by and between
the shipper and the carrier, springs from either a relation of agency that may exist
between him and the shipper or consignor, or his status as stranger in whose favor
some stipulation is made in said contract, and who becomes a party thereto when he
demands fulfillment of that stipulation, in this case the delivery of the goods or cargo
shipped. In neither capacity can he assert personally, in bar to any provision of the
bill of lading, the alleged circumstance that fair and free agreement to such provision
was vitiated by its being in such fine print as to be hardly readable. Parenthetically, it
may be observed that in one comparatively recent case (Phoenix Assurance Company
vs. Macondray & Co., Inc., 64 SCRA 15) where this Court found that a similar package
limitation clause was "printed in the smallest type on the back of the bill of lading,"
it nonetheless ruled that the consignee was bound thereby on the strength of
authority holding that such provisions on liability limitation are as much a part of a
bill of lading as through physically in it and as though placed therein by agreement of
the parties.
There can, therefore, 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 proposition,
moreover, rests upon an almost uniform weight of authority. (Emphasis supplied).
When private respondent 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.9
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.
Private respondent, however, insists that the carrier should be liable for the full value
of the lost cargo in the amount of Y1,552,500.00, considering that the shipper,
Maruman Trading, had "fully declared the shipment . . ., the contents of each crate,
the dimensions, weight and value of the contents," 10 as shown in the commercial
Invoice No. MTM-941.
This claim was denied by petitioner, contending that it did not know of the contents,
quantity and value of "the shipment which consisted of three pre-packed crates
described in Bill of Lading No. NGO-53MN merely as '3 CASES SPARE PARTS.'" 11
The bill of lading in question confirms petitioner's contention. To defeat the carrier's
limited liability, the aforecited Clause 18 of the bill of lading requires that the shipper
should have declared in writing a higher valuation of its goods before receipt thereof
by the carrier and insert the said declaration in the bill of lading, with extra freight
paid. These requirements in the bill of lading were never complied with by the
shipper, hence, the liability of the carrier under the limited liability clause stands. The
commercial Invoice No. MTM-941 does not in itself sufficiently and convincingly show
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
that petitioner has knowledge of the value of the cargo as contended by private
respondent. No other evidence was proffered by private respondent to support is
contention. Thus, we are convinced that petitioner should be liable for the full value
of the lost cargo.
In fine, the liability of petitioner for the loss of the cargo is limited to One Hundred
Thousand (Y100,000.00) Yen, pursuant to Clause 18 of the bill of lading.
WHEREFORE, the decision of the Court of Appeals dated June 14, 1995 in C.A.-G.R.
CV No. 42803 is hereby REVERSED and SET ASIDE.
SO ORDERED.
29.
G.R. No. 84680 February 5, 1996
SUMMA INSURANCE CORPORATION, petitioner,
vs.
COURT OF APPEALS and METRO PORT SERVICE, INC., respondents.
DECISION
PANGANIBAN, J.:
Is an arrastre operator legally liable for the loss of a shipment in its custody? If so,
what is the extent of its liability? These are the two questions that this Court faced in
this petition for review on certiorari of the Decision1 of the Court of Appeals2 in CA-
G.R. No. CV 04964 promulgated on April 27, 1988, which affirmed with modification
the decision of the Court of First Instance of Manila in Civil Case No. 82-13988,
ordering petitioner to pay private respondent a sum of money, with legal interest,
attorney's fees and the costs of the suit.
The Facts
On November 22, 1981, the 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 insurance under Certificate No. 82/012-FEZ issued
by petitioner and Bill of Lading No. SF/MLA 1014. 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.
On February 24, 1982, 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 March 9, 1982. When
Semirara inspected the shipment at its warehouse, it discovered that the bundle of
PC8U blades was missing.
On March 15, 1982, 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.
On September 29, 1982, 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 (Civil Case No. 8213988) with the Regional Trial
Court, Branch XXIV, Manila, against NGSC and private respondent for collection of a
sum of money, damages and attorney's fees.
On August 2, 1984, the trial court rendered a decision absolving NGSC from any
liability but finding private respondent liable to petitioner. The dispositive portion of
the decision reads as follows:
PREMISES CONSIDERED, judgment is hereby rendered ordering defendant Metro
Port Service, Inc. to pay plaintiff Summa Insurance Corporation the sum of
P280,969.68 with legal interest from November 22, 1982, the date of the filing of the
complaint, until full payment, and attorney's fees in the sum of P20,000.00, with costs
of suit.
The complaint as against defendant National Galleon Shipping Corporation and the
counterclaim interposed by said defendant are hereby dismissed. (Rollo, p. 32).
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
In resolving the issue as to who had custody of the shipment when it was lost, the
trial court relied more on the good-order cargo receipts issued by NGSC than on the
short-landed certificate issued by private respondent. The trial court held:
As between the aforementioned two documentary exhibits, the Court is more
inclined to give credence to the cargo receipts. Said cargo receipts were signed by a
checker of defendant NGSC and a representative of Metro Port. It is safe to presume
that the cargo receipts accurately describe the quantity and condition of the
shipment when it was discharged from the vessel. Metro Port's representative would
not have signed the cargo receipts if only four (4) packages were discharged from the
vessel and given to the possession and custody of the arrastre operator. Having been
signed by its representative, the Metro Port is bound by the contents of the cargo
receipts.
On the other hand, the Metro Port's shortlanded certificate could not be given much
weight considering that, as correctly argued by counsel for defendant NGSC, it was
issued by Metro Port alone and was not countersigned by the representatives of the
shipping company and the consignee. Besides, the certificate was prepared by Atty.
Servillano V. Dolina, Second Deputy General Manager of Metro Port, and there is no
proof on record that he was present at the time the subject shipment was unloaded
from the vessel and received by the arrastre operator. Moreover, the shortlanded
certificate bears the date of March 15, 1982, more than three months after the
discharge of the cargo from the carrying vessel.
Neither could the Court give probative value to the marine report (Exhibit "J", also
Exhibit "l"-Razon). The attending surveyor who attended the unloading of the
shipment did not take the witness stand to testify on said report. Although
Transnational Adjustment Co.'s general manager, Mariano C. Remorin, was
presented as a witness, his testimony is not competent because he was not present
at the time of the discharge of the cargo.
