TABACLERA CASE

FACTS:

Sacks of grains were loaded on board a vessel owned by North Front Shipping
(common carrier); the consignee: Republic Floor Mills. The vessel was inspected
by representatives of the shipper prior to the transport and was found fitting to
carry the cargo; it was also issued a Permit to Sail. The goods were successfully
delivered but it was not immediately unloaded by the consignee. There were a
shortage of 23.666 metric tons and some of the merchandise was already moldy
and deteriorating. Hence, the consignee rejected all the cargo and demanded
payment of damages from the common carrier. Upon refusal, the insurance
companies (petitioners) were obliged to pay. Petitioners now allege that there was
negligence on the part of the carrier. The trial court ruled that only ordinary
diligence was required since the charter-party agreement converted North Front
Shipping into a private carrier.

ISSUE:

WON North Front Shipping is a common carrier. If indeed, did it fail to exercise the
required diligence and thus should be held liable?

HELD:

North Front Shipping is a common carrier. Thus, it has the burden of proving that it
observed extraordinary diligence in order to avoid responsibility for the lost cargo.
The charter-party agreement between North Front Shipping Services, Inc., and
Republic Flour Mills Corporation did not in any way convert the common carrier
into a private carrier. A charter-party is defined as a contract by which an entire
ship, or some principal part thereof, is let by the owner to another person for a
specified time or usex x x

Having been in the service since 1968, the master of the vessel would have
known at the outset that corn grains that were farm wet and not properly dried
would eventually deteriorate when stored in sealed and hot compartments as in
hatches of a ship. Equipped with this knowledge, the master of the vessel and his
crew should have undertaken precautionary measures to avoid or lessen the
cargos possible deterioration as they were presumed knowledgeable about the
nature of such cargo.
But none of such measures was taken.
It did not even endeavor to establish that the loss, destruction or deterioration of
the goods was due to the following: (a) flood, storm, earthquake, lightning, or
other natural disaster or calamity; (b) act of the public enemy in war, whether
international or civil; act or omission of the shipper or owner of the goods; (d)
the character of the goods or defects in the packing or in the containers; (e) order
or act of competent public authority. This is a closed list. If the cause of
destruction, loss or deterioration is other than the enumerated circumstances,
then the carrier is rightly liable therefor.

However, the destruction, loss or deterioration of the cargo cannot be attributed

solely to the carrier. The consignee Republic Flour Mills Corporation is guilty of
contributory negligence. It was seasonably notified of the arrival of the barge but
did not immediately start the unloading operations.

VALENZUELA VS CA

FACTS:
June 24, 1990 2 am: While driving from her restaurant at Araneta avenue towards
the direction of Manila, Ma. Lourdes Valenzuela noticed that she had a flat tire so
she parked along the sidewalk about 1 1/2 feet away, place her emergency lights
and seeked help
She was with her companion Cecilia Ramon
While she was pointing her tools to the man who will help her fixed the tires, she
was suddenly hit by another Mitsubishi Lancer driven by Richard Li who was
intoxicated and she slammed accross his windshield and fell to the ground
She was sent to UERM where she stayed for 20 days and her leg was amputated
and was replaced with an artificial one.
Her expenses totalled 147, 000 [120,000 php (confinement) + 27, 000 (aritificial
leg)]
RTC: Richard Li guilty of gross negligence and liable for damages under Article
2176 of the Civil Code. Alexander Commercial, Inc., Lis employer, jointly and
severally liable for damages pursuant to Article 2180 P41,840 actual damages,
P37,500 unrealized profits because of the stoppage of plaintiffs Bistro La Conga
restaurant 3 weeks after the accident on June 24, 1990, P20,000 a month as
unrealized profits of Bistro La Conga restaurant, from August, 1990 until the date
of this judgment, P30,000.00, a month, for unrealized profits in 2 Beauty salons,
P1,000,000 in moral damages, P50,000, as exemplary damages, P60,000, as
reasonable attorneys fees and costs.
CA: there was ample evidence that the car was parked at the side but absolved
Li's employer
Li: 55 kph - self serving and uncorraborated
Rogelio Rodriguez, the owner-operator of an establishment located just across the
scene of the accident: Valenzuelas car parked parallel and very near the sidewalk
and Li was driving on a very fast speed and there was only a drizzle (NOT heavy
rain)

ISSUE:

W/N Valenzuela was guilty of contributory negligence - NO

HELD:

NO.
Contributory negligence is conduct on the part of the injured party,
contributing as a legal cause to the harm he has suffered, which falls
below the standard to which he is required to conform for his own
protection
emergency rule
an individual who suddenly finds himself in a situation of danger and is required to
act without much time to consider the best means that may be adopted to avoid
the impending danger, is not guilty of negligence if he fails to undertake what
subsequently and upon reflection may appear to be a better solution, unless the
emergency was brought by his own negligence
She is not expected to run the entire boulevard in search for a parking zone or
turn on a dark Street or alley where she would likely find no one to help her
She stopped at a lighted place where there were people, to verify whether she
had a flat tire and to solicit help if needed
she parked along the sidewalk, about 1 feet away, behind a Toyota Corona Car

PNR VS CA

FACTS:

The facts show that on September 10, 1972, at about 9:00 o'clock in the evening,
Winifredo Tupang, husband of plaintiff Rosario Tupang, boarded 'Train No. 516 of
appellant at Libmanan, Camarines Sur, as a paying passenger bound for Manila.
Due to some mechanical defect, the train stopped at Sipocot, Camarines Sur, for
repairs, taking some two hours before the train could resume its trip to Manila.
Unfortunately, upon passing Iyam Bridge at Lucena, Quezon, Winifredo Tupang fell
off the train resulting in his death.The train did not stop despite the alarm raised
by the other passengers that somebody fell from the train. Instead, the train
conductor Perfecto Abrazado, called the station agent at Candelaria, Quezon, and
requested for verification of the information. Police authorities of Lucena City were
dispatched to the Iyam Bridge where they found the lifeless body of Winifredo
Tupang.

As shown by the autopsy report, Winifredo Tupang died of cardio-respiratory

failure due to massive cerebral hemorrhage due to traumatic injury [Exhibits B
and C, Folder of Exhibits],Tupang was later buried in the public cemetery of
Lucena City by the local police authorities. [Rollo, pp. 91-92]

Upon complaint filed by the deceased's widow, Rosario Tupang, the then Court of
First Instance of Rizal, after trial, held the petitioner PNR liable for damages for
breach of contract of carriage and ordered "to pay the plaintiff the sum of
P12,000,00 for the death of Winifredo Tupang, plus P20,000.00 for loss of his
earning capacity and the further sum of P10,000.00 as moral damages, and
P2,000.00 as attorney's fees, and costs. 1

On appeal, the Appellate Court sustained the holding of the trial court that the
PNR did not exercise the utmost diligence required by law of a common carrier. It
further increased the amount adjudicated by the trial court by ordering PNR to
pay the plaintiff an additional sum of P5,000.00 as exemplary damages.

