SUPREME COURT REPORTS ANNOTATED

G.R. No. 166250. July 26, 2010.*

Unsworth Transport International (Phils.), Inc. vs. Court of Appeals UNSWORTH TRANSPORT INTERNATIONAL (PHILS.), INC., petitioner, vs. COURT OF APPEALS and PIONEER INSURANCE AND SURETY CORPORATION, respondents.

Remedial Law; Appeals; Factual questions may not be raised in a petition for review on certiorari. Well established is the rule that factual questions may not be raised in a petition for review on certiorari as clearly stated in Section 1, Rule 45 of the Rules of Court. Commercial Law; Carriage of Goods by Sea Act; Words and Phrases; Meaning of Freight Forwarder.Petitioner is a freight forwarder. The term freight forwarder refers to a firm holding itself out to the general p ublic (other than as a pipeline, rail, motor, or water carrier) to provide transportation of property for compensation and, in the ordinary course of its business, (1) to assemble and consolidate, or to provide for assembling and consolidating, shipments, and to perform or provide for break-bulk and distribution operations of the shipments; (2) to assume responsibility for the transportation of goods from the place of receipt to the place of destination; and (3) to use for any part of the transportation a carrier subject to the federal law pertaining to common carriers. Same; Same; Limitation of a Freight Forwarders Liability.A freight forwarders liability is limited to damages arising from its own negligence, including negligence in choosing the carrier; however, where the forwarder contracts to deliver goods to their destination instead of merely arranging for their transportation, it becomes liable as a common carrier for loss or damage to goods. A freight forwarder assumes the responsibility of a carrier, which actually executes the transport, even though the forwarder does not carry the merchandise itself. Same; Same; Bill of Lading; Meaning of a Bill of Lading; A bill of lading operates both as receipts and as a contract. A bill of lading is a written acknowledgement of the receipt of goods and an agreement to transport and to deliver them at a specified place to a person named or on his or her order. It operates both as a receipt and as a contract. It is a receipt for the goods shipped and a contract to transport and deliver the same as therein stipulated. As a receipt, it recites the date and place of shipment, describes the goods as to quantity, weight, dimensions, identification marks, condition, quality, and value. As a contract, it names the contracting parties, which include the consignee; fixes the route, destination, and freight rate or charges; and stipulates the rights and obligations assumed by the parties. Same; Same; Common Carriers; Negligence; 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; 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.UTI is liable as a common carrier. Common carriers, as a general rule, are presumed to have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed. That is, unless they prove that they exercised extraordinary diligence in transporting the goods. In order to avoid responsibility for any loss or damage, therefore, they have the burden of proving that they observed such diligence. Mere proof of delivery of the goods in good order to a common carrier and oftheir arrival in bad order at their destination constitutes a 1

prima facie case of fault or negligence against the carrier. If no adequate explanation is given as to how the deterioration, loss, or destruction of the goods happened, the transporter shall be held responsible. Same; Same; Same; The Civil Code does not limit the liability of the common carrier to a fixed amount per package; The Carriage of Goods by Sea Act (COGSA) supplements the Civil Code by establishing a provision limiting the carriers liability in the absence of a shippers declaration of a higher value in the bill of lading.It is to be noted that the Civil Code does not limit the liability of the common carrier to a fixed amount per package. In all matters not regulated by the Civil Code, the rights and obligations of common carriers are governed by the Code of Commerce and special laws. Thus, the COGSA supplements the Civil Code by establishing a provision limiting the carriers liability in the absen ce of a shippers declaration of a higher value in the bill of lading. Same; Same; Same; Insertion of an invoice number does not in itself sufficiently and convincingly show that petitioner had knowledge of the value of the cargo.In the present case, the shipper did not declare a higher valuation of the goods to be shipped. Contrary to the CAs conclusion, the insertion of the words L/C No. LC No. 1 -187-008394/NY 69867 covering shipment of raw materials for pharmaceutical Mfg. x x x cannot be the basis of petitioners liability. Furthermore, the insertion of an invoice number does not in itself sufficiently and convincingly show that petitioner had knowledge of the value of the cargo.

DECISION NACHURA, J.:

For review is the Court of Appeals (CA) Decision[1] dated April 29, 2004 and Resolution[2] dated November 26, 2004. The assailed Decision affirmed the Regional Trial Court (RTC) decision [3] dated February 22, 2001; while the assailed Resolution denied petitioner Unsworth Transport International (Philippines), Inc., American President Lines, Ltd. (APL), and Unsworth Transport International, Inc.s (UTIs) motion for reconsideration. The facts of the case are: On August 31, 1992, the shipper Sylvex Purchasing Corporation delivered to UTI a shipment of 27 drums of various raw materials for pharmaceutical manufacturing, consisting of: 1) 3 drums (of) extracts, flavoring liquid, flammable liquid x x x banana flavoring; 2) 2 drums (of) flammable liquids x x x turpentine oil; 2 pallets. STC: 40 bags dried yeast; and 3) 20 drums (of) Vitabs: Vitamin B Complex Extract. [4] UTI issued Bill of Lading No. C320/C159912,[5] covering the aforesaid shipment. The subject shipment was insured with private respondent Pioneer Insurance and Surety Corporation in favor of Unilab against all risks in the amount of P1,779,664.77 under and by virtue of Marine Risk Note Number MC RM UL 0627 92 [6] and Open Cargo Policy No. HO-022-RIU.[7]

On the same day that the bill of lading was issued, the shipment was loaded in a sealed 1x40 container van, with no. APLU-982012, boarded on APLs vessel M/V Pres. Jackson, Voyage 42, and transshipped to APLs M/V Pres. Taft[8] for delivery to petitioner in favor of the consignee United Laboratories, Inc. (Unilab). On September 30, 1992, the shipment arrived at the port of Manila. On October 6, 1992, petitioner received the said shipment in its warehouse after it stamped the Permit to Deliver Imported Goods[9] procured by the Champs Customs Brokerage.[10] Three days thereafter, or on October 9, 1992, Oceanica Cargo Marine Surveyors Corporation (OCMSC) conducted a stripping survey of the shipment located in petitioners warehouse. The survey results stated: 2-pallets STC 40 bags Dried Yeast, both in good order condition and properly sealed 19- steel drums STC Vitamin B Complex Extract, all in good order condition and properly sealed 1-steel drum STC Vitamin B Complex Extra[ct] with cut/hole on side, with approx. spilling of 1%[11]

On October 15, 1992, the arrastre Jardine Davies Transport Services, Inc. (Jardine) issued Gate Pass No. 7614
[12]

which stated that 22 drums[13] Raw Materials for Pharmaceutical Mfg. were loaded on a truck with Plate N o.

PCK-434 facilitated by Champs for delivery to Unilabs warehouse. The materials were noted to be complete and in good order in the gate pass.[14] On the same day, the shipment arrived in Unilabs warehouse and was immediately surveyed by an independent surveyor, J.G. Bernas Adjusters & Surveyors, Inc. (J.G. Bernas). The Report stated: 1-p/bag torn on side contents partly spilled 1-s/drum #7 punctured and retaped on bottom side content lacking 5-drums shortship/short delivery[15] On October 23 and 28, 1992, the same independent surveyor conducted final inspection surveys which yielded the same results. Consequently, Unilabs quality control representative rejected one paper bag containing dried yeast and one steel drum containing Vitamin B Complex as unfit for the intended purpose. [16] On November 7, 1992, Unilab filed a formal claim[17] for the damage against private respondent and UTI. On November 20, 1992, UTI denied liability on the basis of the gate pass issued by Jardine that the goods were in complete and good condition; while private respondent paid the claimed amount on March 23, 1993. By virtue of the Loss and Subrogation Receipt[18] issued by Unilab in favor of private respondent, the latter filed a complaint for Damages against APL, UTI and petitioner with the RTC of Makati. [19]The case was docketed as Civil Case No. 93-3473 and was raffled to Branch 134. After the termination of the pre-trial conference, trial on the merits ensued. On February 22, 2001, the RTC decided in favor of private respondent and against APL, UTI and petitioner, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered in favor of plaintif PIONEER INSURANCE & SURETY CORPORATION and against the defendants AMERICAN PRESIDENT LINES and 3

UNSWORTH TRANSPORT INTERNATIONAL (PHILS.), INC. (now known as JUGRO TRANSPORT INTL., PHILS.), ordering the latter to pay, jointly and severally, the former the following amounts: 1. The sum of SEVENTY SIX THOUSAND TWO HUNDRED THIRTY ONE and 27/100 (Php76,231.27) with interest at the legal rate of 6% per annum to be computed starting from September 30, 1993 until fully paid, for and as actual damages; 2. The amount equivalent to 25% of the total sum as attorneys fees; 3. Cost of this litigation. SO ORDERED.[20]

On appeal, the CA affirmed the RTC decision on April 29, 2004. The CA rejected UTIs defense that it was merely a forwarder, declaring instead that it was a common carrier. The appellate court added that by issuing the Bill of La ding, UTI acknowledged receipt of the goods and agreed to transport and deliver them at a specific place to a person named or his order. The court further concluded that upon the delivery of the subject shipment to petitioners warehouse, its liabilit y became similar to that of a depositary. As such, it ought to have exercised ordinary diligence in the care of the goods. And as found by the RTC, the CA agreed that petitioner failed to exercise the required diligence. The CA also rejected petitioners claim that its liability should be limited to $500 per package pursuant to the Carriage of Goods by Sea Act (COGSA) considering that the value of the shipment was declared pursuant to the letter of credit and the pro forma invoice. As to APL, the court considered it as a common carrier notwithstanding the non-issuance of a bill of lading inasmuch as a bill of lading is not indispensable for the execution of a contract of carriage. [21] Unsatisfied, petitioner comes to us in this petition for review on certiorari, raising the following issues: 1. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN UPHOLDING THE DECISION OF THE REGIONAL TRIAL COURT DATED 22 FEBRUARY 2001, AWARDING THE SUM OF SEVENTY SIX THOUSAND TWO HUNDRED THIRTY ONE AND 27/100 PESOS (PHP76,231.27) WITH LEGAL INTEREST AT 6% PER ANNUM AS ACTUAL DAMAGES AND 25% AS ATTORNEYS FEES. 2. WHETHER OR NOT PETITIONER UTI IS A COMMON CARRIER.

3. WHETHER OR NOT PETITIONER UTI EXERCISED THE REQUIRED ORDINARY DILIGENCE. 4. WHETHER OR NOT THE PRIVATE RESPONDENT SUFFICIENTLY ESTABLISHED THE ALLEGED DAMAGE TO ITS CARGO.[22]

Petitioner admits that it is a forwarder but disagrees with the CAs conclusion that it is a common carrier. It also questions the appellate courts findings that it failed to establish that it exercised extraordinary or ordinary diligence in the vigilance over the subject shipment. As to the damages allegedly suffered by private respondent, petitioner counters that they were not sufficiently proven. Lastly, it insists that its liability, in any event, should be limited to $500 pursuant to the 4

package limitation rule. Indeed, petitioner wants us to review the factual findings of the RTC and the CA and to evaluate anew the evidence presented by the parties. The petition is partly meritorious. Well established is the rule that factual questions may not be raised in a petition for review on certiorari as clearly stated in Section 1, Rule 45 of the Rules of Court, viz.: Section 1. Filing of petition with Supreme Court. A party desiring to appeal by certiorari from a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may file with the Supreme Court a verified petition for review on certiorari. The petition shall raise only questions of law which must be distinctly set forth.