Under the foregoing considerations, the Court finds that the one (1) bundle of PC8U
blade in question was not lost while the cargo was in the custody of the carrying
vessel. Considering that the missing bundle was discharged from the vessel unto the
custody of defendant arrastre operator and considering further that the consignee
did not receive this cargo from the arrastre operator, it is safe to conclude from these
facts that said missing cargo was lost while same was in the possession and control
of defendant Metro Port. Defendant Metro Port has not introduced competent
evidence to prove that the loss was not due to its fault or negligence. Consequently,
only the Metro Port must answer for the value of the missing cargo. Defendant NGSC
is absolved of any liability for such loss.
On appeal, the Court of Appeals modified the decision of the trial court and reduced
private respondent's liability to P3,500.00 as follows3 :
WHEREFORE, the judgment appealed from is MODIFIED in that defendant Metro Port
Service, Inc., is ordered to pay plaintiff Summa Insurance Corporation:
(1) the sum of P3,500.00, with legal interest from November 22, 1982, until fully paid;
and
(2) the sum of P7,000.00, as and for attorney's fees.
Costs against defendant Metro Port Service, Inc.
Petitioner moved for reconsideration of the said decision but the Court of Appeals
denied the same. Hence, the instant petition.
The Issues
The issues brought by the parties could be stated as follows:
(1) Is the private respondent legally liable for the loss of the shipment in question?
(2) If so, what is the extent of its liability?
The First Issue: Liability for Loss of Shipment
Petitioner was subrogated to the rights of the consignee. The relationship therefore
between the consignee and the arrastre operator must be examined. This
relationship is much akin to that existing between the consignee or owner of shipped
goods and the common carrier, or that between a depositor and a warehouseman4 .
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.
In this case, it has been established that the shipment was lost while in the custody
of private respondent. We find private respondent liable for the loss. This is an issue
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
of fact determined by the trial court and respondent Court, which is not reviewable
in a petition under Rule 45 of the Rules of Court.
The Second Issue: Extent of Liability
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 to5 .The insurer, as successor-in-interest of the consignee, is
likewise bound by the management contract6 . 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.7
However, a consignee who does not avail of the services of the arrastre operator is
not bound by the management contract8 . Such an exception to the rule does not
obtain here as the consignee did in fact accept delivery of the cargo from the arrastre
operator.
Section 1, Article VI of the Management Contract between private respondent and
the Bureau of Customs9 provides:
1. Responsibility and Liability for Losses and Damages The CONTRACTOR shall, at its
own expense handle all merchandise in the piers and other designated places and at
its own expense perform all work undertaken by it hereunder diligently and in a
skillful workmanlike and efficient manner; that the CONTRACTOR shall be solely
responsible as an independent CONTRACTOR, and hereby agrees to accept liability
and to promptly pay to the steamship company, consignee, consignor or other
interested party or parties for the loss, damage, or non-delivery of cargoes to the
extent of the actual invoice value of each package which in no case shall be more
than Three Thousand Five Hundred Pesos (P3,500.00) for each package unless the
value of the importation is otherwise specified or manifested or communicated in
writing together with the invoice value and supported by a certified packing list to
the CONTRACTOR by the interested party or parties before the discharge of the goods,
as well as all damage that may be suffered on account of loss, damage, or destruction
of any merchandise while in custody or under the control of the CONTRACTOR in any
pier, shed, warehouse, facility or other designated place under the supervision of the
BUREAU, . . . (Emphasis supplied).
Interpreting a similar provision in the management contract between private
respondent's predecessor, E. Razon, Inc. and the Bureau of Customs, the Court said
in E. Razon Inc. vs. Court of Appeals 10 :
Indeed, the provision in the management contract regarding the declaration of the
actual invoice value "before the arrival of the goods" must be understood to mean a
declaration before the arrival of the goods in the custody of the arrastre operator,
whether it be done long before the landing of the shipment at port, or immediately
before turn-over thereof to the arrastre operator's custody. What is essential is
knowledge beforehand of the extent of the risk to be undertaken by the arrastre
operator, as determined by the value of the property committed to its care that it
may define its responsibility for loss or damage to such cargo and to ascertain
compensation commensurate to such risk assumed . . . .
In the same case, the Court added that the advance notice of the actual invoice of
the goods entrusted to the arrastre operator is "for the purpose of determining its
liability, that it may obtain compensation commensurable to the risk it assumes,
(and) not for the purpose of determining the degree of care or diligence it must
exercise as a depository or warehouseman" 11 since the arrastre operator should not
discriminate between cargoes of substantial and small values, nor exercise care and
caution only for the handling of goods announced to it beforehand to be of sizeable
value, for that would be spurning the public service nature of its business.
On the same provision limiting the arrastre operator's liability, the Court held in
Northern Motors, Inc. v. Prince Line12 :
Appellant claims that the above quoted provision is null and void, as it limits the
liability of appellee for the loss, destruction or damage of any merchandise, to
P500.00 per package, contending that to sustain the validity of the limitation would
be to encourage acts of conversion and unjust enrichment on the part of the arrastre
operator. Appellant, however, overlooks the fact that the limitation of appellee's
liability under said provision, is not absolute or unqualified, for if the value of the
merchandise is specified or manifested by the consignee, and the corresponding
arrastre charges are paid on the basis of the declared value, the limitation does not
apply. Consequently, the questioned provision is neither unfair nor abitrary, as
contended, because the consignee has it in his hands to hold, if he so wishes, the
arrastre operator responsible for the full value of his merchandise by merely
specifying it in any of the various documents required of him, in clearing the
merchandise from the customs. For then, the appellee arrastre operator, by reasons
of the payment to it of a commensurate charge based on the higher declared value
of the merchandise, could and should take extraordinary care of the special or
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
valuable cargo. In this manner, there would be mutuality. What would, indeed, be
unfair and arbitrary is to hold the arrastre operator liable for the full value of the
merchandise after the consignee has paid the arrastre charges only (on) a basis much
lower than the true value of the goods.
