II.

TRANSPORTATION OF GOODS

1. Extraordinary Diligence

Eastern Shipping v. Court of Appeals, G.R. No. 94151 April 30, 1991.

Delsan Transport v. Court of Appeals, G.R. No. 127897, November 15, 2001.

Philippine Charter Insurance Corp. v. Unknown Owner of Vessel M/V “National Honor”, National

Shipping Corp. and International Container Services, Inc., G.R. No. 161833, July 08, 2005

Saludo v. Court of Appeals, G.R. No. 95536, March 23, 1992.

Lorenzo Shipping v. BJ Marthel, G.R. No. 145483, November 19, 2004.

Sealoader Shipping v. Grand Cement Manufacturing, G.R. Nos. 167363 & 177466, 15 December

2010.

2. Presumption of Negligence

Delsan Transport v. American Home, G.R. No. 149019, 15 August 2006

Delsan Transport Lines v. CA, G.R. No. 127897, 15 November 2001

Maersk Lines v. Court of Appeals, 222 SCRA 108, G.R. 94761, May 17, 1993.

FGU Insurance v. Court of Appeals, 454 SCRA 337, G.R. No. 137775, March 31, 2005.

DSR-Senator v. Federal, 413 SCRA 14, G.R. No. 135377, October 07, 2003.

Philamgen v. Court of Appeals, 222 SCRA 155, G.R. No. 101426, May 17, 1993.

Belgian Overseas Chartering and Shipping, N. V. v. Philippine First Insurance Co., G.R. No.

143133, 05 June 2002

Cokaliong Shipping Lines v. WCPB, Gen. Insurance Co., G.R. No. 146018, 25 June 2003

Sarkies Tours Phil., Inc. v. CA, 280 SCRA 58, G.R. No. 108897. October 2, 1997

Valenzuela Hardwood and Industrial Supply v. CA, 274 SCRA 642, G.R. No. 102316. June 30,

1997

Yobido v. CA, 281 SCRA 1, G.R. No. 113003. October 17, 1997

Page | 1
 CASE 27

EASTERN SHIPPING LINES, INC., petitioner,

vs.
THE COURT OF APPEALS and THE FIRST NATIONWIDE ASSURANCE CORPORATION,
respondents.

G.R. No. 94151 April 30, 1991

FACTS:

• On September 4, 1978, thirteen coils of uncoated 7-wire stress relieved wire strand for prestressed concrete were
shipped on board the vessel "Japri Venture," owned and operated by the defendant Eastern Shipping Lines, Inc., at
Kobe, Japan, for delivery to Stresstek Post-Tensioning Phils., Inc. in Manila.
• On September 16, 1978, the carrying vessel arrived in Manila and discharged the cargo to the custody of the
defendant E. Razon, Inc. from whom the consignee's customs broker received it for delivery to the consignee's
warehouse.
• On February 19, 1979, the plaintiff indemnified the consignee in the amount of P171,923.00 for damage and loss
• The plaintiff now seeks to recover from the defendants what it has indemnified the consignee.
• It appears that while enroute from Kobe to Manila, the carrying vessel "encountered very rough seas and stormy
weather" for three days, more or less, which caused it to roll and pound heavily. The coils wrapped in burlap cloth and
cardboard paper were stored in the lower hold of the hatch of the vessel which was flooded with water about one foot
deep causing rust to the thirteen coils.
• Private respondent, First Nationwide Assurance Co., sued the petitioners which was however dismissed by RTC
Manila.
• CA set aside the lower court's decision and ordered the petitioners to pay the appellant.
• The petitioner claims it should not be held liable as the shipment was discharged and delivered complete into the
custody of the arrastre operator under clean tally sheets.

ISSUE: W/N the petitioner can be held liable for the damages incurred by the private respondent.

DECISION: The petition is DISMISSED.

RULING:

Plainly, the heavy seas and rains referred to in the master's report were not caso fortuito, but normal occurrences that
an ocean-going vessel, particularly in the month of September which, in our area, is a month of rains and heavy seas
would encounter as a matter of routine. They are not unforeseen nor unforeseeable. These are conditions that ocean-
going vessels would encounter and provide for, in the ordinary course of a voyage. That rain water (not sea water)
found its way into the holds of the Jupri Venture is a clear indication that care and foresight did not attend the closing of
the ship's hatches so that rain water would not find its way into the cargo holds of the ship.

The presumption, therefore, that the cargo was in apparent good condition when it was delivered by the vessel to the
arrastre operator by the clean tally sheets has been overturned and traversed. The evidence is clear to the effect that
the damage to the cargo was suffered while aboard petitioner's vessel.

Page | 2
DELSAN TRANSPORT LINES, INC., petitioner,vs.

THE HON. COURT OF APPEALS and AMERICAN HOME ASSURANCE CORPORATION,

respondents.

G.R. No. 127897 November 15, 2001

FACTS:

Carrier – Delsan Transport Lines Inc. Shipper –

Caltex Philippine

Insurer – American Home Assurance Corporation

Caltex entered into a contract with Delsan Transport Lines to transport its petroleum goods from Batangas–Bataan
Refinery to Zamboanga City. The shipment was insured by private respondentAmerican Home
Assurance Corp. MT Maysum set sail from Batangas for Zamboanga City. Unfortunately, the vessel sank in the early
morning of August 16, 1986 near Panay Gulf in the Visayas taking with it the entire cargo of fuel oil. Subsequently,
private respondent paid Caltex the sum of(P5,096,635.67) representing the insured value of the lost cargo. Exercising
its right of subrogation, the private respondent demanded of the petitioner the same amount it paid to Caltex. Delsan
failed to pay its obligation the American Home Assurance Corp. Hence, the latter institutes an action to recover the
amount paid. The regional trial court ruled in favor of petitioner stating that MT Maysum, was seaworthy as certified by
Philippine Coastguard and the incident was caused by unexpected inclement weather condition or force majeure. I the
court of appeals, it reversed the trial court’s decision by giving credence to the weather report issued by the PAG-ASA
that the sea was calm during the voyage.

ISSUE: W/N petitioner should be held liable for damages

RULING:

YES. From the nature of their business and for reasons of public policy, common carriers are bound to observe
extraordinary diligence in the vigilance over the goods and for the safety of passengers transported by them, according
to all the circumstance of each case. In the event of loss, destruction or deterioration of the insured goods, common
carriers shall be responsible unless the same is brought about, among others, by flood, storm, earthquake, lightning or
other natural disaster or calamity. In all other cases, if the goods are lost, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary
diligence. The tale of strong winds and big waves by the said officers of the petitioner however, was effectively rebutted
and belied by the weather report from the PAGASA, showing that from 2:00 o’clock to 8:00 o’clock in the morning on
August 16, 1986, the wind speed remained at ten (10) to twenty (20) knots per hour while the height of the waves ranged
from .7 to two (2) meters in the vicinity of Cuyo East Pass and Panay Gulf where the subject vessel sank. Thus, as the
appellate court correctly ruled, petitioner’s vessel, MT Maysun, sank with its entire cargo for the reason that it was not
seaworthy. There was no squall or bad weather or extremely poor sea condition in the vicinity when the said vessel sank.
Thus not having overturned the evidence presented, (that it observed extraordinary diligence) the presumption of
negligence stands, and therefore it is but right and proper to rule that petitioner should be held liable for damages

