Transpo Cases PDF

Personally Digested Cases
LAW ON TRANSPORTATION
AND PUBLIC UTILITIES
A. Concept, Parties, and Perfection

EVERETT STEAMSHIP CORPORATION (Petitioner) v COURT OF APPEALS and HERNANDEZ
TRADING CO. INC (Private Respondent).
Facts:
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 ADELFA EVERETTE," 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 conXirmed 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 1,552,500.00 Yen, the amount shown in an Invoice No. MTM-941, dated November
14, 1991. However, petitioner offered to pay only 100,000.00 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 RTC of Caloocan City.
Issue/s:
1. WON, the limited liability clause in the bill of lading was valid.
2. WON, private respondent (Hernandez Trading Co.) as consignee, who is not a signatory to the bill
of lading is bound by the stipulations thereof.
Held/Ratio:
1. 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.
Art. 1750. A contract Xixing 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.
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 speciXically 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 proXits 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.
University of San Carlos
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Abellana | Abril | Cebrecus | Deogracias

Felongco | Parado | Tacuyan
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 Appeals 5 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."
2. 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.
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 consignee. . . . .
. . . 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 fulXillment of that stipulation, in this case the delivery of the goods or
cargo shipped.
When private respondent formally claimed reimbursement for the missing goods from petitioner and
subsequently Xiled 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 conXirms 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 sufXiciently and convincingly show 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.
MOF COMPANY, INC (Petitioner) v SHIN YANG BROKERAGE CORPORATION (Respondent).
Facts:
On October 25, 2001, Halla Trading Co., a company based in Korea, shipped to Manila secondhand cars
and other articles on board the vessel Hanjin Busan 0238W. The bill of lading covering the shipment,
i.e., Bill of Lading No. HJSCPUSI14168303, which was prepared by the carrier Hanjin Shipping Co., Ltd.
(Hanjin), named respondent Shin Yang Brokerage Corp. (Shin Yang) as the consignee and indicated
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that payment was on a "Freight Collect" basis, i.e., that the consignee/receiver of the goods would be
the one to pay for the freight and other charges in the total amount of P57,646.00.
The shipment arrived in Manila on October 29, 2001. Thereafter, petitioner MOF Company, Inc. (MOF),
Hanjins exclusive general agent in the Philippines, repeatedly demanded the payment of ocean freight,
documentation fee and terminal handling charges from Shin Yang. The latter, however, failed and
refused to pay contending that it did not cause the importation of the goods, that it is only the
Consolidator of the said shipment, that the ultimate consignee did not endorse in its favor the original
bill of lading and that the bill of lading was prepared without its consent.
Thus, on March 19, 2003, MOF Xiled a case for sum of money before the Metropolitan Trial Court of
Pasay City (MeTC Pasay). MOF alleged that Shin Yang, a regular client, caused the importation and
shipment of the goods and assured it that ocean freight and other charges would be paid upon arrival
of the goods in Manila. Yet, after Hanjin's compliance, Shin Yang unjustly breached its obligation to pay.
MOF argued that Shin Yang, as the named consignee in the bill of lading, entered itself as a party to the
contract and bound itself to the "Freight Collect" arrangement. MOF thus prayed for the payment
of P57,646.00 representing ocean freight, documentation fee and terminal handling charges as well as
damages and attorneys fees.
Claiming that it is merely a consolidator/forwarder and that Bill of Lading No. HJSCPUSI14168303 was
not endorsed to it by the ultimate consignee, Shin Yang denied any involvement in shipping the goods
or in promising to shoulder the freightage. It asserted that it never authorized Halla Trading Co. to ship
the articles or to have its name included in the bill of lading. Shin Yang also alleged that MOF failed to
present supporting documents to prove that it was Shin Yang that caused the importation or the one
that assured payment of the shipping charges upon arrival of the goods in Manila.
Issue/s:
WON, a consignee who is not a signatory to the bill of lading, is bound by the stipulations thereof
(WON, private respondent who was not an agent of the shipper and who did not make any demand for
the fulXilment of the stipulations of the bill of lading drawn in its favor is liable to pay the
corresponding freight and handling charges).
Held/Ratio:
Generally yes, but in this case, MOF failed to prove that it was Shin Yang which furnished all the details
indicated in the bill of lading and that Shin Yang consented to shoulder the shipment costs. There is
also nothing in the records which would indicate that Shin Yang was an agent of Halla Trading Co. or
that it exercised any act that would bind it as a named consignee. Thus, the CA correctly dismissed the
suit for failure of petitioner to establish its cause against respondent.
The bill of lading is oftentimes drawn up by the shipper/consignor and the carrier without the
intervention of the consignee. However, the latter can be bound by the stipulations of the bill of lading
when a) there is a relation of agency between the shipper or consignor and the consignee or b)
when the consignee demands fulYillment of the stipulation of the bill of lading which was drawn
up in its favor.
In Keng Hua Paper Products Co., Inc. v. Court of Appeals, we held that once the bill of lading is received
by the consignee who does not object to any terms or stipulations contained therein, it
constitutes as an acceptance of the contract and of all of its terms and conditions, of which the
acceptor has actual or constructive notice.
In sum, a consignee, although not a signatory to the contract of carriage between the shipper
and the carrier, becomes a party to the contract by reason of either a) the relationship of agency
between the consignee and the shipper/ consignor; b) the unequivocal acceptance of the bill of
lading delivered to the consignee, with full knowledge of its contents or c) availment of the
stipulation pour autrui, i.e., when the consignee, a third person, demands before the carrier the
fulYillment of the stipulation made by the consignor/shipper in the consignees favor,
speciYically the delivery of the goods/cargoes shipped.
In the instant case, Shin Yang consistently denied in all of its pleadings that it authorized Halla Trading,
Co. to ship the goods on its behalf; or that it got hold of the bill of lading covering the shipment or that
it demanded the release of the cargo. Basic is the rule in evidence that the burden of proof lies upon
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him who asserts it, not upon him who denies, since, by the nature of things, he who denies a fact
cannot produce any proof of it. Thus, MOF has the burden to controvert all these denials, it being
insistent that Shin Yang asserted itself as the consignee and the one that caused the shipment of the
goods to the Philippines.
In civil cases, the party having the burden of proof must establish his case by preponderance of
evidence, which means evidence which is of greater weight, or more convincing than that which is
offered in opposition to it. Here, MOF failed to meet the required quantum of proof. Other than
presenting the bill of lading, which, at most, proves that the carrier acknowledged receipt of the
subject cargo from the shipper and that the consignee named is to shoulder the freightage, MOF has
not adduced any other credible evidence to strengthen its cause of action.
DANGWA TRANSPORTATION CO., INC. and THEODORE LARDIZABAL (petitioners) v COURT OF
APPEALS, INOCENCIA CUDIAMAT, et al, (respondents)
Facts:
On May 13, 1985, private respondents Xiled a complaint for damages against petitioners for the death
of Pedrito Cudiamat as a result of a vehicular accident which occurred on March 25, 1985 at Marivic,
Sapid, Mankayan, Benguet. Among others, it was alleged that on said date, while petitioner Theodore
M. Lardizabal was driving a passenger bus belonging to petitioner corporation in a reckless and
imprudent manner and without due regard to trafXic rules and regulations and safety to persons and
property, it ran over its passenger, Pedrito Cudiamat. However, instead of bringing Pedrito immediately
to the nearest hospital, the said driver, in utter bad faith and without regard to the welfare of the
victim, Xirst brought his other passengers and cargo to their respective destinations before bringing
said victim to the Lepanto Hospital where he expired.
On the other hand, petitioners alleged that they had observed and continued to observe the
extraordinary diligence required in the operation of the transportation company and the supervision
of the employees, even as they add that they are not absolute insurers of the safety of the public at
large. Further, it was alleged that it was the victim's own carelessness and negligence which gave rise
to the subject incident, hence they prayed for the dismissal of the complaint plus an award of damages
in their favor by way of a counterclaim.
Issue/s:
WON, the CA erred in reversing the decision of the trial court and in Xinding petitioners negligent and
liable for the damages claimed.
However, respondent court (CA), in arriving at a different opinion, declares that:
From the testimony of appellees' own witness in the person of Vitaliano Safarita, it is evident
that the subject bus was at full stop when the victim Pedrito Cudiamat boarded the same as it
was precisely on this instance where a certain Miss Abenoja alighted from the bus. Moreover,
contrary to the assertion of the appellees, the victim did indicate his intention to board the bus
as can be seen from the testimony of the said witness when he declared that Pedrito Cudiamat
was no longer walking and made a sign to board the bus when the latter was still at a distance
from him. It was at the instance when Pedrito Cudiamat was closing his umbrella at the
platform of the bus when the latter made a sudden jerk movement (as) the driver commenced
to accelerate the bus.
Evidently, the incident took place due to the gross negligence of the appellee-driver in
prematurely stepping on the accelerator and in not waiting for the passenger to Xirst secure his
seat especially so when we take into account that the platform of the bus was at the time
slippery and wet because of a drizzle. The defendants-appellees utterly failed to observe their
duty and obligation as common carrier to the end that they should observe extra-ordinary
diligence in the vigilance over the goods and for the safety of the passengers transported by
them according to the circumstances of each case (Article 1733, New Civil Code).
Held/Ratio:
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No, the CA correctly held. The foregoing testimonies show that the place of the accident and the place
where one of the passengers alighted were both between Bunkhouses 53 and 54, hence the Xinding of
the Court of Appeals that the bus was at full stop when the victim boarded the same is correct. They
further conXirm the conclusion that the victim fell from the platform of the bus when it suddenly
accelerated forward and was run over by the rear right tires of the vehicle, as shown by the physical
evidence on where he was thereafter found in relation to the bus when it stopped. Under such
circumstances, it cannot be said that the deceased was guilty of negligence.
The contention of petitioners that the driver and the conductor had no knowledge that the victim
would ride on the bus, since the latter had supposedly not manifested his intention to board the same,
does not merit consideration. When the bus is not in motion there is no necessity for a person who
wants to ride the same to signal his intention to board. A public utility bus, once it stops, is in effect
making a continuous offer to bus riders. Hence, it becomes the duty of the driver and the
conductor, every time the bus stops, to do no act that would have the effect of increasing the
peril to a passenger while he was attempting to board the same. The premature acceleration of
the bus in this case was a breach of such duty.
It is the duty of common carriers of passengers, including common carriers by railroad train, streetcar,
or motorbus, to stop their conveyances a reasonable length of time in order to afford passengers
an opportunity to board and enter, and they are liable for injuries suffered by boarding
passengers resulting from the sudden starting up or jerking of their conveyances while they are
doing so.
Further, even assuming that the bus was moving, the act of the victim in boarding the same cannot be
considered negligent under the circumstances. As clearly explained in the testimony of the aforestated
witness for petitioners, Virginia Abalos, the bus had "just started" and "was still in slow motion" at the
point where the victim had boarded and was on its platform.
It is not negligence per se, or as a matter of law, for one attempt to board a train or streetcar which is
moving slowly. An ordinarily prudent person would have made the attempt aboard the moving
conveyance under the same or similar circumstances. The fact that passengers board and alight from
slowly moving vehicle is a matter of common experience both the driver and conductor in this case
could not have been unaware of such an ordinary practice.
The victim herein, by stepping and standing on the platform of the bus, is already considered a
passenger and is entitled all the rights and protection pertaining to such a contractual relation. Hence,
it has been held that the duty which the carrier passengers owes to its patrons extends to persons
boarding cars as well as to those alighting therefrom.
Common carriers, from the nature of their business and reasons of public policy, are bound to observe
extraordinary diligence for the safety of the passengers transported by according to all the
circumstances of each case. A common carrier is bound to carry the passengers safely as far as human
care and foresight can provide, using the utmost diligence very cautious persons, with a due regard for
all the circumstances.
It has also been repeatedly held that in an action based on a contract of carriage, the court need not
make an express Xinding of fault or negligence on the part of the carrier in order to hold it responsible
to pay the damages sought by the passenger. By contract of carriage, the carrier assumes the express
obligation to transport the passenger to his destination safely and observe extraordinary diligence
with a due regard for all the circumstances, and any injury that might be suffered by the passenger is
right away attributable to the fault or negligence of the carrier. This is an exception to the general rule
that negligence must be proved, and it is therefore incumbent upon the carrier to prove that it has
exercised extraordinary diligence as prescribed in Articles 1733 and 1755 of the Civil Code.
KOREAN AIRLINES CO., LTD., (petitioner) v COURT OF APPEALS and JUANITO C.
LAPUZ, (respondents).
Sometime in 1980, Juanito C. Lapuz, an automotive electrician, was contracted for employment in
Jeddah, Saudi Arabia, for a period of one year through Pan PaciXic Overseas Recruiting Services, Inc.
Lapuz was supposed to leave on November 8, 1980, via Korean Airlines. Initially, he was "wait-listed,"
which meant that he could only be accommodated if any of the conXirmed passengers failed to show up
at the airport before departure. When two of such passengers did not appear, Lapuz and another
person by the name of Perico were given the two unclaimed seats.
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According to Lapuz, he was allowed to check in with one suitcase and one shoulder bag at the check-in
counter of KAL. He passed through the customs and immigration sections for routine check-up and was
cleared for departure as Passenger No. 157 of KAL Flight No. KE 903. Together with the other
passengers, he rode in the shuttle bus and proceeded to the ramp of the KAL aircraft for boarding.
However, when he was at the third or fourth rung of the stairs, a KAL ofXicer pointed to him and
shouted "Down! Down!" He was thus barred from taking the Xlight. When he later asked for another
booking, his ticket was canceled by KAL. Consequently, he was unable to report for his work in Saudi
Arabia within the stipulated 2-week period and so lost his employment.
KAL, on the other hand, alleged that on November 8, 1980, Pan PaciXic Recruiting Services Inc.
coordinated with KAL for the departure of 30 contract workers, of whom only 21 were conXirmed and
9 were wait-listed passengers. The agent of Pan PaciXic, Jimmie Joseph, after being informed that there
was a possibility of having one or two seats becoming available, gave priority to Perico, who was one of
the supervisors of the hiring company in Saudi Arabia. The other seat was won through lottery by
Lapuz. However, only one seat became available and so, pursuant to the earlier agreement that Perico
was to be given priority, he alone was allowed to board.
Issue/s:
WON, the CA erred in concluding that petitioner committed a breach of contract of carriage
notwithstanding lack of proper, competent and sufXicient evidence of the existence of such contract.
Held/Ratio:
No, it correctly held that petitioner committed a breach of contract. The status of Lapuz as standby
passenger was changed to that of a conXirmed passenger when his name was entered in the passenger
manifest of KAL for its Flight No. KE 903. His clearance through immigration and customs clearly
shows that he had indeed been conXirmed as a passenger of KAL in that Xlight. KAL thus committed a
breach of the contract of carriage between them when it failed to bring Lapuz to his destination.
This Court has held that a contract to transport passengers is different in kind and degree from
any other contractual relation. The business of the carrier is mainly with the traveling public. It
invites people to avail themselves of the comforts and advantages it offers. The contract of air carriage
generates a relation attended with a public duty. Passengers have the right to be treated by the
carrier's employees with kindness, respect, courtesy and due consideration. They are entitled to be
protected against personal misconduct, injurious language, indignities and abuses from such
employees. So it is that any discourteous conduct on the part of these employees toward a passenger
gives the latter an action for damages against the carrier.
The breach of contract was aggravated in this case when, instead of courteously informing Lapuz of his
being a "wait-listed" passenger, a KAL ofXicer rudely shouted "Down! Down!" while pointing at him,
thus causing him embarrassment and public humiliation.
KAL argues that "the evidence of conFirmation of a chance passenger status is not through the entry of the
name of a chance passenger in the passenger manifest nor the clearance from the Commission on
Immigration and Deportation, because they are merely means of facilitating the boarding of a chance
passenger in case his status is conFirmed. The SC was not persuaded.
The evidence presented by Lapuz shows that he had indeed checked in at the departure
counter, passed through customs and immigration, boarded the shuttle bus and proceeded to
the ramp of KAL's aircraft. In fact, his baggage had already been loaded in KAL's aircraft, to be
Ylown with him to Jeddah. The contract of carriage between him and KAL had already been
perfected when he was summarily and insolently prevented from boarding the aircraft.
LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN (petitioners) v MARJORIE NAVIDAD,
PRUDENT SECURITY AGENCY, et al, (respondents).
Facts:
On 14 October 1993, about half an hour past seven oclock in the evening, Nicanor Navidad, then
drunk, entered the EDSA LRT station after purchasing a "token" (representing payment of the fare).
While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the security guard
assigned to the area approached Navidad. A misunderstanding or an altercation between the two
apparently ensued that led to a Xist Xight. No evidence, however, was adduced to indicate how the Xight
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started or who, between the two, delivered the Xirst blow or how Navidad later fell on the LRT tracks.
At the exact moment that Navidad fell, an LRT train, operated by petitioner Rodolfo Roman, was
coming in. Navidad was struck by the moving train, and he was killed instantaneously.
The widow and the children Xiled a complaint for damages against Junelito Escartin, Rodolfo Roman,
the LRTA, the Metro Transit Organization, Inc. (Metro Transit), and Prudent for the death of her
husband.
The lower court ruled in favor of the plaintiffs. However, the appellate court ratiocinated that while the
deceased might not have then as yet boarded the train, a contract of carriage theretofore had already
existed when the victim entered the place where passengers were supposed to be after paying the fare
and getting the corresponding token therefor. In exempting Prudent from liability, the court stressed
that there was nothing to link the security agency to the death of Navidad. It said that Navidad failed to
show that Escartin inXlicted Xist blows upon the victim and the evidence merely established the fact of
death of Navidad by reason of his having been hit by the train owned and managed by the LRTA and
operated at the time by Roman. The appellate court faulted petitioners for their failure to present
expert evidence to establish the fact that the application of emergency brakes could not have stopped
the train.
Issue/s:
WON, the CA was correct in exempting Prudent from liability and holding the LRTA and Roman jointly
and severally liable.
Held/Ratio:
Law and jurisprudence dictate that a common carrier, both from the nature of its business and for
reasons of public policy, is burdened with the duty of exercising utmost diligence in ensuring the safety
of passengers. The Civil Code, governing the liability of a common carrier for death of or injury to its
passengers, provides:
"Article 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 all the
circumstances.
"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."
"Article 1759. Common carriers are liable for the death of or injuries to passengers through the
negligence or willful acts of the formers employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of the common carriers.
"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."
"Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the
willful acts or negligence of other passengers or of strangers, if the common carriers employees
through the exercise of the diligence of a good father of a family could have prevented or stopped the
act or omission."
The law requires common carriers to carry passengers safely using the utmost diligence of very
cautious persons with due regard for all circumstances. Such duty of a common carrier to provide
safety to its passengers so obligates it not only during the course of the trip but for so long as the
passengers are within its premises and where they ought to be in pursuance to the contract of
carriage. The statutory provisions render a common carrier liable for death of or injury to passengers
(a) through the negligence or wilful acts of its employees or b) on account of wilful acts or negligence
of other passengers or of strangers if the common carriers employees through the exercise of due
diligence could have prevented or stopped the act or omission. In case of such death or injury, a carrier
is presumed to have been at fault or been negligent, and by simple proof of injury, the passenger is
relieved of the duty to still establish the fault or negligence of the carrier or of its employees and the
burden shifts upon the carrier to prove that the injury is due to an unforeseen event or to force
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majeure. In the absence of satisfactory explanation by the carrier on how the accident occurred, which
petitioners, according to the appellate court, have failed to show, the presumption would be that it has
been at fault, an exception from the general rule that negligence must be proved.
The foundation of LRTAs liability is the contract of carriage and its obligation to indemnify the victim
arises from the breach of that contract by reason of its failure to exercise the high diligence required of
the common carrier. In the discharge of its commitment to ensure the safety of passengers, a carrier
may choose to hire its own employees or avail itself of the services of an outsider or an independent
Xirm to undertake the task. In either case, the common carrier is not relieved of its responsibilities
under the contract of carriage.
Should Prudent be made likewise liable? If at all, that liability could only be for tort under the
provisions of Article 217612 and related provisions, in conjunction with Article 2180,13 of the Civil
Code. The premise, however, for the employers liability is negligence or fault on the part of the
employee.
There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any culpable act
or omission, he must also be absolved from liability. Needless to say, the contractual tie between the
LRT and Navidad is not itself a juridical relation between the latter and Roman; thus, Roman can be
made liable only for his own fault or negligence.
B. Common Carries (Arts 1731 to 1766, NCC)
Art. 1731. He who has executed work upon a movable has a right to retain it by way of pledge until he
is paid. (1600)

SECTION 4. - Common Carriers (n)
SUBSECTION 1. - General Provisions
Art. 1732. Common carriers are persons, corporations, Xirms 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.
Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed in Articles 1734,
1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is
further set forth in Articles 1755 and 1756.

SUBSECTION 2. - Vigilance Over Goods
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods,
unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act of omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the
goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed extraordinary diligence as required in
Article 1733.
Art. 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
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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.
Art. 1737. The common carrier's duty to observe extraordinary diligence over the goods remains in full
force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or
owner has made use of the right of stoppage in transitu.
Art. 1738. The extraordinary liability of the common carrier continues to be operative even during the
time the goods are stored in a warehouse of the carrier at the place of destination, until the consignee
has been advised of the arrival of the goods and has had reasonable opportunity thereafter to remove
them or otherwise dispose of them.
Art. 1739. In order that the common carrier may be exempted from responsibility, the natural disaster
must have been the proximate and only cause of the loss. However, the common carrier must exercise
due diligence to prevent or minimize loss before, during and after the occurrence of Xlood, storm or
other natural disaster in order that the common carrier may be exempted from liability for the loss,
destruction, or deterioration of the goods. The same duty is incumbent upon the common carrier in
case of an act of the public enemy referred to in Article 1734, No. 2.
Art. 1740. If the common carrier negligently incurs in delay in transporting the goods, a natural
disaster shall not free such carrier from responsibility.
Art. 1741. If the shipper or owner merely contributed to the loss, destruction or deterioration of the
goods, the proximate cause thereof being the negligence of the common carrier, the latter shall be
liable in damages, which however, shall be equitably reduced.
Art. 1742. Even if the loss, destruction, or deterioration of the goods should be caused by the character
of the goods, or the faulty nature of the packing or of the containers, the common carrier must exercise
due diligence to forestall or lessen the loss.
Art. 1743. If through the order of public authority the goods are seized or destroyed, the common
carrier is not responsible, provided said public authority had power to issue the order.
Art. 1744. A stipulation between the common carrier and the shipper or owner limiting the liability of
the former for the loss, destruction, or deterioration of the goods to a degree less than extraordinary
diligence shall be valid, provided it be:
(1) In writing, signed by the shipper or owner;
(2) Supported by a valuable consideration other than the service rendered by the common carrier; and
(3) Reasonable, just and not contrary to public policy.
Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and
contrary to public policy:
(1) That the goods are transported at the risk of the owner or shipper;
(2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods;
(3) That the common carrier need not observe any diligence in the custody of the goods;
(4) That the common carrier shall exercise a degree of diligence less than that of a good father of a
family, or of a man of ordinary prudence in the vigilance over the movables transported;
(5) That the common carrier shall not be responsible for the acts or omission of his or its employees;
(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with
grave or irresistible threat, violence or force, is dispensed with or diminished;
(7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on
account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the
contract of carriage.
Art. 1746. An agreement limiting the common carrier's liability may be annulled by the shipper or
owner if the common carrier refused to carry the goods unless the former agreed to such stipulation.
Art. 1747. If the common carrier, without just cause, delays the transportation of the goods or changes
the stipulated or usual route, the contract limiting the common carrier's liability cannot be availed of in
case of the loss, destruction, or deterioration of the goods.
Art. 1748. An agreement limiting the common carrier's liability for delay on account of strikes or riots
is valid.
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.
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Art. 1750. A contract Xixing 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.
Art. 1751. The fact that the common carrier has no competitor along the line or route, or a part thereof,
to which the contract refers shall be taken into consideration on the question of whether or not a
stipulation limiting the common carrier's liability is reasonable, just and in consonance with public
policy.
Art. 1752. Even when there is an agreement limiting the liability of the common carrier in the vigilance
over the goods, the common carrier is disputably presumed to have been negligent in case of their loss,
destruction or deterioration.
Art. 1753. The law of the country to which the goods are to be transported shall govern the liability of
the common carrier for their loss, destruction or deterioration.
Art. 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 employee. As to other baggage, the rules in Articles 1998 and
2000 to 2003 concerning the responsibility of hotel-keepers shall be applicable.

SUBSECTION 3. - Safety of Passengers
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 all the
circumstances.
Art. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at
fault or to have acted negligently, unless they prove that they observed extraordinary diligence as
prescribed in Articles 1733 and 1755.
Art. 1757. The responsibility of a common carrier for the safety of passengers as required in Articles
1733 and 1755 cannot be dispensed with or lessened by stipulation, by the posting of notices, by
statements on tickets, or otherwise.
Art. 1758. When a passenger is carried gratuitously, a stipulation limiting the common carrier's
liability for negligence is valid, but not for wilful acts or gross negligence.
The reduction of fare does not justify any limitation of the common carrier's liability.
Art. 1759. Common carriers are liable for the death of or injuries to passengers through the negligence
or wilful 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 carriers.
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.
Art. 1760. The common carrier's responsibility prescribed in the preceding article cannot be
eliminated or limited by stipulation, by the posting of notices, by statements on the tickets or
otherwise.
Art. 1761. The passenger must observe the diligence of a good father of a family to avoid injury to
himself.
Art. 1762. The contributory negligence of the passenger does not bar recovery of damages for his
death or injuries, if the proximate cause thereof is the negligence of the common carrier, but the
amount of damages shall be equitably reduced.
Art. 1763. A common carrier is responsible for injuries suffered by a passenger on account of the wilful
acts or negligence of other passengers or of strangers, if the common carrier's employees through the
exercise of the diligence of a good father of a family could have prevented or stopped the act or
omission.