In this case, no evidence was offered by petitioner proving the amount of arrastre
fees paid to private respondent so as to put the latter on notice of the value of the
cargo. While petitioner alleged that prior to the loss of the package, its value had
been relayed to private respondent through the documents the latter had processed,
petitioner does not categorically state that among the submitted documents were
the pro forma invoice value and the certified packing list. Neither does petitioner
pretend that these two documents were prerequisites to the issuance of a permit to
deliver or were attachments thereto. Even the permit to deliver, upon which
petitioner anchors its arguments, may not be considered by the Court because it was
not identified and formally offered in evidence 13 .
In civil cases, the burden of proof is on the party who would be defeated if no
evidence is given on either side. Said party must establish his case by a
preponderance of evidence, which means that the evidence as a whole adduced by
one side is superior to that of the other 14 . Petitioner having asserted the affirmative
of the issue in this case, it should have presented evidence required to obtain a
favorable judgment.
On the other hand, on top of its denial that it had received the invoice value and the
packing list before the discharge of the shipment, private respondent was able to
prove that it was apprised of the value of the cargo only after its discharge from the
vessel, ironically through petitioner's claim for the lost package to which were
attached the invoice and packing list. All told, petitioner failed to convince the Court
that the requirement of the management contract had been complied with to entitle
it to recover the actual invoice value of the lost shipment.
Anent the attorney 's fees, we find the award to be proper considering that the acts
and omissions of private respondent have compelled petitioner to litigate or incur
expenses to protect its rights 15 . However, as to the amount of the award, we find
no reason to re-examine the appellate court's determination thereon in view of the
amount of the principal obligation. Otherwise, we would be disregarding the doctrine
that discretion, when well exercised, should not be disturbed.
WHEREFORE, the petition for review on certiorari is DENIED and the decision of the
Court of Appeals is AFFIRMED. Costs against petitioner.
SO ORDERED.
30. *Repeated case. See #2 case
31.
July 27, 2016
G.R. No. 172682
SULPICIO LINES, INC., Petitioner
vs.
NAPOLEON SESANTE, NOW SUBSTITUTED BY MARIBEL ATILANO, KRISTEN MARIE,
CHRISTIAN IONE, KENNETH KERRN AND KARISNA KATE, ALL SURNAMED SESANTE,
Respondents
DECISION
BERSAMIN, J.:
Moral damages are meant to enable the injured party to obtain the means, diversions
or amusements in order to alleviate the moral suffering. Exemplary damages are
designed to permit the courts to reshape behavior that is socially deleterious in its
consequence by creating negative incentives or deterrents against such behavior.
The Case
This appeal seeks to undo and reverse the adverse decision promulgated on June 27,
2005,1 whereby the Court of Appeals (CA) affirmed with modification the judgment
of the Regional Trial Court (RTC), Branch 91, in Quezon City holding the petitioner
liable to pay temperate and moral damages due to breach of contract of carriage.2
Antecedents
On September 18, 1998, at around 12:55 p.m., the M/V Princess of the Orient, a
passenger vessel owned and operated by the petitioner, sank near Fortune Island in
Batangas. Of the 388 recorded passengers, 150 were lost.3 Napoleon Sesante, then
a member of the Philippine National Police (PNP) and a lawyer, was one of the
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
passengers who survived the sinking. He sued the petitioner for breach of contract
and damages.4
Sesante alleged in his complaint that the M/V Princess of the Orient left the Port of
Manila while Metro Manila was experiencing stormy weather; that at around 11:00
p.m., he had noticed the vessel listing starboard, so he had gone to the uppermost
deck where he witnessed the strong winds and big waves pounding the vessel; that
at the same time, he had seen how the passengers had been panicking, crying for
help and frantically scrambling for life jackets in the absence of the vessel's officers
and crew; that sensing danger, he had called a certain Veney Ceballos through his
cellphone to request him to inform the proper authorities of the situation; that
thereafter, big waves had rocked the vessel, tossing him to the floor where he was
pinned by a long steel bar; that he had freed himself only after another wave had hit
the vessel;5 that he had managed to stay afloat after the vessel had sunk, and had
been carried by the waves to the coastline of Cavite and Batangas until he had been
rescued; that he had suffered tremendous hunger, thirst, pain, fear, shock, serious
anxiety and mental anguish; that he had sustained injuries,6 and had lost money,
jewelry, important documents, police uniforms and the .45 caliber pistol issued to
him by the PNP; and that because it had committed bad faith in allowing the vessel
to sail despite the storm signal, the petitioner should pay him actual and moral
damages of ₱500,000.00 and ₱l,000,000.00, respectively.7
In its defense, the petitioner insisted on the seaworthiness of the M/V Princess of the
Orient due to its having been cleared to sail from the Port of Manila by the proper
authorities; that the sinking had been due to force majeure; that it had not been
negligent; and that its officers and crew had also not been negligent because they
had made preparations to abandon the "'vessel because they had launched life rafts
and had provided the passengers assistance in that regard.8
Decision of the RTC
On October 12, 2001, the RTC rendered its judgment in favor of the respondent,9
holding as follows:
WHEREFORE, judgment is hereby rendered in favor of plaintiff Napoleon Sesante and
against defendant Sulpicio Lines, Inc., ordering said defendant to pay plaintiff:
1. Temperate damages in the amount of ₱400,000.00;
2. Moral damages in the amount of One Million Pesos (₱l ,000,000.00);
3. Costs of suit.
SO ORDERED.10
The RTC observed that the petitioner, being negligent, was liable to Sesante pursuant
to Articles 1739 and 1759 of the Civil Code; that the petitioner had not established
its due diligence in the selection and supervision of the vessel crew; that the ship
officers had failed to inspect the stowage of cargoes despite being aware of the storm
signal; that the officers and crew of the vessel had not immediately sent a distress
signal to the Philippine Coast Guard; that the ship captain had not called for then
"abandon ship" protocol; and that based on the report of the Board of Marine Inquiry
(BMI), the erroneous maneuvering of the vessel by the captain during the extreme
weather condition had been the immediate and proximate cause of the sinking.