Admittedly, petitioner is a freight forwarder. The term freight forwarder" refers to a firm holding itself out to the general public (other than as a pipeline, rail, motor, or water carrier) to provide transportation of property for compensation and, in the ordinary course of its business, (1) to assemble and consolidate, or to provide for assembling and consolidating, shipments, and to perform or provide for breakbulk and distribution operations of the shipments; (2) to assume responsibility for the transportation of goods from the place of receipt to the place of destination; and (3) to use for any part of the transportation a carrier subject to the federal law pertaining to common carriers. [23] A freight forwarders liability is limited to damages arising from its own negligence, including negligence in choosing the carrier; however, where the forwarder contracts to deliver goods to their destination instead of merely arranging for their transportation, it becomes liable as a common carrier for loss or damage to goods. A freight forwarder assumes the responsibility of a carrier, which actually executes the transport, even though the forwarder does not carry the merchandise itself.[24] It is undisputed that UTI issued a bill of lading in favor of Unilab. Pursuant thereto, petitioner undertook to transport, ship, and deliver the 27 drums of raw materials for pharmaceutical manufacturing to the consignee. A bill of lading is a written acknowledgement of the receipt of goods and an agreement to transport and to deliver them at a specified place to a person named or on his or her order. [25] It operates both as a receipt and as a contract. It is a receipt for the goods shipped and a contract to transport and deliver the same as therein stipulated. As a receipt, it recites the date and place of shipment, describes the goods as to quantity, weight, dimensions, identification marks, condition, quality, and value. As a contract, it names the contracting parties, which include the consignee; fixes the route, destination, and freight rate or charges; and stipulates the rights and obligations assumed by the parties. [26]

Undoubtedly, UTI is liable as a common carrier. Common carriers, as a general rule, are presumed to have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed. That is, unless they prove that they exercised extraordinary diligence in transporting the goods. In order to avoid responsibility for any loss or damage, therefore, they have the burden of proving that they observed such diligence. [27] Mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order at their destination constitutes a prima facie case of fault or negligence against the carrier. If no adequate explanation is given as to how the deterioration, loss, or destruction of the goods happened, the transporter shall be held responsible.[28] Though it is not our function to evaluate anew the evidence presented, we refer to the records of the case to show that, as correctly found by the RTC and the CA, petitioner failed to rebut the prima facie presumption of negligence in the carriage of the subject shipment. First, as stated in the bill of lading, the subject shipment was received by UTI in apparent good order and condition in New York, United States of America. Second, theOCMSC Survey Report stated that one steel drum STC Vitamin B Complex Extract was discovered to be with a cut/hole on the side, with approximate spilling of 1%. Third, though Gate Pass No. 7614, issued by Jardine, noted that the subject shipment was in good order and condition, it was specifically stated that there were 22 (should be 27 drums per Bill of Lading No. C320/C15991-2) drums of raw materials for pharmaceutical manufacturing. Last, J.G. Bernas Survey Report stated that 1-s/drum was punctured and retaped on the bottom side and the content was lacking, and there was a short delivery of 5-drums. All these conclusively prove the fact of shipment in good order and condition, and the consequent damage to one steel drum of Vitamin B Complex Extract while in the possession of petitioner which failed to explain the reason for the damage. Further, petitioner failed to prove that it observed the extraordinary diligence and precaution which the law requires a common carrier to exercise and to follow in order to avoid damage to or destruction of the goods entrusted to it for safe carriage and delivery.[29] However, we affirm the applicability of the Package Limitation Rule under the COGSA, contrary to the RTC and the CAs findings. It is to be noted that the Civil Code does not limit the liability of the common carrier to a fixed amount per package. In all matters not regulated by the Civil Code, the rights and obligations of common carriers are governed by the Code of Commerce and special laws. Thus, the COGSA supplements the Civil Code by establishing a provision limiting the carriers liability in the absence of a shippers declaration of a higher value in the bill of lading. [30] Section 4(5) of the COGSA provides: (5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package of lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by 6

the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier.

In the present case, the shipper did not declare a higher valuation of the goods to be shipped. Contrary to the CAs conclusion, the insertion of the words L/C No. LC No. 1-187-008394/ NY 69867 covering shipment of raw materials for pharmaceutical Mfg. x x x cannot be the basis of petitioners liability. [31] Furthermore, the insertion of an invoice number does not in itself sufficiently and convincingly show that petitioner had knowledge of the value of the cargo. [32] In light of the foregoing, peti tioners liability should be limited to $500 per steel drum. In this case, as there was only one drum lost, private respondent is entitled to receive only $500 as damages for the loss. In addition to said amount, as aptly held by the trial court, an interest rate of 6% per annum should also be imposed, plus 25% of the total sum as attorneys fees. WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The Court of Appeals Decision dated April 29, 2004 and Resolution dated November 26, 2004 are AFFIRMED with MODIFICATION by reducing the principal amount due private respondent Pioneer Insurance and Surety Corporation from P76,231.27 to $500, with interest of 6% per annum from date of demand, and 25% of the amount due as attorneys fees. The other aspects of the assailed Decision and Resolution STAND.

SO ORDERED.

SUPREME COURT REPORTS ANNOTATED Ace Navigation Co., Inc. vs. FGU Insurance Corporation G.R. No. 171591. June 25, 2012.* ACE NAVIGATION CO., INC., petitioner, vs. FGU INSURANCE CORPORATION and PIONEER INSURANCE AND SURETY CORPORATION, respondents.

Mercantile Law; Bill of Lading; A bill of lading is defined as an instrument in writing, signed by a carrier or his agent, describing the freight so as to identify it, stating the name of the consignor, the terms of the contract for carriage, and agreeing or directing that the freight to be delivered to the order or assigns of a specified person at a specified place.A bill of lading is defined as an instrument in writing, signed by a carrier or his agent, describing the freight so as to identify it, stating the name of the consignor, the terms of the contract for carriage, and agreeing or directing that the freight to be delivered to the order or assigns of a specified person at a specified place. It operates both as a receipt and as a contract. As a receipt, it recites the date and place of shipment, describes the goods as to quantity, weight, dimensions, identification marks and condition, quality, and value. As a contract, it names the contracting parties, which include the consignee, fixes the route, destination, and freight rates or charges, and stipulates the rights and obligations assumed by the parties. As such, it shall only be binding upon the parties who make them, their assigns and heirs. Civil Law; Agency; An agent is not personally liable to the party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers. Article 1868 of the Civil Code states: ART. 1868. By the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. Corollarily, Article 1897 of the same Code provides that an agent is not personally liable to the party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers. [Ace Navigation Co., Inc. vs. FGU Insurance Corporation, 674 SCRA 348(2012)]

DECISION PERLAS-BERNABE, J.: This is an appeal under Rule 45 of the Rules of Court seeking to reverse the June 22, 2004 Decision 1 and February 17, 2006 Resolution2 of the Court of Appeals (CA) ordering petitioner Ace Navigation Co., Inc., jointly and severally with Cardia Limited, to pay respondents FGU Insurance Corp. and Pioneer Insurance and Surety Corp. the sum of P213,518.20 plus interest at the rate of six percentum (6%) from the filing of the complaint until paid. The Facts On July 19, 1990, Cardia Limited (CARDIA) shipped on board the vessel M/V Pakarti Tiga at Shanghai Port China, 8,260 metric tons or 165,200 bags of Grey Portland Cement to be discharged at the Port of Manila and delivered to its consignee, Heindrich Trading Corp. (HEINDRICH). The subject shipment was insured with respondents, FGU Insurance 8

Corp. (FGU) and Pioneer Insurance and Surety Corp. (PIONEER), against all risks under Marine Open Policy No. 062890275 for the amount of P18,048,421.00. 3 The subject vessel is owned by P.T. Pakarti Tata (PAKARTI) which it chartered to Shinwa Kaiun Kaisha Ltd. (SHINWA). 4 Representing itself as owner of the vessel, SHINWA entered into a charter party contract with Sky International, Inc. (SKY), an agent of Kee Yeh Maritime Co. (KEE YEH), 5 which further chartered it to Regency Express Lines S.A. (REGENCY). Thus, it was REGENCY that directly dealt with consignee HEINDRICH, and accordingly, issued Clean Bill of Lading No. SM-1. 6 On July 23, 1990, the vessel arrived at the Port of Manila and the shipment was discharged. However, upon inspection of HEINDRICH and petitioner Ace Navigation Co., Inc. (ACENAV), agent of CARDIA, it was found that out of the 165,200 bags of cement, 43,905 bags were in bad order and condition. Unable to collect the sustained damages in the amount of P1,423,454.60 from the shipper, CARDIA, and the charterer, REGENCY, the respondents, as co-insurers of the cargo, each paid the consignee, HEINDRICH, the amounts of P427,036.40 and P284,690.94, respectively, 7 and consequently became subrogated to all the rights and causes of action accruing to HEINDRICH. Thus, on August 8, 1991, respondents filed a complaint for damages against the following defendants: "REGENCY EXPRESS LINES, S.A./ UNKNOWN CHARTERER OF THE VESSEL 'PAKARTI TIGA'/ UNKNOWN OWNER and/or DEMIFE (sic) CHARTERER OF THE VESSEL 'PAKARTI TIGA', SKY INTERNATIONAL, INC. and/or ACE NAVIGATION COMPANY, INC." 8 which was docketed as Civil Case No. 90-2016. In their answer with counterclaim and cross-claim, PAKARTI and SHINWA alleged that the suits against them cannot prosper because they were not named as parties in the bill of lading. 9 Similarly, ACENAV claimed that, not being privy to the bill of lading, it was not a real party-in-interest from whom the respondents can demand compensation. It further denied being the local ship agent of the vessel or REGENCY and claimed to be the agent of the shipper, CARDIA. 10 For its part, SKY denied having acted as agent of the charterer, KEE YEH, which chartered the vessel from SHINWA, which originally chartered the vessel from PAKARTI. SKY also averred that it cannot be sued as an agent without impleading its alleged principal, KEE YEH. 11 On September 30, 1991, HEINDRICH filed a similar complaint against the same parties and Commercial Union Assurance Co. (COMMERCIAL), docketed as Civil Case No. 91-2415, which was later consolidated with Civil Case No. 91-2016. However, the suit against COMMERCIAL was subsequently dismissed on joint motion by the respondents and COMMERCIAL. 12 Proceedings Before the RTC and the CA In its November 26, 2001 Decision, 13 the RTC dismissed the complaint, the fallo of which reads: WHEREFORE, premises considered, plaintiffs complaint is DISMISSED. Defendants counter -claim against the plaintiffs are likewise dismissed, it appearing that plaintiff[s] did not act in evident bad faith in filing the present complaint against them. Defendant Pakarti and Shinwas cross-claims against their co-defendants are likewise dismissed for lack of sufficient evidence. No costs. SO ORDERED. 9