Page | 3
 PHILIPPINE CHARTER INSURANCE CORPORATION vs. UNKNOWN OWNER OF THE VESSEL M/V
“NATIONAL HONOR,” NATIONAL SHIPPING CORPORATION OF THE PHILIPPINES and
INTERNATIONAL CONTAINER SERVICES, INC.
FACTS: Petitioner Philippine Charter Insurance Corporation (PCIC) is the insurer of a shipment on board the vessel M/V
―National Honor,‖ represented in the Philippines by its agent, National Shipping Corporation of the Philippines (NSCP).
The M/V ―National Honor‖ arrived at the Manila International Container Terminal (MICT). The International Container
Terminal Services, Incorporated (ICTSI) was furnished with a copy of the crate cargo list and bill of lading, and it knew
the contents of the crate. The following day, the vessel started discharging its cargoes using its winch crane. The crane
was operated by Olegario Balsa, a winchman from the ICTSI, exclusive arrastre operator of MICT. Denasto Dauz, Jr.,
the checker-inspector of the NSCP, along with the crew and the surveyor of the ICTSI, conducted an inspection of the
cargo. They inspected the hatches, checked the cargo and found it in apparent good condition. Claudio Cansino, the
stevedore of the ICTSI, placed two sling cables on each end of Crate No. 1. No sling cable was fastened on the mid-
portion of the crate. In Dauz’s experience, this was a normal procedure. As the crate was being hoisted from the
vessel’s hatch, the mid-portion of the wooden flooring suddenly snapped in the air, about five feet high from the vessel’s
twin deck, sending all its contents crashing down hard, resulting in extensive damage to the shipment. PCIC paid the
damage, and as subrogee, filed a case against M/V National Honor, NSCP and ICTSI. Both RTC and CA
dismissed the complaint.

ISSUE: Whether or not the presumption of negligence is applicable in the instant case.
RULING: No. I agree with the contention of the petitioner that common carriers, from the nature of their
business and for reasons of public policy, are mandated to observe extraordinary diligence in the vigilance over
the goods and for the safety of the passengers transported by them, according to all the circumstances of each
case. he Court has defined extraordinary diligence in the vigilance over the goods as follows:
The extraordinary diligence in the vigilance over the goods tendered for shipment requires
the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods
entrusted to it for sale, carriage and delivery. It requires common carriers to render service with the greatest skill and
foresight and ―to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment,
and to exercise due care in the handling and stowage, including such methods as their nature requires.
The common carrier’s duty to observe the requisite diligence in the shipment of goods lasts
from the time the articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier
for transportation until delivered to, or until the lapse of a reasonable time for their acceptance, by the person entitled to
receive them.] >When the goods shipped are either lost or arrive in damaged condition, a presumption arises against
the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold it
liable. To overcome the presumption of negligence in the case of loss, destruction or deterioration of the goods, the
common carrier must prove that it exercised extraordinary diligence.
However, under Article 1734 of the New Civil Code, the presumption of negligence does
not apply to any of the following causes:
1. Flood, storm, earthquake, lightning or other natural disaster or calamity;
2. Act of the public enemy in war, whether international or civil;
3. Act or omission of the shipper or owner of the goods;
4. The character of the goods or defects in the packing or in the containers;
5. Order or act of competent public authority.
It bears stressing that the enumeration in Article 1734 of the New Civil Code which exempts the common carrier
for the loss or damage to the cargo is a closed list. To exculpate itself from liability for the loss/damage to the cargo
under any of the causes, the common carrier is burdened to prove any of the aforecited causes claimed by it by a
preponderance of evidence. If the carrier succeeds, the burden of evidence is shifted to the shipper to
prove that the carrier is negligent.
Defect‖ is the want or absence of something necessary for completeness or perfection; a lack or
absence of something essential to completeness; a deficiency in something essential to the proper use for the purpose
for which a thing is to be used. On the other hand, inferior means of poor quality, mediocre, or second rate. A thing may
be of inferior quality but not necessarily defective. In other words ,defectiveness is not synonymous with inferiority.
In the present case, the trial court declared that based on the record, the loss of the shipment was caused by
the negligence of the petitioner as the shipper. The same may be said with respect to defendant ICTSI. The breakage
and collapse of Crate No. 1 and the total destruction of its contents were not imputable to any fault or negligence on the
part of said defendant in handling the unloading of the cargoes from the carrying vessel, but was due solely to the
inherent defect and weakness of the materials used in the fabrication of said crate. The crate should have three solid
and strong wooden batten placed side by side underneath or on the flooring of the crate to support the weight of its
contents.
Page | 4
30. SALUDO VS. COURT OF APPEALS GR# 95536,
March 23, 1992
Regalado, J.

Parties of the Case: Pomierski and Son Funeral Home (Shipper), Petitioner Maria Saludo (Consignee), Transworld
Airlines (TWA) Chicago – San Francisco, and Philippine Airlines (PAL)- San Francisco – Manila (Carrier)

Facts:
When petitioner’s mother, Crispina Galdo Saludo, died in Chicago Illinois, shipper Pomierski and Son Funeral Home of
Chicago made the necessary preparations and arrangements for the shipment of the remains from Chicago to the
Philippines. The remains were sealed by Philippine Vice Consul Bienvenido
M. Llaneta who sealed such in an airtight and waterproof casket. On the same date, October 26, 1976, Pomierski
brought the remains to C.M.A.S. (Continental Mortuary Air Services) at the airport (Chicago) which made the necessary
arrangements such as flights, transfers, etc.; C.M.A.S. is a national service used by undertakers to throughout the
nation (U.S.A.). C.M.A.S. booked the shipment with PAL thru the carrier's agent Air Care International, with Pomierski
F.H. as the shipper and Mario (Maria) Saludo as the consignee. The requested routing was from Chicago to San
Francisco on board TWA Flight 131 of October 27, 1976 and from San Francisco to Manila on board PAL Flight No.
107 of the same date, and from Manila to Cebu on board PAL Flight 149 of October 29, 1976. Maria Saludo upon
arriving at San Francisco Airport, she then called Pomierski that her mother's remains were not at the West Coast
terminal, and Pomierski immediately called C.M.A.S., which in a matter of 10 minutes informed him that the remains
were on a plane to Mexico City, that there were two bodies at the terminal, and somehow they were switched. The
following day October 28, 1976, the shipment or remains of Crispina Saludo arrived (in) San Francisco from Mexico on
board American Airlines. This shipment was transferred to or received by PAL at 7:45 p.m. This casket bearing the
remains of Crispina Saludo, which was mistakenly sent to Mexico and was opened (there), was resealed by Crispin F.
Patagas for shipment to the Philippines. The shipment was immediately loaded on PAL flight for Manila that same
evening and arrived (in) Manila on October 30, 1976, a day after its expected arrival on October 29, 1976. Aggrieved by
the incident, the petitioners instituted an action against respondents and were asked to pay for damages.

Petitioner alleges: that private respondents received the casketed remains of petitioners' mother on October 26, 1976,
as evidenced by the issuance of PAL Air Waybill by Air Care International as carrier's agent; and from said date, private
respondents were charged with the responsibility to exercise extraordinary diligence so much so that for the alleged
switching of the caskets on October 27, 1976, or one day after private respondents received the cargo, the latter must
necessarily be liable.

RTC - absolved the two respondent airlines companies of liability. CA - affirmed the decision of the lower court in toto.

ISSUE
Is the delay in the delivery of the casketed remains of petitioners' mother was due to the fault of respondent airline
companies?

HELD:
NO. The Court AFFIRMED the CA decision and just awarded P40,000 damages to petitioners
since the switching of caskets prior thereto was not caused by respondents. The facts belie the averment that there
was delivery of the cargo to the carrier on October 26, 1976. Rather, as earlier explained, the body intended to be
shipped as agreed upon was really placed in the possession and control of PAL on October 28, 1976 and it was only
from that date that private respondents became responsible for the agreed cargo under their undertakings in PAL
Airway Bill. Therefore, they cannot be held liable for subsequent events caused thereby.

