Quiz No.

10 – Transportation Law (Bill of Lading to Warsaw Convention)

I
Pablo Esparadon, a duly-licensed ship captain of the M/V Don Jose was drunk while he was on
duty as such, and while M/V Don Jose was sailing from Manila to the Visayas. As a
consequence thereof, the M/V Don Jose rammed another vessel near Corregidor, causing both
vessel to sink completely and thus become total losses. The cargo owners of both sunken vessels
sued the owner of the M/V Don Jose for their losses. Is the shipowner of M/V Don Jose liable?
Explain your answer. (10%)

Answer: Ulep, p. 307; 1978 Bar Exam

No. The shipowner of M/V Don Jose is not liable. The civil liability of the shipowner of a vessel,
in maritime collision which is caused by the fault of the captain, as in this problem (being
drunk), is merely co-existent with his interest in the vessel (M/V Don Jose), such that the total
loss thereof, results in the extinction of said liability (See Arts. 826 & 827, Code of Commerce;
Urrutia & Co. v. Baco River Plantation Co., 26 Phil. 362; Guan v. Cia Maritime (SC), 38 Off.
Gaz. 2536; etc.). (Answer by UP law Center).

II
Two vessels figured in a collision along the Straits of Guimaras resulting in considerable loss of
cargo. The damaged vessels were safely conducted to the Port of Iloilo. Passenger A failed to file
a maritime protest. B, a non-passenger but a shipper who suffered damage to his cargo likewise
did not file a maritime protest at all. Can A and B successfully maintain an action to recover
losses and damages arising from the collision? Reason briefly. (10%)

Answer: Dimaampao, p. 224

A, being a passenger, cannot maintain the action to recover losses without a prior maritime
protest filed by the captain. B can recover because lack of maritime protest will not prejudice the
action to recover damage caused to persons or cargo whose owners were not on board the vessel
at the time of collision. (Art. 836, Code of Commerce).

III
The consignee sued the arrastre operator for its failure to deliver the merchandise shipped from
abroad which the latter received from the carrier for delivery to the consignee. The action was
brought within the period of four years, but after the lapse of one year, from the date when the
goods should have been delivered. The case was dismissed on the ground that it was filed after
one year from the time that the cause of action accrued as provided in the Carriage of Goods by
Sea Act. Was the dismissal of the action correct? (10%)

Answer: Perez, pp. 356-357

The dismissal of the action was not correct. The defendant was neither a charterer nor a
shipowner. Consequently, the Carriage of Goods by Sea Act does not apply to it. The ordinary
period of four years fixed by law will apply. The action in this case was brought within that time.
(Insurance Co. of North America vs. Phil. Ports Terminal, Inc., L-6420, July 18, 1955; Asked,
1965 and 1978 Bar Exams).

IV
The bill of lading stipulated that the liability of the carrier for loss of the shipment is limited to
L100 Sterling or its peso equivalent of P1,544.40. On the other hand, Section 4(5) of the
Carriage of Goods by Sea Act provides for a liability of $500 or its peso equivalent of P3,217.50.
Which one shall prevail? (10%)

Answer: Perez, pp. 367-368

The stipulated amount of liability shall prevail. There is no inconsistency between Section 4(5)
of the Carriage of Goods by Sea Act and the bill of lading. The first part of the provision of
Section 4(5) of the Carriage of Goods by Sea Act limits the maximum amount that may be
recovered by the shipper in the absence of an agreement as to the nature and value of goods
shipped. Said provision does not prescribe the minimum and hence, it could be any amount
which is below $500. By providing that $500 is the maximum liability, the law does not disallow
an agreement for liability at a lesser amount. And such maximum amount of liability prevails
unless the shipper or owner declares a greater value.