SUBSECTION 4. - Common Provisions

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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 common carrier.
Art. 1765. The Public Service Commission may, on its own motion or on petition of any interested
party, after due hearing, cancel the certiXicate of public convenience granted to any common carrier
that repeatedly fails to comply with his or its duty to observe extraordinary diligence as prescribed in
this Section.
Art. 1766. In all matters not regulated by this Code, the rights and obligations of common carriers shall
be governed by the Code of Commerce and by special laws.
1. RA 9295, SEC. 3. DeYinition of Terms. - As used in and for purposes of this Act, the following terms,
whether in singular or plural are hereby deXined as follows:
(a) "Domestic shipping" shall mean the transport of passenger or cargo, or both, by ships duly
registered and licensed under Philippine law to engage in trade and commerce between
Philippine ports and within Philippine territorial or internal waters, for hire or compensation,
with general or limited clientele, whether permanent, occasional or incidental, with or without
Xixed routes, and done for contractual or commercial purposes;
CA 146, Section 13.
XXX
(b) The term "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, sub-way motor vehicle, either for freight or passenger, or both
with or without Xixed route and whether may be its classiXication, 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 railways, marine repair shop,
[warehouse] 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 system, wire or wireless broadcasting stations and other similar public services:
Provided, however, That a person engaged in agriculture, not otherwise a public service, who owns a
motor vehicle and uses it personally and/or enters into a special contract whereby said motor vehicle
is offered for hire or compensation to a third party or third parties engaged in agriculture, not itself or
themselves a public service, for operation by the latter for a limited time and for a speciXic purpose
directly connected with the cultivation of his or their farm, the transportation, processing, and
marketing of agricultural products of such third party or third parties shall not be considered as
operating a public service for the purposes of this Act.
2. Common Carriage:
PEDRO DE GUZMAN (petitioner) v COURT OF APPEALS and ERNESTO CENDANA (respondents)
Facts:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal in
Pangasinan. Upon gathering sufXicient quantities of such scrap material, respondent would bring such
material to Manila for resa le. 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 Xilled 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 Xilled 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
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Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and the
cargo.
In private respondents Answer upon the complaint Xiled against him, 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.
The Court of Appeals reversed the judgment of the trial court and held that respondent had been engaged
in transporting return loads of freight "as a casual occupation a sideline to his scrap iron business" and
not as a common carrier.
Issue/s:
1. WON, private respondent (Cendana) may be properly characterized as a common carrier.
2. WON, private respondent can be held liable.
Held/Ratio:
1. Yes, he is. The Civil Code deXines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, Xirms 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 deliberately omitted 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. 146, 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:
... 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
Xixed route and whatever may be its classiXication, 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 certiXicate of public
convenience, and concluded he was not a common carrier. This is palpable error. A certiYicate 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 Yirm acts
as a common carrier, without regard to whether or not such carrier has also complied with the
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requirements of the applicable regulatory statute and implementing regulations and has been
granted a certiYicate of public convenience or other franchise. To exempt private respondent from
the liabilities of a common carrier because he has not secured the necessary certiXicate 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.
2. He cannot be held liable. The occurrence of the loss (robbery by armed men) 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.
Addtl Notes: Liabilities of Common Carriers Common carriers, "by the nature of their business and
for reasons of public policy are held to a very high degree of care and diligence ("extraordinary
diligence") in the carriage of goods as well as of passengers. The speciXic 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;
(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
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 Xirstly that the speciXic cause alleged in the
instant case the hijacking of the carrier's truck does not fall within any of the Yive (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 presumption, however, may be overthrown by proof of
extraordinary diligence on the part of private respondent.
The duty of extraordinary diligence in the vigilance over goods is, under Article 1733, given additional
speciXication 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;
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(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."
PLANTERS PRODUCTS, INC., (petitioner) v COURT OF APPEALS, KYOSEI KISEN KABUSHIKI
KAISHA, et al, respondents.
Facts:
Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of
New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk
on 16 June 1974 aboard the cargo vessel M/V "Sun Plum" owned by private respondent Kyosei Kisen
Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union, Philippines,
as evidenced by Bill of Lading No. KP-1 signed by the master of the vessel and issued on the date of
departure.
On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant to
the Uniform General Charter was entered into between Mitsubishi as shipper/charterer and KKKK as
shipowner, in Tokyo, Japan. Riders to the aforesaid charter-party starting from par. 16 to 40 were
attached to the pre-printed agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party were also
subsequently entered into on the 18th, 20th, 21st and 27th of May 1974, respectively.
It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th, 14th
and 18th). 10A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was
hired by PPI to determine the "outturn" of the cargo shipped, by taking draft readings of the vessel
prior to and after discharge. 11 The survey report submitted by CSCI to the consignee (PPI) dated 19
July 1974 revealed a shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer
approximating 18 M/T was contaminated with dirt. The same results were contained in a CertiXicate of
Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which showed that the cargo delivered
was indeed short of 94.839 M/T and about 23 M/T were rendered unXit for commerce, having been
polluted with sand, rust and dirt.
Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies (SSA),
the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged shortage
in the goods shipped and the diminution in value of that portion said to have been contaminated with
dirt.
Respondent SSA explained that they were not able to respond to the consignee's claim for payment
because, according to them, what they received was just a request for shortlanded certiXicate and not a
formal claim, and that this "request" was denied by them because they "had nothing to do with the
discharge of the shipment." Hence, on 18 July 1975, PPI Xiled an action for damages with the Court of
First Instance of Manila.
Issue/s:
1. WON, a common carrier becomes a private carrier by reason of a charter-party NO
2. WON, the shipowner in the instant case was able to prove that he had exercised that degree of
diligence required of him under the law. YES
Held/Ratio:
A "charter-party" is deXined as a contract by which an entire ship, or some principal part thereof, is let
by the owner to another person for a speciXied 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; Charter parties
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are of two types: (a) contract of affreightment which involves the use of shipping space on vessels
leased by the owner in part or as a whole, to carry goods for others; and, (b) charter by demise or
bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer to him of
its entire command and possession and consequent control over its navigation, including the master
and the crew, who are his servants. Contract of affreightment may either be time charter, wherein
the vessel is leased to the charterer for a Xixed 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 vessel only, either for
a determinate period of time or for a single or consecutive voyage, the shipowner to supply the ship's
stores, pay for the wages of the master and the crew, and defray the expenses for the maintenance of
the ship.
Upon the other hand, the term "common or public carrier" is deXined in Art. 1732 of the Civil Code. The
deXinition 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. The distinction between a "common or public carrier" and a "private or
special carrier" lies in the character of the business, such that if the undertaking is a single transaction,
not a part of the general business or occupation, although involving the carriage of goods for a fee, the
person or corporation offering such service is a private carrier.
Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their
business, should observe extraordinary diligence in the vigilance over the goods they carry. In the case
of private carriers, however, the exercise of ordinary diligence in the carriage of goods will sufXice.
Moreover, in the case of loss, destruction or deterioration of the goods, common carriers are presumed
to have been at fault or to have acted negligently, and the burden of proving otherwise rests on
them. On the contrary, no such presumption applies to private carriers, for whosoever alleges damage
to or deterioration of the goods carried has the onus of proving that the cause was the negligence of
the carrier.
1) It is not disputed that respondent carrier, in the ordinary course of business, operates as a
common carrier, transporting goods indiscriminately for all persons. When petitioner chartered
the vessel M/V "Sun Plum", the ship captain, its ofXicers and compliment were under the employ of the
shipowner and therefore continued to be under its direct supervision and control. Hardly then can we
charge the charterer, a stranger to the crew and to the ship, with the duty of caring for his cargo when
the charterer did not have any control of the means in doing so. This is evident in the present case
considering that the steering of the ship, the manning of the decks, the determination of the course of
the voyage and other technical incidents of maritime navigation were all consigned to the ofXicers and
crew who were screened, chosen and hired by the shipowner.
It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the
whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as
in the case of a time-charter or voyage-charter. It is only when the charter includes both the vessel and
its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the
particular voyage covering the charter-party is concerned. Indubitably, a shipowner in a time or voyage
charter retains possession and control of the ship, although her holds may, for the moment, be the
property of the charterer.
2) In an action for recovery of damages against a common carrier on the goods shipped, the shipper or
consignee should Xirst prove the fact of shipment and its consequent loss or damage while the same
was in the possession, actual or constructive, of the carrier. Thereafter, the burden of proof shifts to
respondent to prove that he has exercised extraordinary diligence required by law or that the loss,
damage or deterioration of the cargo was due to fortuitous event, or some other circumstances
inconsistent with its liability.
To our mind, respondent carrier has sufXiciently overcome, by clear and convincing proof, the prima
facie presumption of negligence.
The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977 before
the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan, testiXied that before
the fertilizer was loaded, the four (4) hatches of the vessel were cleaned, dried and fumigated. After
completing the loading of the cargo in bulk in the ship's holds, the steel pontoon hatches were closed
and sealed with iron lids, then covered with three (3) layers of serviceable tarpaulins which were tied
with steel bonds. The hatches remained close and tightly sealed while the ship was in transit as the
weight of the steel covers made it impossible for a person to open without the use of the ship's boom.
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It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the
possibility of spillage of the cargo into the sea or seepage of water inside the hull of the vessel. When
M/V "Sun Plum" docked at its berthing place, representatives of the consignee boarded, and in the
presence of a representative of the shipowner, the foreman, the stevedores, and a cargo surveyor
representing CSCI, opened the hatches and inspected the condition of the hull of the vessel. The
stevedores unloaded the cargo under the watchful eyes of the shipmates who were overseeing the
whole operation on rotation basis.
Verily, the presumption of negligence on the part of the respondent carrier has been
efYicaciously overcome by the showing of extraordinary zeal and assiduity exercised by the
carrier in the care of the cargo. This was conXirmed by respondent appellate court thus
. . . Be that as it may, contrary to the trial court's Xinding, the record of the instant case discloses ample
evidence showing that defendant carrier was not negligent in performing its obligations. Particularly,
the following testimonies of plaintiff-appellee's own witnesses clearly show absence of negligence by
the defendant carrier; that the hull of the vessel at the time of the discharge of the cargo was sealed
and nobody could open the same except in the presence of the owner of the cargo and the
representatives of the vessel; that the cover of the hatches was made of steel and it was overlaid with
tarpaulins, three layers of tarpaulins and therefore their contents were protected from the weather;
and, that to open these hatches, the seals would have to be broken, all the seals were found to be intact.
The period during which private respondent was to observe the degree of diligence required of it as a
public carrier began from the time the cargo was unconditionally placed in its charge after the vessel's
holds were duly inspected and passed scrutiny by the shipper, up to and until the vessel reached its
destination and its hull was reexamined by the consignee, but prior to unloading. This is clear from the
limitation clause agreed upon by the parties in the Addendum to the standard "GENCON" time charter-
party which provided for an F.I.O.S., meaning, that the loading, stowing, trimming and discharge of the
cargo was to be done by the charterer, free from all risk and expense to the carrier. Moreover, a
shipowner is liable for damage to the cargo resulting from improper stowage only when the stowing is
done by stevedores employed by him, and therefore under his control and supervision, not when the
same is done by the consignee or stevedores under the employ of the latter.
Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss,
destruction or deterioration of the goods if caused by the charterer of the goods or defects in the
packaging or in the containers. The Code of Commerce also provides that all losses and deterioration
which the goods may suffer during the transportation by reason of fortuitous event, force majeure, or
the inherent defect of the goods, shall be for the account and risk of the shipper, and that proof of these
accidents is incumbent upon the carrier. The carrier, nonetheless, shall be liable for the loss and
damage resulting from the preceding causes if it is proved, as against him, that they arose through his
negligence or by reason of his having failed to take the precautions which usage has established among
careful persons.
ESTRELLITA M. BASCOS (petitioners) v COURT OF APPEALS and RODOLFO A. CIPRIANO
(respondents)
Facts:
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, . . ."

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Cipriano demanded reimbursement from petitioner but the latter refused to pay. Eventually, Cipriano
Xiled a complaint for a sum of money and damages with writ of preliminary attachment for breach of a
contract of carriage.
Issue/s:
1. WON, the petitioner was a common carrier
2. WON, the highjacking could be considered as a force majeure.
Held/Ratio:
Both the lower and the appellate courts appreciated that the 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 afXidavits which referred to the contract as "lease".
These afXidavits were made by Jesus Bascos and by petitioner herself. She further averred that Jesus
Bascos conXirmed in his testimony his statement that the contract was a lease contract. 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.
Article 1732 of the Civil Code deXines a common carrier as "(a) person, corporation or Xirm, or
association engaged in the business of carrying or transporting passengers or goods or both, by land,
water or air, for compensation, offering their services to the public." The test to determine a common
carrier is "whether the given undertaking is a part of the business engaged in by the carrier which he
has held out to the general public as his occupation rather than the quantity or extent of the business
transacted." In this case, petitioner herself has made the admission that she was in the trucking
business, offering her trucks to those with cargo to move. Judicial admissions are conclusive and no
evidence is required to prove the same.
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 afXidavits by petitioner where the transaction was referred to as a lease contract.
Regarding the Xirst contention, 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 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.
2. 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:
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"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 afXidavit, 22 Jesus Bascos'
afXidavit, 23 and Juanito Morden's 24 "Salaysay". However, both the trial court and the Court of Appeals
have concluded that these afXidavits were not enough to overcome the presumption. Petitioner's
afXidavit about the hijacking was based on what had been told her by Juanito Morden. It was not a Xirst-
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 afXidavit of Jesus Bascos
did not dwell on how the hijacking took place. Thirdly, while the afXidavit 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. AfXidavits are not considered the best evidence if the afXiants
are available as witnesses. 25 The subsequent Xiling of the information for carnapping and robbery
against the accused named in said afXidavits did not necessarily mean that the contents of the afXidavits
were true because they were yet to be determined in the trial of the criminal cases.
MR. & MRS. ENGRACIO FABRE, JR. and PORFIRIO CABIL (petitioners) v COURT OF APPEALS,
AMYLINE ANTONIO, JOHN RICHARDS, et al (respondents)
Facts:
Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus. They used
the bus principally in connection with a bus service for school children which they operated in Manila.
The couple had a driver, PorXirio J. Cabil, whom they hired in 1981, after trying him out for two weeks,
His job was to take school children to and from the St. Scholastica's College in Malate, Manila.
On November 2, 1984 private respondent Word for the World Christian Fellowship Inc. (WWCF)
arranged with petitioners for the transportation of 33 members of its Young Adults Ministry from
Manila to La Union and back in consideration of which private respondent paid petitioners the amount
of P3,000.00.
The group was scheduled to leave on November 2, 1984, at 5:00 o'clock in the afternoon. However, as
several members of the party were late, the bus did not leave the Tropical Hut at the corner of Ortigas
Avenue and EDSA until 8:00 o'clock in the evening. Petitioner PorXirio Cabil drove the minibus.
The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at Carmen
was under repair, so that petitioner Cabil, who was unfamiliar with the area (it being his Xirst trip to La
Union), was forced to take a detour through the town of Baay in Lingayen, Pangasinan. At 11:30 that
night, petitioner Cabil came upon a sharp curve on the highway, running on a south to east direction,
which he described as "siete." The road was slippery because it was raining, causing the bus, which was
running at the speed of 50 kilometers per hour, to skid to the left road shoulder. The bus hit the left
trafXic steel brace and sign along the road and rammed the fence of one Jesus Escano, then turned over
and landed on its left side, coming to a full stop only after a series of impacts. The bus came to rest off
the road. A coconut tree which it had hit fell on it and smashed its front portion.
Several passengers were injured. Private respondent Amyline Antonio was thrown on the Xloor of the
bus and pinned down by a wooden seat which came down by a wooden seat which came off after being
unscrewed. It took three persons to safely remove her from this portion. She was in great pain and
could not move.
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The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said he was not
familiar with the area and he could not have seen the curve despite the care he took in driving the bus,
because it was dark and there was no sign on the road. He said that he saw the curve when he was
already within 15 to 30 meters of it. He allegedly slowed down to 30 kilometers per hour, but it was too
late.
Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati, Metro Manila. As a
result of the accident, she is now suffering from paraplegia and is permanently paralyzed from the
waist down. During the trial she described the operations she underwent and adduced evidence
regarding the cost of her treatment and therapy. Immediately after the accident, she was taken to the
Nazareth Hospital in Baay, Lingayen. As this hospital was not adequately equipped, she was transferred
to the Sto. Nio Hospital, also in the town of Ba-ay, where she was given sedatives. An x-ray was taken
and the damage to her spine was determined to be too severe to be treated there. She was therefore
brought to Manila, Xirst to the Philippine General Hospital and later to the Makati Medical Center where
she underwent an operation to correct the dislocation of her spine.
Issue/s:
WON, petitioners were liable because (1) an earlier departure (made impossible by the congregation's
delayed meeting) could have averted the mishap and (2) under the contract, the WWCF was directly
responsible for the conduct of the trip.
Held/Ratio: Yes, they were liable. The hour of departure had not been Xixed. Even if it had been, the
delay did not bear directly on the cause of the accident. With respect to the second contention, it was
held in an early case that:
[A] person who hires a public automobile and gives the driver directions as to the place to which he
wishes to be conveyed, but exercises no other control over the conduct of the driver, is not responsible for
acts of negligence of the latter or prevented from recovering for injuries suffered from a collision between
the automobile and a train, caused by the negligence or the automobile driver.
As already stated, this case actually involves a contract of carriage. Petitioners, the Fabres, did not have
to be engaged in the business of public transportation for the provisions of the Civil Code on common
carriers to apply to them. As this Court has held:
Art. 1732. Common carriers are persons, corporations, Xirms 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
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.
As common carriers, the Fabres were found to exercise "extraordinary diligence" for the safe
transportation of the passengers to their destination. This duty of care is not excused by proof that
they exercise the diligence of a good father of the family in the selection and supervision of their
employee. As Art. 1759 of the Code provides:
Common carriers are liable for the death of 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 carriers.
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.
FIRST PHILIPPINE INDUSTRIAL CORPORATION (petitioner) v COURT OF APPEALS, HONORABLE
PATERNO V. TAC-AN, (respondents)
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Facts: Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to
contract, install and operate oil pipelines. The original pipeline concession was granted in 1967 1 and
renewed by the Energy Regulatory Board in 1992.
Sometime in January 1995, petitioner applied for a mayor's permit with the OfXice of the Mayor of
Batangas City. However, before the mayor's permit could be issued, the respondent City Treasurer
required petitioner to pay a local tax based on its gross receipts for the Xiscal year 1993 pursuant to the
Local Government Code. The respondent City Treasurer assessed a business tax on the petitioner
amounting to P956,076.04 payable in four installments based on the gross receipts for products
pumped at GPS-1 for the Xiscal year 1993 which amounted to P181,681,151.00. In order not to hamper
its operations, petitioner paid the tax under protest in the amount of P239,019.01 for the Xirst quarter
of 1993.
On January 20, 1994, petitioner Xiled a letter-protest addressed to the respondent City Treasurer, the
pertinent portion of which reads:
Please note that our Company (FPIC) is a pipeline operator with a government concession
granted under the Petroleum Act. It is engaged in the business of transporting petroleum
products from the Batangas reXineries, via pipeline, to Sucat and JTF Pandacan Terminals. As
such, our Company is exempt from paying tax on gross receipts under Section 133 of the Local
Government Code of 1991 . . . .
Moreover, Transportation contractors are not included in the enumeration of contractors under
Section 131, Paragraph (h) of the Local Government Code. Therefore, the authority to impose tax
"on contractors and other independent contractors" under Section 143, Paragraph (e) of the
Local Government Code does not include the power to levy on transportation contractors.
The imposition and assessment cannot be categorized as a mere fee authorized under Section
147 of the Local Government Code. The said section limits the imposition of fees and charges on
business to such amounts as may be commensurate to the cost of regulation, inspection, and
licensing. Hence, assuming arguendo that FPIC is liable for the license fee, the imposition thereof
based on gross receipts is violative of the aforecited provision. The amount of P956,076.04
(P239,019.01 per quarter) is not commensurate to the cost of regulation, inspection and
licensing. The fee is already a revenue raising measure, and not a mere regulatory imposition.
On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner cannot
be considered engaged in transportation business, thus it cannot claim exemption under Section 133
(j) of the Local Government Code.
On June 15, 1994, petitioner Xiled with the Regional Trial Court of Batangas City a complaint for tax
refund with prayer for writ of preliminary injunction against respondents City of Batangas and
Adoracion Arellano in her capacity as City Treasurer.
Issue/s:
1) WON, the petitioner is not a common carrier
2) WON, the exemption sought for by the petitioner is not clear under the law.
Held/Ratio:
1) The petitioner is a common carrier. A "common carrier" may be deXined, broadly, as one who holds
himself out to the public as engaged in the business of transporting persons or property from place to
place, for compensation, offering his services to the public generally.
Art. 1732 of the Civil Code deXines a "common carrier" as "any person, corporation, Xirm or association
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air,
for compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a public employment,
and must hold himself out as ready to engage in the transportation of goods for person
generally as a business and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is conXined;
3. He must undertake to carry by the method by which his business is conducted and over his
established roads; and
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4. The transportation must be for hire.