The petitioner sought reconsideration, but the RTC only partly granted its motion by
reducing the temperate damages from ₱500,000.00 to ₱300,000.00.11
Dissatisfied, the petitioner appealed.12 It was pending the appeal in the CA when
Sesante passed away. He was substituted by his heirs.13
Judgment of the CA
On June 27, 2005, the CA promulgated its assailed decision. It lowered the temperate
damages to ₱120,000.00, which approximated the cost of Sesante's lost personal
belongings; and held that despite the seaworthiness of the vessel, the petitioner
remained civilly liable because its officers and crew had been negligent in performing
their duties.14
Sttill aggrieved, Sulpicio Lines moved for reconsideration, but the CA denied the
motion.15
Hence, this appeal.
Issues
The petitioner attributes the following errors to the CA, to wit:
I
THE ASSAILED DECISION ERRED IN SUSTAINING THE AWARD OF MORAL DAMAGES,
AS THE INSTANT CASE IS FOR ALLEGED PERSONAL INJURIES PREDICATED ON BREACH
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
OF CONTRACT OF CARRIAGE, AND THERE BEING NO PROOF OF BAD FAITH ON THE
PART OF SULPICIO
II
THE ASSAILED DECISION ERRED IN SUSTAINING THE AMOUNT OF MORAL DAMAGES
AWARDED, THE SAME BEING UNREASONABLE, EXCESSIVE AND UNCONSCIONABLE,
AND TRANSLATES TO UNJUST ENRICHMENT AGAINST SULPICIO
III
THE ASSAILED DECISION ERRED IN SUSTAINING THE AWARD OF TEMPERATE
DAMAGES AS THE SAME CANNOT SUBSTITUTE FOR A FAILED CLAIM FOR ACTUAL
DAMAGES, THERE BEING NO COMPETENT PROOF TO WARRANT SAID AWARD
IV
THE AWARD OF TEMPERATE DAMAGES IS UNTENABLE AS THE REQUISITE NOTICE
UNDER THE LAW WAS NOT GIVEN TO SULPICIO IN ORDER TO HOLD IT LIABLE FOR
THE ALLEGED LOSS OF SESANTE'S PERSONAL BELONGINGS
V
THE ASSAILED DECISION ERRED IN SUBSTITUTING THE HEIRS OF RESPONDENT
SESANTE IN THE INST ANT CASE, THE SAME BEING A PERSONAL ACTION WHICH DOES
NOT SURVIVE
VI
THE ASSAILED DECISION ERRED IN APPLYING ARTICLE 1759 OF THE NEW CIVIL CODE
AGAINST SULPICIO SANS A CLEAR-CUT FINDING OF SULPICIO'S BAD FAITH IN THE
INCIDENT16
In other words, to be resolved are the following, namely: (1) Is the complaint for
breach of contract and damages a personal action that does not survive the death of
the plaintiff?; (2) Is the petitioner liable for damages under Article 1759 of the Civil
Code?; and (3) Is there sufficient basis for awarding moral and temperate damages?
Ruling of the Court
The appeal lacks merit.
I
An action for breach of contract of carriage
survives the death of the plaintiff
The petitioner urges that Sesante's complaint for damages was purely personal and
cannot be transferred to his heirs upon his death. Hence, the complaint should be
dismissed because the death of the plaintiff abates a personal action.
The petitioner's urging is unwarranted.
Section 16, Rule 3 of the Rules of Court lays down the proper procedure in the event
of the death of a litigant, viz.:
Section 16. Death of party; duty of counsel. - Whenever a party to a pending action
dies, and the claim is not thereby extinguished, it shall be the duty of his counsel to
inform the court within thirty (30) days after such death of the fact thereof, and to
give the name and address of his legal representative or representatives. Failure of
counsel to comply with his duty shall be a ground for disciplinary action.
The heirs of the deceased may be allowed to be substituted for the deceased, without
requiring the appointment of an executor or administrator and the court may appoint
a guardian ad litem for the minor heirs.
xxxx
Substitution by the heirs is not a matter of jurisdiction, but a requirement of due
process.17 It protects the right of due process belonging to any party, that in the
event of death the deceased litigant continues to be protected and properly
represented in the suit through the duly appointed legal representative of his
estate.18
The application of the rule on substitution depends on whether or not the action
survives the death of the litigant. Section 1, Rule 87 of the Rules of Court enumerates
the following actions that survive the death of a party, namely: (1) recovery of real or
personal property, or an interest from the estate; (2) enforcement of liens on the
estate; and (3) recovery of damages for an injury to person or property. On the one
hand, Section 5, Rule 86 of the Rules of Court lists the actions abated by death as
including: (1) claims for funeral expenses and those for the last sickness of the
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
decedent; (2) judgments for money; and (3) all claims for money against the deceased,
arising from contract, express or implied.
A contract of carriage generates a relation attended with public duty, neglect or
malfeasance of the carrier's employees and gives ground for an action for
damages.19 Sesante's claim against the petitioner involved his personal injury caused
by the breach of the contract of carriage. Pursuant to the aforecited rules, the
complaint survived his death, and could be continued by his heirs following the rule
on substitution.
II
The petitioner is liable for
breach of contract of carriage
The petitioner submits that an action for damages based on breach of contract of
carriage under Article 1759 of the Civil Code should be read in conjunction with
Article 2201 of the same code; that although Article 1759 only provides for a
presumption of negligence, it does not envision automatic liability; and that it was
not guilty of bad faith considering that the sinking of M/V Princess of the Orient had
been due to a fortuitous event, an exempting circumstance under Article 1174 of the
Civil Code.
The submission has no substance.
Article 1759 of the Civil Code does not establish a presumption of negligence because
it explicitly makes the common carrier liable in the event of death or injury to
passengers due to the negligence or fault of the common carrier's employees. It
reads:
Article 1759. Common carriers are liable for the death or injuries to passengers
through the negligence or willful acts of the former's employees, although such
employees may have acted beyond the scope of their authority or in violation of the
orders of the common earners.