The bill of lading in this case, particularly PAL Airway Bill issued on October 27, 1976, was not evidence of
evidence of receipt of delivery of the cargo but merely as confirmation of the booking thus made for the San Francisco-
Manila flight scheduled on October 27, 1976. Actually, it was not until October 28, 1976 that PAL received physical
delivery of the body at San Francisco.
Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of the common
carrier begins from the time the goods are delivered to the carrier. This responsibility remains in full force and effect
even when they are temporarily unloaded or stored in transit, unless the shipper or owner exercises the right of
stoppagein transitu, and terminates only after the lapse of a reasonable time for the acceptance, of the goods by the
consignee or such other person entitled to receive them. And, there is delivery to the carrier when the goods are ready
for and have been placed in the exclusive possession, custody and control of the carrier for the purpose of their
immediate transportation and the carrier has accepted them. Where such a delivery has thus been accepted by the
carrier, the liability of the common carrier commences eo instanti.
Page | 5
31. LORENZO SHIPPING CORP VS. BJ MARTHEL
G.R. No. 145483 November 19, 2004 Chico-
Nazario, J.
Facts:
Petitioner Lorenzo Shipping Corporation is a domestic corporation engaged in coastwise shipping. It used to
own the cargo vessel M/V Dadiangas Express while respondent BJ Marthel International, Inc. is a business entity
engaged in trading, marketing, and selling of various industrial commodities. It is also an importer and distributor of
different brands of engines and spare parts. Respondent supplied petitioner with spare parts for the latter's marine
engines. Respondent supplied petitioner with spare parts for the latter's marine engines. According to the quotation it
sent, deliveries of such items are ―within 2 months after receipt of firm order.‖ Petitioner thereafter issued to
respondent Purchase Order No. 13839 for the procurement of one set of cylinder liner, valued at P477,000, to be used
for M/V Dadiangas Express. The purchase order was co-signed by Jose Go, Jr., petitioner's vice-president, and Henry
Pajarillo, respondent’s sales manager.
Instead of paying the 25% down payment (indicated in the purchase order) for the first cylinder liner, petitioner
issued in favor of respondent 10 postdated checks supposedly representing the full payment of the cylinder liner.
Subsequently, petitioner issued Purchase Order No. 14011, for another unit of cylinder liner. This purchase
order stated the term of payment to be "25% upon delivery, balance payable in 5 bi- monthly equal installments." Like
the first purchase order, the second purchase order did not state the date of the cylinder liner's delivery.
On 26 January 1990, respondent deposited petitioner's check that was postdated 18 January 1990, however,
the same was dishonored by the drawee bank due to insufficiency of funds. The remaining nine postdated checks were
eventually returned by respondent to petitioner.
Petitioner claimed that it replaced said check with a good one, the proceeds of which were applied to its other
obligation to respondent. For its part, respondent insisted that it returned said postdated check to petitioner.
On 20 April 1990, Pajarillo delivered the two cylinder liners at petitioner's warehouse in Manila. The sales
invoices evidencing the delivery of the cylinder liners both contain the notation "subject to verification" under which the
signature of petitioner's warehouseman, appeared.
Respondent sent a Statement of Account and respondent's vice-president sent a demand letter dated to
petitioner requiring the latter to pay. Petitioner sent the former a letter offering to pay only P150,000 for the cylinder
liners. In said letter, petitioner claimed that as the cylinder liners were delivered late and due to the scrapping of the M/V
Dadiangas Express, it (petitioner) would have to sell the cylinder liners in Singapore and pay the balance from the
proceeds of said sale.
Respondent filed an action for sum of money and damages before the RTC. Prior to the filing of a responsive
pleading, respondent filed an amended complaint with preliminary attachment. The amendments also pertained to the
issuance by petitioner of the postdated checks and the amounts of damages claimed.
RTC - granted respondent's prayer for the issuance of a preliminary attachment. Petitioner filed an Urgent Ex-
Parte Motion to Discharge Writ of Attachment attaching thereto a counter-bond which the RTC allowed.
Petitioner afterwards filed its Answer alleging therein that time was of the essence in the delivery of the cylinder
liners and that the delivery on 20 April 1990 of said items was late as respondent committed to deliver said items "within
two (2) months after receipt of firm order."
Respondent filed a Second Amended Complaint with Preliminary Attachment which dealt solely with the
number of postdated checks issued by petitioner as full payment for the first cylinder liner it ordered from respondent. (In
the first amended complaint, only nine postdated checks were involved, in its second amended complaint, there were ten
postdated checks).
Petitioner filed a Motion alleging therein that the cylinder liners run the risk of obsolescence and deterioration to
the prejudice of the parties to this case. Thus, petitioner prayed that it be allowed to sell the cylinder liners at the best
possible price and to place the proceeds of said sale in escrow. This motion was granted.
The RTC dismissed the complaint which ordered the plaintiff to pay P50,000.00 to the defendant. It held
respondent bound to the quotation it submitted to petitioner particularly with respect to the terms of payment and delivery
of the cylinder liners. It also declared that respondent had agreed to the cancellation of the contract of sale when it
returned the postdated checks issued by petitioner. CA - reversed the decision of the RTC.
ISSUES: 1. W/N respondent incurred delay in performing its obligation under the contract of sale - NO
Whether or not said contract was validly rescinded by petitioner. –NO
HELD: The Court DENIED since time was not of the essence in the contract, as depicted from the actual
or intention of the parties. The delivery of the cylinder liners on 20 April 1990 was made within a reasonable period of
time considering that respondent had to place the order for the cylinder liners with its principal in Japan and that the
latter was, at that time, beset by heavy volume of work. There having been no failure on the part of the respondent to
perform its obligation, the power to rescind the contract is unavailing to the petitioner. Therefore, it can be said that
respondent exercised due diligence in the performance of its obligation.
Page | 6
G.R. No. 167363. December 15, 2010.

SEALOADER SHIPPING CORPORATION, petitioner v.

GRAND CEMENT MANUFACTURING CORPORATION, JOYCE LAUNCH & TUG CO., INC.

LEONARDO-DE CASTRO, J p:

FACTS:

These are two petitions for Review on Certiorari under Rule 45 of the Rules of Court, both seeking to challenge the
Amended Decision of the Court of Appeals by reducing by 50% the award of actual damages that was previously
granted
in the Decision of the Regional Trial Court of Cebu City. The

antecedent facts are as follows:

Sealoader Shipping Corporation, herein petitioner, is a domestic corporation engaged in the business of shipping and
hauling cargo from one point to another using seagoing inter-island barges. Grand Cement Manufacturing Corporation,
on the other hand, is a domestic corporation engaged in the business of manufacturing and selling cement through its
authorized distributors and, for which purposes, it maintains its own private wharf in San Fernando, Cebu, Philippines.
On March 24, 1993, petitioner executed a Time Charter Party Agreement with Respondent (Joyce Launch & Tug Co.,
Inc.), which operated and owned the motor tugboat M/T Viper. Sealoader chartered the M/T Viper in order to tow the
former's unpropelled barges for a minimum period of 15 from the date of acceptance, renewable on a 15-day basis
upon mutual agreement of the parties.

Sealoader then entered into a contract with Grand Cement for loading of cement clinkers and the delivery to Manila.
March 31, 1994, Sealoader’s barge, D/B Toploader, arrived at the wharf of Grand Cement tugged by the M/T Viper. The
D/B Toploader, however, was not immediately loaded with its intended cargo as the employees of Grand Cement were
still loading another vessel.

April 4, 1994, Typhoon Bising struck the Visayas area (120 km/hr; Public storm signal no. 3). As the winds blew stronger
and the waves grew higher, the M/T Viper tried to tow the D/B Toploader away from the wharf when the towing line
connecting the two vessels snapped. The following day, the employees of Grand Cement discovered the D/B Toploader
situated on top of the wharf, apparently having rammed the same and causing significant damage thereto.