V
Northwest Orient Airlines (Northwest) is a foreign corporation with principal office in
Minnesota, U.S.A., and licensed to do business in the Philippines. Plaintiff is a minor and a
resident of the Philippines. Plaintiff purchased from Northwest a round-trip ticket in San
Francisco, U.S.A., for his flight from San Francisco to Manila via Tokyo and back. No date was
specified for his return to San Francisco. On December 19, 1986, plaintiff checked in at the
Northwest counter in San Francisco for his scheduled departure to Manila. Despite a previous
confirmation and re-confirmation, he was informed that he had no reservation for his flight from
Tokyo to Manila. He therefore had to be wait-listed. Plaintiff sued Northwest in Makati but the
latter filed a motion to dismiss for lack of jurisdiction. Northwest contended that the Philippines
was not its domicile nor was this its principal place of business. Neither was the plaintiff’s ticket
issued in this country nor was his ultimate destination Manila but San Francisco in the United
States. The court dismissed the case. Was the dismissal correct? (10%)

Answer: Perez, pp. 145-146

Yes. The dismissal of the case was correct. Under Article 28(1) of the Warsaw Convention, the
complaint for damages for violation of an international air carriage should be filed only in the
territory of one of the High Contracting Parties, before: (1) the court of the domicile of the
carrier; (2) the court of its principal place of business; (3) the court where it has a place of
business through which the contract has been made; and (4) the court of the place of destination.
The domicile of Northwest was U.S.A., not the Philippines, and its principal place of business
was in Minnesota, U.S.A. The contract was made in San Francisco, U.S.A. where the ticket was
issued, and the destination was San Francisco, U.S.A. The ticket was from San Francisco, U.S.A.
to Manila via Tokyo and back to San Francisco, and therefore the final destination was San
Francisco. Manila should be considered merely as an agreed stopping placer and not the
destination. A citizen does not necessarily have the right to sue in his own courts simply because
the defendant airline has a place of business in his country. His right is limited by the provisions
of the Warsaw Convention. (Santos III vs. Northwest Orient Airlines, 210 SCRA 256).

VI
San Agustin was a passenger of the Sabena Belgium World Airlines (Sabena) from Casablanca
to Brussels on her way back to Manila. She stayed overnight at Belgium leaving her luggage
containing valuables on board the plane. San Agustin arrived in Manila without her luggage, but
was informed that the Brussels Office of Sabena found the luggage and that it would be shipped
to Manila. Later however, San Agustin was informed that the luggage was lost for the second
time. San Agustin demanded the money value of the luggage but Sabena claimed that the former
was guilty of contributory negligence as she should have retrieved her luggage in Brussels as her
onward flight was yet to be confirmed. Sabena further claimed that its liability for the loss should
be limited to $20.00 per kilo unless a higher value is declared, pursuant to the Warsaw
Convention. Are the contentions of Sabena correct? (10%)

Answer: Perez, pp. 152-153

No. Sabena is not completely off track when it has raised in its defense the tort doctrine of
proximate cause. Unfortunately for Sabena, however, the said doctrine can not support its
defense in this case. The loss of the baggage not only once, but twice underscores the negligence
and lack of care on the part of the carrier.
The Warsaw Convention denies the carrier availment of its provisions which exclude or limit its
liability if the damage is caused by its willful misconduct or by such default on its part which
may be considered to be equivalent to willful misconduct, or if the damage is similarly caused by
any agent of the carrier acting within the scope of his employment. The attendance of gross
negligence holds the common carrier liable for all damages, which can be reasonably attributed,
although unforeseen, to the non-performance of the obligation, including moral and exemplary
damages. (Sabena Belgian World Airlines vs. Court of Appeals, 255 SCRA 38).

VII
X Shipping Company spent almost a fortune in refitting and repairing its luxury passenger
vessel, the MV Marina, which plied the inter-island routes of the company from La Union in the
north to Davao City in the south. The MV Marina met an untimely fate during its post-repair
voyage. It sank off the coast of Zambales while en route to La Union from Manila. The
investigation showed that the captain alone was negligent. There were no casualties in that
disaster. Faced with a claim for the payment of the refitting and repair, X Shipping Company
asserted exemption from liability on the basis of the hypothecary or limited liability rule under
Article 587 of the Code of Commerce. Is X Shipping Company’s assertion valid? Explain. (10%)

Answer: 2000 Bar Exam

No, the assertion of X Shipping Company is not valid. The total destruction of the vessel does
not affect the liability of the shipowner for repairs on the vessel completed before its loss.