Based on the above deXinitions and requirements, there is no doubt that petitioner is a common
carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum products,
for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to
all persons who choose to employ its services, and transports the goods by land and for
compensation. The fact that petitioner has a limited clientele does not exclude it from the
deYinition of a common carrier.
Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the
Local Government Code refers only to common carriers transporting goods and passengers
through moving vehicles or vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the deXinition of "common carriers" in the Civil Code makes no
distinction as to the means of transporting, as long as it is by land, water or air. It does not
provide that the transportation of the passengers or goods should be by motor vehicle. In fact,
in the United States, oil pipe line operators are considered common carriers. 17
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common
carrier." Thus, Article 86 thereof provides that:
Art. 86. Pipe line concessionaire as common carrier. A pipe line shall have the
preferential right to utilize installations for the transportation of petroleum owned by him,
but is obligated to utilize the remaining transportation capacity pro rata for the
transportation of such other petroleum as may be offered by others for transport, and to
charge without discrimination such rates as may have been approved by the Secretary of
Agriculture and Natural Resources.
Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7
thereof provides:
that everything relating to the exploration for and exploitation of petroleum . . . and
everything relating to the manufacture, reXining, storage, or transportation by special
methods of petroleum, is hereby declared to be a public utility. (Emphasis Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling
No. 069-83, it declared:
. . . since [petitioner] is a pipeline concessionaire that is engaged only in transporting
petroleum products, it is considered a common carrier under Republic Act No. 387 . . . .
Such being the case, it is not subject to withholding tax prescribed by Revenue Regulations
No. 13-78, as amended.
2) From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and,
therefore, exempt from the business tax as provided for in Section 133 (j), of the Local Government
Code, to wit:
Sec. 133.Common Limitations on the Taxing Powers of Local Government Units. Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of the following:
xxx xxx xxx
(j) Taxes on the gross receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers by air, land or
water, except as provided in this Code.
LOADSTAR SHIPPING CO., INC. (petitioner) v COURT OF APPEALS and THE MANILA INSURANCE
CO., INC., (respondents)
Facts:
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.
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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 Xiled 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.
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 afXirmed
its decision in toto.
In dismissing LOADSTARs 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.[if !supportFootnotes][4][endif]
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. LOADSTARS 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 Xinding of
negligence on the part of the carrier.[if !supportFootnotes][5][endif]
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 latters rights as against the carrier, LOADSTAR.[if !supportFootnotes][6][endif]
5) There was a clear breach of the contract of carriage when the shippers goods never reached their
destination. LOADSTARs 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.
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.[if !supportFootnotes][7][endif]
Issue/s:
1) WON, the M/V Cherokee was a private or a common carrier?
2) WON, Loadstar observe due and/or ordinary diligence in these premises?
Held/Ratio:
1) LOADSTAR is a common carrier. It is not necessary that the carrier be issued a certiXicate 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
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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.
The Civil Code deXines "common carriers" in the following terms:
Art. 1732. Common carriers are persons, corporations, Xirms 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
service on an occasional, episodic or unscheduled basis.
2) Moving on to the second assigned error, we Xind that the M/V Cherokee was not seaworthy when it
embarked on its voyage on 19 November 1984. The vessel was not even sufYiciently manned at the
time. For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned
with a sufYicient number of competent ofYicers 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.
Neither do we agree with LOADSTARs 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. 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 area where it sank was determined to be moderate. Since it was remiss 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 Courts pronouncements in St. Paul Fire & Marine Ins. Co. v. Macondray & Co.,
Inc., and National Union Fire Insurance v. Stolt-Nielsen Phils., Inc. 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. The SC did not agree. In the Xirst place, the cases relied
on by LOADSTAR involved a limitation on the carriers liability to an amount Xixed 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
carriers 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 owners
risk. Such stipulation is obviously null and void for being contrary to public policy. It has been said:
Three kinds of stipulations have often been made in a bill of lading. The Xirst is one exempting the
carrier from any and all liability for loss or damage occasioned by its own negligence. The second is
one providing for an unqualiXied 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 Xirst and second
kinds of stipulations are invalid as being contrary to public policy, but the third is valid and
enforceable.
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.
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Neither is there merit to the contention that the claim in this case was barred by prescription. MICs
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 speciXic 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 good. In this case, the period for Xiling the action
for recovery has not yet elapsed. Moreover, a stipulation reducing the one-year period is null and void;
it must, accordingly, be struck down.
VIRGINES CALVO, owner of TRANSORIENT CONTAINER TERMINAL SERVICES, INC. (petitioner) v
UCPB GENERAL INSURANCE CO., INC. (formerly Allied Guarantee Ins. Co., Inc.) (respondent).
Facts:
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 Yluting 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 Xluting 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 Xinding petitioner
liable to respondent for the damage to the shipment.
Issue/s:
WON, the CA erred in holding that the petitioner was a common carrier and not as private or special
carrier who did not hold its services to the public.
Held/Ratio:
She is a common carrier. 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. 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 Xindings 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 -
"Article 1732. Common carriers are persons, corporations, Xirms 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
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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
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.
ASIA LIGHTERAGE AND SHIPPING, INC. (petitioner) v COURT OF APPEALS and PRUDENTIAL
GUARANTEE AND ASSURANCE, INC., (respondents)
Facts:
On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk, valued at US
$423,192.35 was shipped by Marubeni American Corporation of Portland, Oregon on board the vessel
M/V NEO CYMBIDIUM V-26 for delivery to the consignee, General Milling Corporation in Manila,
evidenced by Bill of Lading No. PTD/Man-4. The shipment was insured by the private respondent
Prudential Guarantee and Assurance, Inc. against loss or damage forP14,621,771.75 under Marine
Cargo Risk Note RN 11859/90.
On July 25, 1990, the carrying vessel arrived in Manila and the cargo was transferred to the custody of
the petitioner Asia Lighterage and Shipping, Inc. The petitioner was contracted by the consignee as
carrier to deliver the cargo to consignee's warehouse at Bo. Ugong, Pasig City.
On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI III, evidenced by
Lighterage Receipt No. 03647 for delivery to consignee. The cargo did not reach its destination.
It appears that on August 17, 1990, the transport of said cargo was suspended due to a warning of an
incoming typhoon. On August 22, 1990, the petitioner proceeded to pull the barge to Engineering
Island off Baseco to seek shelter from the approaching typhoon. PSTSI III was tied down to other
barges which arrived ahead of it while weathering out the storm that night. A few days after, the barge
developed a list because of a hole it sustained after hitting an unseen protuberance underneath the
water. The petitioner Xiled a Marine Protest on August 28, 1990. It likewise secured the services of
Gaspar Salvaging Corporation which reXloated the barge. The hole was then patched with clay and
cement.
The barge was then towed to ISLOFF terminal before it Xinally headed towards the consignee's wharf
on September 5, 1990. Upon reaching the Sta. Mesa spillways, the barge again ran aground due to
strong current. To avoid the complete sinking of the barge, a portion of the goods was transferred to
three other barges.
The next day, September 6, 1990, the towing bits of the barge broke. It sank completely, resulting in the
total loss of the remaining cargo. A second Marine Protest was Xiled on September 7, 1990.
On September 14, 1990, a bidding was conducted to dispose of the damaged wheat retrieved and
loaded on the three other barges.13 The total proceeds from the sale of the salvaged cargo
was P201,379.75.
On the same date, September 14, 1990, consignee sent a claim letter to the petitioner, and another
letter dated September 18, 1990 to the private respondent for the value of the lost cargo.
On January 30, 1991, the private respondent indemniXied the consignee in the amount
of P4,104,654.22. Thereafter, as subrogee, it sought recovery of said amount from the petitioner, but to
no avail.
Issue/s:
(1) Whether the petitioner is a common carrier; and
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(2) Assuming the petitioner is a common carrier, whether it exercised extraordinary diligence in its
care and custody of the consignee's cargo.
Held/Ratio:
(1) Yes, the petitioner is a common carrier.
Article 1732 of the Civil Code deXines common carriers as persons, corporations, Xirms 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.
Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it has no Xixed and
publicly known route, maintains no terminals, and issues no tickets. It points out that it is not obliged
to carry indiscriminately for any person. It is not bound to carry goods unless it consents. In short, it
does not hold out its services to the general public. The SC disagreed to this.
In De Guzman vs. Court of Appeals, we held that the deXinition of common carriers in Article 1732 of
the Civil Code makes no distinction between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary activity. We also did not
distinguish 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. Further, we ruled
that Article 1732 does not distinguish between a carrier offering its services to the general public, and
one who offers services or solicits business only from a narrow segment of the general population.
In the case at bar, the principal business of the petitioner is that of lighterage and drayage22 and
it offers its barges to the public for carrying or transporting goods by water for compensation.
Petitioner is clearly a common carrier. In De Guzman, supra, we considered private respondent
Ernesto Cendaa to be a common carrier even if his principal occupation was not the carriage
of goods for others, but that of buying used bottles and scrap metal in Pangasinan and selling
these items in Manila.
The SC held that petitioner is a common carrier whether its carrying of goods is done on an
irregular rather than scheduled manner, and with an only limited clientele. A common carrier
need not have Yixed and publicly known routes. Neither does it have to maintain terminals or
issue tickets.
To be sure, petitioner Xits the test of a common carrier as laid down in Bascos vs. Court of
Appeals. The test to determine a common carrier is "whether the given undertaking is a part of
the business engaged in by the carrier which he has held out to the general public as his
occupation rather than the quantity or extent of the business transacted. In the case at bar, the
petitioner admitted that it is engaged in the business of shipping and lighterage, offering its
barges to the public, despite its limited clientele for carrying or transporting goods by water for
compensation.
(2) No, the petitioner failed to exercise extraordinary diligence in its care and custody of the
consignees goods. Common carriers are bound to observe extraordinary diligence in the vigilance over
the goods transported by them. They are presumed to have been at fault or to have acted negligently if
the goods are lost, destroyed or deteriorated. To overcome the presumption of negligence in the case of
loss, destruction or deterioration of the goods, the common carrier must prove that it exercised
extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of the Civil Code
enumerates the instances when the presumption of negligence does not attach:
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods,
unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(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;
In the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss
of its cargo. Petitioner claims that this was caused by a typhoon, hence, it should not be held
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liable for the loss of the cargo. However, petitioner failed to prove that the typhoon is the
proximate and only cause of the loss of the goods, and that it has exercised due diligence before,
during and after the occurrence of the typhoon to prevent or minimize the loss.[if !
supportFootnotes][30][endif] The evidence show that, even before the towing bits of the barge broke,
it had already previously sustained damage when it hit a sunken object while docked at the
Engineering Island. It even suffered a hole. Clearly, this could not be solely attributed to the typhoon.
The partly-submerged vessel was reXloated but its hole was patched with only clay and cement. The
patch work was merely a provisional remedy, not enough for the barge to sail safely. Thus, when
petitioner persisted to proceed with the voyage, it recklessly exposed the cargo to further damage.
CONTINUATION OF B. 2. COMMON CARRIERS
AF Sanchez Brokerage vs CA
Facts:
AF Sanchez is engaged in a broker business wherein its main job is to calculate customs duty, fees and
charges as well as storage fees for the cargoes. Part also of the services being given by AF Sanchez is
the delivery of the shipment to the consignee upon the instruction of the shipper.
27
Wyett engaged the services of AF Sanchez where the latter delivered the shipment to Hizon
Laboratories upon instruction of Wyett. Upon inspection, it was found out that at least 44 cartons
containing contraceptives were in bad condition. Wyett claimed insurance from FGU. FGU exercising its
right of subrogation claims damages against AF Sanchez who delivered the damaged goods. AF
Sanchez contended that it is not a common carrier but a brokerage Xirm.
Issue:
Whether or not AF Sanchez is a common carrier.
Held:
Article 1732 does not distinguish between one whose principal business activity is the carrying of
goods and one who does such carrying only as an ancillary activity.[44] The contention, therefore, of
petitioner that it is not a common carrier but a customs broker whose principal function is to
prepare the correct customs declaration and proper shipping documents as required by law is
bereft of merit. It sufYices that petitioner undertakes to deliver the goods for pecuniary
consideration.
In this light, petitioner as a common carrier is mandated to observe, under Article 1733[45] of the
Civil Code, extraordinary diligence in the vigilance over the goods it transports according to all the
circumstances of each case. In the event that the goods are lost, destroyed or deteriorated, it is
presumed to have been at fault or to have acted negligently, unless it proves that it observed
extraordinary diligence.[46]
[47]
The concept of extra-ordinary diligence was explained in Compania Maritima v. Court of Appeals:
The extraordinary diligence in the vigilance over the goods tendered for shipment requires the
common carrier to know and to follow the required precaution for avoiding damage to, or destruction
of the goods entrusted to it for sale, carriage and delivery. It requires common carriers to render
service with the greatest skill and foresight and to use all reasonable means to ascertain the nature and
characteristics of goods tendered for shipment, and to exercise due care in the handling and stowage,
including such methods as their nature requires.[48]
In the case at bar, it was established that petitioner received the cargoes from the PSI warehouse
in NAIA in good order and condition;[49] and that upon delivery by petitioner to Hizon Laboratories
Inc., some of the cargoes were found to be in bad order, as noted in the Delivery Receipt[50] issued by
petitioner, and as indicated in the Survey Report of Elite Surveyors[51] and the Destruction Report of
Hizon Laboratories, Inc.[52]
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In an attempt to free itself from responsibility for the damage to the goods, petitioner posits that
they were damaged due to the fault or negligence of the shipper for failing to properly pack them and
to the inherent characteristics of the goods[53]; and that it should not be faulted for following the
instructions of Calicdan of Wyeth-Suaco to proceed with the delivery despite information conveyed to
the latter that some of the cartons, on examination outside the PSI warehouse, were found to be wet.[54]
While paragraph No. 4 of Article 1734[55] of the Civil Code exempts a common carrier from liability
if the loss or damage is due to the character of the goods or defects in the packing or in the containers,
the rule is that if the improper packing is known to the carrier or his employees or is apparent upon
ordinary observation, but he nevertheless accepts the same without protest or exception
notwithstanding such condition, he is not relieved of liability for the resulting damage.[56]
If the claim of petitioner that some of the cartons were already damaged upon delivery to it were
true, then it should naturally have received the cargo under protest or with reservations duly noted on
the receipt issued by PSI. But it made no such protest or reservation.[57]
Moreover, as observed by the appellate court, if indeed petitioners employees only examined the
cargoes outside the PSI warehouse and found some to be wet, they would certainly have gone back to
PSI, showed to the warehouseman the damage, and demanded then and there for Bad Order
documents or a certiXication conXirming the damage.[58] Or, petitioner would have presented, as
witness, the employees of the PSI from whom Morales and Domingo took delivery of the cargo to prove
that, indeed, part of the cargoes was already damaged when the container was allegedly opened
outside the warehouse.
Note:
AF Sanchez claimed that the proximate cause of the damage is improper packing. Under the CC,
improper packing of the goods is an exonerating circumstance. But in this case, the SC held that though
the goods were improperly packed, since AF Sanchez knew of the condition and yet it accepted the
shipment without protest or reservation, the defense is deemed waived.
SCHMITZ TRANSPORT AND BROKERAGE CORP. v. TRANSPORT VENTURE, INC.

Facts:
On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from the port of Ilyichevsk, Russia on board
M/V Alexander Saveliev 545 hot rolled steel sheets in coil weighing 6,992,450 metric tons. The
cargoes, which were to be discharged at the port of Manila in favor of the consignee, Little Giant Steel
Pipe Corporation (Little Giant), were insured against all risks with Industrial Insurance Company Ltd.
(Industrial Insurance) under Marine Policy No. M-91-3747-TIS. The vessel arrived at the port of
Manila and the Philippine Ports Authority (PPA) assigned it a place of berth at the outside breakwater
at the Manila South Harbor.
Schmitz Transport, whose services the consignee engaged to secure the requisite clearances, to receive
the cargoes from the shipside, and to deliver them to its (the consignees) warehouse at Cainta, Rizal, in
turn engaged the services of TVI to send a barge and tugboat at shipside. TVIs tugboat Lailani towed
the barge Erika V to shipside. The tugboat, after positioning the barge alongside the vessel, left and
returned to the port terminal. Arrastre operator Ocean Terminal Services Inc. commenced to unload
37 of the 545 coils from the vessel unto the barge. By 12:30 a.m. of October 27, 1991 during which the
weather condition had become inclement due to an approaching storm, the unloading unto the barge
of the 37 coils was accomplished. No tugboat pulled the barge back to the pier, however. At around
5:30 a.m. of October 27, 1991, due to strong waves, the crew of the barge abandoned it and transferred
to the vessel. The barge pitched and rolled with the waves and eventually capsized, washing the 37
coils into the sea.

Little Giant thus Xiled a formal claim against Industrial Insurance which paid it the amount of
P5,246,113.11. Little Giant thereupon executed a subrogation receipt in favor of Industrial Insurance.
Industrial Insurance later Yiled a complaint against Schmitz Transport, TVI, and Black Sea
through its representative Inchcape (the defendants) before the RTC of Manila, they faulted the
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defendants for undertaking the unloading of the cargoes while typhoon signal No. 1 was raised.
The RTC held all the defendants negligent. Defendants Schmitz Transport and TVI 7iled a joint
motion for reconsideration assailing the 7inding that they are common carriers. RTC denied the
motion for reconsideration. CA afXirmed the RTC decision in toto, Xinding that all the defendants were
common carriers Black Sea and TVI for engaging in the transport of goods and cargoes over the seas
as a regular business and not as an isolated transaction, and Schmitz Transport for entering into a
contract with Little Giant to transport the cargoes from ship to port for a fee.
Issue:
Whether or not Black Sea and TVI are common carriers
Held :
Contrary to petitioners insistence, this Court, as did the appellate court, Xinds that petitioner is a
common carrier. For it undertook to transport the cargoes from the shipside of M/V Alexander
Saveliev to the consignees warehouse at Cainta, Rizal. As the appellate court put it, as long as a
person or corporation holds [itself] to the public for the purpose of transporting goods as [a]
business, [it] is already considered a common carrier regardless if [it] owns the vehicle to be used
or has to hire one. That petitioner is a common carrier, the testimony of its own Vice-President
and General Manager Noel Aro that part of the services it offers to its clients as a brokerage Yirm
includes the transportation of cargoes reYlects so.
It is settled that under a given set of facts, a customs broker may be regarded as a common carrier.
Thus, this Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable Court of Appeals,[44] held:
The appellate court did not err in Xinding petitioner, a customs broker, to be also a common
carrier, as deXined under Article 1732 of the Civil Code, to wit,
Art. 1732. Common carriers are persons, corporations, Yirms 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.
x x x
Article 1732 does not distinguish between one whose principal business activity is the carrying of
goods and one who does such carrying only as an ancillary activity. The contention, therefore, of
petitioner that it is not a common carrier but a customs broker whose principal function is to prepare
the correct customs declaration and proper shipping documents as required by law is bereft of merit.
It suf7ices that petitioner undertakes to deliver the goods for pecuniary consideration.
And in Calvo v. UCPB General Insurance Co. Inc.,[46] this Court held that as the transportation of
goods is an integral part of a customs broker, the customs broker is also a common carrier. For to
declare otherwise would be to deprive those with whom [it] contracts the protection which the
law affords them notwithstanding the fact that the obligation to carry goods for [its] customers,
is part and parcel of petitioners business.
PHIL CHARTER vs. M/V "NATIONAL HONOR,"
Facts:
On November 5, 1995, J. Trading Co. Ltd. of Seoul, Korea, loaded a shipment of four units of parts and
accessories 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 contained in two wooden
crates, namely, Crate No. 1 and Crate No. 2, complete and in good order condition. Crate No. 1
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 Xlooring of the wooden crates were three wooden battens
placed side by side to support the weight of the cargo. It was insured for P2,547,270.00 with the
Philippine Charter Insurance Corporation (PCIC).
The M/V "National Honor" arrived at the Manila International Container Terminal (MICT). The
International Container Terminal Services, Incorporated (ICTSI) was the exclusive arrastre operator of
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MICT and was charged with discharging the cargoes from the vessel. Claudio Cansino, the stevedore of
the ICTSI, placed two sling cables on each end of Crate No. 1. No sling cable was fastened on the mid-
portion of the crate. As the crate was being hoisted from the vessel's hatch, the mid-portion of
the wooden Ylooring suddenly snapped in the air, about Yive feet high from the vessel's twin
deck, sending all its contents crashing down hard, resulting in extensive damage to the
shipment.
Blue Mono International Company, Incorporated (BMICI) subsequently Xiled separate claims against
the NSCP, the ICTSI, and its insurer, the PCIC, for US$61,500.00. When the other companies denied
liability, PCIC paid the claim and was issued a Subrogation Receipt for P1,740,634.50. On March 22,
1995, PCIC, as subrogee, Xiled with the RTC of Manila a Complaint for Damages against the "Unknown
owner of the vessel M/V National Honor," NSCP and ICTSI, as defendants. ICTSI, for its part, Xiled 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, insufXicient packing or acts of the shipper.
The trial court rendered judgment for PCIC and ordered the complaint dismissed. 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 CA afXirmed in TOTO the decision of the RTC.
ISSUE:
Whether or not the common carrier is liable for the damage sustained by the shipment in the hands of
the arrastre operator.
HELD:
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 petition has no merit.
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 according to all the circumstances of each case. The extraordinary diligence in the
vigilance over the goods 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." 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 Xinding of negligence to hold it liable. However, under Article 1734 of the New Civil Code, the
presumption of negligence does not apply to any of the following causes:
1.
Flood, storm, earthquake, lightning or other natural disaster or calamity;
2.
Act of the public enemy in war, whether international or civil;
3.
Act or omission of the shipper or owner of the goods;
4.
The character of the goods or defects in the packing or in the containers;
5.
Order or act of competent public authority.
It bears stressing that the enumeration in Article 1734 of the New Civil Code which exempts the
common carrier for the loss or damage to the cargo is a closed list. 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.
The CA afXirmed 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 Xind no compelling reason to depart from the factual Xindings of
the trial court. It appears that the wooden batten used as support for the Ylooring was not made
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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. 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 Xive (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.
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. The statement in the Bill of Lading, that the
shipment was in apparent good condition, is sufXicient to sustain a Xinding 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.
LEA MER INDUSTRIES INC VS MALAYAN INSURANCE CO, INC.
Facts:
Ilian Silica Mining entered into a contract of carriage with the petitioner, Lea Mer Industries Inc. for the
shipment of 900 metric tons of silica sand worth P565,000. The cargo was consigned to Vulcan
Industrial and Mining Corporation and was to be shipped from Palawan to Manila. The silica sand was
boarded to Judy VII, the vessel leased by Lea Mer. However, during the course of its voyage, the vessel
sank which led to the loss of the cargo.
Consequently, the respondent, as the insurer, paid Vulcan the value of the lost cargo. Malayan Insurance
Co., Inc. then collected from the petitioner the amount it paid to Vulcan as reimbursement and as its
exercise on the right of subrogation. Lea Mer refused to pay which led Malayan to institute a complaint
with the RTC. The RTC dismissed the complaint stating that the loss was due to a fortuitous event,
Typhoon Trining. Petitioner did not know that a typhoon was coming and that it has been cleared by
the Philippine Coast Guard to travel from Palawan to Manila. The CA reversed the ruling of the trial
court for the reason that said vessel was not seaworthy when it sailed to Manila.
Issue:
Whether or not the petitioner is liable for the loss of the cargo.
Held:
Common carriers are persons, corporations, Xirms or associations engaged in the business of carrying
or transporting passengers or goods, or both by land, water, or air when this service is offered to
the public for compensation. Petitioner is clearly a common carrier, because it offers to the public its
business of transporting goods through its vessels. Thus, the Court corrects the trial court's Xinding
that petitioner became a private carrier when Vulcan chartered it. Charter parties are classiXied as
contracts of demise (or bareboat) and affreightment, which are distinguished as follows:
"Under the demise or bareboat charter of the vessel, the charterer will generally be considered as
owner for the voyage or service stipulated. The charterer mans the vessel with his own people and
becomes, in effect, the owner pro hac vice, subject to liability to others for damages caused by
negligence. To create a demise, the owner of a vessel must completely and exclusively relinquish
possession, command and navigation thereof to the charterer; anything short of such a
complete transfer is a contract of affreightment (time or voyage charter party) or not a charter
party at all."
The distinction is signiXicant, because a demise or bareboat charter indicates a business
undertaking that is private in character. Consequently, the rights and obligations of the parties to a
contract of private carriage are governed principally by their stipulations, not by the law on common
carriers. The Contract in the present case was one of affreightment, as shown by the fact that it was
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petitioner's crew that manned the tugboat M/V Ayalit and controlled the barge Judy VII.
Common carriers are bound to observe extraordinary diligence in their vigilance over the goods and
the safety of the passengers they transport, as required by the nature of their business and for reasons
of public policy. Extraordinary diligence requires rendering service with the greatest skill and foresight
to avoid damage and destruction to the goods entrusted for carriage and delivery.
Common carriers are presumed to have been at fault or to have acted negligently for loss or damage to
the goods that they have transported. This presumption can be rebutted only by proof that they
observed extraordinary diligence, or that the loss or damage was occasioned by any of the following
causes:
"(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
"(2) Act of the public enemy in war, whether international or civil;
"(3) Act or omission of the shipper or owner of the goods;
"(4) The character of the goods or defects in the packing or in the containers;
"(5) Order or act of competent public authority."
Jurisprudence deXines the elements of a "fortuitous event" as follows: (a) the cause of the unforeseen
and unexpected occurrence, or the failure of the debtors to comply with their obligations, must have
been independent of human will; (b) the event that constituted the caso fortuito must have been
impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have been such as
to render it impossible for the debtors to fulXill their obligation in a normal manner; and (d) the obligor
must have been free from any participation in the aggravation of the resulting injury to the creditor. To
excuse the common carrier fully of any liability, the fortuitous event must have been the
proximate and only cause of the loss. Moreover, it should have exercised due diligence to prevent or
minimize the loss before, during and after the occurrence of the fortuitous event. As required by the
pertinent law, it was not enough for the common carrier to show that there was an unforeseen or
unexpected occurrence. It had to show that it was free from any fault a fact it miserably failed to
prove.
LOADSTAR SHIPPING CO., INC., v. CA
Facts:

On 19 November 1984, LOADSTAR received on board 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. 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. MIC Xiled 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. LOADSTAR denied any liability for the loss of the shipper's goods and claimed that sinking
of its vessel was due to force majeure. LOADSTAR submits that the vessel was a private carrier because
it was not issued certiXicate of public convenience, it did not have a regular trip or schedule nor a Xixed
route, and there was only "one shipper, one consignee for a special cargo.
Issues:
(1) Whether or not MV Cherokee is a common carrier.
(2) Whether LOADSTAR observed due and/or ordinary diligence in these premises.
Held:

SC held that LOADSTAR is a common carrier. It is not necessary that the carrier be issued a certiXicate
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. 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
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carrying passengers. Under Article 1732 of the Civil Code the Civil Code deXines "common carriers" in
the following terms:
Art. 1732. Common carriers are persons, corporations, Xirms or associations engaged in the
On to the second assigned error, we Xind that the M/V "Cherokee" was not seaworthy when it
embarked on its voyage on 19 November 1984. The vessel was not even sufXiciently manned at the
time. "For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a
sufXicient number of competent ofXicers 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.
CEBU SALVAGE CORP. v. PHIL. HOME ASSURANCE CORP.
Facts:
On November 12, 1984, CSC & Maria Christina Chemicals Industries, Inc., (MCCII) entered into a
voyage charter wherein CSC was to load 800-1,100 metric tons of silica quartz on board the M/T
Espiritu Santo at Ayungon, Negros Occidental for transport to and discharge at Tagoloan, Misamis
Oriental to consigned Ferrochrome Phils., Inc. Pursuant to the contract, on December 23, 1984, CSC
received & loaded 1,100 metric tons of silica quartz on board the M/T Espiritu Santo which left
Ayungon for Tagoloan the next day.
However, the shipment never reached its destination because the M/T Espiritu Santo sank in the
afternoon of December 24, 1984 off the beach of Opol, Misamis Oriental, resulting in the total loss of
the cargo.
MCCII Xiled a claim for the loss of the shipment with its insurer, PHAC. PHAC paid the claim in the
amount of P211,500 and was surrogated to MCCIIs rights. It thereafter Xiled a case in the RTC against
CSC for reimbursement of the amount it paid MCCII.
However, CSC claims no liability insisting that the agreement was merely a contract of hire wherein
MCCII hired the vessel from its owner, ALS Timber Enterprises. Not being the owner of the M/T
Espiritu Santo, petitioner did not have control over the vessel, its master & crew. Thus, it could not
allegedly be held liable for the loss of the shipment caused by the sinking of a ship it didnt own.
Issues:
1. Whether or not there is a contract of carriage between CSC and MCCII.
2. Whether or not CSC is a common carrier despite not being the owner of the vessel it used.
3. Whether or not the bill of lading should prevail over the voyage charter as the contract of carriage
between the parties.
4. Whether or not MCCII should be held liable for its own loss
5. Whether or not a carrier that enters into a contract of carriage is not liable to the charterer/shipper
if it does not own the vessel it chooses to use.
Held:
1. Yes. The cargo was loaded on board the vessel; loss/non-delivery of the cargo was proven; and
petitioner failed to prove that it exercised extraordinary diligence to prevent such loss or that it was
due to some casualty or force majeure. The voyage charter here being a contract of affreightment,
the carrier was answerable for the loss of the goods received for transportation.
2. CSC was the one which contracted with MCCII for the transport of the cargo. It had control over what
vessel it would use. All throughout its dealings with MCCII, it represented itself as a common carrier.
The fact that it did not own the vessel it decided to use to consummate the contract of carriage did not
negate its character & duties as a common carrier. The MCCII could not be reasonably expected to
inquire about the ownership of the vessels which petitioner carrier offered to utilize. It is very difXicult
& often impossible for the general public to enforce its rights of action under a contract of carriage if it
should be required to know who the actual owner of the vehicle is. In this case, the voyage charter
itself denominated the petitioner as the owner/operator of the vessel.