This liability of the common carriers does not cease upon proof that they exercised
all the diligence of a good father of a family in the selection and supervision of their
employees.
The liability of common carriers under Article 1759 is demanded by the duty of
extraordinary diligence required of common carriers in safely carrying their
passengers.20
On the other hand, Article 1756 of the Civil Code lays down the presumption of
negligence against the common carrier in the event of death or injury of its passenger,
viz.:
Article 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.
Clearly, the trial court is not required to make an express finding of the common
carrier's fault or negligence.21 Even the mere proof of injury relieves the passengers
from establishing the fault or negligence of the carrier or its employees.22 The
presumption of negligence applies so long as there is evidence showing that: (a) a
contract exists between the passenger and the common carrier; and (b) the injury or
death took place during the existence of such contract.23 In such event, the burden
shifts to the common carrier to prove its observance of extraordinary diligence, and
that an unforeseen event or force majeure had caused the injury.24
Sesante sustained injuries due to the buffeting by the waves and consequent sinking
of M/V Princess of the Orient where he was a passenger. To exculpate itself from
liability, the common carrier vouched for the seaworthiness of M/V Princess of the
Orient, and referred to the BMI report to the effect that the severe weather condition
- a force majeure – had brought about the sinking of the vessel.
The petitioner was directly liable to Sesante and his heirs.
A common carrier may be relieved of any liability arising from a fortuitous event
pursuant to Article 117425 of the Civil Code. But while it may free a common carrier
from liability, the provision still requires exclusion of human agency from the cause
of injury or loss.26 Else stated, for a common carrier to be absolved from liability in
case of force majeure, it is not enough that the accident was caused by a fortuitous
event. The common carrier must still prove that it did not contribute to the
occurrence of the incident due to its own or its employees' negligence.27 We
explained in Schmitz Transport & Brokerage Corporation v. Transport Venture, Inc.,28
as follows:
In order to be considered a fortuitous event, however, (1) the cause of the
unforeseen and unexpected occurrence, or the failure of the debtor to comply with
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
his obligation, must be independent of human will; (2) it must be impossible to
foresee the event which constitute the caso fortuito, or if it can be foreseen it must
be impossible to avoid; (3) the occurrence must be such as to render it impossible for
the debtor to fulfill his obligation in any manner; and (4) the obligor must be free
from any participation in the aggravation of the injury resulting to the creditor.
[T]he principle embodied in the act of God doctrine strictly requires that the act must
be occasioned solely by the violence of nature. Human intervention is to be excluded
from creating or entering into the cause of the mischief. When the effect is found to
be in part the result of the participation of man, whether due to his active
intervention or neglect or failure to act, the whole occurrence is then humanized and
removed from the rules applicable to the acts of God.29 (bold underscoring supplied
for emphasis)
The petitioner has attributed the sinking of the vessel to the storm notwithstanding
its position on the seaworthiness of M/V Princess of the Orient.1âwphi1 Yet, the
findings of the BMI directly contradicted the petitioner's attribution, as follows:
7. The Immediate and the Proximate Cause of the Sinking
The Captain's erroneous maneuvers of the MIV Princess of the Orient minutes before
she sunk [sic] had caused the accident. It should be noted that during the first two
hours when the ship left North Harbor, she was navigating smoothly towards
Limbones Point. During the same period, the ship was only subjected to the normal
weather stress prevailing at the time. She was then inside Manila Bar. The waves
were observed to be relatively small to endanger the safety of the ship. It was only
when the MV Princess of the Orient had cleared Limbones Pt. while navigating
towards the direction of the Fortune Island when this agonizing misfortune struck the
ship.
Initially, a list of three degrees was observed. The listing of the ship to her portside
had continuously increased. It was at this point that the captain had misjudged the
situation. While the ship continuously listed to her portside and was battered by big
waves, strong southwesterly winds, prudent judgement [sic] would dictate that the
Captain should have considerably reduced the ship's speed. He could have
immediately ordered the Chief Engineer to slacken down the speed. Meanwhile, the
winds and waves continuously hit the ship on her starboard side. The waves were at
least seven to eight meters in height and the wind velocity was a[t] 25 knots. The MV
Princess of the Orient being a close-type ship (seven decks, wide and high
superstructure) was vulnerable and exposed to the howling winds and ravaging seas.
Because of the excessive movement, the solid and liquid cargo below the decks must
have shifted its weight to port, which could have contributed to the tilted position of
the ship.
Minutes later, the Captain finally ordered to reduce the speed of the ship to 14 knots.
At the same time, he ordered to put ballast water to the starboard-heeling tank to
arrest the continuous listing of the ship. This was an exercise in futility because the
ship was already listing between 15 to 20 degrees to her portside. The ship had
almost reached the maximum angle of her loll. At this stage, she was about to lose
her stability.
Despite this critical situation, the Captain executed several starboard maneuvers.
Steering the course of the Princess to starboard had greatly added to her tilting. In
the open seas, with a fast speed of 14 knots, advance maneuvers such as this would
tend to bring the body of the ship in the opposite side. In navigational terms, this
movement is described as the centripetal force. This force is produced by the water
acting on the side of the ship away from the center of the turn. The force is
considered to act at the center of lateral resistance which, in this case, is the centroid
of the underwater area of the ship's side away from the center of the turn. In the
case of the Princess, when the Captain maneuvered her to starboard, her body
shifted its weight to port. Being already inclined to an angle of 15 degrees, coupled
with the instantaneous movement of the ship, the cargoes below deck could have
completely shifted its position and weight towards portside. By this time, the ship
being ravaged simultaneously by ravaging waves and howling winds on her starboard
side, finally lost her grip.30
Even assuming the seaworthiness of the M/VPrincess of the Orient, the petitioner
could not escape liability considering that, as borne out by the aforequoted findings
of the BMI, the immediate and proximate cause of the sinking of the vessel had been
the gross negligence of its captain in maneuvering the vessel.