ISSUE:

WON the deceased is liable for contributory negligence

HELD:

The appellate court found, the petitioner does not deny, that the train boarded by
the deceased Winifredo Tupang was so over-crowded that he and many other
passengers had no choice but to sit on the open platforms between the coaches
of the train. It is likewise undisputed that the train did not even slow down when it
approached the Iyam Bridge which was under repair at the time, Neither did the
train stop, despite the alarm raised by other passengers that a person had fallen
off the train at lyam Bridge. 7

The petitioner has the obligation to transport its passengers to their

destinations and to observe extraordinary diligence in doing so. Death
or any injury suffered by any of its passengers gives rise to the
presumption that it was negligent in the performance of its obligation
under the contract of carriage. Thus, as correctly ruled by the
respondent court, the petitioner failed to overthrow such presumption of
negligence with clear and convincing evidence.

But while petitioner failed to exercise extraordinary diligence as required by law, 8

it appears that the deceased was chargeable with contributory negligence. Since
he opted to sit on the open platform between the coaches of the train, he should
have held tightly and tenaciously on the upright metal bar found at the side of
said platform to avoid falling off from the speeding train. Such contributory
negligence, while not exempting the PNR from liability, nevertheless justified the
deletion of the amount adjudicated as moral damages. By the same token, the
award of exemplary damages must be set aside. Exemplary damages may be
allowed only in cases where the defendant acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner. 9 There being no evidence of fraud,
malice or bad faith on the part of petitioner, the grant of exemplary damages
should be discarded.

PAL VS CA

FACTS:

On January 27, 1990, plaintiff Gilda C. Mejia shipped thru defendant, Philippine
Airlines, one (1) unit microwave oven, with a gross weight of 33 kilograms from
San Francisco, U.S.A. to Manila, Philippines. Upon arrival, however, of said article
in Manila, Philippines, plaintiff discovered that its front glass door was broken and
the damage rendered it unserviceable. Demands both oral and written were made
by plaintiff against the defendant for the reimbursement of the value of the
damaged microwave oven, and transportation charges paid by plaintiff to
defendant company. But these demands fell on deaf ears.

On September 25, 1990, plaintiff Gilda C. Mejia filed the instant action for
damages against defendant in the lower court.

In its answer, defendant Airlines alleged inter alia, by way of special and
affirmative defenses, that the court has no jurisdiction over the case; that plaintiff
has no valid cause of action against defendant since it acted only in good faith
and in compliance with the requirements of the law, regulations, conventions and
contractual commitments; and that defendant had always exercised the required
diligence in the selection, hiring and supervision of its employees.[4]

What had theretofore transpired at the trial in the court a quo is narrated as
follows:

Plaintiff Gilda Mejia testified that sometime on January 27, 1990, she took
defendants plane from San Francisco, U.S.A. for Manila, Philippines (Exh. F).
Amongst her baggages (sic) was a slightly used microwave oven with the brand
name Sharp under PAL Air Waybill No. 0-79-1013008-3 (Exh. A). When shipped,
defendants office at San Francisco inspected it. It was in good condition with its
front glass intact. She did not declare its value upon the advice of defendants
personnel at San Francisco.

When she arrived in Manila, she gave her sister Concepcion C. Dio authority to
claim her baggag(e) (Exh. G) and took a connecting flight for Bacolod City.

When Concepcion C. Dino claimed the baggag(e) (Exh. B) with defendant, then
with the Bureau of Customs, the front glass of the microwave oven was already
broken and cannot be repaired because of the danger of radiation. They
demanded from defendant thru Atty. Paco P30,000.00 for the damages although a
brand new one costs P40,000.00, but defendant refused to pay.

Hence, plaintiff engaged the services of counsel. Despite demand (Exh. E) by

counsel, defendant still refused to pay.

The damaged oven is still with defendant. Plaintiff is engaged in (the) catering
and restaurant business. Hence, the necessity of the oven. Plaintiff suffered
sleepless nights when defendant refused to pay her (for) the broken oven and
claims P 10,000.00 moral damages, P20,000.00 exemplary damages, P10,000.00
attorneys fees plus P300.00 per court appearance and P15,000.00 monthly loss of
income in her business beginning February, 1990.

Defendant Philippine Airlines thru its employees Rodolfo Pandes and Vicente
Villaruz posited that plaintiffs claim was not investigated until after the filing of
the formal claim on August 13, 1990 (Exh. 6 also Exh. E). During the
investigations, plaintiff failed to submit positive proof of the value of the cargo.
Hence her claim was denied.

Also plaintiffs claim was filed out of time under paragraph 12, a(1) of the Air
Waybill (Exh. A, also Exh. 1) which provides: (a) the person entitled to delivery
must make a complaint to the carrier in writing in case: (1) of visible damage to
the goods, immediately after discovery of the damage and at the latest within 14
days from the receipt of the goods.[5]

As stated at the outset, respondent Court of Appeals similarly ruled in favor of

private respondent by affirming in full the trial courts judgment in Civil Case No.
6210, with costs against petitioner.[6]

ISSUE:

WON THE provisions limiting the liability of carriers contained in bills of lading
have been consistently upheld

HELD:

The validity of provisions limiting the liability of carriers contained in bills of lading
have been consistently upheld for the following reason:

x x x. The stipulation in the bill of lading limiting the common carriers liability to
the value of goods appearing in the bill, unless the shipper or owner declares a
greater value, is valid and binding. The limitation of the carriers liability is
sanctioned by the freedom of the contracting parties to establish such
stipulations, clauses, terms, or conditions as they may deem convenient, provided
they are not contrary to law, morals, good customs and public policy. x x x.[19]

However, the Court has likewise cautioned against blind reliance on adhesion
contracts where the facts and circumstances warrant that they should be
disregarded.[20]

In the case at bar, it will be noted that private respondent signified an intention to
declare the value of the microwave oven prior to shipment, but was explicitly
advised against doing so by PALs personnel in San Francisco, U.S.A., as borne out
by her testimony in court

It cannot be denied that the attention of PAL through its personnel in San
Francisco was sufficiently called to the fact that private respondents cargo was
highly susceptible to breakage as would necessitate the declaration of its actual
value. Petitioner had all the opportunity to check the condition and manner of
packing prior to acceptance for shipment,[22] as well as during the preparation of
the air waybill by PALs Acceptance Personnel based on information supplied by
the shipper,[23] and to reject the cargo if the contents or the packing did not
meet the companys required specifications. Certainly, PAL could not have been
otherwise prevailed upon to merely accept the cargo.

There is no absolute obligation on the part of a carrier to accept a cargo. Where a

common carrier accepts a cargo for shipment for valuable consideration, it takes
the risk of delivering it in good condition as when it was loaded. And if the fact of
improper packing is known to the carrier or its personnel, or apparent upon
observation but it accepts the goods notwithstanding such condition, it is not
relieved of liability for loss or injury resulting therefrom.[27]

The acceptance in due course by PAL of private respondents cargo as packed and
its advice against the need for declaration of its actual value operated as an
assurance to private respondent that in fact there was no need for such a
declaration. Petitioner can hardly be faulted for relying on the representations of
PALs own personnel.

In other words, private respondent Mejia could and would have complied with the
conditions stated in the air waybill, i.e., declaration of a higher value and payment
of supplemental transportation charges, entitling her to recovery of damages
beyond the stipulated limit of US$20 per kilogram of cargo in the event of loss or
damage, had she not been effectively prevented from doing so upon the advice of
PALs personnel for reasons best known to themselves.