Dissatisfied, the respondents appealed to the CA which, in its assailed June 22, 2004 Decision, 14 found PAKARTI, SHINWA, KEE YEH and its agent, SKY, solidarily liable for 70% of the respondents' claim, with the remaining 30% to be shouldered solidarily by CARDIA and its agent, ACENAV, thus: WHEREFORE, premises considered, the Decision dated November 26, 2001 is hereby MODIFIED in the sense that: a) defendant-appellees P.T. Pakarti Tata, Shinwa Kaiun Kaisha, Ltd., Kee Yeh Maritime Co., Ltd. and the latters agent Sky International, Inc. are hereby declared jointly and severally liable, and are DIRECTED to pay FGU Insurance Corporation the amount of Two Hundred Ninety Eight Thousand Nine Hundred Twenty Five and 45/100 (P298,925.45) Pesos and Pioneer Insurance and Surety Corp. the sum of One Hundred Ninety Nine Thousand Two Hundred Eighty Three and 66/100 (P199,283.66) Pesos representing Seventy (70%) percentum of their respective claims as actual damages plus interest at the rate of six (6%) percentum from the date of the filing of the complaint; and b) defendant Cardia Ltd. and defendant-appellee Ace Navigation Co., Inc. are DECLARED jointly and severally liable and are hereby DIRECTED to pay FGU Insurance Corporation One Hundred Twenty Eight Thousand One Hundred Ten and 92/100 (P128,110.92) Pesos and Pioneer Insurance and Surety Corp. Eighty Five Thousand Four Hundred Seven and 28/100 (P85,407.28) Pesos representing thirty (30%) percentum of their respective claims as actual damages, plus interest at the rate of six (6%) percentum from the date of the filing of the complaint. SO ORDERED. Finding that the parties entered into a time charter party, not a demise or bareboat charter where the owner completely and exclusively relinquishes possession, command and navigation to the charterer, the CA held PAKARTI, SHINWA, KEE YEH and its agent, SKY, solidarily liable for 70% of the damages sustained by the cargo. This solidarity liability was borne by their failure to prove that they exercised extraordinary diligence in the vigilance over the bags of cement entrusted to them for transport. On the other hand, the CA passed on the remaining 30% of the amount claimed to the shipper, CARDIA, and its agent, ACENAV, upon a finding that the damage was partly due to the cargo's inferior packing. With respect to REGENCY, the CA affirmed the findings of the RTC that it did not acquire jurisdiction over its person for defective service of summons. PAKARTI's, SHINWA's, SKY's and ACENAV's respective motions for reconsideration were subsequently denied in the CA's assailed February 17, 2006 Resolution. Issues Before the Court PAKARTI, SHINWA, SKY and ACENAV filed separate petitions for review on certiorari before the Court, docketed as G.R. Nos. 171591, 171614, and 171663, which were ordered consolidated in the Courts Resolution dated July 31, 2006. 15 On April 21, 2006, SKY manifested 16 that it will no longer pursue its petition in G.R. No. 171614 and has preferred to await the resolution in G.R. No. 171663 filed by PAKARTI and SHINWA. Accordingly, an entry of judgment 17 against it was made on August 18, 2006. Likewise, on November 29, 2007, PAKARTI and SHINWA moved 18 for the withdrawal of their petitions for lack of interest, which the Court granted in its January 21, 2008 Resolution. 19 The corresponding entry of judgment 20 against them was made on March 17, 2008. Thus, only the petition of ACENAV remained for the Court's resolution, with the lone issue of whether or not it may be held liable to the respondents for 30% of their claim.

10

Maintaining that it was not a party to the bill of lading, ACENAV asserts that it cannot be held liable for the damages sought to be collected by the respondents. It also alleged that since its principal, CARDIA, was not impleaded as a partydefendant/respondent in the instant suit, no liability can therefore attach to it as a mere agent. Moreover, there is dearth of evidence showing that it was responsible for the supposed defective packing of the goods upon which the award was based. The Court's Ruling A bill of lading is defined as "an instrument in writing, signed by a carrier or his agent, describing the freight so as to identify it, stating the name of the consignor, the terms of the contract for carriage, and agreeing or directing that the freight to be delivered to the order or assigns of a specified person at a specified place." 21 It operates both as a receipt and as a contract. As a receipt, it recites the date and place of shipment, describes the goods as to quantity, weight, dimensions, identification marks and condition, quality, and value. As a contract, it names the contracting parties, which include the consignee, fixes the route, destination, and freight rates or charges, and stipulates the rights and obligations assumed by the parties. 22 As such, it shall only be binding upon the parties who make them, their assigns and heirs. 23 In this case, the original parties to the bill of lading are: (a) the shipper CARDIA; (b) the carrier PAKARTI; and (c) the consignee HEINDRICH. However, by virtue of their relationship with PAKARTI under separate charter arrangements, SHINWA, KEE YEH and its agent SKY likewise became parties to the bill of lading. In the same vein, ACENAV, as admitted agent of CARDIA, also became a party to the said contract of carriage. The respondents, however, maintain 24 that ACENAV is a ship agent and not a mere agent of CARDIA, as found by both the CA 25 and the RTC. 26 The Court disagrees. Article 586 of the Code of Commerce provides: ART. 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the obligations contracted by the latter to repair, equip, and provision the vessel, provided the creditor proves that the amount claimed was invested therein. By ship agent is understood the person entrusted with the provisioning of a vessel, or who represents her in the port in which she may be found. (Emphasis supplied) Records show that the obligation of ACENAV was limited to informing the consignee HEINDRICH of the arrival of the vessel in order for the latter to immediately take possession of the goods. No evidence was offered to establish that ACENAV had a hand in the provisioning of the vessel or that it represented the carrier, its charterers, or the vessel at any time during the unloading of the goods. Clearly, ACENAV's participation was simply to assume responsibility over the cargo when they were unloaded from the vessel. Hence, no reversible error was committed by the courts a quo in holding that ACENAV was not a ship agent within the meaning and context of Article 586 of the Code of Commerce, but a mere agent of CARDIA, the shipper. On this score, Article 1868 of the Civil Code states: ART. 1868. By the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter.

11

Corollarily, Article 1897 of the same Code provides that an agent is not personally liable to the party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers. Both exceptions do not obtain in this case. Records are bereft of any showing that ACENAV exceeded its authority in the discharge of its duties as a mere agent of CARDIA. Neither was it alleged, much less proved, that ACENAV's limited obligation as agent of the shipper, CARDIA, was not known to HEINDRICH. Furthermore, since CARDIA was not impleaded as a party in the instant suit, the liability attributed upon it by the CA 27 on the basis of its finding that the damage sustained by the cargo was due to improper packing cannot be borne by ACENAV. As mere agent, ACENAV cannot be made responsible or held accountable for the damage supposedly caused by its principal. 28 Accordingly, the Court finds that theCA erred in ordering ACENAV jointly and severally liable with CARDIA to pay 30o/o of the respondents' claim. WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are hereby REVERSED.1awp++i1 The complaint against petitioner Ace Navigation Co., Inc. is hereby DISMISSED. SO ORDERED.

12

SUPREME COURT REPORTS ANNOTATED Keng Hua Paper Products Co., Inc. vs. Court of Appeals G.R. No. 116863. February 12, 1998.*

KENG HUA PAPER PRODUCTS CO., INC., petitioner, vs. COURT OF APPEALS; REGIONAL TRIAL COURT OF MANILA, BR. 21; and SEA-LAND SERVICE, INC., respondents.

Commercial Law; Bills of Lading; Nature of a Bill of Lading.A bill of lading serves two functions. First, it is a receipt for the goods shipped. Second, it is a contract by which three parties, namely, the shipper, the carrier, and the consignee undertake specific responsibilities and assume stipulated obligations. A bill of lading delivered and accepted constitutes the contract of carriage even though not signed, because the (a)cceptance of a paper containing the terms of a proposed contract generally constitutes an acceptance of the contract and of all of its terms and conditions of which the acceptor has actual or constructive notice. In a nutshell, the acceptance of a bill of lading by the shipper and the consignee, with full knowledge of its contents, gives rise to the presumption that the same was a perfected and binding contract. Same; Same; Same; Both lower courts held that the bill of lading was a valid and perfected contract between the shipper, the consignee, and the carrier.In the case at bar, both lower courts held that the bill of lading was a valid and perfected contract between the shipper (Ho Kee), the consignee (Petitioner Keng Hua), and the carrier (Private Respondent Sea-Land). Section 17 of the bill of lading provided that the shipper and the consignee were liable for the payment of demurrage charges for the failure to discharge the containerized shipment beyond the grace period allowed by tariff rules. Applying said stipulation, both lower courts found petitioner liable. Same; Same; Same; Contrary to petitioners contention, the notice and the letter supportnot beliethe findings of the two lower courts that the bill of lading was impliedly accepted by petitioner. Petitioners reliance on the Notice of Refused or On Hand Freight, as proof of its nonacceptance of the bill of lading, is of no consequence. Said notice was not written by petitioner; it was sent by private respondent to petitioner in November 1982, or four months after petitioner received the bill of lading. If the notice has any legal significance at all, it is to highlight petitioners prolonged failu re to object to the bill of lading. Contrary to petitioners contention, the notice and the letter supportnot beliethe findings of the two lower courts that the bill of lading was impliedly accepted by petitioner. Same; Same; Same; Mere apprehension of violating customs, tariff and central bank laws without a clear demonstration that taking delivery of the shipment has become legally impossible, cannot defeat the petitioners contractual obligation and liability under the bill of lading.Petitioners attempt to evade its obligation to receive the shipment on the pretext that this may cause it to violate customs, tariff and central bank laws must likewise fail. Mere apprehension of violating said laws, without a clear demonstration that taking delivery of the shipment has become legally impossible, cannot defeat the petitioners contractual obligation and liability under the bill of lading. Same; Letters of Credit; In a letter of credit, there are three distinct and independent contracts. In a letter of credit, there are three distinct and independent contracts: (1) the contract of sale between the buyer and the seller, (2) the contract of the buyer with the issuing bank, and (3) the letter of credit proper in which the bank promises to pay the seller pursuant to the terms and conditions stated therein. Few things are more clearly settled in law than that the 13

three contracts which make up the letter of credit arrangement are to be maintained in a state of perpetual separation. A transaction involving the purchase of goods may also require, apart from a letter of credit, a contract of transportation specially when the seller and the buyer are not in the same locale or country, and the goods purchased have to be transported to the latter. Remedial Law; Appeals; Questions raised on appeal must be within the issues framed by the parties and, consequently, issues not raised in the trial court cannot be raised for the first time on appeal.In any event, the issue of whether petitioner accepted the bill of lading was raised for the first time only in petitioners memorandum before this Court. Clearly, we cannot now entertain an issue raised for the very first time on appeal, in deference to the wellsettled doctrine that (a)n issue raised for the first time on appeal and not raised timely in the proceedings in the lower court is barred by estoppel. Questions raised on appeal must be within the issues framed by the parties and, consequently, issues not raised in the trial court cannot be raised for the first time on appeal. Same; Attorneys Fees; The text of the decision should state the reason for the award of attorneys fees.The Court notes that the matter of attorneys fees was taken up only in the dispositive portion of the trial courts decision. This falls short of the settled requirement that the text of the decision should state the reason for the award of attorneys fees, for without such justification, its award would be a conclusion without a premise, its basis being improperly left to speculation and conjecture.

DECISION PANGANIBAN, J.: What is the nature of a bill of lading? When does a bill of lading become binding on a consignee? Will an alleged overshipment justify the consignees refusal to receive the goods described in the bill of lading? When may interest be computed on unpaid demurrage charges?