The Grand Cement filed a Complaint for Damages against Sealoader; Romulo Diantan, the Captain of the M/T Viper;
and Johnny Ponce, the Barge Patron of the D/B Toploader. Grand Cement claimed, among others, that when the D/B
Toploader arrived at its wharf on March 31, 1994, the same was not properly secured. Grand Cement stated that after it
received the weather updates for that day, it immediately advised Romulo Diantan and Johnny Ponce to move their
respective vessels away from the wharf to a safer berthing area. Both men allegedly refused to do so. Because of the
strong winds of Typhoon Bising, the D/B Toploader was forced to smash against the wharf of Grand Cement.

Sealoader maintained that Joyce Launch should be held liable for the negligent acts of the latter are employees who
were manning the M/T Viper to which Grand Cement included Joyce Launch as one of the party defendants. Sealoader
insist to argue that Joyce Launch had the sole duty and responsibility to secure the M/T Viper and the D/B Toploader in
order to avert any damage to the properties of third parties. Sealoader filed an Answer maintaining that it only had
the right to use the M/T Viper for the
purposes for which the tugboat was chartered and nothing more. Sealoader pointed out that Grand Cement did not
initiate the loading of the D/B Toploader notwithstanding the fact that the said barge had been docked at the latter's
wharf long before Typhoon Bising came on April 4, 1994. As the typhoon was a force majeure, the damage it brought
upon the wharf of Grand Cement was allegedly beyond the control of Sealoader.

Grand Cement presented ex parte witnesses:

 Wennie C. Saniel pertinently stated that, on April 4, 1994, he gave instructions for the pullout of the D/B
Toploader from the wharf in view of the incoming typhoon. As the instructions were ignored, Grand Cement
resultantly suffered damages estimated to be around P2.4 million.
Sealoader’s motion to take the testimonies of its witnesses:
 Marita S. Santos was taken by Sealoader in order to prove that the damage to the wharf of Grand Cement was
caused by force majeure, as well as the negligent acts and omissions of Grand Cement and Joyce Launch. The
Grand Cement was notified that the D/B Toploader was ready to load. The crew of the bargePage
then|waited
7 as
 Grand Cement had three days from notice to load cargo into the barge.
 At around 3:00 p.m. when the typhoon came, the crew of the barge found Diantan trying to maneuver the M/T
Viper to tow the D/B Toploader away from the wharf. The M/T Viper failed to tow the barge since the mooring
lines were not cast off and the arrastre responsible for the same were not at the wharf. If Grand Cement could
have loaded the D/B Toploader with cargo before the typhoon (April 4, 1994), the accident could have averted
and the D/B Toploader had no engine, the M/T Viper was responsible for towing the barge to safety.
RTC ruled in favor of Grand Cement and that Sealoaders, Joyce Launch, and Johnny Ponce are guilty of negligence,
which caused damage to the Grand Cement’s wharf. CA still found merit in Sealoader’s appeal and rendered its
judgement partially modifying by reducing the award for actual damages by 50% or half. The appellate court decided
that Grand Cement did not take any precaution to avoid the damages brought by the storm and due to its contributory
negligence for merely instructing the Petitioners to leave the wharf the day before the storm, Grand Cement must carry
part of the brunt of the damages. CA subsequently found that Grand Cement likewise did not exercise due diligence
since it belatedly informed Sealoader of the approaching typhoon and, thereafter, still continued to load another vessel.

ISSUE: Who should be liable for the damage sustained by the wharf of Grand Cement?

RULING:

Sealoader cannot pass to Grand Cement the responsibility of casting off the mooring lines connecting the D/B
Toploader to the wharf. People at the wharf could not just cast off the mooring lines without any instructions from the
crew of the D/B Toploader and the M/T Viper. As the D/B Toploader was without an engine, casting off the mooring
lines prematurely might send the barge adrift or even run the risk of the barge hitting the wharf sure enough. Thus,
Sealoader should have taken the initiative to cast off the mooring lines early on or, at the very least, requested the crew
at the wharf to undertake the same. In failing to do so, Sealoader was manifestly negligent.

Contrary to the judgement of the CA, Grand Cement was not guilty of negligent acts, which contributed to the damage
that was incurred on its wharf. Court holds that Sealoader had the responsibility to inform itself of the prevailing weather
conditions in the areas where its vessel was set to sail. Sealoader cannot merely rely on other vessels for weather
updates and warnings on approaching storms, as what apparently happened in this case.

Hence, the petition for review was DENIED.

Page | 8
G.R. No. 149019. August 15, 2006.

DELSAN TRANSPORT LINES, INC., petitioner v.

AMERICAN HOME ASSURANCE CORPORATION, respondent .

GARCIA, J :

FACTS:

This is a petition for review on certiorari under Rule 45 of the Rules of Court wherein petitioner assails and seeks to set
aside the Decision of the CA, affirming an earlier decision of RTC of Manila in two separate complaints for damages.

The facts are as follows:

Delsan is a domestic corporation which owns and operates the vessel MT Larusan. On the other hand, respondent
American Home Assurance Corporation is a foreign insurance company duly licensed to do business in the Philippines
through its agent, the American-International Underwriters, Inc. (Phils.). It is engaged, among others, in insuring
cargoes for transportation within the Philippines.

On August 5, 1984, Delsan received on board MT Larusan a shipment consisting of 1,986.627 k/l Automotive Diesel Oil
at the Bataan Refinery Corporation for transportation and delivery to the bulk depot in Bacolod City of Caltex Phils.,
pursuant to a Contract of Afreightment. The shipment was insured by respondent AHAC against all risks under Inland
Floater Policy.

When they were successfully discharging the diesel oil on Aug. 7, 1984 in Bacolod, at about 10:30PM, they had to
stopped on account of the discovery that the port bow mooring of the vessel was intentionally cut or stolen by unknown
persons. Because there was nothing holding it, the vessel drifted westward, dragged and stretched the flexible rubber
hose attached to the riser, broke the elbow into pieces, severed completely the rubber hose connected to the tanker
from the main delivery line at sea bed level and ultimately caused the diesel oil to spill into the sea. To avoid further
spillage, the vessel's crew tried water flushing to clear the line of the diesel oil but to no avail.

In the meantime, the shore tender, who was waiting for the completion of the water flushing, was surprised when the
tanker signaled a "red light" which meant stop pumping. Unaware of what happened, the shore tender, thinking that the
vessel would, at any time, resume pumping, did not shut the storage tank gate valve. As all the gate valves remained
open, the diesel oil that was earlier discharged from the vessel into the shore tank backflowed.

As a result of spillage and backflow of diesel oil, Caltex sought recovery of the loss from Delsan, but the latter refused
to pay. As insurer, AHAC paid Caltex the sum of P479,262.57 for spillage and P1,939,575.37 for backflow of
the diesel oil pursuant to Inland Floater Policy.

American Home Assurance Corp., as Caltex subrogee, instituted a civil case against Delsan for loss caused by the
spillage and another for the loss caused by the backflow.

RTC ruled in favor of American Home Assurance Corp. holding Delsan liable for the loss of the cargo for it negligence
in its duty as a common carrier. CA also agreed with the decision of the RTC stating that Delsan failed to
exercise the extraordinary diligence.

Hence, petitioner filed this case arguing that CA erred in ruling that Article 1734 of the Civil Code cannot absolve it
from liability for the loss of the subject cargo and in not applying the rule on contributory negligence against
Caltex, the shipper-owner of the cargo, and in not taking into consideration the fact that the loss due to backflow
occurred when the diesel oil was already completely delivered to Caltex.

Delsan would have the Court absolve it from liability for the loss of its cargo on two grounds. First , the loss through
spillage was partly due to the contributory negligence of Caltex; and Second, the loss through backflow should not be
borne by Delsan because it was already delivered to Caltex's shore tank.

Page | 9
ISSUE: Will the arguments of the Petitioner prosper?