As pointed out by private respondent, the aforestated facts were not denied by
PAL in any of its pleadings nor rebutted by way of evidence presented in the
course of the trial, and thus in effect it judicially admitted that such an advice was
given by its personnel in San Francisco, U.S.A. Petitioner, therefore, is estopped
from blaming private respondent for not declaring the value of the cargo shipped
and which would have otherwise entitled her to recover a higher amount of
damages. The Courts bidding in the Fieldmens Insurance case once again rings
true:

x x x. As estoppel is primarily based on the doctrine of good faith and the

avoidance of harm that will befall an innocent party due to its injurious reliance,
the failure to apply it in this case would result in gross travesty of justice.

Citadel Lines, Inc. vs. Court of Appeals

FACTS:

Petitioner Citadel Lines, Inc. (hereafter referred to as the CARRIER) is the general
agent of the vessel "Cardigan Bay/Strait Enterprise," while respondent Manila
Wine Merchants, Inc. (hereafter, the CONSIGNEE) is the importer of the subject
shipment of Dunhill cigarettes from England.

On or about March 17, 1979, the vessel "Cardigan Bay/Strait Enterprise" loaded
on board at Southampton, England, for carriage to Manila, 180 Filbrite cartons of
mixed British manufactured cigarettes called "Dunhill International Filter" and
"Dunhill International Menthol," as evidenced by Bill of Lading No. 70621374 2
and Bill of Lading No. 70608680 3 of the Ben Line Containers Ltd. The shipment
arrived at the Port of Manila Pier 13, on April 18, 1979 in container van No. BENU
204850-9. The said container was received by E. Razon, Inc. (later known as Metro
Port Service, Inc. and referred to herein as the ARRASTRE) under Cargo Receipt
No. 71923 dated April 18, 1979. 4

On April 30, 1979, the container van, which contained two shipments was
stripped. One shipment was delivered and the other shipment consisting of the
imported British manufactured cigarettes was palletized. Due to lack of space at
the Special Cargo Coral, the aforesaid cigarettes were placed in two containers
with two pallets in container No. BENU 204850-9, the original container, and four
pallets in container No. BENU 201009-9, with both containers duly padlocked and
sealed by the representative of the CARRIER.

In the morning of May 1, 1979, the CARRIER'S headchecker discovered that

container van No. BENU 201009-9 had a different padlock and the seal was
tampered with. The matter was reported to Jose G. Sibucao, Pier Superintendent,
Pier 13, and upon verification, it was found that 90 cases of imported British
manufactured cigarettes were missing. This was confirmed in the report of said
Superintendent Sibucao to Ricardo Cosme, Assistant Operations Manager, dated
May 1, 1979 5 and the Official Report/Notice of Claim of Citadel Lines, Inc. to E.
Razon, Inc. dated May 8, 1979. 6 Per investigation conducted by the ARRASTRE, it
was revealed that the cargo in question was not formally turned over to it by the
CARRIER but was kept inside container van No. BENU 201009-9 which was
padlocked and sealed by the representatives of the CARRIER without any
participation of the ARRASTRE.

When the CONSIGNEE learned that 90 cases were missing, it filed a formal claim
dated May 21, 1979, 7 with the CARRIER, demanding the payment of P315,000.00
representing the market value of the missing cargoes. The CARRIER, in its reply
letter dated May 23, 1979, 8 admitted the loss but alleged that the same occurred
at Pier 13, an area absolutely under the control of the ARRASTRE. In view thereof,
the CONSIGNEE filed a formal claim, dated June 4, 1979, 9 with the ARRASTRE,
demanding payment of the value of the goods but said claim was denied.

After trial, the lower court rendered a decision on August 30, 1985, exonerating
the ARRASTRE of any liability on the ground that the subject container van was
not formally turned over to its custody, and adjudging the CARRIER liable for the
principal amount of P312,480.00 representing the market value of the lost
shipment, and the sum of P30,000.00 as and for attorney's fees and the costs of
suit.

ISSUE:

1. Whether the loss occurred while the cargo in question was in the custody of E.
Razon, Inc. or of Citadel Lines, Inc; and

2. Whether the stipulation limiting the liability of the carrier contained in the bill
of lading is binding on the consignee.

HELD:

1. 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. 11 If the goods are lost, destroyed or
deteriorated, common carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed extra ordinary diligence
as required in Article 1733 of the Civil Code. 12 The duty of the consignee is to
prove merely that the goods were lost. Thereafter, the burden is shifted to the
carrier to prove that it has exercised the extraordinary diligence required by law.
And, its extraordinary responsibility lasts from the time the goods are
unconditionally placed in the possession of, and received by the carrier
for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee or to the person who has
the right to receive them. 13

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

2.The CONSIGNEE itself admits in its memorandum that the value of the goods
shipped does not appear in the bills of lading. 16 Hence, the stipulation on the
carrier's limited liability applies. There is no question that the stipulation is just
and reasonable under the circumstances and have been fairly and freely agreed
upon. In Sea-land Service, Inc. vs. Intermediate Appellate Court, et al. 17 we there
explained what is a just and reasonable, and a fair and free, stipulation, in this
wise:

. . . That said stipulation is just and reasonable arguable from the fact that it
echoes Art. 1750 itself in providing a limit to liability only if a greater value is not
declared for the shipment in the bill of lading. To hold otherwise would amount to
questioning the justice and fairness of that law itself, and this the private
respondent does not pretend to do. But over and above that consideration the just
and reasonable character of such stipulation is implicit in it giving the shipper or
owner the option of avoiding accrual of liability limitation by the simple and surely
far from onerous expedient of declaring the nature and value of the shipment in
the bill of lading. And since the shipper here has not been heard to complain of
having been "rushed," imposed upon or deceived in any significant way into
agreeing to ship the cargo under a bill of lading carrying such a stipulation in
fact, it does not appear, that said party has been heard from at all insofar as this
dispute is concerned there is simply no ground for assuming that its agreement
thereto was not as the law would require, freely and fairly sought and well.

The bill of lading shows that 120 cartons weigh 2,978 kilos or 24.82 kilos per
carton. Since 90 cartons were lost and the weight of said cartons is 2,233.80 kilos,
at $2.00 per kilo the CARRIER's liability amounts to only US$4,467.60.

MACAM VS CA

FACTS:

Benito Macam, doing business under name Ben-Mac Enterprises, shipped on

board vessel Nen-Jiang, owned and operated by respondent China Ocean Shipping
Co. through local agent Wallem Philippines Shipping Inc., 3,500 boxes of
watermelon covered by Bill of Lading No. HKG 99012, and 1,611 boxes of fresh
mangoes covered by Bill of Lading No. HKG 99013. The shipment was bound for
Hongkong with PAKISTAN BANK as consignee and Great Prospect Company of
Rowloon (GPC) as notify party.

Upon arrival in Hongkong, shipment was delivered by respondent WALLEM directly

to GPC, not to PAKISTAN BANK and without the required bill of lading having been
surrendered. Subsequently, GPC failed to pay PAKISTAN BANK, such that the
latter, still in possession of original bill of lading, refused to pay petitioner thru
SOLIDBANK. Since SOLIDBANK already pre-paid the value of shipment, it
demanded payment from respondent WALLEM but was refused. MACAM
constrained to return the amount paid by SOLIDBANK and demanded payment
from WALLEM but to no avail.