Statement of the Case These are the main questions raised in this petition assailing the Decision [1] of the Court of Appeals[2] promulgated on May 20, 1994 in C.A.-G.R. CV No. 29953 affirming in toto the decision[3] dated September 28, 1990 in Civil Case No. 8533269 of the Regional Trial Court of Manila, Branch 21. The dispositive portion of the said RTC decision reads: WHEREFORE, the Court finds by preponderance of evidence that Plaintiff has proved its cause of action and right to relief. Accordingly, judgment is hereby rendered in favor of the Plaintiff and against Defendant, ordering the Defendant to pay plaintiff: 1. The sum of P67,340.00 as demurrage charges, with interest at the legal rate from the date of the extrajudicial demand until fully paid; 2. A sum equivalent to ten (10%) percent of the total amount due as Attorneys fees and litigation expenses.

Send copy to respective counsel of the parties. SO ORDERED.

[4]

The Facts

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The factual antecedents of this case as found by the Court of Appeals are as follows: Plaintiff (herein private respondent), a shipping company, is a foreign corporation licensed to do business in the Philippines. On June 29, 1982, plaintiff received at its Hong Kong terminal a sealed container, Container No. SEAU 67523, containing seventy-six bales of unsorted waste paper for shipment to defendant (herein petitioner), Keng Hua Paper Products, Co. in Manila. A bill of lading (Exh. A) to cover the shipment was issued by the plaintiff. On July 9, 1982, the shipment was discharged at the Manila International Container Port. Notices of arrival were transmitted to the defendant but the latter failed to discharge the shipment from the container during the free time period or grace period. The said shipment remained inside the plaintiffs container from the moment the free time period expired on July 29, 1982 until the time when the shipment was unloaded from the container on November 22, 1983, or a total of four hundred eighty-one (481) days. During the 481-day period, demurrage charges accrued. Within the same period, letters demanding payment were sent by the plaintiff to the defendant who, however, refused to settle its obligation which eventually amounted to P67,340.00. Numerous demands were made on the defendant but the obligation remained unpaid. Plaintiff thereafter commenced this civil action for collection and damages. In its answer, defendant, by way of special and affirmative defense, alleged that it purchased fifty (50) tons of waste paper from the shipper in Hong Kong, Ho Kee Waste Paper, as manifested in Letter of Credit No. 824858 (Exh. 7. p. 110. Original Record) issued by Equitable Banking Corporation, with partial shipment permitted; that under the letter of credit, the remaining balance of the shipment was only ten (10) metric tons as shown in Invoice No. H-15/82 (Exh. 8, p. 111, Original Record); that the shipment plaintiff was asking defendant to accept was twenty (20) metric tons which is ten (10) metric tons more than the remaining balance; that if defendant were to accept the shipment, it would be violating Central Bank rules and regulations and custom and tariff laws; that plaintiff had no cause of action against the defendant because the latter did not hire the former to carry the merchandise; that the cause of action should be against the shipper which contracted the plaintiffs services and not against defendant; and that the defendant duly notifie d the plaintiff about the wrong shipment through a letter dated January 24, 1983 (Exh. D for plaintiff, Exh. 4 for defendant, p. 5. Folder of Exhibits). As previously mentioned, the RTC found petitioner liable for demurrage, attorneys fees and expenses of litigation. The petitioner appealed to the Court of Appeals, arguing that the lower court erred in (1) awarding the sum of P67,340 in favor of the private respondent, (2) rejecting petitioners contention that there was overshipment, (3) ruling that petitioners recourse was against the shipper, and (4) computing legal interest from date of extrajudicial demand.[5] Respondent Court of Appeals denied the appeal and affirmed the lower courts decision in toto. In a subsequent resolution,[6] it also denied the petitioners motion for reconsideration. Hence, this petition for review.[7]

The Issues In its memorandum, petitioner submits the following issues: I. II. III. IV. Whether or not petitioner had accepted the bill of lading; Whether or not the award of the sum of P67,340.00 to private respondent was proper; Whether or not petitioner was correct in not accepting the overshipment; Whether or not the award of legal interest from the d ate of private respondents extrajudicial demand was proper; [8]

In the main, the case revolves around the question of whether petitioner was bound by the bill of lading. We shall, thus, discuss the above four issues as they intertwine with this main question.

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The Courts Ruling The petition is partly meritorious. We affirm petitioners liability for demurrage, but modify the interest rate thereon.

Main Issue: Liability Under the Bill of Lading A bill of lading serves two functions. First, it is a receipt for the goods shipped. Second, it is a contract by which three parties, namely, the shipper, the carrier, and the consignee undertake specific responsibilities and assume [9] stipulated obligations. A bill of lading delivered and accepted constitutes the contract of carriage even though not [10] signed, because the (a)cceptance of a paper containing the terms of a proposed contract generally constitutes an acceptance of the contract and of all of its terms and conditions of which the acceptor has actual or constructive [11] notice. In a nutshell, the acceptance of a bill of lading by the shipper and the consignee, with full knowledge of its contents, gives rise to the presumption that the same was a perfected and binding contract. [12] In the case at bar, both lower courts held that the bill of lading was a valid and perfected contract between the shipper (Ho Kee), the consignee (Petitioner Keng Hua), and the carrier (Private Respondent Sea-Land). Section 17 of the bill of lading provided that the shipper and the consignee were liable for the payment of demurrage charges for the failure to discharge the containerized shipment beyond the grace period allowed by tariff rules. Applying said stipulation, both lower courts found petitioner liable. The aforementioned section of the bill of lading reads: 17. COOPERAGE FINES. The shipper and consignee shall be liable for, indemnify the carrier and ship and hold them harmless against, and the carrier shall have a lien on the goods for, all expenses and charges for mending cooperage, baling, repairing or reconditioning the goods, or the van, trailers or containers, and all expenses incurred in protecting, caring for or otherwise made for the benefit of the goods, whether the goods be damaged or not, and for any payment, expense, penalty fine, dues, duty, tax or impost, loss, damage, detention,demurrage, or liability of whatsoever nature, sustained or incurred by or levied upon the carrier or the ship in connection with the goods or by reason of the goods being or having been on board, or because of shippers failure to procure consular or other proper permits, certificates or any papers that may be required at any port or place or shippers failure to supply information or otherwise to comply with all laws, regulations and requirements of law in connection with the goods of from any other act or omission of the shipper or consignee: (Underscoring supplied.) Petitioner contends, however, that it should not be bound by the bill of lading because it never gave its consent thereto. Although petitioner admits physical acceptance of the bill of lading, it argues that its subsequent actions belie the finding that it accepted the terms and conditions printed therein. [13] Petitioner cites as support the Notice of Refused or On Hand Freight it received on November 2, 1982 from private respondent, which acknowledged that petitioner declined to accept the shipment. Petitioner adds that it sent a copy of the said notice to the shipper on December 29, 1982. Petitioner points to its January 24, 1983 letter to the private respondent, stressing that its acceptance of the bill of lading would be tantamount to an act of smuggling as the amount it had imported (with full documentary support) was only (at that time) for 10,000 kilograms and not for 20,313 kilograms as stated in the bill of lading and could lay them vulnerable to legal sanctions for violation of customs and tariff as well as Central Bank laws.[14] Petitioner further argues that the demurrage was a consequence of the shippers mistake of shipping more than what was bought. The discrepancy in the amount of waste paper it actually purchased, as reflected in the invoice vis--vis the excess amount in the bill of lading, allegedly justifies its refusal to accept the shipment. [15]

Petitioner Bound by the Bill of Lading We are not persuaded. Petitioner admits that it received the bill of lading immediately after the arrival of the shipment[16] on July 8, 1982.[17] Having been afforded an opportunity to examine the said document, petitioner did not immediately object to or dissent from any term or stipulation therein. It was only six months later, on January 24, 1983, that petitioner sent a letter to private respondent saying that it could not accept the shipment. Petitioners inaction for such a long period conveys the clear inference that it accepted the terms and conditions of the bill of lading. Moreover, said letter spoke only of petitioners inability to use the delivery permit, i.e. to pick up the cargo, due to the shippers failure to comply with the terms and conditions of the letter of credit, for which reason the bill of lading and other shipping

16

documents were returned by the banks to the shipper. [18] The letter merely proved petitioners refusal to pick up the cargo, not its rejection of the bill of lading. Petitioners reliance on the Notice of Refused or On Hand Freight, as proof of its nonacceptance of the bill of lading, is of no consequence. Said notice was not written by petitioner; it was sent by private respondent to petitioner in November 1982, or four months after petitioner received the bill of lading. If the notice has any legal significance at all, it is to highlight petitioners prolonged failure to object to the bill of lading. Contrary to petitioners contention, the notice and the letter support not belie the findings of the two lower courts that the bill of lading was impliedly accepted by petitioner. As aptly stated by Respondent Court of Appeals: In the instant case, (herein petitioner) cannot and did not allege non -receipt of its copy of the bill of lading from the shipper. Hence, the terms and conditions as well as the various entries contained therein were brought to its knowledge. (Herein petitioner) accepted the bill of lading without interposing any objection as to its contents. This raises the presumption that (herein petitioner) agreed to the entries and stipulations imposed therein. Moreover, it is puzzling that (herein petitioner) allowed months to pass, six (6) months to be exact, before notifying (herein private respondent) of the wrong shipment. It was only on January 24, 1983 that (herein petitioner) sent (herein private respondent) such a letter of notification (Exh D for plaintiff, Exh. 4 for defendant; p. 5, Folder of Exhibits). Thus, for the duration of those six months (herein private respondent never knew the reason for (herein petitioners) refusal to discharge th e shipment. After accepting the bill of lading, receiving notices of arrival of the shipment, failing to object thereto, (herein petitioner) cannot now deny that it is bound by the terms in the bill of lading. If it did not intend to be bound, (herein petitioner) would not have waited for six months to lapse before finally bringing the matter to (herein private respondents attention. The most logical reaction in such a case would be to immediately verify the matter with the other parties involved. In this case, however, (herein petitioner) unreasonably detained (herein private respondents) vessel to the latters prejudice.[19] Petitioners attempt to evad e its obligation to receive the shipment on the pretext that this may cause it to violate customs, tariff and central bank laws must likewise fail. Mere apprehension of violating said laws, without a clear demonstration that taking delivery of the shipment has become legally impossible,[20] cannot defeat the petitioners contractual obligation and liability under the bill of lading. In any event, the issue of whether petitioner accepted the bill of lading was raised for the first time only in petitioners memorandum before this Court. Clearly, we cannot now entertain an issue raised for the very first time on appeal, in deference to the well-settled doctrine that (a)n issue raised for the first time on appeal and not raised timely in the proceedings in the lower court is barred by estoppel. Questions raised on appeal must be within the issues framed by the parties and, consequently, issues not raised in the trial court cannot be raised for the first time on appeal.[21] In the case at bar, the prolonged failure of petitioner to receive and discharge the cargo fr om the private respondents vessel constitutes a violation of the terms of the bill of lading. It should thus be liable for demurrage to the former. In The Apollon,[22] Justice Story made the following relevant comment on the nature of demurrage: In truth, demurrage is merely an allowance or compensation for the delay or detention of a vessel. It is often a matter of contract, but not necessarily so. The very circumstance that in ordinary commercial voyages, a particular sum is deemed by the parties a fair compensation for delays, is the very reason why it is, and ought to be, adopted as a measure of compensation, in cases ex delicto. What fairer rule can be adopted than that which founds itself upon mercantile usage as to indemnity, and fixes a recompense upon the deliberate consideration of all the circumstances attending the usual earnings and expenditures in common voyages? It appears to us that an allowance, by way of demurrage, is the true measure of damages in all cases of mere detention, for that allowance has reference to the ships expenses, wear and tear, and common [23] employment.