The Court also notes that Metro Manila was experiencing Storm Signal No. 1 during
the time of the sinking.31 The BMI observed that a vessel like the M/V Princess of the
Orient, which had a volume of 13.734 gross tons, should have been capable of
withstanding a Storm Signal No. I considering that the responding fishing boats of less
than 500 gross tons had been able to weather through the same waves and winds to
go to the succor of the sinking vessel and had actually rescued several of the latter's
distressed passengers.32
III
The award of moral damages and
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
temperate damages is proper
The petitioner argues that moral damages could be meted against a common carrier
only in the following instances, to wit: (1) in the situations enumerated by Article
2201 of the Civil Code; (2) in cases of the death of a passenger; or (3)where there was
bad faith on the part of the common carrier. It contends that none of these instances
obtained herein; hence, the award should be deleted.
We agree with the petitioner that moral damages may be recovered in an action upon
breach of contract of carriage only when: (a) death of a passenger results, or (b) it is
proved that the carrier was guilty of fraud and bad faith, even if death does not
result.33 However, moral damages may be awarded if the contractual breach is
found to be wanton and deliberately injurious, or if the one responsible acted
fraudulently or with malice or bad faith.34
The CA enumerated the negligent acts committed by the officers and crew of M/V
Princess of the Orient, viz.:
x x x. [W]hile this Court yields to the findings of the said investigation report, yet it
should be observed that what was complied with by Sulpicio Lines were only the basic
and minimal safety standards which would qualify the vessel as seaworthy. In the
same report however it also revealed that the immediate and proximate cause of the
sinking of the M/V Princess of the Orient was brought by the following: erroneous
maneuvering command of Captain Esrum Mahilum and due to the weather condition
prevailing at the time of the tragedy. There is no doubt that under the circumstances
the crew of the vessel were negligent in manning it. In fact this was clearly established
by the investigation of the Board of Marine Inquiry where it was found that:
The Chief Mate, when interviewed under oath, had attested that he was not able to
make stability calculation of the ship vis-à-vis her cargo. He did not even know the
metacentric height (GM) of the ship whether it be positive or negative.
As cargo officer of the ship, he failed to prepare a detailed report of the ship's cargo
stowage plan.
He likewise failed to conduct the soundings (measurement) of the ballast tanks
before the ship departed from port. He readily presumed that the ship was full of
ballast since the ship was fully ballasted when she left Cebu for Manila on 16
September 1998 and had never discharge[d] its contents since that time.
Being the officer-in-charge for emergency situation (sic) like this, he failed to execute
and supervise the actual abandonship (sic) procedure. There was no announcement
at the public address system of abandonship (sic), no orderly distribution of life
jackets and no orderly launching of life rafts. The witnesses have confirmed this
finding on their sworn statements.
There was miscalculation in judgment on the part of the Captain when he erroneously
navigated the ship at her last crucial moment.x x x
To aggravate his case, the Captain, having full command and responsibility of the MV
Princess of the Orient, had failed to ensure the proper execution of the actual
abandoning of the ship.
The deck and engine officers (Second Mate, Third Mate, Chief Engineers, Second
Engineer, Third Engineer and Fourth Engineer), being in charge of their respective
abandonship (sic) post, failed to supervise the crew and passengers in the proper
execution of abandonship (sic) procedure.
The Radio Officer (spark) failed to send the SOS message in the internationally
accepted communication network (VHF Channel 16). Instead, he used the Single Side
Band (SSB) radio in informing the company about the emergency situation. x x x x35
The aforestated negligent acts of the officers and crew of M/V Princess of the Orient
could not be ignored in view of the extraordinary duty of the common carrier to
ensure the safety of the passengers. The totality of the negligence by the officers and
crew of M/V Princess of the Orient, coupled with the seeming indifference of the
petitioner to render assistance to Sesante,36 warranted the award of moral damages.
While there is no hard-and-fast rule in determining what is a fair and reasonable
amount of moral damages, the discretion to make the determination is lodged in the
trial court with the limitation that the amount should not be palpably and
scandalously excessive. The trial court then bears in mind that moral damages are
not intended to impose a penalty on the wrongdoer, or to enrich the plaintiff at the
expense of the defendant.37 The amount of the moral damages must always
reasonably approximate the extent of injury and be proportional to the wrong
committed.38
The Court recognizes the mental anguish, agony and pain suffered by Sesante who
fought to survive in the midst of the raging waves of the sea while facing the
immediate prospect of losing his life. His claim for moral and economic vindication is
a bitter remnant of that most infamous tragedy that left hundreds of families broken
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
in its wake. The anguish and moral sufferings he sustained after surviving the tragedy
would always include the memory of facing the prospect of his death from drowning,
or dehydration, or being preyed upon by sharks. Based on the established
circumstances, his survival could only have been a miracle wrought by God's grace,
by which he was guided in his desperate swim for the safety of the shore. But even
with the glory of survival, he still had to grapple with not just the memory of having
come face to face with almost certain death, but also with having to answer to the
instinctive guilt for the rest of his days of being chosen to live among the many who
perished in the tragedy.39
While the anguish, anxiety, pain and stress experienced by Sesante during and after
the sinking cannot be quantified, the moral damages to be awarded should at least
approximate the reparation of all the consequences of the petitioner's negligence.
With moral damages being meant to enable the injured party to obtain the means,
diversions or amusements in order to alleviate his moral and physical sufferings,40
the Court is called upon to ensure that proper recompense be allowed to him,
through his heirs. For this purpose, the amount of ₱l,000,000.00, as granted by the
RTC and affirmed by the CA, is maintained.
The petitioner contends that its liability for the loss of Sesante' s personal belongings
should conform with A1iicle 1754, in relation to Articles 1998, 2000 to 2003 of the
Civil Code, which provide:
Article 1754. The provisions of Articles 1733 to 1753 shall apply to the passenger's
baggage which is not in his personal custody or in that of his employees. As to other
baggage, the rules in Articles 1998 and 2000 to 2003 concerning the responsibility of
hotel-keepers shall be applicable.
xxxx
Article 1998. The deposit of effects made by travellers in hotels or inns shall also be
regarded as necessary. The keepers of hotels or inns shall be responsible for them as
depositaries, provided that notice was given to them, or to their employees, of the
effects brought by the guests and that, on the part of the latter, they take the
precautions which said hotel-keepers or their substitutes advised relative to the care
and vigilance of their effects.
xxxx
Article 2000. The responsibility referred to in the two preceding articles shall include
the loss of, or injury to the personal property of the guests caused by the servants or
employees of the keepers of hotels or inns as well as by strangers; but not that which
may proceed from any force majeure. The fact that travellers are constrained to rely
on the vigilance of the keeper of the hotel or inn shall be considered in determining
the degree of care required of him.