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3. No. The bill of lading was merely a receipt issued by ALS to evidence the fact that the goods had been
received for transportation. It was not signed by MCCII, as in fact it was simply signed by the
supercargo of ALS. This is consistent with the fact that MCCII did not contract directly with ALS. While
it is true that a bill of lading may serve as the contract of carriage between the parties, it cannot prevail
over the express provision of the voyage charter that MCCII and petitioner executed.
4. No. It deserves scant consideration that the voyage charter stipulated that cargo insurance
was for the charterers account. This meant that the charterer would take care of having the
goods insured. It could not exculpate the carrier from liability for the breach of its contract of
carriage. The law prohibits it and condemns it as unjust & contrary to public policy.
5. The idea proposed by CSC is preposterous & dangerous. MCCII never dealt with ALS and yet
petitioner insists that MCCII should sue ALS for reimbursement for its loss. Certainly, to permit a
common carrier to escape its responsibility for the goods it agreed to transport (by expedient of
alleging non-ownership of the vessel it employed) would radically derogate from the carriers duty of
extraordinary diligence. It would also open the door to collusion between the carrier & the supposed
owner and to the possible shifting of liability from the carrier to one without any Xinancial capability to
answer for the resulting damages.
SPS. CRUZ v. SUN HOLIDAYS

Facts:
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 2001 against Sun
Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City for damages arising from
the death of their son Ruelito C. Cruz (Ruelito) who perished with his wife on September 11, 2000 on
board the boat M/B Coco Beach III that capsized en route to Batangas from Puerto Galera, Oriental
Mindoro where the couple had stayed at Coco Beach Island Resort (Resort) owned and operated by
respondent.
On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including
petitioners son and his wife trekked to the other side of the Coco Beach mountain that was sheltered
from the wind where they boarded M/B Coco Beach III, which was to ferry them to Batangas.
Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and
into the open seas, the rain and wind got stronger, causing the boat to tilt from side to side and the
captain to step forward to the front, leaving the wheel to one of the crew members.
The waves got more unwieldy. After getting hit by two big waves which came one after the
other, M/B Coco Beach III capsized putting all passengers underwater. The passengers, who had put on
their life jackets, struggled to get out of the boat. Upon seeing the captain, Matute and the other
passengers who reached the surface asked him what they could do to save the people who were still
trapped under the boat. The captain replied "Iligtas niyo na lang ang sarili niyo" (Just save yourselves).
Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto
Galera passed by the capsized M/B Coco Beach III. Boarded on those two boats were 22 persons,
consisting of 18 passengers and four crew members, who were brought to Pisa Island. Eight
passengers, including petitioners son and his wife, died during the incident.
Issue:
Whether or not respondent is a common carrier.
Held:
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Article 1732. Common carriers are persons, corporations, Xirms or associations engaged in the
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
Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main
business as to be properly considered ancillary thereto. The constancy of respondents ferry services in
its resort operations is underscored by its having its own Coco Beach boats. And the tour packages it
offers, which include the ferry services, may be availed of by anyone who can afford to pay the same.
These services are thus available to the public.
That respondent does not charge a separate fee or fare for its ferry services is of no moment. It
would be imprudent to suppose that it provides said services at a loss. The Court is aware of the
practice of beach resort operators offering tour packages to factor the transportation fee in arriving at
the tour package price. That guests who opt not to avail of respondents ferry services pay the same
amount is likewise inconsequential. These guests may only be deemed to have overpaid.
UNSWORTH TRANSPORT INTERNATIONAL, INC. v. CA

Facts:
On August 31, 1992, the shipper Sylvex Purchasing Corporation delivered to UTI a shipment of
27 drums of various raw materials for pharmaceutical manufacturing, consisting of: "1) 3 drums (of)
extracts, Xlavoring liquid, Xlammable liquid x x x banana Xlavoring; 2) 2 drums (of) Xlammable liquids x
x x turpentine oil; 2 pallets. STC: 40 bags dried yeast; and 3) 20 drums (of) Vitabs: Vitamin B Complex
Extract." UTI issued Bill of Lading No. C320/C15991-2, covering the aforesaid shipment. The subject
shipment was insured with private respondent Pioneer Insurance and Surety Corporation in favor of
Unilab against all risks in the amount of P1,779,664.77 under and by virtue of Marine Risk Note
Number MC RM UL 0627 92 and Open Cargo Policy No. HO-022-RIU.
On the same day that the bill of lading was issued, the shipment was loaded in a sealed 1x40
container van, with no. APLU-982012, boarded on APLs vessel M/V "Pres. Jackson," Voyage 42, and
transshipped to APLs M/V "Pres. Taft" for delivery to petitioner in favor of the consignee United
Laboratories, Inc. (Unilab).
On September 30, 1992, the shipment arrived at the port of Manila. On October 6, 1992,
petitioner received the said shipment in its warehouse after it stamped the Permit to Deliver Imported
Goods procured by the Champs Customs Brokerage. Three days thereafter, or on October 9, 1992,
Oceanica Cargo Marine Surveyors Corporation (OCMSC) conducted a stripping survey of the shipment
located in petitioners warehouse.
Consequently, Unilabs quality control representative rejected one paper bag containing dried
yeast and one steel drum containing Vitamin B Complex as unXit for the intended purpose. On
November 7, 1992, Unilab Xiled a formal claim for the damage against private respondent and UTI. On
November 20, 1992, UTI denied liability on the basis of the gate pass issued by Jardine that the goods
were in complete and good condition; while private respondent paid the claimed amount on March 23,
1993. By virtue of the Loss and Subrogation Receipt issued by Unilab in favor of private respondent,
the latter Xiled a complaint for Damages against APL, UTI and petitioner with the RTC of Makati.
Issue:
Whether or not petitioner is a common carrier.
Held:
Admittedly, petitioner is a freight forwarder. The term "freight forwarder" refers to a Xirm holding itself
out to the general public (other than as a pipeline, rail, motor, or water carrier) to provide
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transportation of property for compensation and, in the ordinary course of its business, (1) to
assemble and consolidate, or to provide for assembling and consolidating, shipments, and to perform
or provide for break-bulk and distribution operations of the shipments; (2) to assume responsibility
for the transportation of goods from the place of receipt to the place of destination; and (3) to use for
any part of the transportation a carrier subject to the federal law pertaining to common carriers.
A freight forwarders liability is limited to damages arising from its own negligence, including
negligence in choosing the carrier; however, where the forwarder contracts to deliver goods to their
destination instead of merely arranging for their transportation, it becomes liable as a common carrier
for loss or damage to goods. A freight forwarder assumes the responsibility of a carrier, which actually
executes the transport, even though the forwarder does not carry the merchandise itself.
Undoubtedly, UTI is liable as a common carrier. Common carriers, as a general rule, are
presumed to have been at fault or negligent if the goods they transported deteriorated or got lost or
destroyed. That is, unless they prove that they exercised extraordinary diligence in transporting the
goods. In order to avoid responsibility for any loss or damage, therefore, they have the burden of
proving that they observed such diligence. Mere proof of delivery of the goods in good order to a
common carrier and of their arrival in bad order at their destination constitutes a prima facie case of
fault or negligence against the carrier. If no adequate explanation is given as to how the deterioration,
loss, or destruction of the goods happened, the transporter shall be held responsible.
SPS. PERENA v. SPS. ZARATE

Facts:
In June 1996, Nicolas and Teresita Zarate contracted Teodoro and Nanette Perea to transport their
(Zarates) son, Aaron Zarate, to and from school. The Pereas were owners of a van being used for
private school transport.
At about 6:45am of August 22, 1996, the driver of the said private van, Clemente Alfaro, while the
children were on board including Aaron, decided to take a short cut in order to avoid trafXic. The usual
short cut was a railroad crossing of the Philippine National Railway (PNR).
Alfaro saw that the barandilla (the pole used to block vehicles crossing the railway) was up which
means it was okay to cross. He then tried to overtake a bus. However, there was in fact an oncoming
train but Alfaro no longer saw the train as his view was already blocked by the bus he was trying to
overtake. The bus was able to cross unscathed but the vans rear end was hit. During the collision,
Aaron, was thrown off the van. His body hit the railroad tracks and his head was severed. He was only
15 years old.
It turns out that Alfaro was not able to hear the train honking from 50 meters away before the collision
because the vans stereo was playing loudly.
The Zarates sued PNR and the Pereas (Alfaro became at-large). Their cause of action against PNR was
based on quasi-delict. Their cause of action against the Pereas was based on breach of contract of
common carriage.
In their defense, the Pereas invoked that as private carriers they were not negligent in selecting Alfaro
as their driver as they made sure that he had a drivers license and that he was not involved in any
accident prior to his being hired. In short, they observed the diligence of a good father in selecting their
employee.
PNR also disclaimed liability as they insist that the railroad crossing they placed there was not meant
for railroad crossing (really, thats their defense!).
The RTC ruled in favor of the Zarates. The Court of Appeals afXirmed the RTC. In the decision of the RTC
and the CA, they awarded damages in favor of the Zarates for the loss of earning capacity of their dead
son.
The Pereas appealed. They argued that the award was improper as Aaron was merely a high school
student, hence, the award of such damages was merely speculative. They cited the case of People vs
Teehankee where the Supreme Court did not award damages for the loss of earning capacity despite
the fact that the victim there was enrolled in a pilot school.
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Issues:
Whether or not the defense of due diligence of a good father by the Pereas is untenable.
Held:
This defense of a good father of a family is not tenable in this case. The Pereas are common carriers.
They are not merely private carriers. (Prior to this case, the status of private transport for school
services or school buses is not well settled as to whether or not they are private or common carriers
but they were generally regarded as private carriers). Private transport for schools are common
carriers. The Pereas, as the operators of a school bus service were: (a) engaged in transporting
passengers generally as a business, not just as a casual occupation; (b) undertaking to carry
passengers over established roads by the method by which the business was conducted; and (c)
transporting students for a fee. Despite catering to a limited clientle, the Pereas operated as a
common carrier because they held themselves out as a ready transportation indiscriminately to the
students of a particular school living within or near where they operated the service and for a fee.
Being a common carrier, what is required of the Pereas is not mere diligence of a good father. What is
speciXically required from them by law is extraordinary diligence a fact which they failed to prove in
court. Verily, their obligation as common carriers did not cease upon their exercise of diligently
choosing Alfaro as their employee.
WESTWIND SHIPPING CORPORATION v. UCPB GENERAL INSURANCE CO., INC.
Facts:
Kinsho-Mataichi Corporation shipped from the port of Kobe, Japan, 197 metal containers/skids of tin-
free steel for delivery to the consignee, San Miguel Corporation (SMC). The shipment, covered by Bill of
Lading No. KBMA-1074,4 was loaded and received clean on board M/V Golden Harvest Voyage No. 66, a
vessel owned and operated by Westwind Shipping Corporation (Westwind).
SMC insured the cargoes against all risks with UCPB General Insurance Co., Inc.
The shipment arrived in Manila, Philippines on August 31, 1993 and was discharged in the custody of
the arrastre operator, Asian Terminals, Inc. During the unloading operation, however, six containers/
skids worth Philippine Pesos: One Hundred Seventeen Thousand Ninety-Three and Twelve Centavos
(P117,093.12) sustained dents and punctures from the forklift used by the stevedores of Ocean
Terminal Services, Inc. (OTSI) in centering and shuttling the containers/skids. As a consequence, the
local ship agent of the vessel, Baliwag Shipping Agency, Inc., issued two Bad Order Cargo Receipt.
Orient Freight International, Inc. (OFII), the customs broker of SMC, withdrew from ATI the 197
containers/skids, including the six in damaged condition, and delivered the same at SMCs warehouse
in Calamba, Laguna through J.B. Limcaoco Trucking (JBL). It was discovered upon discharge that
additional nine containers/skids valued at Philippine Pesos: One Hundred Seventy-Five Thousand Six
Hundred Thirty-Nine and Sixty-Eight Centavos (P175,639.68) were also damaged due to the forklift
operations; thus, making the total number of 15 containers/skids in bad order.
SMC Xiled a claim against UCPB, Westwind, ATI, and OFII to recover the amount corresponding to the
damaged 15 containers/skids. When UCPB paid the total sum, the SMC signed the subrogation receipt.
Thereafter, in the exercise of its right of subrogation, UCPB instituted on August 30, 1994 a complaint
for damages against Westwind, ATI, and OFII.
After trial, the RTC dismissed UCPBs complaint and the counterclaims of Westwind, ATI, and OFII. It
ruled that the right, if any, against ATI already prescribed based on the stipulation in the 16 Cargo Gate
Passes issued, as well as the doctrine laid down in International Container Terminal Services, Inc. v.
Prudential Guarantee & Assurance Co. Inc.7 that a claim for reimbursement for damaged goods must be
Xiled within 15 days from the date of consignees knowledge. With respect to Westwind, even if the
action against it is not yet barred by prescription, conformably with Section 3 (6) of the Carriage of
Goods by Sea Act (COGSA) and Our rulings in E.E. Elser, Inc., et al. v. Court of Appeals, et al.8 and Belgian
Overseas Chartering and Shipping N.V. v. Phil. First Insurance Co., Inc.,9 the court a quo still opined that
Westwind is not liable, since the discharging of the cargoes were done by ATI personnel using forklifts
and that there was no allegation that it (Westwind) had a hand in the conduct of the stevedoring
operations. Finally, the trial court likewise absolved OFII from any liability, reasoning that it never
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undertook the operation of the forklifts which caused the dents and punctures, and that it merely
facilitated the release and delivery of the shipment as the customs broker and representative of SMC.
While the CA sustained the RTC judgment that the claim against ATI already prescribed, it rendered a
contrary view as regards the liability of Westwind and OFII. For the appellate court, Westwind, not ATI,
is responsible for the six damaged containers/skids at the time of its unloading. In its rationale, which
substantially followed Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc.,11 it concluded
that the common carrier, not the arrastre operator, is responsible during the unloading of the cargoes
from the vessel and that it is not relieved from liability and is still bound to exercise extraordinary
diligence at the time in order to see to it that the cargoes under its possession remain in good order
and condition. The CA also considered that OFII is liable for the additional nine damaged containers/
skids, agreeing with UCPBs contention that OFII is a common carrier bound to observe extraordinary
diligence and is presumed to be at fault or have acted negligently for such damage. Noting the
testimony of OFIIs own witness that the delivery of the shipment to the consignee is part of OFIIs job
as a cargo forwarder, the appellate court ruled that Article 1732 of the New Civil Code (NCC) does not
distinguish between one whose principal business activity is the carrying of persons or goods or both
and one who does so as an ancillary activity. The appellate court further ruled that OFII cannot excuse
itself from liability by insisting that JBL undertook the delivery of the cargoes to SMCs warehouse. It
opined that the delivery receipts signed by the inspector of SMC showed that the containers/skids
were received from OFII, not JBL. At the most, the CA said, JBL was engaged by OFII to supply the
trucks necessary to deliver the shipment, under its supervision, to SMC.
Westwind argues that it no longer had actual or constructive custody of the containers/skids at the
time they were damaged by ATIs forklift operator during the unloading operations. In accordance with
the stipulation of the bill of lading, which allegedly conforms to Article 1736 of the NCC, it contends
that its responsibility already ceased from the moment the cargoes were delivered to ATI, which is
reckoned from the moment the goods were taken into the latters custody. Westwind adds that ATI,
which is a completely independent entity that had the right to receive the goods as exclusive operator
of stevedoring and arrastre functions in South Harbor, Manila, had full control over its employees and
stevedores as well as the manner and procedure of the discharging operations.
As for OFII, it maintains that it is not a common carrier, but only a customs broker whose participation
is limited to facilitating withdrawal of the shipment in the custody of ATI by overseeing and
documenting the turnover and counterchecking if the quantity of the shipments were in tally with the
shipping documents at hand, but without participating in the physical withdrawal and loading of the
shipments into the delivery trucks of JBL.
Held:
The case of Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc.12 applies, as it settled the
query on which between a common carrier and an arrastre operator should be responsible for damage
or loss incurred by the shipment during its unloading. We elucidated at length:
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. Subject to certain
exceptions enumerated under Article 1734 of the Civil Code, common carriers are responsible for the
loss, destruction, or deterioration of the goods. The extraordinary responsibility of the common carrier
lasts from the time the goods are unconditionally placed in the possession of, and received by the
carrier for transportation until the same are delivered, actually or constructively, by the carrier to the
consignee, or to the person who has a right to receive them.
For marine vessels, Article 619 of the Code of Commerce provides that the ship captain is liable for the
cargo from the time it is turned over to him at the dock or aXloat 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, the Court interpreted the ship
captains liability as ultimately that of the shipowner by regarding the captain as the representative of
the shipowner.
On the other hand, the functions of an arrastre operator involve the handling of cargo deposited on the
wharf or between the establishment of the consignee or shipper and the ship's tackle. Being the
custodian of the goods discharged from a vessel, an arrastre operator's duty is to take good care of the
goods and to turn them over to the party entitled to their possession.
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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.
In Firemans Fund Insurance Co. v. Metro Port Service, Inc., 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.
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 carriers 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, it was ruled that like the
duty of seaworthiness, the duty of care of the cargo is non-delegable, 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. 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.
To recapitulate, common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case. The mere proof of
delivery of goods in good order to the carrier, and their arrival in the place of destination in bad order,
make out a prima facie case against the carrier, so that if no explanation is given as to how the injury
occurred, the carrier must be held responsible. It is incumbent upon the carrier to prove that the loss
was due to accident or some other circumstances inconsistent with its liability.18
The contention of OFII is likewise untenable. A customs broker has been regarded as a common carrier
because transportation of goods is an integral part of its business.19 In Schmitz Transport & Brokerage
Corporation v. Transport Venture, Inc.,20 the Court already reiterated: It is settled that under a given set
of facts, a customs broker may be regarded as a common carrier.1
3. PRIVATE CARRIAGE
HOME INSURANCE CO. v. AMERICAN STEAMSHIP AGENCIES, INC.
Facts:
"Consorcio Pesquero del Peru of South America" shipped freight pre-paid at Chimbate, Peru, 21,740
jute bags of Peruvian Xish meal through SS Crowborough. The cargo, consigned to San Miguel Brewery,
Inc., now San Miguel Corporation, and insured by Home Insurance Company for $202,505, arrived in
Manila and was discharged into the lighters of Luzon Stevedoring Company. When the cargo was
delivered to consignee San Miguel Brewery Inc., there were shortages amounting to P12,033.85,
causing the latter to lay claims against Luzon Stevedoring Corporation, Home Insurance Company and
the American Steamship Agencies, owner and operator of SS Crowborough.

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Because the others denied liability, Home Insurance Company paid the consignee P14,870.71. Having
been refused reimbursement by both the Luzon Stevedoring Corporation and American Steamship
Agencies, Home Insurance Company, as subrogee to the consignee, Xiled against them before the Court
of First Instance a complaint for recovery of P14,870.71 with legal interest, plus attorney's fees.

In answer, Luzon Stevedoring Corporation alleged that it delivered with due diligence the goods in the
same quantity and quality that it had received the same from the carrier. It also claimed that plaintiff's
claim had prescribed under Article 366 of the Code of Commerce stating that the claim must be made
within 24 hours from receipt of the cargo.
American Steamship Agencies denied liability by alleging that under the provisions of the Charter
party referred to in the bills of lading, the charterer, not the shipowner, was responsible for any loss or
damage of the cargo. Furthermore, it claimed to have exercised due diligence in stowing the goods and
that as a mere forwarding agent, it was not responsible for losses or damages to the cargo.

The Court of First Instance absolved the Luzon Stevedoring Corporation from any liability and ordered
the American Steamship Agencies to pay the sum. Hence, this petition.
Issue:
Whether or not the stipulation in the charter party of the owner's non-liability is valid so as to absolve
the American Steamship Agencies from liability for loss.
Held:
Judgment was reversed and American Steamship Agencies was absolved liability.
The bills of lading provided at the back thereof that the bills of lading shall be governed by and subject
to the terms and conditions of the charter party, if any, otherwise, the bills of lading prevail over all the
agreements.
Section 2, paragraph 2 of the charter party, provides that the owner is liable for loss or damage to the
goods caused by personal want of due diligence on its part or its manager to make the vessel in all
respects seaworthy and to secure that she be properly manned, equipped and supplied or by the
personal act or default of the owner or its manager. Said paragraph, however, exempts the owner of the
vessel from any loss or damage or delay arising from any other source, even from the neglect or fault of
the captain or crew or some other person employed by the owner on board, for whose acts the owner
would ordinarily be liable except for said paragraph..
The Court of First Instance declared the contract as contrary to Article 587 of the Code of Commerce
making the ship agent civilly liable for indemnities suffered by third persons arising from acts or
omissions of the captain in the care of the goods and Article 1744 of the Civil Code under which a
stipulation between the common carrier and the shipper or owner limiting the liability of the former
for loss or destruction of the goods to a degree less than extraordinary diligence is valid provided it be
reasonable, just and not contrary to public policy. The release from liability in this case was held
unreasonable and contrary to the public policy on common carriers.
Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to
a special person only, becomes a private carrier.8 As a private carrier, a stipulation exempting the
owner from liability for the negligence of its agent is not against public policy, and is deemed valid.
The Civil Code provisions on common carriers should not be applied where the carrier is not acting as
such but as a private carrier. The stipulation in the charter party absolving the owner from liability for
loss due to the negligence of its agent would be void only if the strict public policy governing common
carriers is applied. Such policy has no force where the public at large is not involved, as in the case of a
ship totally chartered for the use of a single party.
And furthermore, in a charter of the entire vessel, the bill of lading issued by the master to the
charterer, as shipper, is in fact and legal contemplation merely a receipt and a document of title not a
contract, for the contract is the charter party. The consignee may not claim ignorance of said charter
party because the bills of lading expressly referred to the same. Accordingly, the consignees under the
bills of lading must likewise abide by the terms of the charter party. And as stated, recovery cannot be
had thereunder, for loss or damage to the cargo, against the shipowners, unless the same is due to
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personal acts or negligence of said owner or its manager, as distinguished from its other agents or
employees. In this case, no such personal act or negligence has been proved.
NATIONAL STEEL CORP. v. CA

Facts:
National Steel Corporation (NSC) as Charterer and defendant Vlasons Shipping, Inc. (VSI) as Owner,
entered into a Contract of Voyage Charter Hire (Affreightment) whereby NSC hired VSIs vessel, the MV
VLASONS I to make one (1) voyage to load steel products at Iligan City and discharge them at North
Harbor, Manila. VSI carried passengers or goods only for those it chose under a special contract of
charter party.
The vessel arrived with the cargo in Manila, but when the vessels three (3) hatches containing the
shipment were opened, nearly all the skids of tin plates and hot rolled sheets were allegedly found to
be wet and rusty.
NSC Xiled its complaint against defendant before the CFI wherein it claimed that it sustained losses as a
result of the act, neglect and default of the master and crew in the management of the vessel as well as
the want of due diligence on the part of the defendant to make the vessel seaworthy -- all in violation
of defendants undertaking under their Contract of Voyage Charter Hire.
In its answer, defendant denied liability for the alleged damage claiming that the MV VLASONS I was
seaworthy in all respects for the carriage of plaintiffs cargo; that said vessel was not a common
carrier inasmuch as she was under voyage charter contract with the plaintiff as charterer under the
charter party.
The trial court ruled in favor of VSI; it was afXirmed by the CA on appeal.
Issue:
Whether or not VSI contracted with NSC as a common carrier.
Held:
VSI was not a common carrier but a private carrier At the outset, it is essential to establish whether VSI
contracted with NSC as a common carrier or as a private carrier. The resolution of this preliminary
question determines the law, standard of diligence and burden of proof applicable to the present case.
Article 1732 of the Civil Code deXines a common carrier as persons, corporations, Xirms or
associations engaged in the business of carrying or transporting passengers or goods or both, by land,
water, or air, for compensation, offering their services to the public. It has been held that the true test
of a common carrier is the carriage of passengers or goods, provided it has space, for all who opt to
avail themselves of its transportation service for a fee. A carrier which does not qualify under the
above test is deemed a private carrier. Generally, private carriage is undertaken by special agreement
and the carrier does not hold himself out to carry goods for the general public. The most typical,
although not the only form of private carriage, is the charter party, a maritime contract by which the
charterer, a party other than the shipowner, obtains the use and service of all or some part of a ship for
a period of time or a voyage or voyages.
In the instant case, it is undisputed that VSI did not offer its services to the general public. As found by
the Regional Trial Court, it carried passengers or goods only for those it chose under a special contract
of charter party. As correctly concluded by the Court of Appeals, the MV Vlasons I was not a common
but a private carrier. Consequently, the rights and obligations of VSI and NSC, including their
respective liability for damage to the cargo, are determined primarily by stipulations in their contract
of private carriage or charter party. Recently, in Valenzuela Hardwood and Industrial Supply, Inc., vs.
Court of Appeals and Seven Brothers Shipping Corporation, the Court ruled:

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x x x [I]n a contract of private carriage, the parties may freely stipulate their duties and obligations
which perforce would be binding on them. Unlike in a contract involving a common carrier, private
carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on
common carriers protecting the general public cannot justiXiably be applied to a ship transporting
commercial goods as a private carrier. Consequently, the public policy embodied therein is not
contravened by stipulations in a charter party that lessen or remove the protection given by law in
contracts involving common carriers.
VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY, INC. v. CA
Facts:
Plaintiff shipped at Maconcon Port, Isabela 940 round logs on board M/V Seven Ambassador, a vessel
owned by defendant Seven Brothers Shipping Corporation. Plaintiff insured the logs against loss and/
or damage with defendant South Sea Surety and Insurance Co., Inc. for P2M and the latter issued its
Marine Cargo Insurance Policy on said date. In the meantime, the M/V Seven Ambassador sank
resulting in the loss of the plaintiffs insured logs.
Plaintiff demanded from defendant South Sea Surety and Insurance Co., Inc. the payment of the
proceeds of the policy but the latter denied liability under the policy. Plaintiff likewise Xiled a formal
claim with defendant Seven Brothers Shipping Corporation for the value of the lost logs but the latter
denied the claim.
Court of Appeals afXirmed in part the RTC judgment by sustaining the liability of South Sea Surety and
Insurance Company ("South Sea"), but modiXied it by holding that Seven Brothers Shipping
Corporation ("Seven Brothers") was not liable for the lost cargo.
Issue:
Whether or not defendants shipping corporation and the surety company are liable to the plaintiff for
the latter's lost logs.
Held:
The charter party between the petitioner and private respondent stipulated that the "(o)wners shall
not be responsible for loss, split, short-landing, breakages and any kind of damages to the cargo"
VALID
There is no dispute between the parties that the proximate cause of the sinking of M/V Seven
Ambassadors resulting in the loss of its cargo was the "snapping of the iron chains and the subsequent
rolling of the logs to the portside due to the negligence of the captain in stowing and securing the logs
on board the vessel and not due to fortuitous event." Likewise undisputed is the status of Private
Respondent Seven Brothers as a private carrier when it contracted to transport the cargo of Petitioner
Valenzuela. Even the latter admits this in its petition.
Private respondent had acted as a private carrier in transporting petitioner's lauan logs. Thus, Article
1745 and other Civil Code provisions on common carriers which were cited by petitioner may not be
applied unless expressly stipulated by the parties in their charter party.
In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests
solely on the charterer, exempting the shipowner from liability for loss of or damage to the cargo
caused even by the negligence of the ship captain. Pursuant to Article 1306 of the Civil Code, such
stipulation is valid because it is freely entered into by the parties and the same is not contrary to law,
morals, good customs, public order, or public policy. Indeed, their contract of private carriage is not
even a contract of adhesion. We stress that in a contract of private carriage, the parties may freely
stipulate their duties and obligations which perforce would be binding on them. Unlike in contract
involving a common carrier, private carriage does not involve the general public. Hence, the stringent
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provisions of the Civil Code on common carriers protecting the general public cannot justiXiably be
applied to a ship transporting commercial goods as a private carrier. Consequently, the public policy
embodied therein is not contravened by stipulations in a charter party that lessen or remove the
protection given by law in contracts involving common carriers.
The provisions of our Civil Code on common carriers were taken from Anglo-American law. Under
American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a
special person only, becomes a private carrier. As a private carrier a stipulation exempting the owner
from liability for the negligence of its agent is not against public policy and is deemed valid. Such
doctrine We Xind reasonable. The Civil Code provisions on common carriers should not be applied
where the carrier is not acting as such but as a private carrier. The stipulation in the charter party
absolving the owner from liability for loss due to the negligence of its agent would be void only if the
strict public policy governing common carriers is applied. Such policy has no force where the public at
large is not involved as in this case of a ship totally chartered for the use of a single party. (Home
Insurance Co. vs. American Steamship Agencies Inc., 23 SCRA 24, April 4, 1968)
PHIL. FIRST INSURANCE v. WALLEM PHILS. SHIPPING, UNKNOWN CHARTERER OF THE VESSEL
M/S OFFSHORE MASTER, and SHANGHAI FAREAST SHIP BUSINESS COMPANY
Facts:
Oct 2 95: Anhui Chemicals Import and Export Corp. loaded on board M/S Offshore Master a shipment
consisting 10,000 bags of sodium sulphate, complete and in good order for tranpo to and delivery at
the port of Manila for consignee, LG Atkimson Import-Export, Inc. (consignee), covered by a Clean Bill
of Lading. The Bill of Lading reXlects the ggross weight of the total cargo at 500,200 kilograms. The
owner/charterer M/V Offshore Master is unknown while the shipper of the shipment is Shanghai. Both
are foreign Xirms doing business in the Philippines, thru its local ship agent, Wallem.
Oct 16 95: 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 were in bad order and condition, having sustained various degrees spillages and
losses. This is evidenced by the Turn Over Survey of Bad Order Cargoes of the arrastre operator, Asian
Terminals (arrastre operator). The bad state of the bags is also evinced by the arrastre operators
Request for Bad Order Survey.
Asia Star undertook the delivery of the subject shipment from the pier to the consignees warehouse in
QC., while the Xinal inspection was conducted jointly by the consignees 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 kilograms of the shipment had
sustained unrecovered spillages, while 58,235 kilograms had been exposed and contaminated,
resulting in losses due to depreciation and downgrading.
Consignee Xiled a formal claim with Wallem for the value of the damaged shipment, to no avail. Since
the shipment was insured with Phil. First against all risks in the amt of P2.47 million, the consignee
Xiled a formal claim with Phil First for the damage and losses sustained by the shipment. Phil First
found the claim to be in order and compensable under the marine insurance policy. Consequently, Phil
First paid the consignee and the latter signed a subrogation receipt.
Phil First, sent a demand letter to Wallem for the recovery of the amount paid by the former to the
consignee. However, Wallem did not settle.
RTC: ordered Wallem to pay Phil First the amount with 6% interest plus attys fees and costs of the suit.
It attributed the damage and losses sustained by the shipment to the arrastre operators mishandling
in the discharge of the shipment; it held Wallem and the arrastre operator solidarily liable since both
are charged with and obligated to deliver the goods in good condition to the consignee; 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; 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.
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CA: reversed and set aside the RTCs decision; that there is no solidary liability bet. 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; that the instant case falls under an exception recognized in Eastern Shipping Lines case,
hence arrastre operator solely liable to the consignee.
Issue(s):
Whether or not Shanghai, the common carrier, is liable for the damaged/lost shipment.
Ruling:
Yes. 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.
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. 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.
wharf or between the establishment of the consignee or shipper and the ships tackle. Being the
custodian of the goods discharged from a vessel, an arrastre operators duty is to take good care of the
goods and tot turn over the party entitled to their possession.
Handling cargo is mainly the arrastre operators principal work so its drivers/operators or employees
should observe the standards and measures necessary to prevent losses and damage shipments under
its custody.
In this case the CA is correct insofar as it ruled that an arrasre operator and a carrier may not be held
during its unloading from the vessel.
The aforementioned Section 3(2) of the COGSA states that among the carriers responsibilities are to
he records are replete with evidence which show that the damage to the bags happened before and
after their discharge and it was caused by the stevedores of the arrastre operator who were then under
the supervision of Wallem.
It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under
the custody of the carrier. In the instant case, the damage or losses were incurred during the discharge
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of the shipment while under the supervision of the carrier. Consequently, the carrier is liable for the
damage or losses caused to the shipment. As the cost of the actual damage to the subject shipment has
long been settled, the trial courts Xinding of actual damages in the amount of P397,879.69 has to be
sustained.
UCPB GENERAL INSURANCE v. ABOITIZ SHIPPING CORP, EAGLE EXPRESS LINES, DAMCO
INTERMODAL SERVICES, INC., and PIMENTEL CUSTOMS BROKERAGE CO.
Facts:
3 units of waste water treatment plant with accessories were purchased by San Miguel Corp from
Super Max Engineering Enterprises of Taipei, Taiwan. The goods came from Charleston, USA and
arrived at the port of Manila on board m/v Scandutch Star. The same were the transported to Cebu on
board MV aboitiz supercon II. After its arrival the port of Cebu and clearance from the Bureau of
Customs ,the goods were delivered to and received by SMC at its plant site. It was then discovered that
one electrical motor of DBS Drive Unit was damaged.
Pursuant to an insurance agreement, UCPB paid SMC the value of the damaged unit. In turn, SMC
executed a subrogation form in favor of UCPB.
UCPB Xiled a complaint as subrogee of SMC seeking to recover from defendants the amount it paid to
SMC.
UCPB in its amended complaint impleaded East Asia as among defendants for being the general agent
of DAMCO. TC admitted the same.
DAMCO was declared in default by the TC.
Easts defense: dismissal of the complaint on the ground of prescription (but denied). This was
elevated to the SC, ordering the dismissal of the complaints against East.
TC: dismissed the complaint against East; declared defendants solidarily liable for the damaged
shipment
CA: reversed the decision and ruled that UCPBs right of action against respondents did not accrue
because the former failed to Xile a formal notice of claim within 24 hours from SMCs receipt of the
damaged merchandise as required under art. 366 of the Code of Commerce; the Xiling of a claim within
the time limitation in art. 366 is a condition precedent to the accrual of a right of action against the
carrier for the damages caused to the merchandise.
UCPB asserts that the claim requirement does not apply to this case because the damage to the
merchandise had already been known to the carrier. Interestingly, UCPB makes this revelation: xxx
damage to the cargo was found upon discharge from the foreign carrier onto the Intl Container
Terminal Services, Inc. in the presence of the carriers representative who signed the Request for Bad
Order Survey and the Turn Over of Bad Order Cargoes. On transshipment, the cargo was already
damaged when loaded on board the inter-island carrier. This knowledge, UCPB argues, dispenses with
the need to give the carrier a formal notice of claim; that under COGSA, notice of loss need not be given
if the condition of the cargo has been the subject of joint inspection such as, in this case, the inspection
in the presence of the Eagel Express representative at the time the cargo was opened at the ICTSI.
Eagle asserts that it cannot be held liable for the damage as it acted merely as a freight forwarders
agent in the transaction. It allegedly facilitated the transshipment of the cargo from MNL to CEB but
represented the interest of the cargo owner, and not the carriers. The only reason why the name of
Eagle representative appeared on the Permit to Deliver Imported Goods was that the form did not have
a space for the freight forwarders agent, but only for the agent of the shipping line; that it was East
which was the real agent of DAMCO, the ship owner.
Aboitiz, on the other hand, points out that it cannot be held liable because the damage was incurred
not during the transshipment to CEB on board Aboitiz vessel, but was already existent at the time of
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unloading in MNL; that art. 366 of the COC is applicable and serves as a condition precedent to the
accrual of UCPBs cause of action against it.
Pimentel reiterates the applicability of art. 366 of the COC.
Eagle (amended complaint): no cause of action under the COC and terms of the BOL; consignee made
no claim within 24 hours following receipt of the cargo
Aboitiz: UCPB did not Xile a claim with it and that the complaint states no cause of action
Issue:
Whether or not UCPB may hold liable any of the defendants.
Ruling:
NO. The provisions of the Code of Commerce, which apply to overland, river and maritime
transportation, come into play.

Art. 366 of the Code of Commerce states:

Art. 366. Within twenty-four hours following the receipt of the merchandise, the claim against the
carrier for damage or average which may be found therein upon opening the packages, may be made,
provided that the indications of the damage or average which gives rise to the claim cannot be
ascertained from the outside part of such packages, in which case the claim shall be admitted only at
the time of receipt.
After the periods mentioned have elapsed, or the transportation charges have been paid, no
claim shall be admitted against the carrier with regard to the condition in which the goods
transported were delivered.
The law clearly requires that the claim for damage or average must be made within 24 hours from
receipt of the merchandise if, as in this case, damage cannot be ascertained merely from the outside
packaging of the cargo.
In Philippine Charter Insurance Corporation v. Chemoil Lighterage Corporation,
petitioner, as subrogee of Plastic Group Phil., Inc. (PGP), Xiled suit against respondent
therein for the damage found on a shipment of chemicals loaded on board respondents barge.
Respondent claimed that no timely notice in accordance with Art. 366 of the Code of Commerce was
made by petitioner because an employee of PGP merely made a phone call to respondents Vice
President, informing the latter of the contamination of the cargo. The Court ruled that the notice of
claim was not timely made or relayed to respondent in accordance with Art. 366 of the Code of
Commerce.

The requirement to give notice of loss or damage to the goods is not an empty formalism. The
fundamental reason or purpose of such a stipulation is not to relieve the carrier from just liability, but
reasonably to inform it that the shipment has been damaged and that it is charged with liability
therefor, and to give it an opportunity to examine the nature and extent of the injury. This protects the
carrier by affording it an opportunity to make an investigation of a claim while the matter is still fresh
and easily investigated so as to safeguard itself from false and fraudulent claims.
We have construed the 24-hour claim requirement as a condition precedent to the accrual of a right of
action against a carrier for loss of, or damage to, the goods. The shipper or consignee must allege and
prove the fulXillment of the condition. Otherwise, no right of action against the carrier can accrue in
favor of the former.
The shipment in this case was received by SMC on August 2, 1991. However, as found by the
Court of Appeals, the claims were dated October 30, 1991, more than three (3) months from receipt of
the shipment and, at that, even after the extent of the loss had already been determined by SMCs
surveyor. The claim was, therefore, clearly Xiled beyond the 24-hour time frame prescribed by Art. 366
of the Code of Commerce.

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But what of the damage already discovered in the presence of Eagle Expresss representative
at the time the shipment was discharged in Manila? The Request for Bad Order Survey and Turn Over
Survey of Bad Order Cargoes, respectively dated June 17, 1999 and June 28, 1991, evince the fact that
the damage to the cargo was already made known to Eagle Express and, possibly, SMC, as of those
dates.

Sec. 3(6) of the COGSA provides a similar claim mechanism as the Code of Commerce but
prescribes a period of three (3) days within which notice of claim must be given if the loss or damage is
not apparent. It states:

Sec. 3(6). Unless notice of loss or damage and the general nature of such loss or damage be given in
writing to the carrier or his agent at the port of discharge or at the time of the removal of the goods
into the custody of the person entitled to delivery thereof under the contract of carriage, such removal
shall be prima facie evidence of the delivery by the carrier of the goods as descibed in the bill of lading.
If the loss or damage is not apparent, the notice must be given within three days of the delivery.
Said notice of loss or damage may be endorsed upon the receipt of the
goods given by the person taking delivery thereof.
The notice in writing need not be given if the state of the goods has at the
time of their receipt been the subject of joint survey or inspection.
UCPB seizes upon the last paragraph which dispenses with the written notice if the state of the goods
has been the subject of a joint survey which, in this case, was the opening of the shipment in the
presence of an Eagle Express representative. It should be noted at this point that the applicability of
the above-quoted provision of the COGSA was not raised as an issue by UCPB before the trial court and
was only cited by UCPB in its Memorandum in this case.

UCPB, however, is ambivalent as to which party Eagle Express represented in the
transaction. By its own manifestation, East Asiatic, and not Eagle Express, acted as the agent through
which summons and court notices may be served on DAMCO. It would be unjust to hold that Eagle
Expresss knowledge of the damage to the cargo is such that it served to preclude or dispense with the
24-hour notice to the carrier required by Art. 366 of the Code of Commerce. Neither did the inspection
of the cargo in which Eagle Expresss representative had participated lead to the waiver of the written
notice under the Sec. 3(6) of the COGSA. Eagle Express, after all, had acted as the agent of the freight
consolidator, not that of the carrier to whom the notice should have been made.

At any rate, the notion that the request for bad order survey and turn over survey of bad cargoes
signed by Eagle Expresss representative is construable as compliant with the notice requirement
under Art. 366 of the Code of Commerce was foreclosed by the dismissal of the complaint against
DAMCOs representative, East Asiatic.

As regards respondent Pimentel Customs, it is sufXicient to acknowledge that it had no participation in
the physical handling, loading and delivery of the damaged cargo and should, therefore, be absolved of
liability.

Finally, UCPBs misrepresentation that the applicability of the Code of Commerce was not raised as an
issue before the trial court warrants the assessment of double costs of suit against it.
WALLEM PHILIPPINES SHIPPING, INC. v. S.R. FARMS, INC.

Facts:
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Continental enterprises, ltd. Loaded on board the vessel M/V Hui Yang, in India, a shipment of Indian
Soya Bean Meal, for transportation and delivery to Mnl, with SR Farms as consignee/notify party. The
said shipment weights 1,100 metric tons covered by Bill of Lading. The vessel is owned and operated
by Conti-Feed, with Wallem as its ship agent.
The cargo is part of the entire shipment of Indian Soya Bean Meal/India Rapeseed Meal loaded in bulk
on board the said vessel for delivery to several consignees. Among he consignees were San Miguel Corp
and Vitarich Corp, including SR Farms.
Said vessel (MV Hui Yang) arrived at the port of Mnl, South Harbor. Thereafter, the shipment was
discharged and transferred into the custody of the receiving barges. The ofXloading of the shipment
went on and was handled by OTSI using its own manpower and equipment and w/o the participation
of the crew members of the vessel. All throughout the entire period of unloading operation, good and
fair weather condition prevailed.
At the instance of SR Farms, a cargo check of the subject shipment was made by one Lorenzo Bituin of
Erne Maritime and Allied Services, Co. Inc. who noted a shortage in the shipment which was placed at
80.647 metric tons based on draft survey made on the barges showing that the quantity of cargo
unloaded from the vessel was only 1019.53 metric tons. Thus, per the bill of lading, there was an
estimated shortage of 80.647
PHIL. FIRST INSURANCE v. WALLEM PHILS. SHIPPING, UNKNOWN CHARTERER OF THE VESSEL
M/S OFFSHORE MASTER, and SHANGHAI FAREAST SHIP BUSINESS COMPANY
Facts:
Oct 2 95: Anhui Chemicals Import and Export Corp. loaded on board M/S Offshore Master a shipment
consisting 10,000 bags of sodium sulphate, complete and in good order for tranpo to and delivery at
the port of Manila for consignee, LG Atkimson Import-Export, Inc. (consignee), covered by a Clean Bill
of Lading. The Bill of Lading reXlects the ggross weight of the total cargo at 500,200 kilograms. The
owner/charterer M/V Offshore Master is unknown while the shipper of the shipment is Shanghai. Both
are foreign Xirms doing business in the Philippines, thru its local ship agent, Wallem.
Oct 16 95: 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 were in bad order and condition, having sustained various degrees spillages and
losses. This is evidenced by the Turn Over Survey of Bad Order Cargoes of the arrastre operator, Asian
Terminals (arrastre operator). The bad state of the bags is also evinced by the arrastre operators
Request for Bad Order Survey.
Asia Star undertook the delivery of the subject shipment from the pier to the consignees warehouse in
QC., while the Xinal inspection was conducted jointly by the consignees 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 kilograms of the shipment had
sustained unrecovered spillages, while 58,235 kilograms had been exposed and contaminated,
resulting in losses due to depreciation and downgrading.
Consignee Xiled a formal claim with Wallem for the value of the damaged shipment, to no avail. Since
the shipment was insured with Phil. First against all risks in the amt of P2.47 million, the consignee
Xiled a formal claim with Phil First for the damage and losses sustained by the shipment. Phil First
found the claim to be in order and compensable under the marine insurance policy. Consequently, Phil
First paid the consignee and the latter signed a subrogation receipt.
Phil First, sent a demand letter to Wallem for the recovery of the amount paid by the former to the
consignee. However, Wallem did not settle.
RTC: ordered Wallem to pay Phil First the amount with 6% interest plus attys fees and costs of the suit.
It attributed the damage and losses sustained by the shipment to the arrastre operators mishandling
in the discharge of the shipment; it held Wallem and the arrastre operator solidarily liable since both
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are charged with and obligated to deliver the goods in good condition to the consignee; 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; 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.
CA: reversed and set aside the RTCs decision; that there is no solidary liability bet. 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; that the instant case falls under an exception recognized in Eastern Shipping Lines case,
hence arrastre operator solely liable to the consignee.
Issue(s):
Whether or not Shanghai, the common carrier, is liable for the damaged/lost shipment.
Ruling:
Yes. 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.
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
set forth in the Act. Section 3 (2) thereof then states that among the carriers responsibilities are to
properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.
wharf or between the establishment of the consignee or shipper and the ships tackle. Being the
custodian of the goods discharged from a vessel, an arrastre operators duty is to take good care of the
goods and tot turn over the party entitled to their possession.
Handling cargo is mainly the arrastre operators principal work so its drivers/operators or employees
should observe the standards and measures necessary to prevent losses and damage shipments under
its custody.
In this case the CA is correct insofar as it ruled that an arrasre operator and a carrier may not be held
during its unloading from the vessel.
The aforementioned Section 3(2) of the COGSA states that among the carriers responsibilities are to

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he records are replete with evidence which show that the damage to the bags happened before and
after their discharge and it was caused by the stevedores of the arrastre operator who were then under
the supervision of Wallem.
the custody of the carrier. In the instant case, the damage or losses were incurred during the discharge
of the shipment while under the supervision of the carrier. Consequently, the carrier is liable for the
damage or losses caused to the shipment. As the cost of the actual damage to the subject shipment has
long been settled, the trial courts Xinding of actual damages in the amount of P397,879.69 has to be
sustained.
UCPB GENERAL INSURANCE v. ABOITIZ SHIPPING CORP, EAGLE EXPRESS LINES, DAMCO
INTERMODAL SERVICES, INC., and PIMENTEL CUSTOMS BROKERAGE CO.
Facts:
3 units of waste water treatment plant with accessories were purchased by San Miguel Corp from
Super Max Engineering Enterprises of Taipei, Taiwan. The goods came from Charleston, USA and
arrived at the port of Manila on board m/v Scandutch Star. The same were the transported to Cebu on
board MV aboitiz supercon II. After its arrival the port of Cebu and clearance from the Bureau of
Customs ,the goods were delivered to and received by SMC at its plant site. It was then discovered that
one electrical motor of DBS Drive Unit was damaged.
Pursuant to an insurance agreement, UCPB paid SMC the value of the damaged unit. In turn, SMC
executed a subrogation form in favor of UCPB.
UCPB Xiled a complaint as subrogee of SMC seeking to recover from defendants the amount it paid to
SMC.
UCPB in its amended complaint impleaded East Asia as among defendants for being the general agent
of DAMCO. TC admitted the same.
DAMCO was declared in default by the TC.
Easts defense: dismissal of the complaint on the ground of prescription (but denied). This was
elevated to the SC, ordering the dismissal of the complaints against East.
TC: dismissed the complaint against East; declared defendants solidarily liable for the damaged
shipment
CA: reversed the decision and ruled that UCPBs right of action against respondents did not accrue
because the former failed to Xile a formal notice of claim within 24 hours from SMCs receipt of the
damaged merchandise as required under art. 366 of the Code of Commerce; the Xiling of a claim within
the time limitation in art. 366 is a condition precedent to the accrual of a right of action against the
carrier for the damages caused to the merchandise.
UCPB asserts that the claim requirement does not apply to this case because the damage to the
merchandise had already been known to the carrier. Interestingly, UCPB makes this revelation: xxx
damage to the cargo was found upon discharge from the foreign carrier onto the Intl Container
Terminal Services, Inc. in the presence of the carriers representative who signed the Request for Bad
Order Survey and the Turn Over of Bad Order Cargoes. On transshipment, the cargo was already
damaged when loaded on board the inter-island carrier. This knowledge, UCPB argues, dispenses with
the need to give the carrier a formal notice of claim; that under COGSA, notice of loss need not be given
if the condition of the cargo has been the subject of joint inspection such as, in this case, the inspection
in the presence of the Eagel Express representative at the time the cargo was opened at the ICTSI.
Eagle asserts that it cannot be held liable for the damage as it acted merely as a freight forwarders
agent in the transaction. It allegedly facilitated the transshipment of the cargo from MNL to CEB but
represented the interest of the cargo owner, and not the carriers. The only reason why the name of
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Eagle representative appeared on the Permit to Deliver Imported Goods was that the form did not have
a space for the freight forwarders agent, but only for the agent of the shipping line; that it was East
which was the real agent of DAMCO, the ship owner.
Aboitiz, on the other hand, points out that it cannot be held liable because the damage was incurred
not during the transshipment to CEB on board Aboitiz vessel, but was already existent at the time of
unloading in MNL; that art. 366 of the COC is applicable and serves as a condition precedent to the
accrual of UCPBs cause of action against it.
Pimentel reiterates the applicability of art. 366 of the COC.
Eagle (amended complaint): no cause of action under the COC and terms of the BOL; consignee made
no claim within 24 hours following receipt of the cargo
Aboitiz: UCPB did not Xile a claim with it and that the complaint states no cause of action
Issue:
Whether or not UCPB may hold liable any of the defendants.
Ruling:
NO. The provisions of the Code of Commerce, which apply to overland, river and maritime
transportation, come into play.

Art. 366 of the Code of Commerce states:

Art. 366. Within twenty-four hours following the receipt of the merchandise, the claim against the
carrier for damage or average which may be found therein upon opening the packages, may be made,
provided that the indications of the damage or average which gives rise to the claim cannot be
ascertained from the outside part of such packages, in which case the claim shall be admitted only at
the time of receipt.
After the periods mentioned have elapsed, or the transportation charges have been paid, no
claim shall be admitted against the carrier with regard to the condition in which the goods
transported were delivered.
The law clearly requires that the claim for damage or average must be made within 24 hours from
receipt of the merchandise if, as in this case, damage cannot be ascertained merely from the outside
packaging of the cargo.
In Philippine Charter Insurance Corporation v. Chemoil Lighterage Corporation,
petitioner, as subrogee of Plastic Group Phil., Inc. (PGP), Xiled suit against respondent
therein for the damage found on a shipment of chemicals loaded on board respondents barge.
Respondent claimed that no timely notice in accordance with Art. 366 of the Code of Commerce was
made by petitioner because an employee of PGP merely made a phone call to respondents Vice
President, informing the latter of the contamination of the cargo. The Court ruled that the notice of
claim was not timely made or relayed to respondent in accordance with Art. 366 of the Code of
Commerce.

The requirement to give notice of loss or damage to the goods is not an empty formalism. The
fundamental reason or purpose of such a stipulation is not to relieve the carrier from just liability, but
reasonably to inform it that the shipment has been damaged and that it is charged with liability
therefor, and to give it an opportunity to examine the nature and extent of the injury. This protects the
carrier by affording it an opportunity to make an investigation of a claim while the matter is still fresh
and easily investigated so as to safeguard itself from false and fraudulent claims.
We have construed the 24-hour claim requirement as a condition precedent to the accrual of a right of
action against a carrier for loss of, or damage to, the goods. The shipper or consignee must allege and
prove the fulXillment of the condition. Otherwise, no right of action against the carrier can accrue in
favor of the former.
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The shipment in this case was received by SMC on August 2, 1991. However, as found by the
Court of Appeals, the claims were dated October 30, 1991, more than three (3) months from receipt of
the shipment and, at that, even after the extent of the loss had already been determined by SMCs
surveyor. The claim was, therefore, clearly Xiled beyond the 24-hour time frame prescribed by Art. 366
of the Code of Commerce.

But what of the damage already discovered in the presence of Eagle Expresss representative
at the time the shipment was discharged in Manila? The Request for Bad Order Survey and Turn Over
Survey of Bad Order Cargoes, respectively dated June 17, 1999 and June 28, 1991, evince the fact that
the damage to the cargo was already made known to Eagle Express and, possibly, SMC, as of those
dates.

Sec. 3(6) of the COGSA provides a similar claim mechanism as the Code of Commerce but
prescribes a period of three (3) days within which notice of claim must be given if the loss or damage is
not apparent. It states:

Sec. 3(6). Unless notice of loss or damage and the general nature of such loss or damage be given in
writing to the carrier or his agent at the port of discharge or at the time of the removal of the goods
into the custody of the person entitled to delivery thereof under the contract of carriage, such removal
shall be prima facie evidence of the delivery by the carrier of the goods as descibed in the bill of lading.
If the loss or damage is not apparent, the notice must be given within three days of the delivery.
Said notice of loss or damage may be endorsed upon the receipt of the
goods given by the person taking delivery thereof.
The notice in writing need not be given if the state of the goods has at the time
of their receipt been the subject of joint survey or inspection.
UCPB seizes upon the last paragraph which dispenses with the written notice if the state of the goods
has been the subject of a joint survey which, in this case, was the opening of the shipment in the
presence of an Eagle Express representative. It should be noted at this point that the applicability of
the above-quoted provision of the COGSA was not raised as an issue by UCPB before the trial court and
was only cited by UCPB in its Memorandum in this case.