WALLEM submitted in evidence a telex dated 5 April 1989 as basis for delivering
the cargoes to GPC without the bills of lading and bank guarantee. The telex
instructed delivery of various shipments to the respective consignees without
need of presenting the bill of lading and bank guarantee per the respective
shippers request since for prepaid shipt ofrt charges already fully paid. MACAM,
however, argued that, assuming there was such an instruction, the consignee
referred to was PAKISTAN BANK and not GPC.

The RTC ruled for MACAM and ordered value of shipment. CA reversed RTCs
decision.

ISSUE:

Are the respondents liable to the petitioner for releasing the goods to GPC without
the bills of lading or bank guarantee?

HELD:
It is a standard maritime practice when immediate delivery is of the essence, for
shipper to request or instruct the carrier to deliver the goods to the buyer upon
arrival at the port of destination without requiring presentation of bill of lading as
that usually takes time. Thus, taking into account that subject shipment consisted
of perishable goods and SOLIDBANK pre-paid the full amount of value thereof, it is
not hard to believe the claim of respondent WALLEM that petitioner indeed
requested the release of the goods to GPC without presentation of the bills of
lading and bank guarantee.

To implement the said telex instruction, the delivery of the shipment must be to
GPC, the notify party or real importer/buyer of the goods and not the PAKISTANI
BANK since the latter can very well present the original Bills of Lading in its
possession. Likewise, if it were the PAKISTANI BANK to whom the cargoes were to
be strictly delivered, it will no longer be proper to require a bank guarantee as a
substitute for the Bill of Lading. To construe otherwise will render meaningless the
telex instruction. After all, the cargoes consist of perishable fresh fruits and
immediate delivery thereof the buyer/importer is essentially a factor to reckon
with.

We emphasize that the extraordinary responsibility of the common carriers lasts

until actual or constructive delivery of the cargoes to the consignee or to the
person who has a right to receive them. PAKISTAN BANK was indicated in the bills
of lading as consignee whereas GPC was the notify party. However, in the export
invoices GPC was clearly named as buyer/importer. Petitioner also referred to GPC
as such in his demand letter to respondent WALLEM and in his complaint before
the trial court. This premise draws us to conclude that the delivery of the cargoes
to GPC as buyer/importer which, conformably with Art. 1736 had, other than the
consignee, the right to receive them was proper.

Calvo vs. UCPB Insurance

FACTS:

At the time material to this case, Transorient Container Terminal Services, Inc.
(TCTSI) owned by Virgines Calvo entered into a contract with San Miguel
Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting paper and
124 reels of kraft liner board from the Port Area in Manila to SMC's warehouse at
the Tabacalera Compound, Romualdez St., Ermita, Manila.
The cargo was insured by respondent UCPB General Insurance Co., Inc.
July 14, 1990: arrived in Manila on board "M/V Hayakawa Maru" and later on
unloaded from the vessel to the custody of the arrastre operator, Manila Port
Services, Inc
July 23 to July 25, 1990: Calvo withdrew the cargo from the arrastre operator and
delivered it to SMC's warehouse in Ermita, Manila
July 25, 1990: goods were inspected by Marine Cargo Surveyors, who found that
15 reels of the semi-chemical fluting paper were "wet/stained/torn" and 3 reels of
kraft liner board were likewise torn
SMC collected payment from UCPB the total damage of P93,112 under its
insurance contract
UCPB brought suit against Calvo as subrogee of SMC
Calvo: Art. 1734(4) The character of the goods or defects in the packing or in the
containers
spoilage or wettage" took place while the goods were in the custody of either the
carrying vessel "M/V Hayakawa Maru," which transported the cargo to Manila, or
the arrastre operator, to whom the goods were unloaded and who allegedly kept
them in open air for 9 days notwithstanding the fact that some of the containers
were deformed, cracked, or otherwise damaged
Trial Court: Calvo liable
CA: affirmed
ISSUE:

W/N Calvo can be exempted from liability under Art. 1734(4)

HELD:

NO. CA AFFIRMED.
mere proof of delivery of goods in good order to a carrier, and of their
arrival at the place of destination in bad order, makes out a prima facie
case against the carrier, so that if no explanation is given as to how the
injury occurred, the carrier must be held responsible
extraordinary responsibility lasts from the time the goods are
unconditionally placed in the possession of and received by the carrier
for transportation until the same are delivered actually or constructively
by the carrier to the consignee or to the person who has the right to
receive the same

Article 1732. Common carriers are persons, corporations, firms or associations

engaged in the business of carrying or transporting passengers or goods or both,
by land, water, or air for compensation, offering their services to the public."
The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity . . . Article 1732 also carefully avoids making
any distinction between a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguish between a
carrier offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow
segment of the general population.
concept of "common carrier" under Article 1732 may be seen to coincide neatly
with the notion of "public service," under the Public Service Act (Commonwealth
Act No. 1416, as amended) which at least partially supplements the law on
common carriers set forth in the Civil Code
Under Section 13, paragraph (b) of the Public Service Act, "public service"
includes:
" x x x every person that now or hereafter may own, operate, manage, or control
in the Philippines, for hire or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction railway, subway
motor vehicle, either for freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier service of any class,
express service, steamboat, or steamship line, pontines, ferries and water craft,
engaged in the transportation of passengers or freight or both, shipyard, marine
repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation
system, gas, electric light, heat and power, water supply and power petroleum,
sewerage system, wire or wireless communications systems, wire or wireless
broadcasting stations and other similar public services. x x x"
when Calvo's employees withdrew the cargo from the arrastre operator, they did
so without exception or protest either with regard to the condition of container
vans or their contents
Calvo must do more than merely show the possibility that some other party could
be responsible for the damage. It must prove that it used "all reasonable means to
ascertain the nature and characteristic of goods tendered for transport and that it
exercised due care in the handling

Ganzon vs. Court of Appeals

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

ISSUE:

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

HELD:

YES. Petition is DENIED.

Ganzon thru his employees, actually received the scraps is freely admitted.
Pursuant to Art. 1736, such extraordinary responsibility would cease only upon the
delivery, actual or constructive, by the carrier to the consignee, or to the person
who has a right to receive them.
The fact that part of the shipment had not been loaded on board the lighter did
not impair the said contract of transportation as the goods remained in the
custody and control of the carrier, albeit still unloaded.
failed to show that the loss of the scraps was due to any of the following causes
enumerated in Article 1734 of the Civil Code, namely:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
Hence, the petitioner is presumed to have been at fault or to have acted
negligently.
By reason of this presumption, the court is not even required to make an express
finding of fault or negligence before it could hold the petitioner answerable for the
breach of the contract of carriage.
exempted from any liability had he been able to prove that he observed
extraordinary diligence in the vigilance over the goods in his custody, according to
all the circumstances of the case, or that the loss was due to an unforeseen event
or to force majeure. As it was, there was hardly any attempt on the part of the
petitioner to prove that he exercised such extraordinary diligence.
We cannot sustain the theory of caso fortuito - "order or act of competent public
authority"(Art. 1174 of the Civil Code)
no authority or power of the acting mayor to issue such an order was given in
evidence. Neither has it been shown that the cargo of scrap iron belonged to the
Municipality of Mariveles.
Ganzon was not duty bound to obey the illegal order to dump into the sea the
scrap iron.
Moreover, there is absence of sufficient proof that the issuance of the same order
was attended with such force or intimidation as to completely overpower the will
of the petitioner's employees. The mere difficulty in the fullfilment of the
obligation is not considered force majeure.