RULING:

Both the trial court and the CA uniformly ruled that Delsan failed to prove its claim that there was a contributory
negligence on the part of the owner of the goods —Caltex and the Court sees no reason to depart therefrom. As the
Court saw it, the crew of the vessel should have promptly informed the shore tender that the port mooring line was cut
off but Delsan did not do so on the
lame excuse that there was no available banca. As it is, Delsan's personnel signaled a "red light" which was not a
sufficient warning because such signal only meant that the pumping of diesel oil had been finished. Neither did the
blowing of whistle suffice considering the distance of more than 2 kilometers between the vessel and the Caltex Bulk
Depot, aside from the fact that it was not the agreed signal.

Delsan, being a common carrier, should have exercised extraordinary diligence in the performance of its duties.
Consequently, it is obliged to prove that the damage to its cargo was caused by one of the excepted causes if it were to
seek exemption from responsibility. Having failed to do so, Delsan must bear the consequences.

Page | 10
DELSAN TRANSPORT LINES V CA

GR No. 127897, Nov. 15, 2007

FACTS:

Caltex Philippines entered into a contract of affreightment with the petitioner, Delsan Transport Lines, Inc., for a
period of one year whereby the said common carrier agreed to transport Caltex's industrial fuel oil from the Batangas-
Bataan Refinery to different parts of the country. Under the contract, petitioner took on board its vessel, MT Maysun,
2,277.314 kiloliters of industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City which
was insured by private respondent, American Home Assurance Corporation.

MT Maysun set sail from Batangas for Zamboanga City. Unfortunately, the vessel sank in the early morning of August
16, 1986 near Panay Gulf in the Visayas taking with it the entire cargo of fuel oil. Subsequently, private respondent paid
Caltex P5,096,635.57 representing the insured value of the lost cargo. Exercising its right of subrogation, the private
respondent demanded of the petitioner the same amount it paid to Caltex.

Due to its failure to collect from the petitioner despite prior demand, private respondent filed a complaint with the RTC.
The RTC dismissed the complaint when it found that the vessel, MT Maysun, was seaworthy to undertake the voyage as
determined by the Philippine Coast Guard and the incident was caused by unexpected inclement weather condition or
force majeure.

CA reversed the decision which held that in the absence of any explanation as to what may have caused the sinking of
the vessel coupled with the finding that the same was improperly manned, petitioner is liable.

Before the Court, petitioner theorized that when private respondent paid Caltex the value of its lost cargo, the act of the
private respondent is equivalent to a tacit recognition that the ill-fated vessel was seaworthy; otherwise, private
respondent was not legally liable to Caltex due to the latter's breach of implied warranty under the marine insurance
policy that the vessel was seaworthy.

ISSUE: Whether or not the payment made by the private respondent to Caltex for the insured value of the lost cargo
amounted to an admission that the vessel was seaworthy, thus precluding any action for recovery against the
petitioner.

RULING: NO. The payment made by the private respondent for the insured value of the lost cargo operates as waiver
of its (private respondent) right to enforce the term of the implied warranty against Caltex under the marine insurance
policy. However, the same cannot be validly interpreted as an automatic admission of the vessel's seaworthiness by the
private respondent as to foreclose recourse against the petitioner for any liability under its contractual obligation as a
common carrier.

In order to escape liability for the loss of its cargo of industrial fuel oil belonging to Caltex, petitioner attributes the
sinking of MT Maysun to fortuitous event or force majeure. From the testimonies of Jaime Jarabe and Francisco Berina,
captain and chief mate, respectively of the ill-fated vessel, it appears that a sudden and unexpected change of weather
condition that day contending that there were strong winds with velocity of 30 knots per hour and waves 18-20 feet
high. However, this tale was rebutted by the weather report from PAGASA which showed that the wind speed was only
at 10-20 knots and waves .7-2 meters high. Thus, as the appellate court correctly ruled, petitioner's vessel, MT Maysun,
sank with its entire cargo for the reason that it was not seaworthy. There was no squall or bad weather or extremely
poor sea condition in the vicinity when the said vessel sank.

Petitioner is liable for the insured value of the lost cargo of industrial fuel oil belonging to Caltex for its failure to rebut
the presumption of fault or negligence as common carrier occasioned by the unexplained sinking of its vessel, MT
Maysun, while in transit.

Page | 11
MAERSK LINES V CA

GR. No. 94761, May 17, 1993

FACTS:

Petitioner Maersk Line is engaged in the transportation of goods by sea, doing business in the Philippines through its
general agent Compania de Tabacos de Filipinas, while private respondent Efren Castillo is the proprietor of
Ethegal Laboratories, a firm engaged in the manufacture of pharmaceutical products.

On Nov. 12, 1976, Castillo ordered from Eli Lilly, Inc. of Puerto Rico 600,000 empty gelatin capsules for the
manufacture of his pharmaceutical products. The capsules were placed in 6 drums of 100,000 capsules
each valued at US$1,668.71. Shipper Eli Liily,Inc. advised Castillo through a Memorandum of Shipment that
the products were already shipped on board MV ―Anders Maesrkline‖ and date of arrival to be April 3, 1977.

However, for unknown reasons, said cargoes of capsules were diverted to Richmond, VA and then transported back to
Oakland, CA and with the goods finally arriving in the PI on June 10, 1977. Consignee Castillo refused to take delivery
of the goods on account of its failure to arrive on time, and filed an action for rescission of contract with damages
against Maersk and Eli Lilly alleging gross negligence and undue delay.

Maersk contends that it is liable only in case of loss, destruction or deterioration of goods under Art 1734 NCC while Eli
Lilly in its cross claim argued that the delay was due solely to the negligence of Maersk Line. Trial Court dismissed the
complaint against Eli Lilly and the latter withdrew cross claim but TC still held Maersk liable and CA affirmed with
modifications.

ISSUE: WON the common carrier is liable for damages.

RULING: The SC has carefully reviewed the decisions of respondent court and the trial court and both of them show
that, in finding petitioner liable for damages for the delay in the delivery of goods, reliance was made on the rule that
contracts of adhesion are void. Added to this, the lower court stated that the exemption against liability for delay is
against public policy and is thus, void. Besides, private respondent's action is anchored on Article 1170 of the NCC and
not under the law on Admiralty.

In the case at bar, a delay in the delivery of the goods spanning a period of two 2 months and seven 7 days falls was
beyond the realm of reasonableness. Described as gelatin capsules for use in pharmaceutical products, subject
shipment was delivered to, and left in, the possession and custody of petitioner-carrier for transport to Manila via
Oakland, California. But through petitioner's negligence was mishipped to Richmond, Virginia. Petitioner's insistence
that it cannot be held liable for the delay finds no merit.