VIII
MV SuperFast, a passenger-cargo vessel owned by SF Shipping Company plying the inter-island
routes, was on its way to Zamboanga City from the Manila port when it accidentally, and without
fault or negligence of anyone on the ship, hit a huge floating object. The accident caused damage
to the vessel and loss of an accompanying crated cargo of passenger PR. In order to lighten the
vessel and save it from sinking and in order to avoid risk of damage to or loss of the rest of the
shipped items (none of which was located on the deck), some had to be jettisoned. SF Shipping
had the vessel repaired at its port of destination. SF Shipping thereafter filed a complaint
demanding all the other cargo owners to share in the total repair costs incurred by the company
and in the value jettisoned cargoes. In answer to the complaint, the shippers’ sole contention was
that, under the Code of Commerce, each damaged party should bear its or his own damage and
those that did not suffer any loss or damage were not obligated to make any contribution in favor
of those who did. Is the shippers’ contention valid? Explain. (10%)

Answer: 2000 Bar Exam

No, the shippers’ contention is not valid. The owners of the cargo jettisoned, to save the vessel
from sinking and to save the rest of the cargoes, are entitled to contribution. The jettisoning of
said cargoes constitute general average loss which entitles the owners thereof to contribution
from the owner of the vessel and also from the owners of the cargoes saved. SF Shipping is not
entitled to contribution/reimbursement for the cost of repairs on the vessel from the shippers.

IX
A local consignee sought to enforce judicially a claim against the carrier for loss of a shipment of
drums of lubricating oil from Japan under the COGSA after the carrier had rejected its demand.
The carrier pleaded in its Answer the affirmative defense of prescription under the provisions of
the same Act inasmuch as the suit was brought by the consignee after 1 year from delivery of the
goods. In turn, the consignee contended that the period of prescription was suspended by the
written extrajudicial demand it had made against the carrier within the 1-year period, pursuant to
Article 1155 of the Civil Code providing that the prescription of actions is interrupted when there
is a written extrajudicial demand by the creditors.

a. Has the action, in fact, prescribed? Why? (5%)

 b. If the consignee’s action were predicated on misdelivery or conversion of the goods,
would your answer be the same? Explain briefly. (5%)

Answer: 1992 Bar Exam

a. The action taken by the local consignee has, in fact, prescribed. The period of 1 year
under the COGSA is not interrupted by a written extrajudicial demand. The provision of
Article 1155 of the Civil Code merely apply to the prescriptive periods provided for in
said Code and not the special laws except when otherwise provided.
b. If the consignee’s action were predicated on misdelivery or conversion of the goods, the
provisions of the COGSA would be inapplicable. In these cases, the Civil Code
prescriptive periods, including Art. 1155 of the Civil Code, will apply.

X
Yau Yue agreed to sell to Teves steel sheets under the following terms: the price is to be covered
by a bank draft which Teves would pay upon arrival of the steel sheets and the bill of lading
would be delivered to him for presentation to the carrier’s agent, American Steamship Agencies,
which would then issue a “Permit to Deliver Imported Articles” to be presented to the Bureau of
Customs to obtain the release of the articles. Teves did not pay upon arrival of the goods,
prompting Yau Yue to indorse the bill of lading to Ang. Teves, however, obtained a bank
guaranty in favor of American Steamship Agencies and succeeded in securing the “Permit to
Deliver Imported Articles” from American Steamship Agencies, which he presented to the
Bureau of Customs and the latter delivered the articles to Teves. Ang filed a complaint against
American Steamship Agencies for the latter’s wrongful delivery of the goods covered by the bill
of lading. The defendant filed a motion to dismiss on the ground that the cause of action has
prescribed because more than one year since the goods were delivered to Teves had lapsed. Has
the action prescribed? (10%)

Answer: Perez, p. 359

The action has not prescribed. Where the imported goods were delivered to the wrong person,
the one-year time limitation in paragraph 4, Sec. 3(6) of the Carriage of Goods by Sea Act,
referring to “loss or damage,” does not apply. For suits predicated, not upon loss or damage but
on alleged misdelivery or conversion of imported goods, the applicable rule on prescription is
that found in the New Civil Code, either ten (10) years for breach of a written contract or four (4)
years for quasi-delict. (Ang vs. American Steamship Agencies, Inc., 19 SCRA 123).