Everett Steamship vs. Court of Appeals

FACTS:

Petitioner Everett Steamship Corporation, through this petition for review, seeks
the reversal of the decision[1] of the Court of Appeals, dated June 14, 1995, in CA-
G.R. No. 428093, which affirmed the decision of the Regional Trial Court of
Kalookan City, Branch 126, in Civil Case No. C-15532, finding petitioner liable to
private respondent Hernandez Trading Co., Inc. for the value of the lost cargo.

Private respondent imported three crates of bus spare parts marked as MARCO
C/No. 12, MARCO C/No. 13 and MARCO C/No. 14, from its supplier, Maruman
Trading Company, Ltd. (Maruman Trading), a foreign corporation based in
Inazawa, Aichi, Japan. The crates were shipped from Nagoya, Japan to Manila on
board ADELFAEVERETTE, a vessel owned by petitioners principal, Everett Orient
Lines. The said crates were covered by Bill of Lading No. NGO53MN.

Upon arrival at the port of Manila, it was discovered that the crate marked MARCO
C/No. 14 was missing. This was confirmed and admitted by petitioner in its letter
of January 13, 1992 addressed to private respondent, which thereafter made a
formal claim upon petitioner for the value of the lost cargo amounting to One
Million Five Hundred Fifty Two Thousand Five Hundred (Y1,552,500.00) Yen, the
amount shown in an Invoice No. MTM-941, dated November 14, 1991. However,
petitioner offered to pay only One Hundred Thousand (Y100,000.00) Yen, the
maximum amount stipulated under Clause 18 of the covering bill of lading which
limits the liability of petitioner.

Private respondent rejected the offer and thereafter instituted a suit for collection
docketed as Civil Case No. C-15532, against petitioner before the Regional Trial
Court of Caloocan City, Branch 126.

At the pre-trial conference, both parties manifested that they have no testimonial
evidence to offer and agreed instead to file their respective memoranda.

On July 16, 1993, the trial court rendered judgment[2] in favor of private
respondent, ordering petitioner to pay: (a) Y1,552,500.00; (b) Y20,000.00 or its
peso equivalent representing the actual value of the lost cargo and the material
and packaging cost; (c) 10% of the total amount as an award for and as
contingent attorneys fees; and (d) to pay the cost of the suit

ISSUE:

HELD:

Petitioner now comes to us arguing that the Court of Appeals erred (1) in ruling
that the consent of the consignee to the terms and conditions of the bill of lading
is necessary to make such stipulations binding upon it; (2) in holding that the
carriers limited package liability as stipulated in the bill of lading does not apply in
the instant case; and (3) in allowing private respondent to fully recover the full
alleged value of its lost cargo.

We shall first resolve the validity of the limited liability clause in the bill of lading.
A stipulation in the bill of lading limiting the common carriers liability for loss or
destruction of a cargo to a certain sum, unless the shipper or owner declares a
greater value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil
Code which provide:

ART. 1749. A stipulation that the common carriers liability is limited to the value of
the goods appearing in the bill of lading, unless the shipper or owner declares a
greater value, is binding.

ART. 1750. A contract fixing the sum that may be recovered by the owner or
shipper for the loss, destruction, or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has been freely and fairly
agreed upon.

Such limited-liability clause has also been consistently upheld by this Court in a
number of cases.[3] Thus, in Sea Land Service, Inc. vs Intermediate Appellate
Court[4], we ruled:

It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act
did not exist, the validity and binding effect of the liability limitation clause in the
bill of lading here are nevertheless fully sustainable on the basis alone of the cited
Civil Code Provisions. That said stipulation is just and reasonable is arguable from
the fact that it echoes Art. 1750 itself in providing a limit to liability only if a
greater value is not declared for the shipment in the bill of lading. To hold
otherwise would amount to questioning the justness and fairness of the law itself,
and this the private respondent does not pretend to do. But over and above that
consideration, the just and reasonable character of such stipulation is implicit in it
giving the shipper or owner the option of avoiding accrual of liability limitation by
the simple and surely far from onerous expedient of declaring the nature and
value of the shipment in the bill of lading..

Pursuant to the afore-quoted provisions of law, it is required that the stipulation

limiting the common carriers liability for loss must be reasonable and just under
the circumstances, and has been freely and fairly agreed upon.

The bill of lading subject of the present controversy specifically provides, among
others:

18. All claims for which the carrier may be liable shall be adjusted and settled on
the basis of the shippers net invoice cost plus freight and insurance premiums, if
paid, and in no event shall the carrier be liable for any loss of possible profits or
any consequential loss.

The carrier shall not be liable for any loss of or any damage to or in any
connection with, goods in an amount exceeding One Hundred Thousand Yen in
Japanese Currency (Y100,000.00) or its equivalent in any other currency per
package or customary freight unit (whichever is least) unless the value of the
goods higher than this amount is declared in writing by the shipper before receipt
of the goods by the carrier and inserted in the Bill of Lading and extra freight is
paid as required. (Emphasis supplied)

The above stipulations are, to our mind, reasonable and just. In the bill of lading,
the carrier made it clear that its liability would only be up to One Hundred
Thousand (Y100,000.00) Yen. However, the shipper, Maruman Trading, had the
option to declare a higher valuation if the value of its cargo was higher than the
limited liability of the carrier. Considering that the shipper did not declare a higher
valuation, it had itself to blame for not complying with the stipulations.
The trial courts 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. Also, in Philippine American General Insurance Co., Inc. vs. Sweet Lines ,
Inc.[6] this Court , speaking through the learned Justice Florenz D. Regalado, held:

x x x Ong Yiu vs. Court of Appeals, et.al., instructs us that contracts of adhesion
wherein one party imposes a ready-made form of contract on the other x x x are
contracts not entirely prohibited. The one who adheres to the contract is in reality
free to reject it entirely; if he adheres he gives his consent. In the present case,
not even an allegation of ignorance of a party excuses non-compliance with the
contractual stipulations since the responsibility for ensuring full comprehension of
the provisions of a contract of carriage devolves not on the carrier but on the
owner, shipper, or consignee as the case may be. (Emphasis supplied)

It was further explained in Ong Yiu vs Court of Appeals[7] that stipulations in

contracts of adhesion are valid and binding.

While it may be true that petitioner had not signed the plane ticket x x, he is
nevertheless bound by the provisions thereof. Such provisions have been held to
be a part of the contract of carriage, and valid and binding upon the passenger
regardless of the latters lack of knowledge or assent to the regulation. It is what is
known as a contract of adhesion, in regards which it has been said that contracts
of adhesion wherein one party imposes a ready-made form of contract on the
other, as the plane ticket in the case at bar, are contracts not entirely prohibited.
The one who adheres to the contract is in reality free to reject it entirely; if he
adheres, he gives his consent. x x x , a contract limiting liability upon an agreed
valuation does not offend against the policy of the law forbidding one from
contracting against his own negligence. (Emphasis supplied)

Greater vigilance, however, is required of the courts when dealing with contracts
of adhesion in that the said contracts must be carefully scrutinized in order to
shield the unwary (or weaker party) from deceptive schemes contained in ready-
made covenants,[8] such as the bill of lading in question. The stringent
requirement which the courts are enjoined to observe is in recognition of Article
24 of the Civil Code which mandates that (i)n all contractual, property or other
relations, when one of the parties is at a disadvantage on account of his moral
dependence, ignorance, indigence, mental weakness, tender age or other
handicap, the courts must be vigilant for his protection.