Amount of Demurrage Charges Petitioner argues that it is not obligated to pay any demurrage charges because, prior to the filing of the complaint, private respondent made no demand for the sum of P67,340. Moreover, private respondents loss and prevention

17

manager, Loi Gillera, demanded P50,260, but its counsel, Sofronio Larcia, subsequently asked for a different amount of P37,800. Petitioners position is puerile. The amount of demurrage charges in the sum of P67,340 is a factual conclusion of the trial court that was affirmed by the Court of Appeals and, thus, binding on this Court. [24] Besides such factual finding is supported by the extant evidence.[25] The apparent discrepancy was a result of the variance of the dates when the two demands were made. Necessarily, the longer the cargo remained unclaimed, the higher the demurrage. Thus, while in [26] his letter dated April 24, 1983, private respondents counsel demanded payment of onlyP37,800, the additional demurrage incurred by petitioner due to its continued refusal to receive delivery of the cargo ballooned to P67,340 by November 22, 1983. The testimony of Counsel Sofronio Larcia as regards said letter of April 24, 1983 elucidates, viz: Q A Q A Q A Now, after you sent this letter, do you know what happened? Defendant continued to refuse to take delivery of the shipment and the shipment stayed at the port for a longer period. So, what happened to the shipment? The shipment incurred additional demurrage charges which amounted to P67,340.00 as of November 22, 1983 or more than a year after - almost a year after the shipment arrived at the port. So, what did you do? We requested our collection agency to pursue the collection of this amount.[27]

Bill of Lading Separate from Other Letter of Credit Arrangements In a letter of credit, there are three distinct and independent contracts: (1) the contract of sale between the buyer and the seller, (2) the contract of the buyer with the issuing bank, and (3) the letter of credit proper in which the bank promises to pay the seller pursuant to the terms and conditions stated therein. Few things are more clearly settled in law than that the three contracts which make up the letter of credit arrangement are to be maintained in a state of perpetual separation.[28] A transaction involving the purchase of goods may also require, apart from a letter of credit, a contract of transportation specially when the seller and the buyer are not in the same locale or country, and the goods purchased have to be transported to the latter. Hence, the contract of carriage, as stipulated in the bill of lading in the present case, must be treated independently of the contract of sale between the seller and the buyer, and the contract for the issuance of a letter of credit between the buyer and the issuing bank. Any discrepancy between the amount of the goods described in the commercial invoice in the contract of sale and the amount allowed in the letter of credit will not affect the validity and enforceability of the contract of carriage as embodied in the bill of lading. As the bank cannot be expected to look beyond the documents presented to it by the seller pursuant to the letter of credit, [29] neither can the carrier be expected to go beyond the representations of the shipper in the bill of lading and to verify their accuracy vis--vis the commercial invoice and the letter of credit. Thus, the discrepancy between the amount of goods indicated in the invoice and the amount in the bill of lading cannot negate petitioners obligation to private respondent arising from the contract of transportation. Furthermore, private respondent, as carrier, had no knowledge of the contents of the container. The contract of carriage was under the arrangement known as Shippers Load And Count, and the shipper was solely responsible for the loading of the container while the carrier was oblivious to the contents of the shipment. Petitioners remedy in case of overshipment lies against the seller/shipper, not against the carrier.

Payment of Interest Petitioner posits that it first knew of the demurrage claim of P67,340 only when it received, by summons, private respondents complaint. Hence, interest may not be allowed to run from the date of private respondents extrajudicial demands on March 8, 1983 for P50,260 or on April 24, 1983 for P37,800, considering that, in both cases, there was no demand for interest.[30] We agree. Jurisprudence teaches us: 2. When an obligation, not constituting a loan or forbearance of money , is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall

18

be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged . 3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. [31] The case before us involves an obligation not arising from a loan or forbearance of money; thus, pursuant to Article 2209 of the Civil Code, the applicable interest rate is six percent per annum. Since the bill of lading did not specify the amount of demurrage, and the sum claimed by private respondent increased as the days went by, the total amount demanded cannot be deemed to have been established with reasonable certainty until the trial court rendered its judgment. Indeed, (u)nliquidated damages or claims, it is said, are those which are not or cannot be known until [32] definitely ascertained, assessed and determined by the courts after presentation of proof. Consequently, the legal interest rate is six percent, to be computed from September 28, 1990, the date of the trial courts decision. And in [33] [34] accordance with Philippine Natonal Bank and Eastern Shipping, the rate of twelve percent per annum shall be charged on the total then outstanding, from the time the judgment becomes final and executory until its satisfaction. Finally, the Court notes that the matter of attorneys fees was taken up only in the dispositive portion of the trial courts decision. This falls short of the settled requirement that the text of the decision should state the reason for the award of attorneys fees, for without such justification, its award would be a conclusion without a premise, its basis being improperly left to speculation and conjecture.[35] WHEREFORE, the assailed Decision is hereby AFFIRMED with the MODIFICATION that the legal interest of six percent per annum shall be computed from September 28, 1990 until its full payment before finality of judgment. The rate of interest shall be adjusted to twelve percent per annum, computed from the time said judgment became final and executory until full satisfaction. The award of attorneys fees is DELETED. SO ORDERED. Davide, Jr., (Chairman), Bellosillo, Vitug, and Quisumbing, JJ., concur.

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SUPREME COURT REPORTS ANNOTATED . Phoenix Assurance Co., Ltd. vs. United States Lines No. L-24033. February 22, 1968. .
PHOENIX ASSURANCE Co., LTD., plaintiff-appellant, vs. UNITED STATES LINES, defendant-appellee

Commercial Law; Special contracts of maritime commerce; Bill of lading; Nature.A bill of lading operates both as a receipt and as a contract. It is a receipt for the goods shipped and a contract to transport and deliver the same as therein stipulated. As a receipt, it recites the date and place of shipment, describes the goods as to quantity, weight, dimensions, identification marks and condition, quality and value. As a contract, it names the contracting parties which include the consignee, fixes the route, destination, and freight rate or charges, and stipulates the rights and obligations assumed by the parties. Contracts; The law between the parties.A contract is the law between the contracting parties, and where there is nothing in it which is contrary to law, morals, good customs, public policy or public order, the validity of the contract must be sustained. Commercial Law; Special contracts. of maritime commerce; Bill of lading; Effect of payment of cargo freight.The provisions of the bill of lading exculpating the carrier f rom liability for cargo losses is not rendered inoperative where full cargo freight is paid up to and beyond the point of stipulated discharge on the cargo inasmuch as such a situation is not provided therein as an exception. Commercial Law; Carrier's liability; Effect of filing a claim by carrier for the shipper. The filing of a claim by the carrier with the Manila Port Service for the value of the losses cannot be -considered an indication that it is answerable for cargo losses up to Davao City. On the contrary, it is a convincing proof that said party was not remiss in its duties 'as agent of the consignee.

BENGZON, J.P., J.: The facts antecedent to this appeal from a decision dated October 31, 1964 of the Court of First Instance of Manila, are as follows: On June 29, 1962, General Motors shipped and consigned on a CIF basis to Davao Parts and Service, Inc. at Davao City from New York aboard the United States Lines' vessel SS "Pioneer Moor" a cargo of truck spare parts in 25 cases and 4 crates (2 pieces unboxed), for which United States Lines issues a short form bill of lading No. T-1 (Annex "A" and Exh. "1"), and which shipment was insured against loss and damage with Phoenix Assurance Co., Ltd. The short form bill of lading No. T-1 indicated Manila as the port of discharge and Davao City as the place where the goods were to be transshipped, and expressly incorporated by reference the provisions contained in the carrier's regular long form bill of lading (Annex "B" and Exh. "2"). The SS "Pioneer Moor" on July 28, 1962 discharged at Manila to the custody of the Manila Port Service which was then the operator of the arrastre service at the Port of Manila, the above described cargo, complete but with the exception of two crates, namely, Crates Nos. 3139 and 3148 valued at P1,498.25.

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On July 30, 1962, the Luzon Brokerage Corporation, Customs broker hired by the United States Lines, filed in behalf of the latter a provisional claim against the Manila Port Service for short landed, short-delivered and/or landed in bad order cargo ex-United States Lines' vessel. On August 30, 1962, the afore-described cargo, with the exception of Crates Nos. 3139 and 3148 which were not discharged at the Manila Port, and Crates Nos. 3648 and 3649 which were discharged at the Manila Port but were lost in the custody of the Manila Port Service, was transshipped by United States Lines to Davao through a vessel of its Davao agent, Columbian Rope Company, and duly received in good order by the Davao Parts and Service, Inc. Davao Parts and Service, Inc. filed on December 26, 1962 a formal claim with the United States Lines through the latter's agent, Columbian Rope Company, for the value of Crates Nos. 3139, 3148, 3648 and 3649 in the total sum of P2,010.37. The United States Lines, after proper verification, paid Davao Parts and Service, Inc. the sum of P1,458.25, representing the value of Crates Nos. 3139 and 3148, when it was discovered that these two crates had been overlanded in Honolulu, but refused to pay for the value of Crates Nos. 3648 and 3649 for the reason that these crates had been lost while in the custody of the Manila Port Service. The two crates (Nos. 3139 and 3148) which were overlanded in Honolulu and for which United States Lines paid Davao Parts and Service, Inc. the sum of P1,458.25, were later recovered and returned to Davao Parts and Service, Inc. and the latter refunded United States Lines for the sum it paid. In view of United States Lines' refusal to pay for the two crates (Nos. 3648 and 3649) which were lost while in the custody of the Manila Port Service, Ker & Company, Ltd., agent of Phoenix Assurance Co., Ltd., in the Philippines, and insurer of Davao Parts and Service, Inc., paid to the latter the value of said crates in the sum of P552.12. On March 25, 1963, the United States Lines, through the Columbian Rope Company, by letter informed the Davao Parts and Service, Inc. that it was filing a claim for the undelivered crates with the Manila Port Service. And true to its word, it filed on March 30, 1963 a formal claim with the Manila Port Service for the value of Crates Nos. 3648 and 3649, but the latter declined to honor the same. On June 26, 1963, United States Lines, through Columbian Rope Company, its Davao agent, informed the Davao Parts and Service, Inc., inter alia, that the Manila Port Service had not yet settled its claim, and that the oneyear period provided by law within which to bring action against the Manila Port Service for the two crates (Nos. 3648 and 3649) would expire on July 28, 1963. Phoenix Assurance Co., Ltd., through Ker & Company Ltd., its agent in the Philippines, wrote on July 24, 1963 the United States Lines expressing its appreciation to the latter for taking action against the Manila Port Service. In the same letter it requested for an extension of time to file suit against the United States Lines (the prescriptive period for doing so being set to expire on July 28, 1963), explaining that it could not file suit against any entity (including the Manila Port Service) except the United States Lines with whom its subrogee the Davao Parts and Service, Inc., was in contract. No reply having been received by it from the United States Lines, the Phoenix Assurance Co., Ltd. on July 29, 1963 filed a suit praying that judgment be rendered against the former for the sum of P552.12, with interest at the legal rate, plus attorney's fees and expenses of litigation. 1 On August 16, 1963, the United States Lines filed its answer with counterclaim, 2 while Phoenix Assurance Co., Ltd. filed its answer to said counterclaim on August 26, 1963. On March 9, 1964, the parties submitted a Partial Stipulation of Facts.
3