Page | 12
FGU Insurance Corp. v. CA

Facts:
On April 21, 1987, a car owned by private respondent FILCAR Transport Inc., rented to and driven by Dahl-Jensen, a
Danish tourist, swerved into the right and hit the car owned by Lydia Soriano and driven by Benjamin Jacildone. Dahl-
Jensen did not possess a Philippine driver’s license. Petitioner, as the insurer of Soriano’s car, paid the latter P25,382.20
and, by way of subrogation, sued FILCAR, Dahl-Jensen, and Fortune Insurance Corporation, FILCAR’s insurer, for quasi-
delict. The trial court dismissed the petition for failure to substantiate the claim for subrogation. The Court of Appeals
affirmed the decision, but on the ground that only Dahl-Jensen’s negligence was proven, not that of FILCAR. Hence, this
instant petition.
Issues:
(1) Whether an action based on quasi-delict will prosper against a rent-a-car company and, consequently, its insurer for
fault or negligence of the car lessee in driving the rented vehicle
(2) Whether the ruling in MYC-Agro-Industrial Corporation v. Vda. de Caldo is applicable in the case at bar
Held:
(1) We find no reversible error committed by respondent court in upholding the dismissal of petitioner's complaint.
The pertinent provision is Art. 2176 of the Civil Code which states: "Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is called a quasi-delict . . . . ". To sustain a claim based thereon, the
following requisites must concur: (a) damage suffered by the plaintiff; (b) fault or negligence of the defendant; and, (c)
connection of cause and effect between the fault or negligence of the defendant and the damage incurred by the plaintiff.
We agree with respondent court that petitioner failed to prove the existence of the second requisite, i.e., fault or
negligence of defendant FILCAR, because only the fault or negligence of Dahl-Jensen was sufficiently established, not
that of FILCAR. It should be noted that the damage caused on the vehicle of Soriano was brought about by the
circumstance that Dahl-Jensen swerved to the right while the vehicle that he was driving was at the center lane. It is plain
that the negligence was solely attributable to Dahl-Jensen thus making the damage suffered by the other vehicle his
personal liability. Respondent FILCAR did not have any participation therein. Respondent FILCAR being engaged in a
rent-a-car business was only the owner of the car leased to Dahl-Jensen. As such, there was no vinculum juris between
them as employer and employee. Respondent FILCAR cannot in any way be responsible for the negligent act of Dahl-
Jensen, the former not being an employer of the latter.
(2) Petitioner's insistence on MYC-Agro-Industrial Corporation is rooted in a misapprehension of our ruling
therein. In that case, the negligent and reckless operation of the truck owned by petitioner corporation caused injuries to
several persons and damage to property. Intending to exculpate itself from liability, the corporation raised the defense that
at the time of the collision it had no more control over the vehicle as it was leased to another; and, that the driver was not
its employee but of the lessee. The trial court was not persuaded as it found that the true nature of the alleged lease
contract was nothing more than a disguise effected by the corporation to relieve itself of the burdens and responsibilities
of an employer. We upheld this finding and affirmed the declaration of joint and several liability of the corporation with its
driver.

Page | 40
 DSR-SENATOR LINES AND C.F. SHARP AND COMPANY, INC., petitioners, vs. FEDERAL PHOENIX
ASSURANCE CO., INC., respondent. [G.R. No.

135377. October 7, 2003] FACTS:

Berde Plants, Inc. delivered 632 units of artificial trees to C.F. Sharp and Company, Inc., the General Ship Agent of
DSR-Senator Lines, a foreign shipping corporation, for transportation and delivery to the consignee, Al-Mohr
International Group, in Riyadh, Saudi Arabia. The cargo was loaded in M/S Arabian Senator. Federal Phoenix
Assurance Company, Inc. insured the cargo against all risks in the amount of P941,429.61. On June 7, 1993, M/S
Arabian Senator left the Manila South Harbor for Saudi Arabia with the cargo on board. When the vessel arrived in Khor
Fakkan Port, the cargo was reloaded on board DSR- Senator Lines feeder vessel, M/V Kapitan Sakharov, bound for
Port Dammam, Saudi Arabia. However, while in transit, the vessel and all its cargo caught fire. Consequently, Federal
Phoenix Assurance paid Berde Plants P941,429.61 corresponding to the amount of insurance for the cargo. On
February 8, 1994, Federal Phoenix Assurance sent a letter to C.F. Sharp demanding payment of P941,429.61 on the
basis of the Subrogation Receipt. C.F. Sharp denied any liability on the ground that such liability was extinguished
when the vessel carrying the cargo was gutted by fire.
ISSUE:
Whether DSR-Senator Lines and C.F. Sharp are liable for the loss of the cargo

RULING:
Yes, petitioners are liable to Federal Phoenix Assurance Co., Inc. for payment of the loss of the cargo. Article 1734 of the
Civil Code provides:
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due
to any of the following causes only:
(1)Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
Fire is not one of those enumerated under the above provision which exempts a carrier from liability for loss or
destruction of the cargo. When the goods shipped either are lost or arrive in damaged condition, a presumption arises
against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold
it liable. Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by
them. Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed
or deteriorated. There are very few instances when the presumption of negligence does not attach and these instances
are enumerated in Article 1734.

Page | 40
 33. Philamgen v. Court of Appeals, 222 SCRA 155, G.R. No. 101426, May 17, 1993.
CASE 38

PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC., petitioner, vs. COURT OF

APPEALS and TRANSPACIFIC TOWAGE, INC., respondents.

[G.R. No. 101426; May 17, 1993] FACTS:

On September 4, 1985 the Davao Union Marketing Corporation of Davao City shipped on board the vessel M/V "Crazy
Horse" operated by the Transpacific Towage, Inc. cargo consisting of 9,750 sheets of
union brand GI sheets with a declared value of P1,086,750.00 and 86,860 bags of union Pozzolan and union Portland
Cement with a declared value of P4,300,000.00.

The wharf where the vessel had to dock was shallow and rocky, hence it had to drop anchor some distance away in a
private port. Buoys had to be constructed in order that the vessel may properly moored. After the buoys were installed a
wooden stage had to be constructed so that the stevedores could reach the vessel. For this they needed a floating
crane which was not immediately available. The barges that were to load the cargo from the vessel could not go near
the wharf because of the shallo w and rocky condition. A catwalk had to be installed between the barge and the wharf.
This necessitated the dismantling of the wooden stage previously installed.

Apart from these preparations and constructions that had to be made, the weather was not cooperative. Even before
the typhoon struck there were intermittent rains, hence the unloading was not continuous. The actual unloading started
on September 13, 1985 and could have been finished in 4 or 5 days but because of the rains it was delayed. Another
factor that caused further delay was the fact that the fiesta of the Virgin of Penafrancia was celebrated and for the
length of time that the celebrations were held, the stevedores who were from the place refused to work.

ISSUE:

Whether the delay involved in the unloading of the goods is deemed negligently incurred in so as not to free private
respondent from responsibility

RULING:

No, the delay incurred in the unloading of the goods was not due to the negligence of the parties but was occasioned by
causes that may not be attributed solely to human factors, among which were the natural conditions of the port where
the M/V "Crazy Horse" had docked, the customs of the place, and the weather conditions. Under Art. 1740 of the New
Civil Code, if the common carrier negligently incurs in delay in transporting the goods, a natural disaster shall not free
the carrier from responsibility. While it is true that there was indeed delay in discharging the cargo from the vessel, we
agree with the Court of Appeals that neither of the parties herein could be faulted for such delay, for the same (delay)
was due not to negligence, but to several factors earlier discussed. The cargo having been lost due to typhoon "Saling",
and the delay incurred in its unloading not being due to negligence, private respondent is exempt from liability for the
loss of the cargo, pursuant to Article 1740 of the Civil Code.

Page | 41
 BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES TRANSPORT
SERVICES, INC., petitioners, vs. PHILIPPINE FIRST INSURANCE CO., INC., respondent. [G.R. No.

143133. June 5, 2002]

FACTS:

On June 13, 1990, CMC Trading A.G. shipped on board the MN Anangel Sky at Hamburg, Germany 242 coils of
various Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine Steel Trading
Corporation. On July 28, 1990, MN Anangel Sky arrived at the port of Manila and, within the subsequent days,
discharged the subject cargo. Four (4) coils were found to be in bad order B.O. Tally sheet No. 154974. Finding the four
(4) coils in their damaged state to be unfit for the intended purpose, the consignee Philippine Steel Trading Corporation
declared the same as total loss.

Despite receipt of a formal demand, defendants-appellees refused to submit to the consignees claim. Consequently,
plaintiff-appellant paid the consignee five hundred six thousand eighty six & 50/100 pesos (P506,086.50), and was
subrogated to the latters rights and causes of action against defendants- appellees. Subsequently, plaintiff-appellant
instituted this complaint for recovery of the amount paid by them, to the consignee as insured.