The shipper, Maruman Trading, we assume, has been extensively engaged in the
trading business. It can not be said to be ignorant of the business transactions it
entered into involving the shipment of its goods to its customers. The shipper
could not have known, or should know the stipulations in the bill of lading and
there it should have declared a higher valuation of the goods shipped. Moreover,
Maruman Trading has not been heard to complain that it has been deceived or
rushed into agreeing to ship the cargo in petitioners vessel. In fact, it was not
even impleaded in this case.

Summa Insurance vs. Court of Appeals

FACTS:

On November 22, 1981, the S/S Galleon Sapphire, a vessel owned by the National
Galleon Shipping Corporation (NGSC), arrived at Pier 3, South Harbor, Manila,
carrying a shipment consigned to the order of Caterpillar Far East Ltd. with
Semirara Coal Corporation (Semirara) as notify party. The shipment, including a
bundle of PC 8 U blades, was covered by marine insurance under Certificate No.
82/012-FEZ issued by petitioner and Bill of Lading No. SF/MLA 1014. The shipment
was discharged from the vessel to the custody of private respondent, formerly
known as E. Razon, Inc., the exclusive arrastre operator at the South Harbor.
Accordingly, three good-order cargo receipts were issued by NGSC, duly signed by
the ships checker and a representative of private respondent.

On February 24, 1982, the forwarder, Sterling International Brokerage

Corporation, withdrew the shipment from the pier and loaded it on the barge
Semirara 8104. The barge arrived at its port of destination, Semirara Island, on
March 9, 1982. When Semirara inspected the shipment at its warehouse, it
discovered that the bundle of PC8U blades was missing.

On March 15, 1982, private respondent issued a shortlanded certificate stating

that the bundle of PC8U blades was already missing when it received the
shipment from the NGSC vessel. Semirara then filed with petitioner, private
respondent and NGSC its claim for P280,969.68, the alleged value of the lost
bundle.

On September 29, 1982, petitioner paid Semirara the invoice value of the lost
shipment. Semirara thereafter executed a release of claim and subrogation
receipt. Consequently, petitioner filed its claims with NGSC and private
respondent but it was unsuccessful.

Petitioner then filed a complaint (Civil Case No. 82-13988) with the Regional Trial
Court, Branch XXIV, Manila, against NGSC and private respondent for collection of
a sum of money, damages and attorneys fees.

On August 2, 1984, the trial court rendered a decision absolving NGSC from any
liability but finding private respondent liable to petitioner.

ISSUE:

(1) Is the private respondent legally liable for the loss of the shipment in question?

(2) If so, what is the extent of its liability?

HELD:

Petitioner was subrogated to the rights of the consignee. The relationship

therefore between the consignee and the arrastre operator must be examined.
This relationship is much akin to that existing between the consignee or owner of
shipped goods and the common carrier, or that between a depositor and a
warehouseman.[4] In the performance of its obligations, an arrastre operator
should observe the same degree of diligence as that required of a
common carrier and a warehouseman as enunciated under Article 1733
of the Civil Code and Section 3(b) of the Warehouse Receipts Law,
respectively. Being the custodian of the goods discharged from a vessel,
an arrastre operators duty is to take good care of the goods and to turn
them over to the party entitled to their possession.

In this case, it has been established that the shipment was lost while in the
custody of private respondent. We find private respondent liable for the loss.--

In the performance of its job, an arrastre operator is bound by the management

contract it had executed with the Bureau of Customs. However, a management
contract, which is a sort of a stipulation pour autrui within the meaning of Article
1311 of the Civil Code, is also binding on a consignee because it is incorporated in
the gate pass and delivery receipt which must be presented by the consignee
before delivery can be effected to it.[5] The insurer, as successor-in-interest of the
consignee, is likewise bound by the management contract.[6] Indeed, upon taking
delivery of the cargo, a consignee (and necessarily its successor-in- interest)
tacitly accepts the provisions of the management contract, including those which
are intended to limit the liability of one of the contracting parties, the arrastre
operator.[7]

However, a consignee who does not avail of the services of the arrastre operator
is not bound by the management contract.[8] Such an exception to the rule does
not obtain here as the consignee did in fact accept delivery of the cargo from the
arrastre operator.

the Court added that the advance notice of the actual invoice of the goods
entrusted to the arrastre operator is for the purpose of determining its liability,
that it may obtain compensation commensurable to the risk it assumes, (and) not
for the purpose of determining the degree of care or diligence it must exercise as
a depository or warehouseman[11] since the arrastre operator should not
discriminate between cargoes of substantial and small values, nor exercise care
and caution only for the handling of goods announced to it beforehand to be of
sizeable value, for that would be spurning the public service nature of its
business.

On the same provision limiting the arrastre operators liability, the Court held in
Northern Motors, Inc. v. Prince Line[12]:

Appellant claims that the above quoted provision is null and void, as it limits the
liability of appellee for the loss, destruction or damage of any merchandise, to
P500.00 per package, contending that to sustain the validity of the limitation
would be to encourage acts of conversion and unjust enrichment on the part of
the arrastre operator. Appellant, however, overlooks the fact that the limitation of
appellees liability under said provision, is not absolute or unqualified, for if the
value of the merchandise is specified or manifested by the consignee, and the
corresponding arrastre charges are paid on the basis of the declared value, the
limitation does not apply. Consequently, the questioned provision is neither unfair
nor abitrary, as contended, because the consignee has it in his hands to hold, if
he so wishes, the arrastre operator responsible for the full value of his
merchandise by merely specifying it in any of the various documents required of
him, in clearing the merchandise from the customs. For then, the appellee
arrastre operator, by reasons of the payment to it of a commensurate charge
based on the higher declared value of the merchandise, could and should take
extraordinary care of the special or valuable cargo. In this manner, there would be
mutuality. What would, indeed, be unfair and arbitrary is to hold the arrastre
operator liable for the full value of the merchandise after the consignee has paid
the arrastre charges only (on) a basis much lower than the true value of the
goods.

In this case, no evidence was offered by petitioner proving the amount of arrastre
fees paid to private respondent so as to put the latter on notice of the value of the
cargo. While petitioner alleged that prior to the loss of the package, its value had
been relayed to private respondent through the documents the latter had
processed, petitioner does not categorically state that among the submitted
documents were the pro forma invoice value and the certified packing list. Neither
does petitioner pretend that these two documents were prerequisites to the
issuance of a permit to deliver or were attachments thereto. Even the permit to
deliver, upon which petitioner anchors its arguments, may not be considered by
the Court because it was not identified and formally offered in evidence.[13]
In civil cases, the burden of proof is on the party who would be defeated if no
evidence is given on either side. Said party must establish his case by a
preponderance of evidence, which means that the evidence as a whole adduced
by one side is superior to that of the other.[14] Petitioner having asserted the
affirmative of the issue in this case, it should have presented evidence required to
obtain a favorable judgment.