Article 2001. The act of a thief or robber, who has entered the hotel is not deemed
force majeure, unless it is done with the use of arms or through an irresistible force.
Article 2002. The hotel-keeper is not liable for compensation if the loss is due to the
acts of the guest, his family, servants or visitors, or if the loss arises from the character
of the things brought into the hotel.
Article 2003. The hotel-keeper cannot free himself from responsibility by posting
notices to the effect that he is not liable for the articles brought by the guest. Any
stipulation to the contrary between the hotel-keeper and the guest whereby the
responsibility of the former as set forth in Articles 1998 to 2001 is suppressed or
diminished shall be void.
The petitioner denies liability because Sesante' s belongings had remained in his
custody all throughout the voyage until the sinking, and he had not notified the
petitioner or its employees about such belongings. Hence, absent such notice, liability
did not attach to the petitioner.
Is notification required before the common carrier becomes liable for lost belongings
that remained in the custody of the passenger?
We answer in the negative.
The rule that the common carrier is always responsible for the passenger's baggage
during the voyage needs to be emphasized. Article 1754 of the Civil Code does not
exempt the common carrier from liability in case of loss, but only highlights the
degree of care required of it depending on who has the custody of the belongings.
Hence, the law requires the common carrier to observe the same diligence as the
hotel keepers in case the baggage remains with the passenger; otherwise,
extraordinary diligence must be exercised.41 Furthermore, the liability of the
common carrier attaches even if the loss or damage to the belongings resulted from
the acts of the common carrier's employees, the only exception being where such
loss or damages is due to force majeure.42
In YHT Realty Corporation v. Court of Appeals,43we declared the actual delivery of
the goods to the innkeepers or their employees as unnecessary before liability could
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
attach to the hotelkeepers in the event of loss of personal belongings of their guests
considering that the personal effects were inside the hotel or inn because the
hotelkeeper shall remain accountable.44 Accordingly, actual notification was not
necessary to render the petitioner as the common carrier liable for the lost personal
belongings of Sesante. By allowing him to board the vessel with his belongings
without any protest, the petitioner became sufficiently notified of such belongings.
So long as the belongings were brought inside the premises of the vessel, the
petitioner was thereby effectively notified and consequently duty-bound to observe
the required diligence in ensuring the safety of the belongings during the voyage.
Applying Article 2000 of the Civil Code, the petitioner assumed the liability for loss of
the belongings caused by the negligence of its officers or crew. In view of our finding
that the negligence of the officers and crew of the petitioner was the immediate and
proximate cause of the sinking of the M/V Princess of the Orient, its liability for
Sesante' s lost personal belongings was beyond question.
The petitioner claims that temperate damages were erroneously awarded because
Sesante had not proved pecuniary loss; and that the CA merely relied on his self-
serving testimony.
The award of temperate damages was proper.
Temperate damages may be recovered when some pecuniary loss has been suffered
but the amount cannot, from the nature of the case, be proven with certainty.45
Article 222446 of the Civil Code expressly authorizes the courts to award temperate
damages despite the lack of certain proof of actual damages.47
Indubitably, Sesante suffered some pecuniary loss from the sinking of the vessel, but
the value of the loss could not be established with certainty. The CA, which can try
facts and appreciate evidence, pegged the value of the lost belongings as itemized in
the police report at P120,000.00. The valuation approximated the costs of the lost
belongings. In that context, the valuation of ₱120,000.00 is correct, but to be
regarded as temperate damages.
In fine, the petitioner, as a common carrier, was required to observe extraordinary
diligence in ensuring the safety of its passengers and their personal belongings. It
being found herein short of the required diligence rendered it liable for the resulting
injuries and damages sustained by Sesante as one of its passengers.
Should the petitioner be further held liable for exemplary damages?
In contracts and quasi-contracts, the Court has the discretion to award exemplary
damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner.48 Indeed, exemplary damages cannot be recovered as a matter
of right, and it is left to the court to decide whether or not to award them.49 In
consideration of these legal premises for the exercise of the judicial discretion to
grant or deny exemplary damages in contracts and quasi-contracts against a
defendant who acted in a wanton, fraudulent, reckless, oppressive, or malevolent
manner, the Court hereby awards exemplary damages to Sesante.
First of all, exemplary damages did not have to be specifically pleaded or proved,
because the courts had the discretion to award them for as long as the evidence so
warranted. In Marchan v. Mendoza,50 the Court has relevantly discoursed:
x x x. It is argued that this Court is without jurisdiction to adjudicate this exemplary
damages since there was no allegation nor prayer, nor proof, nor counterclaim of
error for the same by the appellees. It is to be observed however, that in the
complaint, plaintiffs "prayed for such other and further relief as this Court may deem
just and equitable." Now, since the body of the complaint sought to recover damages
against the defendant-carrier wherein plaintiffs prayed for indemnification for the
damages they suffered as a result of the negligence of said Silverio Marchan who is
appellant's employee; and since exemplary damages is intimately connected with
general damages, plaintiffs may not be expected to single out by express term the
kind of damages they arc trying to recover against the defendant's carrier. Suffice it
to state that when plaintiffs prayed in their complaint for such other relief and
remedies that may be availed of under the premises, in effect, therefore, the court is
called upon to exercise and use its discretion whether the imposition of punitive or
exemplary damages even though not expressly prayed or pleaded in the plaintiffs'
complaint."
x x x It further appears that the amount of exemplary damages need not be proved,
because its determination depends upon the amount of compensatory damages that
may be awarded to the claimant. If the amount of exemplary damages need not be
proved, it need not also be alleged, and the reason is obvious because it is merely
incidental or dependent upon what the court may award as compensatory damages.