ISSUE: Whether petitioners have overcome the presumption of negligence of a common carrier

RULING:

No, petitioners have not overcome the presumption of negligence of a common carrier. Well-settled is the rule
that common carriers, from the nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence and vigilance with respect to the safety of the goods and the passengers they transport.
The extraordinary responsibility lasts from the time the goods are unconditionally placed in the possession of
and received for transportation by the carrier until they are delivered, actually or constructively, to the
consignee or to the person who has a right to receive them. Owing to this high degree of diligence required of
them, common carriers, as a general rule, are presumed to have been at fault or negligent if the goods they
transported deteriorated or got lost or destroyed. That is, unless they prove that they exercised extraordinary
diligence in transporting the goods. However, the presumption of fault or negligence will not arise if the loss is
due to any of the following causes enumerated in Article 1734 of the New Civil Code. Corollary to the
foregoing, mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad
order at their destination constitutes a prima facie case of fault or negligence against the carrier. If no adequate
explanation is given as to how the deterioration, the loss or the destruction of the goods happened, the
transporter shall be held responsible.

Page | 42
Cokaliong Shipping Lines v. UPCB G.R. No.

146018 / 25 June 2003 FACTS:

On 11 December 1991, Nestor Angelia, both the shipper and consignee, delivered to the petitioner, Cokaliong Shipping
Lines, cargo consisting of one carton of Christmas decorations and two sacks of plastic toys, to be transported on board
the M/V Tandag scheduled to depart the following day from Cebu City to Surigao del Sur. Zosimo Mercado, also the
shipper and consignee of cargo, likewise delivered to the petitioner two cartons of plastic toys and Christmas decor,
one roll of floor matting, and one bundle of assorted goods for transportation. The cargoes were both insured against all
risk by Feliciana Legaspi through the UCPB General Insurance Co. for PHP150,000.00.

When the vessel left port, it had thirty-four passengers and assorted cargo on board, including the goods of Legaspi.
However, after the vessel had passed by the Mandaue-Mactan Bridge, a fire broke out in the engine room which
threatened the lives of everyone on board. Despite earnest efforts of the officers and crew of the vessel to safeguard
the cargoes, the fire ultimately engulfed and destroyed the entire vessel resulting in the loss of the vessel and the
cargoes therein.
As a result of the sinking, Legaspi filed a claim with the respondent which was subsequently approved with the
issuance of a check for PHP P148,500.00 as payment for the lost goods. Having been issued a Subrogation Receipt for
both insured cargoes, the UPCB filed a claim anchored on torts against Cokaliong Shipping Lines and sought to collect
the sum it payed to Legaspi plus legal interest, attorney’s fees, and the cost of the suit. They principal claim upon which
UPCB anchors its case is that the loss of the cargo was due to the negligence of the officers of the shipping company
which makes them liable to pay for damages by reason of their carelessness.

The petitioners, on the other hand, alleged that they had already been cleared by the Board of Marine Inquiry of any
negligence in the burning of the vessel and the shippers/consignee had already been paid the value of the goods as
stated in the Bill of Lading and, hence, they cannot be held liable for the loss of the cargo beyond the value thereof
declared in the Bills of Lading – a total of PHP20,500.00 for both cargoes it had issued to Legaspi Marketing
Corporation and Nestor Angelia which supposedly extinguishes their liability with the respondent.

Both the Regional Trial Court and the Court of Appeals found the case in favor of the respondent. While it was true that
the petitioner had paid PHP14,000.00 to Legaspi Marketing, the appellate court held that the payment did not
extinguish the petitioner’s obligation to pay the insurance price because there was no evidence that Feliciana Legaspi
was the same owner of Legaspi Marketing. They also pointed out the impropriety of treating the claim covering the
cargo valued therein at P6,500 as a setoff against Nestor Angelia’s account with Chester Enterprises, Inc. Finally, it
ruled that the UPCB is not bound by the valuation of the cargo under the Bills of Lading issued because the goods were
insured with the respondent for the total amount of PHP150,000.00.

ISSUE:

Can the petitioner be liable for the lost goods? If it is, what is the extent of their liability?

RULING:

Yes, the petitioner is liable for the lost cargoes. The uncontroverted findings of the Philippine Coast Guard show that
the M/V Tandag sank due to a fire, which resulted from an unchecked and untended crack in the auxiliary engine fuel
oil service tank from which fuel spurted out and dripped to the heating exhaust manifold, causing the ship to burst into
flames. The crack was located on the side of the fuel oil tank, which had a mere two-inch gap from the engine room
walling, thus precluding constant inspection and care by the crew.

The law provides that a common carrier is presumed to have been negligent if it fails to prove that it exercised
extraordinary vigilance over the goods it transported therewith. Where loss of cargo results from the failure of the
officers of a vessel to inspect their ship frequently so that they would have discovered the existence of cracked, that
loss cannot be attributed to force majeure or even be considered as a caso fortuito, but solely to the negligence of
those officials who were supposed to have inspected the worthiness of their vessel before departure.
Page | 43
With respect to the extent of its liability, the respondent contended that the petitioner’s liability should be based on the
actual insured value of the goods while the petitioner claimed that its liability should be limited to the value declared by
the shipper/consignee in the Bill of Lading.

A stipulation in a 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 Articles 1749 and 1750 of the New Civil Code.
The purpose of the limiting stipulations in Bills of Lading is to protect the common carrier from exorbitant liabilities since
such it obliges the shipper/consignee to notify the common carrier of the amount that the latter may be liable for in case
of loss of the goods. The common carrier can then take appropriate measures to protect itself from harm.

Pursuant to the aforementioned provisions of law, it then must be 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. In the present case, however, in their desire to obtain lower freightage fees, Zosimo Mercado and Nestor Angelia
willfully misled the petitioner by undervaluing the goods in their respective Bills of Lading, hence, the petitioner was
exposed to a risk that was deliberately hidden from it, and from which it could not protect itself. Not only did it violate a
valid contractual stipulation, they likewise committed a fraudulent act which sought to make the common carrier liable
for more than the amount declared in the Bills of Lading.

Considering these circumstances then, in addition to the facts that the insurance company was paid the correct higher
premium by Feliciana Legaspi while the petitioner was paid a fee lower than what i t was entitled to for transporting the
goods that had been deliberately undervalued by the shippers in the Bills of Lading they prepared, it is in accordance
with justice and equity that between the two of them, UPCB should bear the loss in excess of the value declared in the
Bills of Lading

Page | 44
Sarkies Tours Philippines, Inc. v. CA

G.R. No. 108897/ 2 October 1997

FACTS: On 31 August 1984, Fatima boarded the petitioner’s De Luxe Bus No. 5 in Manila on her way to Legazpi City.
Her brother, Raul, helped her load three pieces of luggage containing all of her optometry review books, materials,
equipment, trial lenses, trial contact lenses, passport and visa, as well as her mother’s US Immigration Green Card,
among other important documents and personal belongings. Her belongings were kept in the baggage compartment of
the bus, but during a stopover at Daet, it was discovered that all but one bag remained in the open compartment. The
others passengers, including Fatima, suggested retracing the route to try to recover the lost items, but the driver ignored
them and instead proceeded to Legazpi City.

Fatima immediately reported the loss to her mother who, in turn, went to petitioner’s office in Legazpi City and later at
its head office in Manila. The latter, however, merely offered her P1,000.00 for each piece of luggage lost which she
turned down. After returning to Bicol, 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 Fatima’s 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 20 September 1984, respondents, through counsel, formally demanded satisfaction of their complaint from
petitioner. In a letter dated 1 October 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 of the incident. However, after more than nine
months of fruitless waiting, the respondents decided to instead file a case for damages to recover the value of the
remaining lost items, as well as moral and exemplary damages, attorney’s fees, and expenses of litigation.