On the other hand, on top of its denial that it had received the invoice value and
the packing list before the discharge of the shipment, private respondent was able
to prove that it was apprised of the value of the cargo only after its discharge
from the vessel, ironically through petitioners claim for the lost package to which
were attached the invoice and packing list. All told, petitioner failed to convince
the Court that the requirement of the management contract had been complied
with to entitle it to recover the actual invoice value of the lost shipment.

Anent the attorneys fees, we find the award to be proper considering that the acts
and omissions of private respondent have compelled petitioner to litigate or incur
expenses to protect its rights.[15] However, as to the amount of the award, we
find no reason to re-examine the appellate courts determination thereon in view
of the amount of the principal obligation. Otherwise, we would be disregarding the
doctrine that discretion, when well exercised, should not be disturbed.

The Phil. American Gen. Insurance Co., Inc. vs Court of Appeals and
Felman Shipping Lines

Facts:
July 6, 1983 Coca-cola loaded on board MV Asilda, owned and operated by
Felman, 7,500 cases of 1-liter Coca-Cola soft drink bottles to be transported to
Zamboanga City to Cebu. The shipment was insured with Philamgen.

July 7, the vessel sank in Zamboanga del Norte. July 15, cocacola filed a claim
with respondent Felman for recovery of damages. Felman denied thus prompted
cocacola to file an insurance claim with Philamgen. Philamgen later on claimed its
right of subrogation against Felman which disclaimed any liability for the loss.

Philamgen alleged that the sinking and loss were due to the vessel's
unseaworthiness, that the vessel was improperly manned and its officers were
grossly negligent. Felman filed a motion to dismiss saying that there is no right of
subrogation in favor of Philamgen was transmitted by the shipper.

RTC dismissed the complaint of Philamgen. CA set aside the dismissal and
remanded the case to the lower court for trial on the merits. Felman filed a
petition for certiorari but was denied.

RTC rendered judgment in favor of Felman. it ruled that the vessel was seaworthy
when it left the port of Zamboanga as evidenced by the certificate issued by the
Phil. Coast Guard and the ship owners surveyor. Thus, the loss is due to a
fortuitous event, in which, no liability should attach unless there is stipulation or
negligence.

On appeal, CA rendered judgment finding the vessel unseaworthy for the cargo
for being top-heavy and the cocacola bottles were also improperly stored on deck.
Nonetheless, the CA denied the claim of Philamgen, saying that Philamgen was
not properly subrogated to the rights and interests of the shipper plus the filing of
notice of abandonment had absolved the ship owner from liability under the
limited liability rule.
Issues:

(a) Whether the vessel was seaworthy, (b) whether limited liability rule should
apply and (c) whether Philamgen was properly subrogated to the rights against
Felman.

Ruling:

(a) The vessel was unseaworthy. The proximate cause thru the findings of the Elite
Adjusters, Inc., is the vessel's being top-heavy. Evidence shows that days after the
sinking coca-cola bottles were found near the vicinity of the sinking which would
mean that the bottles were in fact stowed on deck which the vessel was not
designed to carry substantial amount of cargo on deck. The inordinate loading of
cargo deck resulted in the decrease of the vessel's metacentric height thus
making it unstable.

(b) Art. 587 of the Code of Commerce is not applicable, the agent is liable for the
negligent acts of the captain in the care of the goods. This liability however can
be limited through abandonment of the vessel, its equipment and freightage.
Nonetheless, there are exceptions wherein the ship agent could still be held
answerable despite the abandonment, as where the loss or injury was due to the
fault of the ship owner and the captain. The international rule is that the right of
abandonment of vessels, as legal limitation of liability, does not apply to cases
where the injury was occasioned by the fault of the ship owner. Felman was
negligent, it cannot therefore escape liability.

(c) Generally, in marine insurance policy, the assured impliedly warrants to the
assurer that the vessel is seaworthy and such warranty is as much a term of the
contract as if expressly written on the face of the policy. However, the implied
warranty of seaworthiness can be excluded by terms in writing in the policy of the
clearest language. The marine policy issued by Philamgen to cocacola has
dispensed that the "seaworthiness of the vessel as between the assured and the
underwriters in hereby admitted."

The result of the admission of seaworthiness by Philamgen may mean two things:
(1) the warranty of seaworthiness is fulfilled and (2) the risk of unseaworthiness is
assumed by the insurance company. This waiver clause would mean that
Philamgen has accepted the risk of unseaworthiness, therefore Philamgen is
liable.

On the matter of subrogation, it is provided that;

Art. 2207. If the plaintiff's property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of the
wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person who
has violated the contract. If the amount paid by the insurance company does not
fully cover the injury or loss, the aggrieved party shall be entitled to recover the
deficiency from the person causing the loss or injury.

Pan Malayan Insurance Corp. vs CA: The right of subrogation is not dependent
upon, nor does it grow out of any privity of contract or upon payment by the
insurance company of the insurance claim. It accrues simply upon payment by the
insurance company of the insurance claim.
Therefore, the payment made by PHILAMGEN to Coca-Cola Bottlers Philippines,
Inc., gave the former the right to bring an action as subrogee against FELMAN.
Having failed to rebut the presumption of fault, the liability of FELMAN for the loss
of the 7,500 cases of 1-liter Coca-Cola soft drink bottles is inevitable.

LODESTAR SHIPPING VS CA

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 others; and

c) 49 bundles of mouldings R & W (3) Apitong Bolidenized.

The goods, amounting to P6,067,178, were insured for the same amount with MIC
against various risks including TOTAL LOSS BY TOTAL LOSS OF THE VESSEL. The
vessel, in turn, was insured by Prudential Guarantee & Assurance, Inc. (hereafter
PGAI) for P4 million. On 20 November 1984, on its way to Manila from the port of
Nasipit, Agusan del Norte, the vessel, along with its cargo, sank off Limasawa
Island. As a result of the total loss of its shipment, the consignee made a claim
with LOADSTAR which, however, ignored the same. As the insurer, MIC paid
P6,075,000 to the insured in full settlement of its claim, and the latter executed a
subrogation receipt therefor.

On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI, alleging
that the sinking of the vessel was due to the fault and negligence of LOADSTAR
and its employees. It also prayed that PGAI be ordered to pay the insurance
proceeds from the loss of the vessel directly to MIC, said amount to be deducted
from MICs claim from LOADSTAR.

In its answer, LOADSTAR denied any liability for the loss of the shippers goods and
claimed that the sinking of its vessel was due to force majeure. PGAI, on the other
hand, averred that MIC had no cause of action against it, LOADSTAR being the
party insured. In any event, PGAI was later dropped as a party defendant after it
paid the insurance proceeds to LOADSTAR.

As stated at the outset, the court a quo rendered judgment in favor of MIC,
prompting LOADSTAR to elevate the matter to the Court of Appeals, which,
however, agreed with the trial court and affirmed its decision in toto.