After trial, the lower court on October 31, 1964 rendered a decision dismissing plaintiff's complaint. 4

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Thus this appeal, raising the sole issue of whether or not the lower court erred in dismissing the complaint and in exonerating defendant-appellee from liability for the value of the two undelivered crates Nos. 3648 and 3649. It must be stated at the outset that a bill of lading operates both as a receipt and as a contract. It is a receipt for the goods shipped and a contract to transport and deliver the same as therein stipulated. As a receipt, it recites the date and place of shipment, describes the goods as to quantity, weight, dimensions, identification marks and condition, quality, and value. As a contract, it names the contracting parties, which include the consignee, fixes the route, destination, and freight rate or charges, and stipulates the rights and obligations assumed by the parties. 5 In this jurisdiction, it is a statutory and decisional rule of law that a contract is the law between the contracting parties, 6 and where there is nothing in it which is contrary to law, morals, good customs, public policy, or public order, the validity of the contract must be sustained. 7 The Bill of Lading (short form) No. T-1 dated June 29, 1962 (Annex "A" and Exh. 1) provides under Section 1 thereof (Exh. that, "It is agreed that the receipt, custody carriage, delivery and transshipping of the goods are subject to the norms appearing on the face and back hereof and also to the terms contained in the carrier's regular long form, bill of lading, used in this service, including any clauses presently being stamped or endorsed thereon which shall be deemed to be incorporated in this bill of lading, which shall govern the relations whatsoever they may be between shipper, consignee, carrier and ship in every contingency, wheresoever and whensoever occurring and whether the carrier be acting as such or as bailee, . . . . (Emphasis supplied.) On the other hand, the regular long form Bill of Lading (Annex "B" and Exh. "2") provides, inter alia, that:
1 wp h 1 . t

The carrier shall not be liable in any capacity whatsoever for any loss or damage to the goods while the goods are not in its actual custody . (Par. 2, last subpar. Emphasis supplied.) The carrier or master, in the exercise of its or his discretion and altho' transshipment or forwarding of the goods may have been contemplated or provided for herein, may at port of discharge or any other place whatsoever transship or forward the goods or any part thereof by any means at the risk and expense of the goods and at any time, whether before or after loading on the ship named and by any route, whether within or outside the scope of the voyage or beyond the port of discharge or destination of the goods and without notice to the shipper or consignee. The carrier or master may delay such transshipping or forwarding for any reason, including but not limited to awaiting a vessel or other means of transportation whether by the carrier or others. The carrier or master in making arrangements with any person for or in connection with all transshipping or forwarding of the goods or the use of any means of transportation not used or operated by the carrier shall be considered solely the agent of the shipper and consignee and without any other responsibility whatsoever or for the cost thereof . The receipt, custody, carriage and delivery of the goods by any such person or on carrier and all transshipping and forwarding shall be subject to all the provisions whatsoever of such person's or on carrier's form of bill of lading or agreement then in use, whether or not issued and even though such provisions may be less favorable to the shipper or consignee in any respect than the provisions of this bill of lading. The shipper and consignee authorize the carrier or master to arrange with any such person or on-carrier that the lowest valuation or limitation of liability contained in the bill of lading or other agreement of such person or on-carrier shall apply. All responsibility of the carrier in any capacity shall altogether cease and the goods shall be deemed delivered by it and this contract of carriage shall be deemed fully performed on actual or constructive delivery of the goods to itself as such agent of the shipper and consignee or to any such person or on carrier at port of discharge from ship or elsewhere in case of an earlier transshipment. The shipper and consignee shall be liable to this carrier for and shall indemnify it against all expense of forwarding and transshipping, including any increase in or additional freight or other charges whatsoever.

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Pending or during forwarding or transshipping this carrier or the master may store the goods ashore or afloat solely as agent of the shipper and at the risk and expense of the goods and this carrier shall not be responsible for the acts, neglect, delay or failure to act of anyone to whom the goods are entrusted or delivered for storage, handling, or any service incidental thereto. In case the carrier issues a bill of lading covering transportation by a local or other carrier prior to the goods being delivered to and put into the physical custody of the carrier, it shall not be under any responsibility or liability whatsoever for any loss or damage to the goods occurring prior to or until the actual receipt or custody of the goods by it at the port or place of transportation to such port or place where the goods are put in its physical custody, it acts solely as the agent of the shipper. (Par. 16, emphasis supplied.) It is admitted by both parties that the crates subject matter of this action were lost while in the possession and custody of the Manila Port Service. Since the long form of Bill of Lading (Annex "B" and Exh. "2") provides that "The carrier shall not be liable in any capacity whatsoever for any loss or damage to the goods while the goods are not in its actual custody," appellee cannot be held responsible for the loss of said crates. For as correctly observed by the lower court, it is hardly fair to make appellee accountable for a loss not due to its acts or omissions or over which it had no control. 8 Contrary to appellant's stand, the appellee did not undertake to carry and deliver safely the cargo to the consignee in Davao City. The short form Bill of Lading (Annex "A" and Exh. "1") states in no uncertain terms that the port of discharge of the cargo is Manila, but that the same was to be transshipped beyond the port of discharge to Davao City. Pursuant to the terms of the long form Bill of Lading (Annex "B" and Exh. "2"), appellee's responsibility as a common carrier ceased the moment the goods were unloaded in Manila; and in the matter of transshipment, appellee acted merely as an agent of the shipper and consignee. Contrary likewise to appellant's contention, the cargo was not transshipped with the use of transportation used or operated by appellee. It is true that the vessel used for transshipment is owned and operated by appellee's Davao agent, the Columbian Rope Company, but there is no proof that said vessel is owned or operated by appellee. The vessels of appellee's agent are being erroneously presumed by appellant to be owned and operated by appellee. Appellant argues that the provisions of the Bill of Lading exculpating the appellee from liability for cargo losses, do not apply where full cargo freight is paid up to and beyond the point of stipulated discharge, and here defendant-appellee agreed to absorb all costs of forwarding and transshipment freight having been prepaid up to Davao City. But the receipt of full cargo freight up to Davao City cannot render inoperative the provisions of the Bill of Lading relied upon by appellee inasmuch as such a situation is not provided therein as an exception. In fact, one searches the Bills of Lading (short and long forms) in vain for such an exception. Besides, it is for the convenience of both parties that full freight up to Davao City had been prepaid, otherwise there would have been need to make further arrangements regarding the transshipment of the cargo to Davao City. After all, the long form Bill of Lading provides that, "The shipper and consignee shall be liable to this carrier for and shall indemnify it against all expense of forwarding and transshipping, including any increase in or additional freight or other charge whatsoever." (Annex "B" and Exh. "2", par. 6, subpar. 4) The filing of a claim by defendant-appellee with the Manila Port Service for the value of the losses cannot be considered as an indication that it is answerable for cargo losses up to Davao City. On the contrary, it is a convincing proof that said party was not remiss in its duties as agent of the consignee. That appellee captioned its claim against the Manila Port Service as "SS 'Pioneer Moor' Voy. 25, Reb. 1067 New York/Davao via Manila B/L T-1 31 Packages Truck Spare Parts Cons: Davao Parts and Service," likewise, is no proof that appellee knowingly assumed liability for cargo losses up to Davao City. It merely showed that the goods would have to be, as indeed they were, first unloaded in Manila and thereafter transshipped to Davao City. Through the short form Bill of Lading (Annex "A" and Exh. "1"), incorporating by reference the terms of the regular long form bill of lading (Annex "B" and Exh. "2"), the United States Lines acknowledged the receipt of the cargo of truck spare parts that it carried, and stated the conditions under which it was to carry the cargo, the place where it was to be transshipped, the entity to which delivery is to be made, and the rate of compensation for the carriage. This it delivered to the Davao Parts and Service, Inc. as evidence of a contract between them. By receiving the bill of lading, Davao Parts and Service, Inc. assented to the terms of the consignment contained therein, and became bound thereby, so far as the conditions named are reasonable in the eyes of the law. Since either appellant

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nor appellee alleges that any provision therein is contrary to law, morals, good customs, public policy, or public order, and indeed We found none the validity of the Bill of Lading must be sustained and the provisions therein properly applied to resolve the conflict between the parties. WHEREFORE, the decision appealed from is hereby affirmed, with costs against the appellant. So ordered. Concepcion, C.J., Reyes, J.B.L., Dizon, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur. Makalintal, J., took no part.
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SUPREME COURT REPORTS ANNOTATED Home Insurance Co. vs. American Steamship Agencies, Inc. No. L-25599. April 4, 1968. HOME INSURANCE COMPANY, plaintiff-appellee, vs. AMERICAN STEAMSHIP AGENCIES, INC. and LUZON STEVEDORING CORPORATION, defendants, AMERICAN STEAMSHIP AGENCIES, INC., defendant-appellant.

Code of Commerce; Charter party; Civil Code on common carriers does not apply to charter party.The Civil Code provisions on common carriers should not apply where the common carrier is not acting as such but as a private carrier. Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is valid. Same; Same, Stipulation on absolving owner from liability for loss due to negligence of its agent is valid. The stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent would be void only if the strict public policy governing common carriers is applied. Such policy has no force where the public at large is not involved, as in the case of a ship totally chartered for the use of a single party. The stipulation exempting the owner from liability for the negligence of its agent is not against public policy and is deemed valid. Civil Code; Common carriers; Origin of provisions.The provisions of our Civil Code on common carriers were taken from Anglo-American law. Code of Commerce; Bill of lading; Nature; Not the contract in a charter party.In a charter of the entire vessel, the bill of lading issued by the master to the charterer, as shipper, is in fact and legal contemplation merely a receipt and a document of title, not a contract, for the contract is the charter party.

BENGZON, J.P., J.: "Consorcio Pesquero del Peru of South America" shipped freight pre-paid at Chimbate, Peru, 21,740 jute bags of Peruvian fish meal through SS Crowborough, covered by clean bills of lading Numbers 1 and 2, both dated January 17, 1963. The cargo, consigned to San Miguel Brewery, Inc., now San Miguel Corporation, and insured by Home Insurance Company for $202,505, arrived in Manila on March 7, 1963 and was discharged into the lighters of Luzon Stevedoring Company. When the cargo was delivered to consignee San Miguel Brewery Inc., there were shortages amounting to P12,033.85, causing the latter to lay claims against Luzon Stevedoring Corporation, Home Insurance Company and the American Steamship Agencies, owner and operator of SS Crowborough. Because the others denied liability, Home Insurance Company paid the consignee P14,870.71 the insurance value of the loss, as full settlement of the claim. Having been refused reimbursement by both the Luzon Stevedoring Corporation and American Steamship Agencies, Home Insurance Company, as subrogee to the consignee, filed against them on March 6, 1964 before the Court of First Instance of Manila a complaint for recovery of P14,870.71 with legal interest, plus attorney's fees. In answer, Luzon Stevedoring Corporation alleged that it delivered with due diligence the goods in the same quantity and quality that it had received the same from the carrier. It also claimed that plaintiff's claim had prescribed under Article 366 of the Code of Commerce stating that the claim must be made within 24 hours from receipt of the cargo.