UCPB, however, is ambivalent as to which party Eagle Express represented in the
transaction. By its own manifestation, East Asiatic, and not Eagle Express, acted as the agent through
which summons and court notices may be served on DAMCO. It would be unjust to hold that Eagle
Expresss knowledge of the damage to the cargo is such that it served to preclude or dispense with the
24-hour notice to the carrier required by Art. 366 of the Code of Commerce. Neither did the inspection
of the cargo in which Eagle Expresss representative had participated lead to the waiver of the written
notice under the Sec. 3(6) of the COGSA. Eagle Express, after all, had acted as the agent of the freight
consolidator, not that of the carrier to whom the notice should have been made.

At any rate, the notion that the request for bad order survey and turn over survey of bad cargoes
signed by Eagle Expresss representative is construable as compliant with the notice requirement
under Art. 366 of the Code of Commerce was foreclosed by the dismissal of the complaint against
DAMCOs representative, East Asiatic.

As regards respondent Pimentel Customs, it is sufXicient to acknowledge that it had no participation in
the physical handling, loading and delivery of the damaged cargo and should, therefore, be absolved of
liability.

Finally, UCPBs misrepresentation that the applicability of the Code of Commerce was not raised as an
issue before the trial court warrants the assessment of double costs of suit against it.
WALLEM PHILIPPINES SHIPPING, INC. v. S.R. FARMS, INC.

Facts:
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Continental enterprises, ltd. Loaded on board the vessel M/V Hui Yang, in India, a shipment of Indian
Soya Bean Meal, for transportation and delivery to Mnl, with SR Farms as consignee/notify party. The
said shipment weights 1,100 metric tons covered by Bill of Lading. The vessel is owned and operated
by Conti-Feed, with Wallem as its ship agent.
The cargo is part of the entire shipment of Indian Soya Bean Meal/India Rapeseed Meal loaded in bulk
on board the said vessel for delivery to several consignees. Among he consignees were San Miguel Corp
and Vitarich Corp, including SR Farms.
Said vessel (MV Hui Yang) arrived at the port of Mnl, South Harbor. Thereafter, the shipment was
discharged and transferred into the custody of the receiving barges. The ofXloading of the shipment
went on and was handled by OTSI using its own manpower and equipment and w/o the participation
of the crew members of the vessel. All throughout the entire period of unloading operation, good and
fair weather condition prevailed.
At the instance of SR Farms, a cargo check of the subject shipment was made by one Lorenzo Bituin of
Erne Maritime and Allied Services, Co. Inc. who noted a shortage in the shipment which was placed at
80.647 metric tons based on draft survey made on the barges showing that the quantity of cargo
unloaded from the vessel was only 1019.53 metric tons. Thus, per the bill of lading, there was an
estimated shortage of 80.647.
Upon discovery thereof, the vessel chief ofXicer was immediately notiXied of the said short shipment by
the cargo surveyor, who accdgly issued the corresponding Cert. of Discharge. the survey conducted and
the resultant Xindings embodied thereon. as testiXied by Lorenzo Bituin, the alleged shortage was
arrived at using the draft survey which calls for the measurement of the light and loaded condition of
the barge in relation to the weight of the water supposedly displaced.
Wallem Xiled complaint for damages against cont-feed (foreign corp doing business in the PH and the
owner of M/V Hui Yang); RCS Shipping Agencies, the ship agent of Conti-feed; Ocean Terminal Services,
arrastre operator; and Cargo Trade, customs broker.
SR Farms Xiled and amended complaint imploding Wallem as defendant alleging that the latter, and not
RCS, acted as Conti-feeds ship agent.
Complaint against Cargo Trade was dismissed at the instance of SR Farms.
Upon motion of RCS, case against it was likewise dismissed
OTSI (Answer with Counterclaim and Crossclaim) alleged that it exercised due care and diligence in the
handling of the shipment from the carrying vessel unto the lighters; no damage or loss was sustained
by the cargo while being discharged by OTSI; liability, if any, is attributable to its co-defendants.
Wallem denied allegations; that it is not accountable nor responsible for any alleged shortage
sustained by the shipment while in the possession of its co-defendants; that the alleged shortage was
due to the negligence or faulty loading/unloading of the cargo b y the stevedores/shipper/consignee;
that the shortage was due to pre-shipment damage, inherent nature, vice or defect of the cargo;
respondents claim is already barred by laches/prescription.
RTC: dismissed respondents complaint. as well as the opposing parties counterclaims and crossclaims
CA: reversed and set aside the RTCs decision
Issue:
Whether or not SR Farms claim was already time-barred when the case was Xiled against Wallem
Ruling:
Yes.

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Under Section 3 (6) of the COGSA, notice of loss or damages must be Xiled within three days of delivery.
Admittedly, respondent did not comply with this provision.

Under the same provision, however, a failure to Xile a notice of claim within three days will not bar
recovery if a suit is nonetheless Xiled within one year from delivery of the goods or from the date when
the goods should have been delivered.

In Loadstar Shipping Co., Inc. v. Court of Appeals, the Court 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 neither the Civil Code nor the Code of Commerce
states a speciXic 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 instant case, the Court is not persuaded by respondents claim that the complaint against
petitioner was timely Xiled. Respondent argues that the suit for damages was Xiled on March 11, 1993,
which is within one year from the time the vessel carrying the subject cargo arrived at the Port of
Manila on April 11, 1993, or from the time the shipment was completely discharged from the vessel on
April 15, 1992.

There is no dispute that the vessel carrying the shipment arrived at the Port of Manila on April 11,
1992 and that the cargo was completely discharged therefrom on April 15, 1992. However, respondent
erred in arguing that the complaint for damages, insofar as the petitioner is concerned, was Xiled on
March 11, 1993.
UNSWORTH TRANSPORT INTERNATIONAL (PHILS.), INC. v. CA and PIONEER INSURANCE AND
SURETY CORPORATION
Facts:
Aug 31 92: shipper Sylvex delivered to Unsworth Transport Intl(UTI) a shipment of 27 drums of
various raw materials for pharmaceutical manufacturing. UTI issued B/L covering the shipment. The
shipment was insured with Pioneer in favor of Unilab against all risks in the mat of P1.77 million under
and by virtue of a marine risk note and open cargo policy.
on the same day, the B/L was issued, the shipment was loaded in a sealed container van, boarded on
APLs vessel M/V Pres. Jackson, and transshipped to APLs MV Pres. Taft for delivery to UTI in favor of
the consignee Unilab.
Sept 30 92, the shipment arrived at the port of Mnl. Oct 6, 92: UTI received the said shipment in its
warehouse after it stamped the Permit to Deliver Imported Goods procured by the Champs Customs
Brokerage. 3 days thereafter, Oceania Cargo conduced a stripping survey of the shipment located in
UTIs warehouse 2-pallets STC 40 bags Dried Yeast, both in good order condition and properly
sealed; 19 steel drums STC Vit. B Complex Extract, all in good order condition and properly sealed; and
1 steel drum STC Vit. B complex extract with cut/hole on side, with approx. 1% spilling.
Oct 15 92: the arrastre Jadine Davies issued a gate pass which stated that 22 drums raw materials for
pharmaceutical mfg. were loaded on a truck facilitated by Champs for delivery to Unilabs warehouse.
the materials were noted to be complete and in good order in the gate pass. shipment arrived on the
same day and the same was immediately surveyed by an independent surveyor, JG Bernas Adjusters &
Surveyors.
Oct 23 and 28 92: same surveyor conducted Xinal inspection w/c yielded the same results.
consequently, Unilabs quality control representative rejected one paper bag containing dried yeast
and one steel drum containing vit. B complex as unXit for the intended purpose.
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Unilab Xiled a formal claim for the damage against UTI and Pioneer Insurance. UTI denied liability on
the basis of its gate pass issued to unlit that goods were in complete and good condtion; while Pioneer
paid the claimed amount. Pioneer, as a subrogee, Xiled complaint for damages against APL and UTI.
RTC: ruled in favor of Pioneer Insurance
CA: afXirmed the RTCs decision; rejected UTIs defense that it was merely a forwarder, declaring
instead that it was a common carrier; that by issuing a B/L, UTI acknowledged receipt of the goods
and agreed to transport and deliver them at a speciXic place to a person named or his order.; that upon
delivery of the shipment to UTIs warehouse, its liability became similar to that of a depositary; as
such, it ought mohave exercised ordinary diligence in the care of the goods; that it failed to exercise the
required diligence; rejected the claim that UTIs liability should be limited to $500 per package
pursuant to COGSA considering that the value of the shipment was declared in a letter of credit and the
pro forma invoice
Issues:
a. Whether or not UTI is a common carrier.
b. Whether or not UTIs liability is limited to $500 pursuant to COGSA.
Ruling:
a. Yes. Admittedly, petitioner is a freight forwarder. The term freight forwarder" refers to a Xirm holding
itself out to the general public (other than as a pipeline, rail, motor, or water carrier) to provide
transportation of property for compensation and, in the ordinary course of its business, (1) to
assemble and consolidate, or to provide for assembling and consolidating, shipments, and to perform
or provide for break-bulk and distribution operations of the shipments; (2) to assume responsibility
for the transportation of goods from the place of receipt to the place of destination; and (3) to use for
any part of the transportation a carrier subject to the federal law pertaining to common carriers.
A freight forwarders liability is limited to damages arising from its own negligence, including
negligence in choosing the carrier; however, where the forwarder contracts to deliver goods to their
destination instead of merely arranging for their transportation, it becomes liable as a common carrier
for loss or damage to goods. A freight forwarder assumes the responsibility of a carrier, which actually
executes the transport, even though the forwarder does not carry the merchandise itself.
It is undisputed that UTI issued a bill of lading in favor of Unilab. Pursuant thereto, petitioner
undertook to transport, ship, and deliver the 27 drums of raw materials for pharmaceutical
manufacturing to the consignee.
A bill of lading is a written acknowledgement of the receipt of goods and an agreement to transport
and to deliver them at a speciXied place to a person named or on his or her order. It 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, identiXication marks, condition, quality, and value. As a
contract, it names the contracting parties, which include the consignee; Xixes the route, destination,
and freight rate or charges; and stipulates the rights and obligations assumed by the parties.
Undoubtedly, UTI is liable as a common carrier. Common carriers, as a general rule, are presumed to
have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed. That
is, unless they prove that they exercised extraordinary diligence in transporting the goods. In order to
avoid responsibility for any loss or damage, therefore, they have the burden of proving that they
observed such diligence. Mere proof of delivery of the goods in good order to a common carrier and of
their arrival in bad order at their destination constitutes a prima facie case of fault or negligence
against the carrier. If no adequate explanation is given as to how the deterioration, loss, or destruction
of the goods happened, the transporter shall be held responsible.
b. Yes. It is to be noted that the Civil Code does not limit the liability of the common carrier to a Xixed
amount per package. In all matters not regulated by the Civil Code, the rights and obligations of
common carriers are governed by the Code of Commerce and special laws. Thus, the COGSA
supplements the Civil Code by establishing a provision limiting the carriers liability in the absence of a
shippers declaration of a higher value in the bill of lading. Section 4(5) of the COGSA provides:
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(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 of lawful money of the
United States, or in case of goods not shipped in packages, per customary
freight unit, or the equivalent of that sum in other currency, unless the nature
and value of such goods have been declared by the shipper before shipment
and inserted in the bill of lading. This declaration, if embodied in the bill of
lading, shall be prima facie evidence, but shall not be conclusive on the
carrier.
In the present case, the shipper did not declare a higher valuation of the goods to be shipped. Contrary
to the CAs conclusion, the insertion of the words L/C No. LC No. 1-187-008394/ NY 69867 covering
shipment of raw materials for pharmaceutical Mfg. x x x cannot be the basis of petitioners
liability.Furthermore, the insertion of an invoice number does not in itself sufXiciently and convincingly
show that petitioner had knowledge of the value of the cargo.
NEW WORLD INTERNATIONAL DEVELOPMENT, INC. v. NYK FIL-JAPAN SHIPPING CORP., LEP
PROFIT INTERNATIONAL, INC., ORD, DMT CORP, ADVATECH INDUSTRIES, INC., MARINA PORT
SERVICES., and SEBROS CARRIER CORP.
NEW WORLD v. SEABOARD EASTERN INSURANCE CO.
Facts:
New World bought form DMT Corp through its agent, Advatech, 3 emergency generator sets worth
$721.5 million. DMT shipped the generator sets by truck from Wisconsin, USA to LEP ProXit Ints in
Chicago, Illinois. From there, the shipment went by train to Oakland, California where it was loaded on
S/s Califronia Luna, owned and operated by NYK Fil-Japan for delivery to New World in Manila. NYK
issued a b/l declaring that it received the goods in good condition.
NYK unloaded the shipment in Hong Kong and transshipped it to S/S ACX Ruby that it owned and
operated. On its journey to Manila, it encountered typhoon Kadiang and upon arrival at the Manila
South Harbor, its captain Xiled a sea protest respecting the loss and damage that the goods on board his
vessel suffered.
An examination of the 3 generator sets revealed that all 3 suffered extensive damage and could no
longer be repaired. For these reasons, New World demanded from NYK, DMT, Advatech, LEP ProXit, LEP
Intl Philipines, Marina and Sebros recompense for its loss. Later bin 1994, it Xiled an action for speciXic
performance and damages against all the respondents before the RTC of Makati.
In 1993, New World sent a formal claim to Seaboard-Easter Insurance Co. since it covered the goods
with a marine insurance policy to which it required, in tis reply on Feb 1994, the former to submit to
an itemized list of the damaged units, parts and accessories, with corresponding values, for the
processing of the claim. But, New World did not submit what was required, insisting that the insurance
policy did not include the submission; thus, Seaboard, refused to process the claim.
RTC: absolved the respondents from liability with the exception of NYK; that the generator sets were
damages during transit while in the care of NYKs vessel.; that NYK failed to exercise the degree of
diligence required of it in the face of a foretold raging typhoon in its path; it also ruled, however, that
New World Xiled its claim against NYK beyond the one year period provided by COGSA (New World
Xiled its complain on Oct 11 94 when the deadline for Xiling the action- on or before Oct 7, had already
lapsed; that the one-year period should be counted from the date the goods were delivered to the
arrastre operator and not from the date they were delivered to New Worlds job site; that Seaboard
cannot be faulted for denying the claim against it since New World refused to submit the itemized list
that Seaboard needed for assessing the damage
CA: afXirmed RTCs ruling except with respect to Seaboards liability; that New World can still recoup
its loss from Seaboards marine insurance policy, considering a) that the submission of the itemized
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listing is an unreasonable imposition and b) that the one-year prescriptive period under the COGSA did
not affect New Worlds right under the insurance policy since it was the Insurance Code that governed
the relation between the insurer and the insured
Issue:
a. Whether or not the respondents are liable
b. Whether or not the one-year COGSA prescriptive period for marine claim applies to the present
case
Ruling:
a. Petitioner New World asserts that the roles of respondents DMT, Advatech, LEP, LEP ProXit, Marina
and Serbros in handling and transporting its shipment from Wisconsin to Manila collectively
resulted in the damage to the same, rendering such respondents solidarily liable with NYK, the
vessel owner.
But the issue regarding which of the parties to a dispute incurred negligence is factual and is not a
proper subject of a petition for review on certiorari. And petitioner New World has been unable to
make out an exception to this rule. Consequently, the Court will not disturb the Xinding of the RTC,
afXirmed by the CA, that the generator sets were totally damaged during the typhoon which beset
the vessels voyage from Hong Kong to Manila and that it was her negligence in continuing with that
journey despite the adverse condition which caused petitioner New Worlds loss.
That the loss was occasioned by a typhoon, an exempting cause under Article 1734 of the Civil
Code, does not automatically relieve the common carrier of liability. The latter had the burden of
proving that the typhoon was the proximate and only cause of loss and that it exercised due
diligence to prevent or minimize such loss before, during, and after the disastrous typhoon. As
found by the RTC and the CA, NYK failed to discharge this burden.
b. Yes. Regarding prescription of claims, Section 3(6) of the COGSA provides that the carrier and the
ship shall be discharged from all liability in case of loss or damage unless the suit is brought within
one year after delivery of the goods or the date when the goods should have been delivered.
But whose fault was it that the suit against NYK, the common carrier, was not brought to court on
time? The last day for Xiling such a suit fell on October 7, 1994. The record shows that petitioner
New World Xiled its formal claim for its loss with Seaboard, its insurer, a remedy it had the right to
take, as early as November 16, 1993 or about 11 months before the suit against NYK would have
fallen due.
In the ordinary course, if Seaboard had processed that claim and paid the same, Seaboard would
have been subrogated to petitioner New Worlds right to recover from NYK. And it could have then
Xiled the suit as a subrogee. But, as discussed above, Seaboard made an unreasonable demand on
February 14, 1994 for an itemized list of the damaged units, parts, and accessories, with
corresponding values when it appeared settled that New Worlds loss was total and when the
insurance policy did not require the production of such a list in the event of a claim.
Besides, when petitioner New World declined to comply with the demand for the list, Seaboard
against whom a formal claim was pending should not have remained obstinate in refusing to
process that claim. It should have examined the same, found it unsubstantiated by documents if
that were the case, and formally rejected it. That would have at least given petitioner New World a
clear signal that it needed to promptly Xile its suit directly against NYK and the others. Ultimately,
the fault for the delayed court suit could be brought to Seaboards doorstep.
Section 241 of the Insurance Code provides that no insurance company doing business in the
Philippines shall refuse without just cause to pay or settle claims arising under coverages provided
by its policies. And, under Section 243, the insurer has 30 days after proof of loss is received and
ascertainment of the loss or damage within which to pay the claim. If such ascertainment is not had
within 60 days from receipt of evidence of loss, the insurer has 90 days to pay or settle the claim.
And, in case the insurer refuses or fails to pay within the prescribed time, the insured shall be
entitled to interest on the proceeds of the policy for the duration of delay at the rate of twice the
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ceiling prescribed by the Monetary Board.
Notably, Seaboard already incurred delay when it failed to settle petitioner New Worlds claim as
Section 243 required. Under Section 244, a prima facie evidence of unreasonable delay in payment
of the claim is created by the failure of the insurer to pay the claim within the time Xixed in Section
243.
Consequently, Seaboard should pay interest on the proceeds of the policy for the duration of the
delay until the claim is fully satisXied at the rate of twice the ceiling prescribed by the Monetary
Board. The term ceiling prescribed by the Monetary Board means the legal rate of interest of 12%
per annum provided in Central Bank Circular 416, pursuant to Presidential Decree 116. Section 244
of the Insurance Code also provides for an award of attorneys fees and other expenses incurred by
the assured due to the unreasonable withholding of payment of his claim.
In Prudential Guarantee and Assurance, Inc. v. Trans-Asia Shipping Lines, Inc., the Court regarded as
proper an award of 10% of the insurance proceeds as attorneys fees. Such amount is fair
considering the length of time that has passed in prosecuting the claim. Pursuant to the Courts
ruling in Eastern Shipping Lines, Inc. v. Court of Appeals, a 12% interest per annum from the Xinality
of judgment until full satisfaction of the claim should likewise be imposed, the interim period
equivalent to a forbearance of credit.
Petitioner New World is entitled to the value stated in the policy which is commensurate to the
value of the three emergency generator sets or US$721,500.00 with double interest plus attorneys
fees as discussed above.
BENJAMIN CUA (CUA HIAN TEK) v. WALLEM PHILIPPINES SHIPPING, INC. and ADVANCE
SHIPPING CORPORATION.
Facts:
Nov 12 90: Cua Xiled civil action for damages against Wallem and Advance before RTC Mnl/ He sought
payment for damage to 218 tons and for a shortage of 50 tons of shipment of Brazilian Soybean
consigned to him, as evidenced by a b/l. He claimed that the loss was due to Wallem and Advances
failure to observe EO diligence in carrying the cargo. Advance (foreign corp) was the owner and
manage of MV Argo Trader that carried the cargo, while Wallem was its ofXicial agent.
Advance Xiled a motion to dismiss assailing RTCs jurisdiction over Cuas claim; it argued that Cuas
clam should have Xirst been brought to arbitration. Cua opposed Advances argument; that he, as a
consignee, was not bound by the Charter Party Agreemen, w/c was a contract between the Advance
and the charterers. RTC: deferred in resolving the question of jurisdiction until after trial on the merits,
but upon motion by Advance, the RTC ruled that Cua was not bound by the arbitration clause in the
Charter Party Agreement.
Wallem, Xiled its own motion to dismiss (ground: prescription); invoked sec 3(6) of COGSA that the
carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is
brought within one year after delivery of the goods; that the goods were delivered to Cua on Aug 16 90
more than 1 year than the period allowed under COGSA; and, that since the action was Xield beyond
the one year prescriptive period, Wallem argued that Cuas action has been barred.
Cua Xiled opposition to Wallems MTD, denying the claim of prescription; referred to Aug 10 90 telex
message sent by the manager of the UK P&I Clb, which stated that Advance agreed to extend the
commencement of suit for 90 days, from Aug 14 to Nov 90; that the extension was made w/ the
concurrence of the insurer of the vessel, the UK P&I Club.
Feb 11 92: Wallem Xiled omnibus motion, w/drawing its motion to dismiss and adopting the
arguments of Advances Motion to dismiss. IT made express reservation, however, that it was not
waiving the defense of prescription and will allege as one of its defenses, prescription and/or laches.