Unless and until this premise is determined and established, what may be claimed as
exemplary damages would amount to a mere surmise or speculation. It follows as a
necessary consequence that the amount of exemplary damages need not be pleaded
in the complaint because the same cannot be predetermined. One can merely ask
that it be determined by the court if in the use of its discretion the same is warranted
by the evidence, and this is just what appellee has done. (Bold underscoring supplied
for emphasis)
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754
And, secondly, exemplary damages are designed by our civil law to "permit the courts
to reshape behavior that is socially deleterious in its consequence by creating
negative incentives or deterrents against such behavior. "51 The nature and purpose
for this kind of damages have been well-stated in People v. Dalisay,52to wit:
Also known as 'punitive' or 'vindictive' damages, exemplary or corrective damages
are intended to serve as a deterrent to serious wrong doings, and as a vindication of
undue sufferings and wanton invasion of the rights of an injured or a punishment for
those guilty of outrageous conduct. These terms are generally, but not always, used
interchangeably. In common law, there is preference in the use of exemplary
damages when the award is to account for injury to feelings and for the sense of
indignity and humiliation suffered by a person as a result of an injury that has been
maliciously and wantonly inflicted, the theory being that there should be
compensation for the hurt caused by the highly reprehensible conduct of the
defendant - associated with such circumstances as willfulness, wantonness, malice,
gross negligence or recklessness, oppression, insult or fraud or gross fraud - that
intensifies the injury. The terms punitive or vindictive damages are often used to refer
to those species of damages that may be awarded against a person to punish him for
his outrageous conduct. In either case, these damages arc intended in good measure
to deter the wrongdoer and others like him from similar conduct in the future. (Bold
underscoring supplied for emphasis)
The BMI found that the "erroneous maneuvers" during the ill-fated voyage by the
captain of the petitioner's vessel had caused the sinking. After the vessel had cleared
Limbones Point while navigating towards the direction of Fortune Island, the captain
already noticed the listing of the vessel by three degrees to the portside of the vessel,
but, according to the BMI, he did not exercise prudence as required by the situation
in which his vessel was suffering the battering on the starboard side by big waves of
seven to eight meters high and strong southwesterly winds of 25 knots. The BMI
pointed out that he should have considerably reduced the speed of the vessel based
on his experience about the vessel - a close-type ship of seven decks, and of a wide
and high superstructure - being vulnerable if exposed to strong winds and high waves.
He ought to have also known that maintaining a high speed under such circumstances
would have shifted the solid and liquid cargo of the vessel to port, worsening the
tilted position of the vessel. It was only after a few minutes thereafter that he finally
ordered the speed to go down to 14 knots, and to put ballast water to the starboard-
heeling tank to arrest the continuous listing at portside. By then, his moves became
an exercise in futility because, according to the BMI, the vessel was already listing to
her portside between 15 to 20 degrees, which was almost the maximum angle of the
vessel's loll. It then became inevitable for the vessel to lose her stability.
The BMI concluded that the captain had executed several starboard maneuvers
despite the critical situation of the vessel, and that the maneuvers had greatly added
to the tilting of the vessel. It observed:
x x x In the open seas, with a fast speed of 14 knots, advance maneuvers such as this
would tend to bring the body of the ship in the opposite side. In navigational terms,
this movement is described as the centripetal force. This force is produced by the
water acting on the side of the ship away from the center of the turn. The force is
considered to act at the center of lateral resistance which, in this case, is the centroid
of the underwater area of the ship's side away from the center of the turn. In the
case of the Princess, when the Captain maneuvered her to starboard, her body
shifted its weight to port. Being already inclined to an angle of 15 degrees, coupled
with the instantaneous movement of the ship, the cargoes below deck could have
completely shifted its position and weight towards portside. By this time, the ship
being ravaged simultaneously by ravaging waves and howling winds on her starboard
side, finally lost her grip.53
Clearly, the petitioner and its agents on the scene acted wantonly and recklessly.
Wanton and reckless are virtually synonymous in meaning as respects liability for
conduct towards others.54 Wanton means characterized by extreme recklessness
and utter disregard for the rights of others; or marked by or manifesting arrogant
recklessness of justice or of rights or feelings of others.55 Conduct is reckless when it
is an extreme departure from ordinary care, in a situation in which a high degree of
danger is apparent. It must be more than any mere mistake resulting from
inexperience, excitement, or confusion, and more than mere thoughtlessness or
inadvertence, or simple inattention.56
The actuations of the petitioner and its agents during the incident attending the
unfortunate sinking of the M/V Princess of the Orient were far below the standard of
care and circumspection that the law on common carriers demanded. Accordingly,
we hereby fix the sum of ₱l ,000,000.00 in order to serve fully the objective of
exemplarity among those engaged in the business of transporting passengers and
cargo by sea. The amount would not be excessive, but proper. As the Court put it in
Pereria v. Zarate:57
Anent the ₱1,000,000.00 allowed as exemplary damages, we should not reduce the
amount if only to render effective the desired example for the public good. As a
common carrier, the Pereñas needed to be vigorously reminded to observe their duty
to exercise extraordinary diligence to prevent a similarly senseless accident from
happening again. Only by an award of exemplary damages in that amount would
TRANSPO LAW – FT CASE / NCC ART 1734 – 1754

suffice to instill in them and others similarly situated like them the ever-present need
for greater and constant vigilance in the conduct of a business imbued with public
interest.58 (Bold underscoring supplied for emphasis)

WHEREFORE, the Court AFFIRMS the decision promulgated on June 27, 2005 with the
MODIFICATIONS that: (a) the amount of moral damages is fixed at ₱l,000,000.00; (b)
the amount of ₱l,000,000.00 is granted as exemplary damages; and (c) the sum of
₱l20,000.00 is allowed as temperate damages, all to be paid to the heirs of the late
Napoleon Sesante. In addition, all the amounts hereby awarded shall earn interest of
6% per annum from the finality of this decision until fully paid. Costs of suit to be paid
by the petitioner.

SO ORDERED.