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American Steamship Agencies denied liability by alleging that under the provisions of the Charter party referred to in the bills of lading, the charterer, not the shipowner, was responsible for any loss or damage of the cargo. Furthermore, it claimed to have exercised due diligence in stowing the goods and that as a mere forwarding agent, it was not responsible for losses or damages to the cargo. On November 17, 1965, the Court of First Instance, after trial, absolved Luzon Stevedoring Corporation, having found the latter to have merely delivered what it received from the carrier in the same condition and quality, and ordered American Steamship Agencies to pay plaintiff P14,870.71 with legal interest plus P1,000 attorney's fees. Said court cited the following grounds: (a) The non-liability claim of American Steamship Agencies under the charter party contract is not tenable because Article 587 of the Code of Commerce makes the ship agent also civilly liable for damages in favor of third persons due to the conduct of the captain of the carrier; (b) The stipulation in the charter party contract exempting the owner from liability is against public policy under Article 1744 of the Civil Code; (c) In case of loss, destruction or deterioration of goods, common carriers are presumed at fault or negligent under Article 1735 of the Civil Code unless they prove extraordinary diligence, and they cannot by contract exempt themselves from liability resulting from their negligence or that of their servants; and (d) When goods are delivered to the carrier in good order and the same are in bad order at the place of destination, the carrier is prima facie liable. Disagreeing with such judgment, American Steamship Agencies appealed directly to Us. The appeal brings forth for determination this legal issue: Is the stipulation in the charter party of the owner's non-liability valid so as to absolve the American Steamship Agencies from liability for loss? The bills of lading,1 covering the shipment of Peruvian fish meal provide at the back thereof that the bills of lading shall be governed by and subject to the terms and conditions of the charter party, if any, otherwise, the bills of lading prevail over all the agreements.2 On the of the bills are stamped "Freight prepaid as per charter party. Subject to all terms, conditions and exceptions of charter party dated London, Dec. 13, 1962." A perusal of the charter party3 referred to shows that while the possession and control of the ship were not entirely transferred to the charterer,4 the vessel was chartered to its full and complete capacity (Exh. 3). Furthermore, the, charter had the option to go north or south or vice-versa,5 loading, stowing and discharging at its risk and expense.6 Accordingly, the charter party contract is one of affreightment over the whole vessel rather than a demise. As such, the liability of the shipowner for acts or negligence of its captain and crew, would remain in the absence of stipulation. Section 2, paragraph 2 of the charter party, provides that the owner is liable for loss or damage to the goods caused by personal want of due diligence on its part or its manager to make the vessel in all respects seaworthy and to secure that she be properly manned, equipped and supplied or by the personal act or default of the owner or its manager. Said paragraph, however, exempts the owner of the vessel from any loss or damage or delay arising from any other source, even from the neglect or fault of the captain or crew or some other person employed by the owner on board, for whose acts the owner would ordinarily be liable except for said paragraph.. Regarding the stipulation, the Court of First Instance declared the contract as contrary to Article 587 of the Code of Commerce making the ship agent civilly liable for indemnities suffered by third persons arising from acts or omissions of the captain in the care of the goods and Article 1744 of the Civil Code under which a stipulation between the common carrier and the shipper or owner limiting the liability of the former for loss or destruction of the goods to a degree less than extraordinary diligence is valid provided it be reasonable, just and not contrary to public policy. The release from liability in this case was held unreasonable and contrary to the public policy on common carriers.

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The provisions of our Civil Code on common carriers were taken from Anglo-American law.7 Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier.8 As a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is not against public policy,9 and is deemed valid. Such doctrine We find reasonable. The Civil Code provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier. The stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent would be void only if the strict public policy governing common carriers is applied. Such policy has no force where the public at large is not involved, as in the case of a ship totally chartered for the use of a single party. And furthermore, in a charter of the entire vessel, the bill of lading issued by the master to the charterer, as shipper, is in fact and legal contemplation merely a receipt and a document of title not a contract, for the contract is the charter party.10 The consignee may not claim ignorance of said charter party because the bills of lading expressly referred to the same. Accordingly, the consignees under the bills of lading must likewise abide by the terms of the charter party. And as stated, recovery cannot be had thereunder, for loss or damage to the cargo, against the shipowners, unless the same is due to personal acts or negligence of said owner or its manager, as distinguished from its other agents or employees. In this case, no such personal act or negligence has been proved. WHEREFORE, the judgment appealed from is hereby reversed and appellant is absolved from liability to plaintiff. No costs. So ordered. Reyes, J.B.L., Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur. Dizon J., took no part. Concepcion, C.J., is on leave

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SUPREME COURT REPORTS ANNOTATED Compaia Maritima vs. Insurance Company of North America No. L-18965. October 30, 1964. COMPAIA MARITIMA, petitioner, vs. INSURANCE COMPANY OF NORTH AMERICA, respondent. Contract of carriage; When contract completed; Loading of cargo on carriers barge preparatory to loading on ship. Where the shipper delivered the cargo to the carrier and the latter took possession thereof by placing it on a lighter or barge manned by its authorized employees, it is held that there existed a complete contract of carriage the consummation of which had already begun. Same; Same; Bill of lading not indispensable to contract.A bill of lading is not indispensable for the creation of a contract of carriage. Same; Same; Carriers liability for damage to cargo; When storm deemed to exist.Winds of 11 miles per hour, although stronger than the average 46 miles per hour then prevailing in the port where the lighter sank on the night in question, cannot be classified as a storm. For according to Beauforts wind scale, a storm has wind velocities of from 64 to 75 miles per hour; and by Philippine Weather Bureau standards winds should have a velocity of from 55 to 74 miles per hour to be classified as a storm. Same; Same; Implied admission by carrier of charges in waiving its right to have books of accounts of shipper produced in court.The act of the carrier in waiving its right to have the books of account of the shipper presented in Court is tantamount to an admission that the statements contained therein concerning the charges the latter made for the loss of the damaged cargo are correct and their verification is not necessary, because its main defense was that it was not liable for the damage since there was no contract of carriage between it and the shipper and the loss caused, if any, was due to a fortuitous event. Insurance; Right of insurer to sue carrier as assignee of shipper; Defect in insurance policy no defense.An insurance company can sue the carrier under its insurance contract as assignee of the shipper, and the carrier cannot set up as a defense any defect in the insurance policy. Same; Same; When proof of personality of foreign insurance company not important.The question of the personality of a foreign insurance company to sue in this jurisdiction becomes of no importance where the carriers attorney admitted in open court that it is a foreign insurance company doing business in the Philippines with a personality to file the present action. Contract of carriage; When contract completed; Loading of cargo on carriers barge preparatory to loading on shi p. Where the shipper delivered the cargo to the carrier and the latter took possession thereof by placing it on a lighter or barge manned by its authorized employees, it is held that there existed a complete contract of carriage the consummation of which had already begun. Same; Same; Bill of lading not indispensable to contract.A bill of lading is not indispensable for the creation of a contract of carriage.

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Same; Same; Carriers liability for damage to cargo; When storm deemed to exist.Winds of 11 miles per hour, although stronger than the average 46 miles per hour then prevailing in the port where the lighter sank on the night in question, cannot be classified as a storm. For according to Beauforts wind scale, a storm has wind velocities of from 64 to 75 miles per hour; and by Philippine Weather Bureau standards winds should have a velocity of from 55 to 74 miles per hour to be classified as a storm. Same; Same; Implied admission by carrier of charges in waiving its right to have books of accounts of shipper produced in court.The act of the carrier in waiving its right to have the books of account of the shipper presented in Court is tantamount to an admission that the statements contained therein concerning the charges the latter made for the loss of the damaged cargo are correct and their verification is not necessary, because its main defense was that it was not liable for the damage since there was no contract of carriage between it and the shipper and the loss caused, if any, was due to a fortuitous event. Insurance; Right of insurer to sue carrier as assignee of shipper; Defect in insurance policy no defense.An insurance company can sue the carrier under its insurance contract as assignee of the shipper, and the carrier cannot set up as a defense any defect in the insurance policy. Same; Same; When proof of personality of foreign insurance company not important.The question of the personality of a foreign insurance company to sue in this jurisdiction becomes of no importance where the carriers at torney admitted in open court that it is a foreign insurance company doing business in the Philippines with a personality to file the present action.

BAUTISTA ANGELO, J.: Sometime in October, 1952, Macleod and Company of the Philippines contracted by telephone the services of the Compaia Maritima, a shipping corporation, for the shipment of 2,645 bales of hemp from the former's Sasa private pier at Davao City to Manila and for their subsequent transhipment to Boston, Massachusetts, U.S.A. on board the S.S. Steel Navigator. This oral contract was later on confirmed by a formal and written booking issued by Macleod's branch office in Sasa and handcarried to Compaia Maritima's branch office in Davao in compliance with which the latter sent to Macleod's private wharf LCT Nos. 1023 and 1025 on which the loading of the hemp was completed on October 29, 1952. These two lighters were manned each by a patron and an assistant patron. The patrons of both barges issued the corresponding carrier's receipts and that issued by the patron of Barge No. 1025 reads in part: Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at Manila onto S.S. Steel Navigator. FINAL DESTINATION: Boston. Thereafter, the two loaded barges left Macleod's wharf and proceeded to and moored at the government's marginal wharf in the same place to await the arrival of the S.S. Bowline Knot belonging to Compaia Maritima on which the hemp was to be loaded. During the night of October 29, 1952, or at the early hours of October 30, LCT No. 1025 sank, resulting in the damage or loss of 1,162 bales of hemp loaded therein. On October 30, 1952, Macleod promptly notified the carrier's main office in Manila and its branch in Davao advising it of its liability. The damaged hemp was brought to Odell Plantation in Madaum, Davao, for cleaning, washing, reconditioning, and redrying. During the period from November 1-15, 1952, the carrier's trucks and lighters hauled from Odell to Macleod at Sasa a total of 2,197.75 piculs of the reconditioned hemp out of the original cargo of 1,162 bales weighing 2,324 piculs which had a total value of 116,835.00. After reclassification, the value of the reconditioned hemp was reduced to P84,887.28, or a loss in value of P31,947.72. Adding to this last amount the sum of P8,863.30 representing