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RTC: need not act on the motion to dismiss Xiled by Wallem; after trial on the merits, ordered Wallem
and Advance jointly and severally to pay damages to Ca
CA: no basis for RTC to conclude that the prescriptive periods extended by the parties agreement;
hence, set aside RTCs decision
Issue:
Whether or not Cuas claim for payment of damages against Wallem and Advance has prescribed.
Ruling:
Yes.
The COGSA is the applicable law for all contracts for carriage of goods by sea to and from Philippine
ports in foreign trade;28 it is thus the law that the Court shall consider in the present case since the
cargo was transported from Brazil to the Philippines.
Under Section 3(6) of the COGSA, the carrier is discharged from liability for loss or damage to the cargo
unless the suit is brought within one year after delivery of the goods or the date when the goods
should have been delivered.29 Jurisprudence, however, recognized the validity of an agreement
between the carrier and the shipper/consignee extending the one-year period to Xile a claim.30
The vessel MV Argo Trader arrived in Manila on July 8, 1989; Cuas complaint for damages was Xiled
before the RTC of Manila on November 12, 1990. Although the complaint was clearly Xiled beyond the
one-year period, Cua additionally alleged in his complaint (under paragraph 11) that [t]he defendants
x x x agreed to extend the time for Xiling of the action up to November 12, 1990.31
We cannot consider the respondents discussion on prescription in their Memorandum Xiled with the
RTC,39 since their arguments were based on Cuas supposed failure to comply with Article 366 of the
Code of Commerce, not Section 3(6) of the COGSA the relevant and material provision in this case.
Article 366 of the Code of Commerce requires that a claim be made with the carrier within 24 hours
from the delivery of the cargo; the respondents alleged that they were informed of the damage and
shortage only on September 13, 1989, months after the vessels arrival in Manila.
Since the COGSA is the applicable law, the respondents discussion to support their claim of
prescription under Article 366 of the Code of Commerce would, therefore, not constitute a refutation of
Cuas allegation of extension. Given the respondents failure to speciXically deny the agreement on the
extension of the period to Xile an action, the Court considers the extension of the period as an admitted
fact.
This presumed admission is further bolstered by the express admission made by the respondents
themselves in their Memorandum:
STATEMENT OF THE CASE
1. This case was Xiled by [the] plaintiff on 11 November 1990 within the extended
period agreed upon by the parties to Yile suit.
The above statement is a clear admission by the respondents that there was indeed an agreement to
extend the period to Xile the claim. In light of this admission, it would be unnecessary for Cua to
present a copy of the August 10, 1990 telex message to prove the existence of the agreement. Thus, Cua
timely Xiled a claim for the damage to and shortage of the cargo.
ASIAN TERMINALS, INC. v. PHILAM INSURANCE CO., INC.
Facts:
Apr 15 95: Nichem Corp shipped to Universal Motors Corp 219 packages containing 120 units of
brand new Nissan Pickup Truck Double Cab 4x2 model, w/o engine, tires and batteries, on board
vessel S/S Calayan Iris from JPN to MNL. The shipment, which had a declared value of US$81,368 or
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P29,400,000 was insured with Philam against all risks under a marine policy.
The carrying vessel arrived at the port of Mnl on Apr 20 95, and when the shipment was unloaded by
the staff of Asian Terminals Inc (ATI), it was found that the package was in bad order. the Turn over
survey of Bad Order Cargoes identiXied two packages as being dented and broker. Thereafter, the
cargoes were stored for temporary safekeeping inside CFS Warehouse. May 11 95: the shipment was
withdrawn RF Revilla Customs Brokerage, the authorized broker of Universal Motors, and delivered to
the latters warehouse in Mandaluyong City. Upon the request of Universal Motors, a bad order survey
was conducted on the cargoes and it was found that one Frame Axle Sub without LWR was deeply
dented on the bufXle plate while six Frame Assembly with Bush were deformed and misaligned.Owing
to the extent of the damage to said cargoes, Universal Motors declared them a total loss.
Aug 14 95: Universal Motors Xiled a formal claim for damages in the amount of P643,963.84 against
Westwind, ATI and R.F. Revilla Customs Brokerage, Inc. When Universal Motors demands remained
unheeded, it sought reparation from and was compensated in the sum of P633,957.15 by Philam.
Accordingly, Universal Motors issued a subrogation receipt in favor of Philam.
Jan 18 96: Philam, as subrogee of Universal Motors, Xiled a Complaint for damages against Westwind,
ATI and R.F. Revilla Customs Brokerage, Inc. before the RTC of Makati.
RTC: judged in favor of Philam and ordered Westwind and ATI to pay Philam, jointly and severally; that
there was sufXicient evidence to establish the respective participation of Westward and ATI in the
discharge of and consequent damage to the shipment; that the cargoes were compressed while being
hoisted using a cable that was too short and taut; that while the staff of ATI undertook the physical
unloading of the cargoes, Westwinds duty ofXicer exercised full supervision and control throughout the
process; that Westwind is vicariously liable for failing to prove that it exercised EO diligence in the
supervision of the ATI stevedores who unloaded the cargoes from the vessel. However, RTC absolved
RF Revilla Customs because the cargoes had been damaged before delivery to the consignee.
CA: afXirmed RTC decision
Issue:
Who between Westwind and ATI should be liable for the damages to the cargo.
Ruling:
Both, jointly and severally.
While the CA afXirmed the joint liability of ATI and Westwind, it held them liable only for the value of
one unit of Frame Axle Sub without Lower inside Case No. 03-245-42K/1.
It is undisputed that Steel Case No. 03-245-42K/1 was partly torn and crumpled on one side while it
was being unloaded from the carrying vessel. The damage to said container was noted in the Bad Order
Cargo Receipt 48 dated April 20, 1995 and Turn Over Survey of Bad Order Cargoes dated April 21,
1995. The Turn Over Survey of Bad Order Cargoes indicates that said steel case was not opened at the
time of survey and was accepted by the arrastre in good order. Meanwhile, the Bad Order Cargo
Receipt bore a notation "B.O. not yet t/over to ATI." On the basis of these documents, petitioner ATI
claims that the contents of Steel Case No. 03-245-42K/1 were damaged while in the custody of
petitioner Westwind.
We agree.
exceptions enumerated under Article 1734 49 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. 50
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The court a quo, however, found both petitioners Westwind and ATI, jointly and severally, liable for the
damage to the cargo. It observed that while the staff of ATI undertook the physical unloading of the
cargoes from the carrying vessel, Westwind's duty ofXicer exercised full supervision and control over
the entire process. The appellate court afXirmed the solidary liability of Westwind and ATI, but only for
the damage to one Frame Axle Sub without Lower.
Upon a careful review of the records, the Court Xinds no reason to deviate from the Xinding that
petitioners Westwind and ATI are concurrently accountable for the damage to the content of Steel Case
No. 03-245-42K/1.
Section 2 51 of the COGSA provides that under every contract of carriage of goods by the sea, the
carrier in relation to the loading, handling, stowage, carriage, custody, care and discharge of such
set forth in the Act. Section 3 (2) 52 thereof then states that among the carrier's responsibilities are to
properly load, handle, stow, carry, keep, care for and discharge the goods carried. 53
the custody of the carrier. 57 The Damage Survey Report 58 of the survey conducted by Phil. Navtech
Services, Inc. from April 20-21, 1995 reveals that Case No. 03-245-42K/1 was damaged by ATI
stevedores due to overtightening of a cable sling hold during discharge from the vessel's hatch to the
pier. Since the damage to the cargo was incurred during the discharge of the shipment and while under
the supervision of the carrier, the latter is liable for the damage caused to the cargo.
This is not to say, however, that petitioner ATI is without liability for the damaged cargo.
The functions of an arrastre operator involve the handling of cargo deposited on the wharf or between
the establishment of the consignee or shipper and the ship's tackle. Being the custodian of the goods
discharged from a vessel, an arrastre operator's duty is to take good care of the goods and to turn them
over to the party entitled to their possession. 59
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. 60
While it is true that an arrastre operator and a carrier may not be held solidarily liable at all times, 61
the facts of these cases show that apart from ATI's stevedores being directly in charge of the physical
unloading of the cargo, its foreman picked the cable sling that was used to hoist the packages for
transfer to the dock. Moreover, the fact that 218 of the 219 packages were unloaded with the same
sling unharmed is telling of the inadequate care with which ATI's stevedore handled and discharged
Case No. 03-245-42K/1.
PHILAM INSURANCE COMPANY, INC. v. HEUNG-A SHIPPING CORP. and WALLEM PHILIPPINES
SHIPPING, INC.
HEUNG-A SHIPPING CORP and WALLEM PHILIPPINES SHIPPING, INC. v. PHILAM INSURANCE
COMPANY, INC.
Facts:
Dec 19 2000: Novartis imported from Jinsuk Trading in South Korea, 19 pallets of 200 rolls of Ovaltine
Power 18 glaminated plastic packaging material. Gins engaged the services of Protop Shipping corp, a
freight forwarder likewise based in SoKor, to forward the goods to their consignee, Novartis.
Based on a b/l issued by Protop, the cargo was on freight prepaid basis and on shippers load and
count which means that the container was packed with cargo by one shipper where the quantity,
description and condition of the cargo is the sole responsibility of the shipper. Likewise stated is the
name of Sagawa Express Phil. designated as the entity in the PH which will obtain the delivery
contract.
Protop shipped the cargo thru Dongnama which in turn loaded the same on M/V Heung-A Bangkok
owned and operated by Heung-a shipping corp, a Korean corp, pursuant to a slot charter agreement
whereby a space in he latters vessel was reserved for the exclusive use of the former. Wallem is the
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ship agent of Heung-A in the Ph. Novartis insured the shipment with Philam under all risk marine open
policy against all loss, damage, liability or expense before, during transit and even after the discharge
of the shipment from the carrying vessel until its complete delivery to the consignees premises. The
vessel arrived at the port of Mnl on Dec 27 2000 and the shipment contained in a sea van container
was discharged without exception into the possession, custody and care of ATI as the customs arrastre
operator.
Shipment reached Novartis premises on Jan 5 2001 and was thereupon inspected by the companys
senior laboratory technician.
initial inspection - technician found the container van locked with its load intact. After opening the
same, inspected its contents and discovered that the boxes were wet and damp. The boxes on one side
of the van were in disarray while others were opened or damaged due to the dampness; it observed
further that parts of the container van were damaged and rusty. There were also water droplets on the
walls and the Xloor was wet. Since the damaged packaging materials might contaminate the product
they were meant to hold, technician rejected the entire shipment.
Aggrieved, Novartis demanded indemniXication for the lost/damaged shipment from Protop, Sagawa,
ATI and Stephanie but was denied. Insurance claims were thus Xiled with Philam which paid the
insured value of the shipment in the adjusted amount of 1.9 million. Philam thereafter claimed, as
subrogee of Novartis, adjacent the parties liable for damaged shipment.
Philam sent demand letter to Wallem for reimbursement of the insurance claims; however, it was
ignored. Philam imploded Wallem as addtl defendant in an amended complaint
RTC: damage to the shipment occurred onboard the vessel while in transit from Korea to the
Philippines; Heung-A as the common carrier the shipment; that it failed to present evidence showing it
exercised the diligence required of a common carrier. it discounted also the slot charter agreement
between heung-a and dongnama, and held that it did not bind the consignee who was not a party
thereto; furhter, it was hung-as duty to ensure that the container van was in good condition; Wallem
was held liable as Heung-as ship agent in the Philippines while Proptop was adjudged liable because
the damage sustained by the shipment was due to the bad condition of the container van.
CA: afXirmed the RTC decision
Issue:
a. Whether or not he shipment sustained damage while in the possession and custody of Heung-A,
and if so, whether or not Heung-As liability can be limited to Us$500 per package pursuant to the
COGSA
b. Whether or not NOVARTIS/PHILAM failed to Xile a claim against Heung-A or Wallem.
Ruling:
a. Yes.
The uncontested results of the inspection survey conducted by Manila Adjusters Surveyors Company
showed that sea water seeped into the panels/sidings and rooXing of the container van. This was
conXirmed by the examination conducted by Hernandez, the chemist of PRECISION, on samples from
the cartons, boxes, aluminum foil and laminated plastic packaging materials. Based on the laboratory
examination results, the contents of the van were drenched by sea water, an element which is highly
conspicuous in the high seas. It can thus be reasonably concluded that negligence occurred while the
container van was in transit, in HEUNG-As possession, control and custody as the carrier.
Although the container van had defects, they were not, however, so severe as to accommodate heavy
saturation of sea water. The holes were tiny and the rusty portions did not cause gaps or tearing.
Hence, the van was still in a suitable condition to hold the goods and protect them from natural
weather elements or even the normal Xlutter of waves in the seas.
The scale of the damage sustained by the cargo inside the van could have been only caused by large
volume of sea water since not a single package inside was spared. Aside from the defective condition of
the van, some other circumstance or occurrence contributed to the damages sustained by the
shipment. Since the presence of sea water is highly concentrated in the high seas and considering
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HEUNG-As failure to demonstrate how it exercised due diligence in handling and preserving the
container van while in transit, it is liable for the damages sustained thereby.
As the carrier of the subject shipment, HEUNG-A was bound to exercise extraordinary diligence in
conveying the same and its slot charter agreement with DONGNAMA did not divest it of such
characterization nor relieve it of any accountability for the shipment.
Clearly then, despite its contract of affreightment with DONGNAMA, HEUNG-A remained responsible as
the carrier, hence, answerable for the damages incurred by the goods received for transportation.
"[C]ommon carriers, from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligenceand vigilance with respect to the safety of the goods and the
passengers they transport. Thus, common carriers are required to render service with the greatest
skill and foresight and to use all reasonable means to ascertain the nature and characteristics of the
goods tendered for shipment, and toexercise due care in the handling and stowage, including such
methods as their nature requires.
"[C]ommon carriers, as a general rule, are presumed to have been at fault or negligent if the goods they
transported deteriorated or got lost or destroyed. That is, unless they provethat they exercised
extraordinary diligence in transporting the goods. Inorder to avoid responsibility for any loss or
damage, therefore, they have the burden of proving that they observed such diligence."42 Further,
under Article 1742 of the Civil Code, even if the loss, destruction, or deterioration of the goods should
be caused by the faulty nature of the containers, the common carrier must exercise due diligence to
forestall or lessen the loss.
Here, HEUNG-A failed to rebut this prima faciepresumption when it failed to give adequate explanation
as to how the shipment inside the container van was handled, stored and preserved to forestall or
prevent any damage or loss while the same was inits possession, custody and control.
PROTOP is solidarily liable with HEUNG-A for the lost/damaged shipment in view of the bill of lading
the former issued to NOVARTIS. "A bill of lading is a written acknowledgement of the receipt of goods
and an agreement to transport and to deliver them at a speciXied place to a person named or on his or
her order. It 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."43 PROTOP breached its contract with
NOVARTIS when it failed to deliver the goods in the same quantity, quality and description as stated in
Bill of Lading No. PROTAS 200387.
In case, however, of the shippers failure to declare the value of the goods in the bill of lading, Section 4,
paragraph 5 of the COGSA provides:
Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in
connection with the transportation of goods in an amount exceeding $500 per package lawful money
of the United States, or in case of goods not shipped in packages, per customary freight unit, or the
equivalent of that sum in other currency, unless the nature and value of such goods have been declared
by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the
bill of lading shall be prima facieevidence, but shall be conclusive on the carrier.
Hence, when there is a loss/damage to goods covered by contracts of carriage from a foreign port to a
Philippine port and in the absence a shippers declaration of the value of the goods in the bill of lading,
as in the present case, the foregoing provisions of the COGSA shall apply. The CA, therefore, did not err
in ruling that HEUNG-A, WALLEM and PROTOPs liability is limited to $500 per package or pallet.
b. Yes.
Consonant with the ruling in the recent Asian Terminals, Inc. v. Philam Insurance Co., Inc.,48 the
prescriptive period for Xiling an action for lost/damaged goods governed by contracts of carriage by
sea to and from Philippine ports in foreign trade is governed by paragraph 6,Section 3 of the COGSA
which states:
(6) Unless notice of loss or damageand the general nature of such loss or damage be given in
writing to the carrier or his agent at the port of discharge before or at the time of the removal of
the goods into the custody of the person entitled to delivery thereof under the contract of carriage,
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such removal shall be prima facieevidence of the delivery by the carrier of the goods as described
in the bill of lading. If the loss or damage is not apparent, the notice must be given within three
days of the delivery.
Said notice of loss or damage maybe endorsed upon the receipt for the goods given by the person
taking delivery thereof.
The notice in writing need not be given if the state of the goods has at the time of their receipt been the
subject of joint survey or inspection. In any event the carrier and the ship shall be discharged from all
liability in respect of loss or damage unless suit is brought withinone year after delivery of the goods
or the date when the goods should have been delivered: Provided, That if a notice of loss or damage,
either apparent or concealed, is not given as provided for in this section, that fact shall not affect or
prejudice the right of the shipper to bring suit within one year after the delivery of the goods or the
date when the goods should have been delivered.
It was further ruled in Asian Terminals that pursuant to the foregoing COGSA prov:sion, failure to
comply with the notice requirement shall not affect or prejudice the right of the shipper to bring suit
within one year after delivery of the goods.
The consignee, NOVARTIS, received the subject shipment on January 5, 2001. PHILAM, as the subrogee
of NOVARTIS, Xiled a claim against PROTOP on June 4, 2001, against WALLEM on October 12, 2001 and
against HEUNG-A on December 11, 2001, or all within the one-year prescriptive period. Verily then,
despite NOV AR TIS' failure to comply with the three-day notice requirement, its subrogee PHILAM is
not barred from seeking reimbursement from PROTOP, HEUNG-A and WALLEM because the demands
for payment were timely Xiled.
Iron Bulk Shipping v. Remington

A bill of lading partakes of the nature of a receipt and, at the same time, a contract.
Facts:

Remington Industrial Sales (Remington) is a purchaser of 194 packages of hot steel rolls valued
at that time at more than $200 thousand from Wangs Company (Wangs). These packages of steel rolls
were to be shipped to the Philippines through a vessel called MV Indian Reliance, (Indian) owned
by Iron Bulk Shipping (Iron). The packages were insured. A bill of lading was issued covering the
packages and it was indicated therein that the goods were CLEAN ON BOARD.

Upon the arrival of Indian in the Philippines, after the packages were unloaded, it was
discovered by the inspection agency employed by the consignee thereof that the packages were
plagued with rust extending from 50% to 80% contamination. Because of this, Remington Xiled
claims against its insurer, Iron and the Manila Port Services. Because the claims were unheeded,
Remington Xiled a complaint for sum of money against the above-mentioned persons with the Regional
Trial Court (RTC), which rendered judgment in favor of Remington and against Iron only. It found that
Iron failed to exercise extraordinary diligence in handling and transporting the cargoes, and
that based on the bill of lading, the goods were in good condition when it was unconditionally in
its possession for transport. It further held that Iron failed to support its defense of
extraordinary diligence. Hence, the presumption of negligence was left undisputed. This was
afXirmed in toto by the Court of Appeals (CA).

Thus, Iron appealed to the Supreme Court (SC), arguing that the decisions of the RTC and CA
were misplaced in that they relied solely on the bill of lading, which were controverted by contrary
evidence.
Issue:

Are the RTC and CA correct in Xinding fault against Iron and in relying their Xindings on the bill
of lading?
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Ruling and Discussion:

Yes, the RTC and CA are correct.

A bill of lading operates both as a receipt and as a contract. It is a receipt for goods
shipped and received by it, indicating the size, dimensions, weight and condition of the goods at
the time they were received by the carrier. It is also a contract in that the carrier undertakes to
transport the goods indicated therein are the parties, the Yixed route, the destinations, and of
course the freight rates and charges it also stipulates the rights and obligations of the parties
concerning the transaction covered by it.

In the case, Iron controverts the reliance on the bill of lading as to the condition of the goods,
which was merely pro forma, and that there were pieces of evidence to the contrary. The SC held that,
while the bill of lading being in the nature of a receipt may be explained, varied or contradicted, the
evidence adduced by Iron showed that, even though there were slight rusts in the packages, they
were in fair and usually accepted condition. The fact that the bill of lading is pro forma does not
necessarily mean that it deserves scant consideration. The carrier, upon notice that the goods
were not in good condition, could have: (1) not accepted it, or (2) accepted it but put marginal
notes as to the true conditions thereof. This the carrier failed to do. The bill of lading is clean.
Therefore, as to the condition of the goods, the bill of lading deserves greater consideration.

Being a common carrier, the presumption of negligence attaches to Iron, in the event
that the goods were lost or damaged. The burden to overcome the presumption rests on the
common carrier by showing either that (a) the damage or loss was caused by any of the causes
stated in Article 1734 or (b) it exercised extraordinary diligence. In this case, unfortunately, Iron
failed to show any of the two. Thus, the presumption remains. Iron should be held liable for the
damage suffered by Remington.

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Lorenzo Shipping v. Chubb and Sons

A clean bill of lading constitutes a prima facie evidence of the receipt by the carrier of the goods as
therein described, and a consequent arrival of the damaged goods makes a prima facie case against the
carrier for negligence.
Facts:

Mayer Steel Pipes Corporation (Mayer), based in Manila, from whom Sumimoto Corporation
(Sumimoto) a corporation organized and created under the laws of the United States (US) loaded
581 bundles of black steel pipes (the goods) on board a vessel named M/V Lorcon IV (Lorcon),
which was owned by Lorenzo Shipping (Lorenzo). Lorcon was to transport the goods from Manila
to Davao City. There in Davao, the goods would be tranferred to a vessel owned by Gearbulk, Ltd.
(Gearbulk), a foreign corporation created and organized under the laws of Norway. The goods
were insured by Chubb and Sons (Chubb).

Upon receipt by Lorenzo of the goods, it issued a clean bill of lading covering them. Then it
set sail. Upon arrival of at the port of Davao City, the surveyors hired by Sumimoto discovered that the
cargo hold of Lorcon was Xlooded with seawater. Also, it found that the goods were heavily rusted.
Notwithstanding, the goods were discharged and were loaded to Gearbulks vessel, which transported
the goods to the US. A bill of lading was issued by Gearbulk with the annotation: CARGO HEAVILY
RUSTED. In the US, Sumimoto received and inspected the goods, but it rejected them after
having found that they were unYit for the purpose they are for. Thus, Sumimoto Xiled a claim with
its insurer, Chubb, which paid the amount of damages caused to the shipment. Chubb now, acting as a
subrogee, alleging that it is a foreign corporation not doing business in the Philippines, sues Lorenzo
for the amount of damages arising from that isolated transaction. Lorenzo countered that Chubb was
not capacitated to sue, because Sumimoto a foreign corporation doing business in the
Philippines without a license, from which it derives its rights as subrogee does not have
capacity to sue in the Philippines.

The Regional Trial Court (RTC) ruled in favor of Chubb, Xinding that it was capacitated to sue in
the Philippines on that isolated transaction and that there was negligence on the part of Lorenzo. This
was afXirmed by the Court of Appeals (CA). Thus, Lorenzo appealed to the Supreme Court (SC), arguing
that Chubb did not have capacity to sue and that the cause of the damage was the improper packaging
of the goods.
Issue:

Were the RTC and CA correct in ruling that Chubb had capacity to sue in the Philippines and
that Lorenzo failed to exercise extraordinary diligence?

Yes, the RTC and CA were correct.

First, Chubb is capacitated to sue in the Philippines, because it sufXiciently established that (a)
it is a foreign corporation (b) not doing business in the Philippines and (c) suing on an isolated
transaction. The fact that there were two bills of lading cannot make the suit not relating to an
isolated transaction. The two bills of lading relate to one incident and to one insurance contract.
Moreover, the fact that it is suing as a subrogee, claiming the right to the debt or sum of money under a
foreign corporation doing business in the Philippines without a license which under the law does not
have the capacity to sue does not incapacitate Chubb to sue in the Philippines. Capacity to sue is a
personal right, exclusive to one to whom it is made available. Since the law gives such right to
foreign corporations not doing business in the Philippines, provided that it is on an isolated
transaction, Chubb in this case may validly sue on matter.

Second, on the liability of Lorenzo, it cannot assert that the damage was proximately
caused by improper packaging. When it issued a clean bill of lading, it represented that the
goods it received were in good condition. In fact, a clean bill of lading is a prima facie evidence
of the carriers receipt of the goods in good condition. Further, when the issuance of a clean bill
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of lading is followed by a consequent delivery of damaged goods, a prima facie case for
negligence against the carrier is proper. In the case, however, there is not just a prima facie case of
negligence, but a clear establishment thereof, as when it was sufXiciently established that upon arrival
of the vessel, the cargo holds were Xlooded in seawater. In fact, when the samples of the goods were
examined, it tested positive for sodium which was a compelling evidence that the proximate
cause of the heavy rusting was the steels contact with salt water. The allegation of improper
packaging could not overcome this established negligence on the part of the carrier. This leads to the
conclusion that Lorenzo failed to keep the vessel seaworthy. And because the vessel was not seaworthy,
damage was caused to the goods. Further, it is shows that Lorenzo failed to exercise extraordinary
diligence in transporting the goods. Thus, it should be held liable to Chubb, the insurer-subrogee, for
the amount of damages.

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Magellan Manufacturing v. Court of Appeals

Being a contract, the bill of lading 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.
Facts:

Magellan Manufacturing (Magellan) exported 136 thousand anahaw fans (the goods) to its
customer Choju Co. (Choju), a foreign corporation organized under the laws of Japan. The goods were
to be shipped through a vessel owned by Orient Overseas Container Lines (Orient). Thus, a letter of
credit was issued by Choju in favor of Magellan which the latter deposited with his Bank.
Contained in the letter of credit were the following conditions, among others: (1) that transshipment
was prohibited and (2) there should be an on board bill of lading issued in favor of the
consignee.

The shipment pushed through. A bill of lading was issued by Orient, wherein it was stated that
a transshipment would be necessary in the transport. However, Magellan encountered a problem
with the payment of the letter of credit, because it was denied by Choju on the ground that there were
violations of the letter of credit: there was transshipment and that no on board bill of lading was
issued. Because of Chojus refusal the goods were shipped back to Manila. Orient demanded payment
from Magellan for the shipment charges from Japan back to Manila, or Magellan may opt to abandon
the goods so that Orient may sell them at a public auction. Magellan opted to abandon the goods.

Thereafter, Orient demanded the payment for the shipment from Manila to Japan, to which
Magellan protested. It argued that it was Orients fault why the goods were rejected by Choju. Hence,
an action was Xiled by Magellan against Orient and its agent for collection of sum of money with the
Regional Trial Court (RTC) based on the loss it suffered from Chojus rejection and for damages. RTC
dismissed the case and adjudged that Magellan should bear the loss. This was afXirmed by the Court of
Appeals (CA). Hence, the decision was appealed to the Supreme Court (SC), arguing that it should not
bear the loss because (a) there was no transshipment, because the goods were transferred to a
vessel still owned by Orient and (b) even if there was, the transshipment was not due to its fault
but by the carrier and (c) there was a bill of lading issued certiYied by its agent, which should be
considered as an on board bill of lading.
Issue:

Are the RTC and CA correct in Xinding that Magellan should bear the loss?

Yes, the RTC and CA are correct in Xinding that Magellan should bear the loss.

The letter of credit prohibited transshipment and required an on board bill of lading.
These two conditions were violated by Magellan.
First, there was transshipment, because the goods were transferred from one vessel to another.
This was admitted by Magellan and Orient. However, the argument that there was no transshipment
because the two vessels were owned by the same company is erroneous, because in maritime law,
transshipment is simply the transfer of goods from one vessel to another regardless of whether
or not the two vessels are owned by the same person. Also, the alternative argument cannot lie,
because according to the bill of lading issued by Orient to Magellan, transshipment was to be done.
When Magellan acceded to the terms and conditions of the bill of lading, it gave its consent
thereto, and it cannot now controvert or adduce evidence aliunde (oral) contrary to the terms of
the bill. The bill of lading is the contract between the parties and, as such, it is the law between
them. According to the parol evidence rule, a party may not vary or contradict the terms of the
contract, unless a mistake mutual to the parties existed. In the case, there is no mistake mutual to
them, because Orient as a carrier had been doing it as part of its business. The fact that the bill is a
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contract of adhesion cannot be an excuse for Magellan. As a rule, contracts of adhesion are not void per
se. They are, however, construed strictly against the one who prepared it in case of doubt and
ambiguity. Also, the party called to adhere to the contract is not entirely without choice. If it
accepts the terms contained therein, it may sign it and consider it binding. But if it does not, it
may reject it and look for another which provides for acceptable terms, according to its
business interest. In this case, Magellan accepted the bill of lading. It is therefore deemed to have
accepted and bound itself to the terms of the contract. The fact that there was transshipment
hence a violation of the letter of credit is attributable to Magellan.

Second, there was no on board bill of lading issued covering the goods. While there was a bill
of lading certiYied by the agent of Orient, the same could not be considered as an on board bill of
lading. The consignees demand for an on board bill of lading is understandable, because it is one
which states the conditions of the goods when received, on board a speci7ic vessel, giving the
shipper and the consignee a reasonable expectation that the shipment is good-to-go. This is
different from a received-for-shipment bill of lading, which merely states that the goods have been
received and to be shipped through a vessel not speciXied which may be available sooner or later
depending on the condition and availability of the vessel. This may not guard sufXiciently the rights of
the consignee, as when the goods to be shipped face hazards of deterioration, such as the goods in this
case. The fact that a certiYication was issued could not have effected the conversion of the simple
bill of lading into an on board bill, because it was issued way beyond the expiry date of the
letter of credit. But granting that it could, the certiXication would have the effect on prospectively, not
retroactively. Thus, it could not have converted the simple bill into an on board bill of lading before or
at the time the letter of credit had expired.

Therefore, because of the violations of Magellan and the latter of credit, having been
dishonored, the loss pertaining thereto must be borne by Magellan.

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Saludo v. Court of Appeals

The representations in a bill of lading or an airway bill issued by a carrier may be made basis by
another carrier in carrying out its duties in good faith, especially when it had no means of ascertaining
the material facts pertaining thereto; so that a carrier may be the proximate transporter of the
passenger or goods but not the proximate cause for the loss or damage.
Facts:

Aniceto Saludo (Aniceto) was in Chicago when her mother died there on October 23, 1976.
Aniceto lost no time in sending the remains of her mother to a funeral home, which embalmed it and
Xixed it for funeral. Because she wanted that her mothers remains be laid rest in the Philippines, she
arranged with Continental Mortuary Air Services (Continental), which arranged for her the Xlight that
was to bring the remains of her mother to the Philippines. Continental booked a Xlight with Philippine
Airlines (PAL) through the latters agent Air Care International (Air Care). An airway bill was issued
by PAL in advance which was dated October 27, 1976.

Continental furnished the air pouch for the casket and sealed it. Also, the vice-consul of the
Philippine consulate in Chicago sealed the same. The same was delivered by Continental to PAL on
October 28, 1976. Continental issued a bill concerning the package which stated that the
remains in the sealed casket were of Crispina Saludo. PAL, relying on the representations in
the bill, loaded the casket in its plane and commenced the shipment. In the meantime,
expecting that the remains would arrive in the Philippines after the delivery, Aniceto and her
brother booked for Ylights to the Philippines. They arrived ahead of the package.