The respondents claimed that the loss was due to petitioner’s failure to observe extraordinary diligence in the care of
Fatima’s luggage and that petitioner dealt with them in bad faith from the start. The 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. In the end, both the trial and appellate courts resolved the matter in favor of the respondents in
declaring Sarkies Tours liable for the losses. Hoping to turn the decision around, the petitioner elevated the case to the
Supreme Court for review.

ISSUE: Is the petitioner liable for the lost luggage?

RULING: Yes, they are. Despite what the petitioner would have the Court believe, the documentary and testimonial
evidence presented at the trial established that Fatima indeed boarded the bus and brought three pieces of luggage with
her, one of them was even recovered with the help of a Philtranco bus driver. Furthermore, in its letter on 1 October, the
petitioner tacitly admitted its liability by apologizing to respondents and assuring them that efforts were being made to
recover the lost items.

The records also reveal that respondents went to great lengths just to salvage their loss. The incident was reported to
the police, the NBI, and the regional and head offices of petitioner. Marisol even sought the assistance of Philtranco
bus drivers and the radio stations. To expedite the replacement of her mother’s lost immigration documents, Fatima
also had to execute an affidavit of loss. Clearly, they would not have gone through all that trouble in pursuit of a fancied
loss. In fact, Fatima was not the only one who lost her luggage as well as other passengers have testified to have
suffered similar fates as well.

Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the goods transported by them, and this liability lasts from the
time the goods are unconditionally placed in the possession of, and received by, the carrier for transportation until the
same are delivered, actually or constructively, to the person who has a right to receive them, unless the loss is due to
any of the excepted causes under Article 1734 thereof.

The cause of the loss in the case at bar was the petitioner’s negligence in not ensuring that the doors of the baggage
compartment of its bus were securely fastened. As a result of this lack of care, almost all the luggage was lost to the
prejudice of the paying passengers. Where the common carrier accepted its passenger’s baggage for transportation
and even had it placed in the vehicle by its own employee, its failure to collect the necessary freight charge is the
common carrier’s own lookout, but it is nevertheless still responsible for the consequent loss of the baggage.
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CASE 42

Valenzuela Hardwood vs. CA (GR 102316, 30 June 1997) FACTS:

Valenzuela Hardwood and Industrial Supply, Inc. (VHIS) entered into an agreement with the Seven Brothers whereby
the latter undertook to load on board its vessel M/V Seven Ambassador the former’s lauan round logs numbering 940 at
the port of Maconacon, Isabela for shipment to Manila. VHIS insured the logs against loss and/or damage with South
Sea Surety and Insurance Co.

The said vessel sank resulting in the loss of VHIS’ insured logs. VHIS demanded from South Sea Surety the payment
of the proceeds of the policy but the latter denied liability under the policy for non-payment of premium. VHIS likewise
filed a formal claim with Seven Brothers for the value of the lost logs but the latter denied the claim.

The RTC ruled in favor of the petitioner.Both Seven Brothers and South Sea Surety appealed. The Court of Appeals
affirmed the judgment except as to the liability of Seven Brothers.South Sea Surety and VHIS filed separate petitions
for review before the Supreme Court. In a Resolution dated 2 June 1995, the Supreme Court denied the petition of
South Sea Surety. The present decision concerns itself to the petition for review filed by VHIS.

ISSUE: Is a stipulation in a charter party that the owners shall not be responsible for loss, split, short- landing,
breakages and any kind of damages to the cargo‖ valid?

RULING:

Yes. It is undisputed that private respondent had acted as a private carrier in transporting petitioner’s lauan logs.
Thus, Article 1745 and other Civil Code provisions on common carriers which were cited by petitioner may not be
applied unless expressly stipulated by the parties in their charter party.

In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on
the charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence
of the ship captain. Pursuant to Article 1306 of the Civil Code, such stipulation is valid because it is freely entered into
by the parties and the same is not contrary to law, morals, good customs, public order, or public policy. Indeed, their
contract of private carriage is not even a contract of adhesion. We stress that in a contract of private carriage, the
parties may freely stipulate their duties and obligations which perforce would be binding on them. Unlike in a contract
involving a common carrier, private carriage does not involve the general public. Hence, the stringent provisions of the
Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship transporting
commercial goods as a private carrier. Consequently, the public policy embodied therein is not contravened by
stipulations in a charter party that lessen or remove the protection given by law in contracts involving common carriers.

The general public enters into a contract of transportation with common carriers without a hand or a voice in the
preparation thereof. The riding public merely adheres to the contract; even if the public wants to, it cannot submit its
own stipulations for the approval of the common carrier. Thus, the law on common carriers extends its protective mantle
against one-sided stipulations inserted in tickets, invoices or other documents over which the riding public has no
understanding or, worse, no choice. Compared to the general public, a charterer in a contract of private carriage is not
similarly situated. It can -- and in fact it usually does -- enter into a free and voluntary agreement. In practice, the parties
in a contract of private carriage can stipulate the carrier’s obligations and liabilities over the shipment which, in turn,
determine the price or consideration of the charter. Thus, a charterer, in exchange for convenience and economy, may
opt to set aside the protection of the law on common carriers. When the charterer decides to exercise this option, he
takes a normal business risk.

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YOBIDO vs. CA and TUMBOY G.R. No. 113003 October 17, 1997 FACTS:

Spouses Tito and Leny Tumboy and their minor children boarded at Mangagoy, Surigao del Sur a Yobido Liner
bus bound for Davao City. Along Picop Road in, the left front tire of the bus exploded. The bus fell into a ravine and
struck a tree. The incident resulted in the death of Tito Tumboy and physical injuries to other passengers.

The winding road was not cemented and was wet due to the rain; it was rough with crushed rocks. The bus
which was full of passengers had cargoes on top. Leny testified that it was running fast and she cautioned the driver to
slow down but he merely stared at her through the mirror.

However, Salce, the bus conductor, testified that the bus was running speed for only 50-60 kmh. The left front
tire that exploded was a brand new Goodyear tire that he mounted on the bus only 5 days before the incident. She
stated that all driver applicants in Yobido Liner underwent actual driving tests before they were employed.

The defendant is invoking that the tire blowout was a caso fortuito.
ISSUES:

1. WON the tire blowout was purely caso fotuito? NO

2. WON the defendant bus liner is liable for damages resulting from the death of Tito? YES

RULING:

1. The explosion of the tire is not in itself a fortuitous event. The cause of the blow-out, if due to a factory defect,
improper mounting, excessive tire pressure, is not an unavoidable event. On the other hand, there may have been
adverse conditions on the road that were unforeseeable and/or inevitable, which could make the blow-out a caso fortuito.
The fact that the cause of the blow-out was not known does not relieve the carrier of liability.

There are human factors involved in the situation. The fact that the tire was new did not imply that it was entirely free
from manufacturing defects or that it was properly mounted on the vehicle. Neither may the fact that the tire bought and
used in the vehicle is of a brand name noted for quality, resulting in the conclusion that it could not explode within five
days’ use. Be that as it may, it is settled that an accident caused either by defects in the automobile or through the
negligence of its driver is not a caso fortuito that would exempt the carrier from liability for damages.

2. A common carrier may not be absolved from liability in case of force majeure or fortuitous event alone. The common
carrier must still prove that it was not negligent in causing the death or injury resulting from an accident. Having failed to
discharge its duty to overthrow the presumption of negligence with clear and convincing evidence, petitioners are hereby
held liable for damages.

Moral damages are generally not recoverable in culpa contractual except when bad faith had been proven. However,
the same damages may be recovered when breach of contract of carriage results in the death of a passenger.
Because petitioners failed to exercise the extraordinary diligence required of a common carrier, which resulted in the
death of Tito Tumboy, it is deemed to have acted recklessly (Article 1756).

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