ISSUE:

HELD:

The Court of Appeals referred to the fact that private respondent held no
certificate of public convenience, and concluded he was not a common carrier.
This is palpable error. A certificate of public convenience is not a requisite for the
incurring of liability under the Civil Code provisions governing common carriers.
That liability arises the moment a person or firm acts as a common carrier,
without regard to whether or not such carrier has also complied with the
requirements of the applicable regulatory statute and implementing regulations
and has been granted a certificate of public convenience or other franchise. To
exempt private respondent from the liabilities of a common carrier because he
has not secured the necessary certificate of public convenience, would be
offensive to sound public policy; that would be to reward private respondent
precisely for failing to comply with applicable statutory requirements. The
business of a common carrier impinges directly and intimately upon the safety
and well being and property of those members of the general community who
happen to deal with such carrier. The law imposes duties and liabilities upon
common carriers for the safety and protection of those who utilize their services
and the law cannot allow a common carrier to render such duties and liabilities
merely facultative by simply failing to obtain the necessary permits and
authorizations.

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.[17] LOADSTAR was at fault or negligent in not maintaining a
seaworthy vessel and in having allowed its vessel to sail despite
knowledge of an approaching typhoon. In any event, it did not sink
because of any storm that may be deemed as force majeure, inasmuch
as the wind condition in the 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.,[18] and National Union Fire Insurance
v. Stolt-Nielsen Phils., Inc.[19] It was ruled in these two cases that after paying the
claim of the insured for damages under the insurance policy, the insurer is
subrogated merely to the rights of the assured, that is, it can recover only the
amount that may, in turn, be recovered by the latter. Since the right of the
assured in case of loss or damage to the goods is limited or restricted by the
provisions in the bills of lading, a suit by the insurer as subrogee is necessarily
subject to the same limitations and restrictions. We do not agree. In the first
place, the cases relied on by LOADSTAR involved a limitation on the carriers
liability to an amount fixed in the bill of lading which the parties may enter into,
provided that the same was freely and fairly agreed upon (Articles 1749-1750). On
the other hand, the stipulation in the case at bar effectively reduces the common
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.[20] It has been said:

Three kinds of stipulations have often been made in a bill of lading. The first is
one exempting the carrier from any and all liability for loss or damage occasioned
by its own negligence. The second is one providing for an unqualified limitation of
such liability to an agreed valuation. And the third is one limiting the liability of
the carrier to an agreed valuation unless the shipper declares a higher value and
pays a higher rate of freight. According to an almost uniform weight of authority,
the first and second kinds of stipulations are invalid as being contrary to public
policy, but the third is valid and enforceable.[21]

Since the stipulation in question is null and void, it follows that when MIC paid the
shipper, it was subrogated to all the rights which the latter has against the
common carrier, LOADSTAR.

Neither is there merit to the contention that the claim in this case was barred by
prescription. 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
specific prescriptive period on the matter, the Carriage of Goods by Sea Act
(COGSA) which provides for a one-year period of limitation on claims for loss of, or
damage to, cargoes sustained during transit may be applied suppletorily to the
case at bar. This one-year prescriptive period also applies to the insurer of the
good.[22] In this case, the period for filing the action for recovery has not yet
elapsed. Moreover, a stipulation reducing the one-year period is null and void;[23]
it must, accordingly, be struck down.

SARKIES CASE

FACTS:

The case arose from a damage suit filed by private respondents Elino, Marisol, and
Fatima Minerva, all surnamed Fortades, against petitioner for breach of contract of
carriage allegedly attended by bad faith.

On August 31, 1984, Fatima boarded petitioners De Luxe Bus No. 5 in Manila on
her way to Legazpi City. Her brother Raul helped her load three pieces of luggage
containing all of her optometry review books, materials and equipment, trial
lenses, trial contact lenses, passport and visa, as well as her mother Marisols U.S.
immigration (green) card, among other important documents and personal
belongings. Her belongings was kept in the baggage compartment of the bus, but
during a stopover at Daet, it was discovered that all but one bag remained in the
open compartment. The others, including Fatimas things, were missing and could
have dropped along the way. Some of the passengers suggested retracing the
route to try to recover the lost items, but the driver ignored them and proceeded
to Legazpi City.

Fatima immediately reported the loss to her mother who, in turn, went to
petitioners office in Legazpi City and later at its head office in Manila. The latter,
however, merely offered her P1,000.00 for each piece of luggage lost, which she
turned down. After returning to Bicol disappointed but not defeated, they asked
assistance from the radio stations and even from Philtranco bus drivers who plied
the same route on August 31st. The effort paid off when one of Fatimas bags was
recovered. Marisol also reported the incident to the National Bureau of
Investigations field office in Legazpi City, and to the local police.

On September 20, 1984, respondents, through counsel, formally demanded

satisfaction of their complaint from petitioner. In a letter dated October 1, 1984,
the latter apologized for the delay and said that (a) team has been sent out to
Bicol for the purpose of recovering or at least getting the full detail[1] of the
incident.

After more than nine months of fruitless waiting, respondents decided to file the
case below to recover the value of the remaining lost items, as well as moral and
exemplary damages, attorneys fees and expenses of litigation. They claimed that
the loss was due to petitioners failure to observe extraordinary diligence in the
care of Fatimas luggage and that petitioner dealt with them in bad faith from the
start. Petitioner, on the other hand, disowned any liability for the loss on the
ground that Fatima allegedly did not declare any excess baggage upon boarding
its bus.

On June 15, 1988, after trial on the merits, the court a quo adjudged the case in
favor of herein respondents

ISSUE:

HELD:
The records also reveal that respondents went to great lengths just to salvage
their loss. The incident was reported to the police, the NBI, and the regional and
head offices of petitioner. Marisol even sought the assistance of Philtranco bus
drivers and the radio stations. To expedite the replacement of her mothers lost
U.S. immigration documents, Fatima also had to execute an affidavit of loss.[3]
Clearly, they would not have gone through all that trouble in pursuit of a fancied
loss.

Fatima was not the only one who lost her luggage. Other passengers suffered a
similar fate: Dr. Lita Samarista testified that petitioner offered her P1,000.00 for
her lost baggage and she accepted it;[4] Carleen Carullo-Magno also lost her
chemical engineering review materials, while her brother lost abaca products he
was transporting to Bicol.[5]

Petitioners receipt of Fatimas personal luggage having been thus established, it

must now be determined if, as a common carrier, it is responsible for their loss.
Under the Civil Code, (c)ommon carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence in the
vigilance over the goods x x x transported by them,[6] and this liability lasts from
the time the goods are unconditionally placed in the possession of, and received
by the carrier for transportation until the same are delivered, actually or
constructively, by the carrier for transportation until the same are delivered,
actually or constructively, by the carrier to x x x the person who has a right to
receive them,[7] unless the loss is due to any of the excepted causes under
Article 1734 thereof.[8]

The cause of the loss in the case at bar was petitioners negligence in not ensuring
that the doors of the baggage compartment of its bus were securely fastened. As
a result of this lack of care, almost all of the luggage was lost, to the prejudice of
the paying passengers. As the Court of Appeals correctly observed:

x x x. Where the common carrier accepted its passengers baggage for

transportation and even had it placed in the vehicle by its own employee, its
failure to collect the freight charge is the common carriers own lookout. It is
responsible for the consequent loss of the baggage. In the instant case, defendant
appellants employee even helped Fatima Minerva Fortades and her brother load
the luggages/baggages in the bus baggage compartment, without asking that
they be weighed, declared, receipted or paid for (TSN, August 4, 1986, pp. 29, 34,
54, 57, 70; December 23, 1987, p. 35). Neither was this required of the other
passengers (TSN, August 4, 1986, p. 104; February 5, 1988, p. 13).