To their dismay, however, when they arrived at the airport of the Philippines, they
discovered that it was another persons remains which were shipped to the Philippines. Worse,
they learned after due veriYication that their mothers remains were shipped to Mexico.

On October 30, 1976, the remains arrived in Manila. Thereafter, Aniceto Xiled a complaint for
damages against PAL because of the mishap in the transport of her mothers remains. The trial court
and the Court of Appeals both found that PAL was not at fault for the said mishap. Aniceto believes
otherwise. So, she Xiled this petition for review alleging in the main that PAL was the author of the
mishap and that it must be held liable for damages.
Issue:

Is PAL at fault in the mis-shipment of the remains of Anicetos mother? If so, is it liable for
damages?

No, PAL is not at fault, and it may not be held liable for damages.

Common carriers are expected to exercise extraordinary diligence in the transport of
passengers and goods. Such duty attaches from the time the goods have been unconditionally
placed in their possession for transport. Moreover, a bill of lading is a very good evidence in
proving receipt of goods, such that it creates a prima facie evidence of delivery to it. An airway
bill, in the case of air transport, has for its functions as that of a bill of lading. However, because of the
recent practices in air transport of goods, as when airway bills may be issued ahead, the
issuance of an airway bill would not necessarily mean the actual delivery of the goods to the
carrier.

In the case, it was sufYiciently established that the airway bill was issued ahead and that
the actual receipt of the remains was on October 28, 1976. Thus, the duty to exercise
extraordinary diligence attached only on that day.

Furthermore, even though it was established that PAL had to exercise extraordinary diligence
starting from that day, PAL cannot be faulted for bringing the wrong casket to the Philippines.
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Circumstances must be taken into account into supporting this view. One, when Continental
delivered the casket to PAL, it issued a bill which represented that the remains therein were of
Anicetos mother. Two, the casket was sealed, and PAL or any of its agents were under no
authority, and in fact prohibited, from opening the same. These circumstances would point out
that PAL was acting in good faith when it relied on the bill issued by Continental. Moreover, it
exercised extraordinary diligence in its duties to transport the goods turned over to it when it safely
arrived in the Philippines. Blame now cannot be on it for having relied in good faith in the
representations of the bill when it could not verify whether or not the casket contains the
remains of Anicetos mother. Even granting it could open the sealed casket, it would be an
undue burden on the part of PAL.

Furthermore, it was established that the switching happened on October 27, 1976, on
which date it was established the package was not yet delivered to PALs custody. It was still
in Continentals custody. Thus, it is not PAL who is at fault. However, while there are hints of
Continentals fault, the Court could not decide on it, because it was not at issue in this case. The
question brought before it was whether PAL is liable for damages to Aniceto or not. To this, the Court
categorically answered in the negative.

Lastly, while the Court commiserates with Aniceto, it could not grant its prayer to hold PAL
liable, for no amount of her misery could warrant an imposition of fault or liability to the innocent. PAL
has been found and established to be innocent in this case regarding the mis-shipment.

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Ysmael v. Barretto
The stipulations in the bill of lading are binding between the parties, provided they are not contrary to
law, moral, etc. However, in case of stipulations of period regarding notices of claim, when the period
would unreasonably burden the claimant or deprive him of his right to claim, the same must be taken
to mean the reasonable time after discovery of the damage or loss.
Facts:

Ysmael Corporation (Ysmael) shipped 164 boxes of silk (the goods) from Manila to Surigao,
through a steamer named Andres owned by Barretto Co. (Barretto). The goods were covered by a bill
of lading issued by Barretto. Upon arrival at the port of Surigao, it was discovered that only 160 boxes
were delivered. Stated in the bill of lading is a condition which required that claims must be made at
the time of delivery to the consignee or his agent, if the goods show signs of external damages;
otherwise, it must be made in writing and given within 24 hours from the time of delivery.
However, the notice of claim was Yiled seven months after the delivery, but within 7 days from the
receipt of the information that only 160 boxes were delivered. Ysmael Xiled a complaint for sum of
money based on the value of the goods against Barretto, which moved for the dismissal of the
complaint, because the notice of claim was Xiled way beyond the stipulated period in the bill of lading.
The trial court ruled in favor of Ysmael which was afXirmed by the appellate court. Thus, Barrettos
agents appealed the case, arguing, among others, that the complaint by Ysmael should not have been
given due course, because the condition precedent was not complied with. Ysmael counter-argues that
the requirement of the Xiling of the notice of claim was substantially complied with.
Issue:

Was the notice of claim timely Xiled, which would make the requirement on Xiling of the notice
of claim substantially complied with?

The notice of claim was timely Yiled, or at the very least, it was Yiled in substantial
compliance with the requirement.

The requirement of notice of claim is so that the carrier may be able to verify the material
allegations in the alleged incident. This is to afford the common carrier from any fraudulent
scheme that a shipper or consignee may employ, in order to claim sums of money as damages
when there was no actual damage or loss. Thus, a period may be prescribed, which must be
complied with. However, the shipper or consignee (collectively as the claimants, as the case may be)
should also be given time to ascertain the truth regarding the incident. In the very nature of things, the
claimant would not commence its action until and unless it had made a full and careful investigation of
all the material facts related to its claim. Therefore, when a period is prescribed in the bill of lading,
although generally controlling, the period must be read in consonance with the circumstances,
such that when it would be unreasonably burdensome to the claimant, the period must be
construed to mean the reasonable time thereafter.

In the case, the bill prescribed that the notice must be Xiled at the time of delivery if external
signs of damage existed, but if not, the claim must be made 24 hours thereafter. Since there was no sign
of external damage, no claim was Xiled on the day of delivery. However, it was only seven months
thereafter that a claim was Xiled for the missing 4 boxes of silk. The Court reasoned out that the period
must be read as reasonable time because of the efYiciency of the means of communication at
that time. At that time also, Surigao was deemed to be very far from Manila, so that the distance was
also a factor. The court, moreover, said that it would be impossible for Ysmael to Xile a notice of claim
when it did not have the information of any loss or damage. By requiring it to observe strictly the
stipulated time would be to encourage him to gamble and employ fraud, in case there is no loss. In fact,
Xiling a notice of claim within seven days from the receipt of information regarding the loss was
JD III - 405 (2015-2016)
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considered reasonable time. Therefore, the case should not be dismissed on the ground of non-
compliance with condition precedent.

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Sweet Lines v. Judge Teves and Atty. Tandog, et al.

The provisions in a contract of adhesion (like a ticket or bill of lading) must be in keeping with the law,
morals and public policy; so much so that, when a provision is utterly injurious to the public, it must
not be given effect.
Facts:

Sweet Lines (Sweet) is a common carrier engaged in inter-island transport through vessels.
Among the vessels it owned were M/V Sweet Hope (Sweet Hope) and M/V Sweet Town (Sweet Town).
Atty. Tandong (Teves) and company were passengers who purchased tickets from Sweet at their
main ofYice in Cagayan de Oro. Their assigned vessel was Sweet Hope, bound for Tagbilaran City via
Cebu City. At the back of the tickets was written in Yine letters: any and all claims against the
company must be brought with the competent courts of Cebu City. This was called Condition 14.

Unfortunately, because many passengers were going to Surigao, Sweet Hope being one with
more capacity was re-assigned to the route for Surigao. Tandog and company were re-assigned
also to Sweet Town. However, since their seat numbers indicated in their tickets do not
correspond the seat numbers of Sweet Hope and that it was already full, they were requested
to hide at the cargo section to avoid the inspection ofYicers of the Coastguard. There they were
exposed to scorching heat of the sun and the dust from the ships cargo of corn grits.

They were able to arrive safely in Tagbilaran and went to Misamis Oriental, where they Xiled an
action for sum of money and damages with the Court of First Instance (CFI). Sweet however moved
that the suit be dismissed, because it was in violation of Condition 14, which was binding upon Tandog
and company. The CFI judge, Judge Teves, denied the motion. Its motion for reconsideration having
been denied, Sweet Xiled this present petition for prohibition against the presiding Judge, who allegedly
committed gross un-procedural conduct and grave abuse of discretion.
Issue:

Did the trial Judge commit grave abuse of discretion when it denied the motion to dismiss?

No, the trial Judge did not commit grave abuse of discretion in denying the motion to dismiss.
In fact, he was correct in denying it.

A contract of carriage of passengers is perfected by mere consent. Thus, by the mere meeting of
the minds of the carrier and the passenger, a contract of carriage is perfected. However, certain
provisions therein may be considered void in light of the circumstances attendant to the case. In the
case, there was undeniably a perfected contract of carriage. The only question is that whether
Condition 14 is valid or not.

The court categorized Condition 14 as one which is in the nature of a contract of
adhesion, that is, the passenger is given the choice to either take it or leave it. The company,
who stands in a higher position as compared to the passengers who generally speaking are middle-
or low-income people drafts the contract and usually are not open to negotiations pertaining to the
terms. When he could not agree with the terms, he/she should reject it. When he does, he may accept
it. Because of this peculiar nature of contracts of adhesion, certain guidelines were formulated by the
Supreme Court (SC) in how to deal with it. In keeping with the principle of the New Civil Code, SC
adopted an approach that would protect the weaker party in such contractual relation and
those contracts must be construed strictly against the company.

Further, because of the nature of inter-island shipping, that is, very often the ports are crowded
the boats are almost always Xilled up to the maximum capacity and the fact that most people who
use these means of transportation are middle- or low-income [some even were less literate, as taken
judicial notice by the SC], the passengers are not expected to read the Xine prints at the back portion of
the tickets. As such, they could not be considered as having waived the venue in Xiling their actions.
Thus, under the circumstances, the Condition 14 would tend to be injurious to the public
JD III - 405 (2015-2016)
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especially to the public to which Sweet caters its services and it should be declared void in this
case.

Therefore, the Judge was correct in denying the motion to dismiss of Sweet.

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Servando v. Philippine Steam Navigation Co. (PSNC)

A stipulation by the parties in the bills of lading issued for the cargoes in question, limiting the
responsibility of the carrier for the lost or damage that may be caused to the shipment is valid
where there is nothing therein that is contrary to law, morals, or public policy. Hence, it is binding
upon the parties even if written on the back of the bill of lading and not signed by the parties.
Facts:

Claro Uy Bico and Amparo Servando loaded on board the PSNCs carriage from Manila to
Pulupandan cavans of rice, cartons of colored paper, toys and general merchandise. The goods arrived
in complete and good order unto the warehouse of the Bureau of Customs. However, it was razed by a
Yire of unknown origin on the same day thus destroying the cargoes. Before, the Xire, Bico was able
to take delivery of a number of cavans of rice. Bico claims for the value of goods but PSNC rejects such
claim.

The lower court however noted that the parties have agreed to limit the liability of PSNC
as provided for in the bill of lading issued for the cargoes in question. Clause 14 herein states:

Clause 14. Carrier shall not be responsible for loss or damage to shipments billed
owners 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

Bico, however, claims that such stipulation is not binding on them because it was printed in
Yine letters on the back of the bill of lading and they did not sign the same.
Issue:
WON Clause 14 is valid and WON PSNC may be held liable.
Held:

Yes, such clause is valid though taking in the form of a contract of adhesion. However, PSNC
may NOT be held liable as the Yire, being the immediate and proximate cause of the loss, is
deemed a fortuitous event.

In the case at bar, the burning of the customs warehouse was an extraordinary even which
happened independently of the will of the PSNC, it could not have foreseen the even. Further, there is
nothing in record to show that PSNC incurred delay in its obligations. Moreover, there was no
shred of proof in the present case that may attribute the cause of the Xire to the negligence of PSNC or
its employees. To note, even the storage of the goods in the Customs warehouse pending
withdrawal by Bico of the cargoes was undoubtedly made with their knowledge and consent.

Also, it is important to note that Clause 14 herein is a mere reiteration of the basic
principle of law in Art. 1174 of the NCC which states that no person shall be responsible for
events which could not have been foreseen, or though foreseen, are inevitable; except in cases
1) speciYied by law; 2) it is declared in the stipulation; and 3) when the nature of the obligation
requires the assumption of risk. Consequently, PSNC is not made liable.

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Maersk Line v. CA (1993)

Generally, contracts of adhesion are considered void. Nonetheless, settled is the rule that bills of
lading are contracts not entirely prohibited. One who adheres to the contract is in reality free to
reject it in its entirety; if he adheres, he gives his consent. However, such rule does not apply if such
contract creates an absurd situation, as in the case in which the date of arrival of the shipment is left to
the sole determination and will of the carrier.
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 carrier previously assume the obligation
to deliver at a given date or time. In such case, delivery of shipment/cargo should be made at least
within a reasonable time.
Facts:

Maersk Line is engaged in the transportation of goods by sea, doing business through its
agent Compania de Tabacos. Castillo, on the other hand, is the proprietor of Ethegal
Laboratories engaged in the manufacture of pharmaceutical products. Castillo ordered from Eli
Lilly of Puerto Rico, through its agent in the Philippines, empty gelatin capsules for the manufacture of
his pharmaceutical products. Through a Memorandum of Shipment, Eli Lilly advised Castillo that the
empty gelatin capsules were already on board MV Maersk Line and it would arrive on the speciFied date
of April 3, 1977. However, the cargoes were mishipped and diverted to USA and then back to
California. After two months from the speciYied date, the goods Yinally arrived in the
Philippines. Castillo, however, refused to take delivery on account of its failure to arrive on time. Thus,
Castillo, alleging negligence on Eli Lilly, Yiled an action for rescission of contract.

Eli Lilly, however, denied that it committed a breach of contract and further claimed that
its liability only attaches in case of loss, destruction, or deterioration of goods. In addition
thereto, it imputed the delay of the delivery of the goods to the negligence of Maersk Line, the
carrier. Hence, the claim against Eli Lilly was dismissed.

Maerks Line claims that it cannot be held liable for the delay as it acted in GF and there
was no special contract under which the carrier undertook to deliver the shipment on or before
a speciYic date. On the contrary, Castillo claims that there was negligence on the part of Maersk Line
and the provision at the back of the bill of lading is void, being a contract of adhesion. Said bill of
lading, among others, reads:
The carrier does not undertake that the Goods shall arrive 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 circumstance 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.
Issue:
WON Clause 4 is valid and WON Maerks Line is held liable.
Held:

Yes, Maerks Line is liable for breach of contract of carriage through gross negligence
amounting to bad faith. Likewise, said Clause is VOID as 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.

Though there is no contract between Maerks and Castillo indicating the date of arrival of the
goods, petitioner was nevertheless very well aware of the speciYic date when the goods were
JD III - 405 (2015-2016)
Page !77 of !83

expected to arrive as indicated in the bill of lading itself. Hence, there is no need to execute
another contract for the purpose as it would be a mere superYluity.

Withal, Maerks Line is in no doubt negligent in the delivery of the goods as the period of
2 months from the estimated date of arrival was well beyond the realm of reasonableness.
Provident Insurance Corp. v. CA and Azucar Shipping Corp. (2004)

A requirement that in a bill of lading that a claim be presented within a short time after delivery as
condition precedent for a right to accrue against the shipper is valid, it being a contract between the
parties.
Facts:

MV Eduardo II took and received on board at Toledo 32,000 plastic woven bags of
various fertilizer in good order and condition for transportation to CDO. The consignee, Atlas
Fertilizer Corporation, was instructed to deliver it to Davao. During the process of unloading the
shipment, 3 bags fell overboard and 281 were unrecovered spillages. Thus, due to the
mishandling of the cargo, the consignee incurred damages. Provident Insurance, payed Atlas and as
a subrogee, Xiled the instant case against Azucar.

Azucar then moved to dismiss the complaint on the ground that the claim or demand by
petitioner has been waived, abandoned, or otherwise extinguished for failure of the consignee
to comply with the required claim for damages as put forth in Stipulation No. 7 of the bill of lading
which reads:
All claims for damages to the goods must be made to the carrier at the time of
delivery to the consignee or his agent if the package or containers show exterior
sign of damage, otherwise t be made in writing to the carrier within 24 hrs from
the time of delivery . . .

Provident claims that: 1) it is unreasonable for the consignee to be required to abide by the
provisions of such stipulation as the place is remote and inaccessible making it difXicult to inform
Azucar within the time prescribed; 2) the words therein was printed in small letters making it difXicult
to read; and 3) that the presence of one of the employees of Azucar during unloading constituted
sufXicient notice.
Issue:
WON Stipulation No. 7 is void and WON Azucar may be held liable.
Held:

Yes, such stipulation is valid and Azucar is NOT liable thereto as there was no
compliance with the limitations prescribed in Stipulation 7. Hence, the claim is deemed waived,
abandoned or extinguished.

As the bill of lading is the contract between the parties, it generally binds them thereto. Hence,
it is no question that the 24 hour requirement under the said stipulation is, by agreement of the
contracting parties, a sine qua non for the accrual of the right of action to recover damages against the
carrier. This is held to be valid as a condition precedent to the liability of the carrier for losses as it
affords them a reasonable opportunity, as well as facilities, to check the validity of the claims while the
facts are still fresh in the minds of the persons who took part in the transactions and the document are
still available.

Therefore, the defenses of Provident are without basis. Upon receipt of Atlas of the bill of
lading, it is presumed to have knowledge of the contents and to have assented to the terms and
conditions set forth therein. Hence, considering that a prompt demand was necessary to
foreclose the possibility of fraud or mistake in ascertaining the validity of claims, there was a
JD III - 405 (2015-2016)
Page !78 of !83

need for the consignee to observe the conditions in Stipulation 7. In addition, the presence of one
of the ofXicers during the unloading is not considered as compliance thereof.


JD III - 405 (2015-2016)
Page !79 of !83

Eastern Shipping v. IAC. (150 SCRA 464)

Thus, as the NCC, which primarily governs the liabilities of common carriers, does not limit the
liability of the common carrier, COGSA which has a suppletory application steps in. In the absence
of a stipulation in the Bill of Lading limiting the carriers liability for the loss or destruction of
goods, COGSA establishes a statutory provision of US$500/package (unit or cartons and not
container following the Mistui and Eurygenes Test), or its peso equivalent, which limits the
carriers liability.
Facts:

This case consists of 2 consolidated cases but involves the same vessel. M/S ASIATICA, a vessel
operated by Eastern Shipping, loaded at Japan for transportation to Manila: 1) 5,000 pieces of
calorized lance pipes, 2) 7 cases of spare parts and 3) 218 cartons of garment fabrics and
accessories, which were insured against marine risk by Development Insurance and Nisshin
Fire, respectively. Enroute to Manila, the vessel caught Yire and sank. The said insurance
companies herein, after paying the insurance were thus subrogated unto the rights of the insured and
Xiled the present claim for recover of amounts imputing against Eastern unseaworthiness of the ship
and non-observance of extra-ordinary diligence.

Eastern Shipping denied liability claiming that: 1) the loss was due to extraordinary fortuitous
even thus making them not liable; and 2) the Xire which caused the sinking of the ship is an exempting
circumstance under Sec. 4(2) (b) of the Carriage of Goods by Sea Act (COGSA); and when the loss of Xire
is established, the burden of proving negligence of the vessel is shifted to the cargo shipper. Lastly, it
claims that its liability shall not exceed US$500/ package as provided in Sec. 4(5) of the COGSA
Issue:
WON Civil Code provisions on Common Carrier governs or the COGSA; and who has the burden of
proof to show negligence of the carrier?
Held:

Civil Code governs as the goods are to be transported to Manila. The application of
COGSA is merely suppletory. Likewise, as there was failure to prove the exercise extraordinary
diligence, Eastern Shipping is liable for the said amounts.

There was lack of diligence as that: 1) when the smoke was noticed, the Xire was already big
and that it must have started 24 hrs. before the same was noticed; 2) that after the cargoes were stored
in the hatches, no regular inspection was made as to their condition to the voyage; 3) no evidence was
presented to show that there was vigilance to prevent the occurrence of Xire; and 4) there was no
showing that there was diligence in the care of cargoes.

However, as there was no concrete stipulation as to the number of containers provided for in
the bill of lading, there is a presumption that the carrier had furnished the containers. Thus, COGSA
applies.

Withal, it is to be noted 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 the liability limitation provision of COGSA.
Belgian Overseas Chartering v. Phil. First Co. (383 SCRA 23)

A notation in the Bill of Lading which indicated the amount of the Letter of Credit obtained by
the shipper did not effect a declaration of the value of the goods as required by the bill. Hence,
COGSA applies.
JD III - 405 (2015-2016)
Page !80 of !83

Sec. 3 (6) of COGSA provides that a claim should be Xiled within 3 days from delivery; however, the
same provision 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.
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, destruction or deterioration of the goods happened, the carrier
shall be held liable.
Facts:

CMC Trading A.G. shipped on board the M/V Anangel Sky at Germany 242 coils of
various Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine
Steel Trading Corp. Upon arrival of the goods, the 4 coils were found in their damaged state unYit
for their intended purposes. Thus, the consignee declared it as loss. Phil. Insurance paid the
consignee and consequent to it being subrogated to the rights of the insured, Yiled the instant action.
Belgian Overseas claims that: 1) it was not negligent especially when the words metal envelopes rust
stained and slightly dented were noted on the bill; and 2) that its liability is limited to US$500/
package as provided for in COGSA. Respondent, however, argues that Sec. 4(5) of the COGSA is
inapplicable because of the indication of the words L/C 90/02447 in the bill of lading.
Issue:
WON petitioner is negligent and WON the COGSA package limitation of liability is applicable.
Held:

Petitioner is negligent and the COGSA Xinds application.
As it was conclusively proved that the goods were shipped in good order and condition,
the consequent damage to such in the possession of the petitioner imputed negligence upon it.
Even if there are words metal envelopes rust stained and slightly dented noted on the Bill,
there was no showing that petitioner exercised due diligence to forestall or lessen the loss. To
note, being in that line of business for long years, they are equipped with the proper knowledge
and nature of the steel sheets in coils and of the proper way of transporting them, hence the
master vessel and his crew should have taken precautionary measures to avoid the
deterioration of the cargo. But none of these measures were taken. Hence, due to its failure to
observe the extraordinary diligence and precaution which the law requires, it is deemed liable.
Likewise, the COGSA package limitation of liability is applicable in the instant case as the
indication of 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.
The notation L/C was made only for the convenience of the shipper and the bank processing
the Letter of Credit. A bill of lading is separate from the Other Letter of Credit arrangements; to
this wise, 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.
Thus, in the instant case, the liability should be computed based on US$500/ package and not
on the per metric ton price declared in the Letter of Credit.
Asian Terminals, Inc. (ATI) v. Simon Enterprises (GR 177116)

A bill of lading which carries an added clause the shipments weight, measure, quantity, quality,
condition, contents and value unknown cannot be a gauge to the determination of the weight of
the cargo from the bill of lading.
Facts:
JD III - 405 (2015-2016)
Page !81 of !83


Contiquincybunge Export Company loaded 6,843.70 metric tons of US Soybean Meal in
bulk on board MV Sea Dream at USA for delivery to Manila to Simon, as consignee. Upon arrival,
the shipment was discharged to the receiving barges of ATI, the arrastre operator. However, Simon
claims a shortage of the metric tons received. After a second delivery, Simon claimed another shortage.
Hence, Simon Xiled an action for damages against the owner of the vessel and ATI. ATI claims that
Simon has no cause of action. To note, the Berth Term Grain Bill of Lading states that the subject
shipment was carried with the qualiXication Shippers weighty, quantity, and quality unknown,
meaning that it was transported with the carrier having been oblivious of its weightt, quantity, etc.
Issue:
WON ATI may be held liable.
Held:
No, ATI may not be held liable as Simon failed to prove that the subject shipment
suffered actual shortage, as there was no competent evidence to prove that it actually weighed
as much as it claims at the port of origin. Hence, the presumption that the 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.
Likewise, 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. Thus, in the instant case, as
Simon failed to present evidence to prove the actual weight of the subject shipment when it was
loaded, its cause of action must likewise fail as it was not able to deXinitely establish the weight of the
subject shipment at the point of origin. Consequently, the fact of shortage cannot be ascertained.
Hence, ATI may not be held liable.

JD III - 405 (2015-2016)
Page !82 of !83

RP rep. by National Trucking and Forwarding Corp. (NTFC) v. Lorenzo Shipping (GR 153563)
The surrender of the BI is NOT a condition precedent for a common carrier to be discharged of
its contractual obligations. Thus, if the surrender of the bill of lading is not possible,
acknowledgment of the delivery by signing the delivery receipt sufYices to discharge the
common carrier of its contractual obligation.
Facts:

RP, through DOH, and the Cooperative for American Relief Anywhere, Inc. (CARE) signed
an agreement wherein CARE would acquire from the US govt donations of non-fat dried milk
and other food products for a period of 2 years. In turn, Phil. would transport and distribute the
donated commodities to the intended beneXiciaries in the country. The govt then entered into a
contract of carriage with NTFC. NTF, shipped 4,868 bags of non-fat milk through Lorenzo
Shipping (LSC). The consignee named in the bill of lading was Jama, the branch supervisor in
Zamboanga. Upon arrival at the warehouse of NTFC in Zamboanga, the delivery checkers of LSC
requested Jama to surrender the Bills, but the latter merely presented certiFied true copies thereof.
Likewise, Jama signed the delivery receipts or asked someone to do it in his stead. However, NTFC
was not able to receive the goods. Upon investigation of the loss of the goods, Jama resigned and
NTFC, DOH and CARE Yiled an action for breach of contract against LSC imputing upon it failure
to exercise extraordinary diligence.
Issue:
WON LSC is presumed negligent as common carrier and hence liable.
Held:

No, LSC is not presumed negligent and is hence not liable as it exercised sufYicient
compliance with the requirements of law.

Art. 353 of the Code of Commerce provides:

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
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 receipt for the goods delivered, this receipt producing the same effects as
the return of the bill of lading.

Hence, in the instant case, as LSC was able to prove that the delivery checkers always asked
for acknowledgement receipts signed by Jama, himself or by his subordinate, for each delivery,
such is a substantial compliance with the law.

JD III - 405 (2015-2016)
Page !83 of !83


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