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Macleod's expenses in checking, grading, rebating, and other fees for washing, cleaning and redrying in the amount of P19.610.00, the total loss adds up to P60,421.02. All abaca shipments of Macleod, including the 1,162 bales loaded on the carrier's LCT No. 1025, were insured with the Insurance Company of North America against all losses and damages. In due time, Macleod filed a claim for the loss it suffered as above stated with said insurance company, and after the same had been processed, the sum of P64,018.55 was paid, which was noted down in a document which aside from being a receipt of the amount paid, was a subrogation agreement between Macleod and the insurance company wherein the former assigned to the latter its rights over the insured and damaged cargo. Having failed to recover from the carrier the sum of P60,421.02, which is the only amount supported by receipts, the insurance company instituted the present action on October 28, 1953. After trial, the court a quo rendered judgment ordering the carrier to pay the insurance company the sum of P60,421.02, with legal interest thereon from the date of the filing of the complaint until fully paid, and the costs. This judgment was affirmed by the Court of Appeals on December 14, 1960. Hence, this petition for review. The issues posed before us are: (1) Was there a contract of carriage between the carrier and the shipper even if the loss occurred when the hemp was loaded on a barge owned by the carrier which was loaded free of charge and was not actually loaded on the S.S. Bowline Knot which would carry the hemp to Manila and no bill of lading was issued therefore?; (2) Was the damage caused to the cargo or the sinking of the barge where it was loaded due to a fortuitous event, storm or natural disaster that would exempt the carrier from liability?; (3) Can respondent insurance company sue the carrier under its insurance contract as assignee of Macleod in spite of the fact that the liability of the carrier as insurer is not recognized in this jurisdiction?; (4) Has the Court of Appeals erred in regarding Exhibit NNN-1 as an implied admission by the carrier of the correctness and sufficiency of the shipper's statement of accounts contrary to the burden of proof rule?; and (5) Can the insurance company maintain this suit without proof of its personality to do so? 1. This issue should be answered in the affirmative. As found by the Court of Appeals, Macleod and Company contracted by telephone the services of petitioner to ship the hemp in question from the former's private pier at Sasa, Davao City, to Manila, to be subsequently transhipped to Boston, Massachusetts, U.S.A., which oral contract was later confirmed by a formal and written booking issued by the shipper's branch office, Davao City, in virtue of which the carrier sent two of its lighters to undertake the service. It also appears that the patrons of said lighters were employees of the carrier with due authority to undertake the transportation and to sign the documents that may be necessary therefor so much so that the patron of LCT No. 1025 signed the receipt covering the cargo of hemp loaded therein as follows: . Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at Manila onto S.S. Steel Navigator. FINAL DESTINATION: Boston. The fact that the carrier sent its lighters free of charge to take the hemp from Macleod's wharf at Sasa preparatory to its loading onto the ship Bowline Knot does not in any way impair the contract of carriage already entered into between the carrier and the shipper, for that preparatory step is but part and parcel of said contract of carriage. The lighters were merely employed as the first step of the voyage, but once that step was taken and the hemp delivered to the carrier's employees, the rights and obligations of the parties attached thereby subjecting them to the principles and usages of the maritime law. In other words, here we have a complete contract of carriage the consummation of which has already begun: the shipper delivering the cargo to the carrier, and the latter taking possession thereof by placing it on a lighter manned by its authorized employees, under which Macleod became entitled to the privilege secured to him by law for its safe transportation and delivery, and the carrier to the full payment of its freight upon completion of the voyage. The receipt of goods by the carrier has been said to lie at the foundation of the contract to carry and deliver, and if actually no goods are received there can be no such contract. The liability and responsibility of the carrier under a contract for the carriage of goods commence on their actual delivery to, or receipt by, the carrier or an authorized agent. ... and delivery to a lighter in charge of a vessel for shipment on the vessel, where it is the custom to deliver in that way, is a good delivery and binds the vessel receiving the freight, the liability commencing at the time of delivery to the lighter. ... and, similarly, where there is a contract to carry

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goods from one port to another, and they cannot be loaded directly on the vessel and lighters are sent by the vessel to bring the goods to it, the lighters are for the time its substitutes, so that the bill of landing is applicable to the goods as soon as they are placed on the lighters . (80 C.J.S., p. 901, emphasis supplied) ... The test as to whether the relation of shipper and carrier had been established is, Had the control and possession of the cotton been completely surrendered by the shipper to the railroad company? Whenever the control and possession of goods passes to the carrier and nothing remains to be done by the shipper, then it can be said with certainty that the relation of shipper and carrier has been established. Railroad Co. v. Murphy, 60 Ark. 333, 30 S.W. 419, 46 A. St. Rep. 202; Pine Bluff & Arkansas River Ry. v. MaKenzie, 74 Ark. 100, 86 S.W. 834; Matthews & Hood v. St. L., I.M. & S.R. Co., 123 Ark. 365, 185 S.W. 461, L.R.A. 1916E, 1194. (W.F. Bogart & Co., et al. v. Wade, et al., 200 S.W. 148). The claim that there can be no contract of affreightment because the hemp was not actually loaded on the ship that was to take it from Davao City to Manila is of no moment, for, as already stated, the delivery of the hemp to the carrier's lighter is in line with the contract. In fact, the receipt signed by the patron of the lighter that carried the hemp stated that he was receiving the cargo "in behalf of S.S. Bowline Knot in good order and condition." On the other hand, the authorities are to the effect that a bill of lading is not indispensable for the creation of a contract of carriage. Bill of lading not indispensable to contract of carriage. As to the issuance of a bill of lading, although article 350 of the Code of Commerce provides that "the shipper as well as the carrier of merchandise or goods may mutua-lly demand that a bill of lading is not indispensable. As regards the form of the contract of carriage it can be said that provided that there is a meeting of the minds and from such meeting arise rights and obligations, there should be no limitations as to form." The bill of lading is not essential to the contract, although it may become obligatory by reason of the regulations of railroad companies, or as a condition imposed in the contract by the agreement of the parties themselves. The bill of lading is juridically a documentary proof of the stipulations and conditions agreed upon by both parties. (Del Viso, pp. 314-315; Robles vs. Santos, 44 O.G. 2268). In other words, the Code does not demand, as necessary requisite in the contract of transportation, the delivery of the bill of lading to the shipper, but gives right to both the carrier and the shipper to mutually demand of each other the delivery of said bill. (Sp. Sup. Ct. Decision, May 6, 1895). (Martin, Philippine Commercial Laws, Vol. II, Revised Edition, pp. 12-13) The liability of the carrier as common carrier begins with the actual delivery of the goods for transportation, and not merely with the formal execution of a receipt or bill of lading; the issuance of a bill of lading is not necessary to complete delivery and acceptance. Even where it is provided by statute that liability commences with the issuance of the bill of lading, actual delivery and acceptance are sufficient to bind the carrier. (13 C.J.S., p. 288) 2. Petitioner disclaims responsibility for the damage of the cargo in question shielding itself behind the claim offorce majeure or storm which occurred on the night of October 29, 1952. But the evidence fails to bear this out. Rather, it shows that the mishap that caused the damage or loss was due, not to force majeure, but to lack of adequate precautions or measures taken by the carrier to prevent the loss as may be inferred from the following findings of the Court of Appeals: Aside from the fact that, as admitted by appellant's own witness, the ill-fated barge had cracks on its bottom (pp. 18-19, t.s.n., Sept. 13, 1959) which admitted sea water in the same manner as rain entered "thru tank man-holes", according to the patron of LCT No. 1023 (exh. JJJ-4) conclusively showing that the barge was not seaworthy it should be noted that on the night of the nautical accident there was no storm, flood, or other natural disaster or calamity. Certainly, winds of 11 miles per hour, although stronger than the average 4.6 miles per hour then prevailing in Davao on October 29, 1952 (exh. 5), cannot be classified as storm. For according to Beaufort's wind scale, a storm has wind velocities of from 64 to 75 miles per hour; and by Philippine Weather Bureau standards winds should have a velocity of from 55 to 74 miles per hour in order to be classified as storm (Northern Assurance Co., Ltd. vs. Visayan Stevedore Transportation Co., CAG.R. No. 23167-R, March 12, 1959).

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The Court of Appeals further added: "the report of R. J. del Pan & Co., Inc., marine surveyors, attributes the sinking of LCT No. 1025 to the 'non-water-tight conditions of various buoyancy compartments' (exh. JJJ); and this report finds confirmation on the above-mentioned admission of two witnesses for appellant concerning the cracks of the lighter's bottom and the entrance of the rain water 'thru manholes'." We are not prepared to dispute this finding of the Court of Appeals.
3. There can also be no doubt that the insurance company can recover from the carrier as assignee of the owner of the cargo for the insurance amount it paid to the latter under the insurance contract. And this is so because since the cargo that was damaged was insured with respondent company and the latter paid the amount represented by the loss, it is but fair that it be given the right to recover from the party responsible for the loss. The instant case, therefore, is not one between the insured and the insurer, but one between the shipper and the carrier, because the insurance company merely stepped into the shoes of the shipper. And since the shipper has a direct cause of action against the carrier on account of the damage of the cargo, no valid reason is seen why such action cannot be asserted or availed of by the insurance company as a subrogee of the shipper. Nor can the carrier set up as a defense any defect in the insurance policy not only because it is not a privy to it but also because it cannot avoid its liability to the shipper under the contract of carriage which binds it to pay any loss that may be caused to the cargo involved therein. Thus, we find fitting the following comments of the Court of Appeals: It was not imperative and necessary for the trial court to pass upon the question of whether or not the disputed abaca cargo was covered by Marine Open Cargo Policy No. MK-134 isued by appellee. Appellant was neither a party nor privy to this insurance contract, and therefore cannot avail itself of any defect in the policy which may constitute a valid reason for appellee, as the insurer, to reject the claim of Macleod, as the insured. Anyway, whatever defect the policy contained, if any, is deemed to have been waived by the subsequent payment of Macleod's claim by appellee. Besides, appellant is herein sued in its capacity as a common carrier, and appellee is suing as the assignee of the shipper pursuant to exhibit MM. Since, as above demonstrated, appellant is liable to Macleod and Company of the Philippines for the los or damage to the 1,162 bales of hemp after these were received in good order and condition by the patron of appellant's LCT No. 1025, it necessarily follows that appellant is likewise liable to appellee who, as assignee of Macleod, merely stepped into the shoes of and substituted the latter in demanding from appellant the payment for the loss and damage aforecited. 4. It should be recalled in connection with this issue that during the trial of this case the carrier asked the lower court to order the production of the books of accounts of the Odell Plantation containing the charges it made for the loss of the damaged hemp for verification of its accountants, but later it desisted therefrom on the claim that it finds their production no longer necessary. This desistance notwithstanding, the shipper however pre-sented other documents to prove the damage it suffered in connection with the cargo and on the strength thereof the court a quo ordered the carrier to pay the sum of P60,421.02. And after the Court of Appeals affirmed this award upon the theory that the desistance of the carrier from producing the books of accounts of Odell Plantation implies an admission of the correctness of the statements of accounts contained therein, petitioner now contends that the Court of Appeals erred in basing the affirmance of the award on such erroneous interpretation. There is reason to believe that the act of petitioner in waiving its right to have the books of accounts of Odell Plantation presented in court is tantamount to an admission that the statements contained therein are correct and their verification not necessary because its main defense here, as well as below, was that it is not liable for the loss because there was no contract of carriage between it and the shipper and the loss caused, if any, was due to a fortuitous event. Hence, under the carrier's theory, the correctness of the account representing the loss was not so material as would necessitate the presentation of the books in question. At any rate, even if the books of accounts were not produced, the correctness of the accounts cannot now be disputed for the same is supported by the original documents on which the entries in said books were based which were presented by the shipper as part of its evidence. And according to the Court of Appeals, these documents alone sufficiently establish the award of P60,412.02 made in favor of respondent. 5. Finally, with regard to the question concerning the personality of the insurance company to maintain this action, we find the same of no importance, for the attorney himself of the carrier admitted in open court that it is a foreign corporation doing business in the Philippines with a personality to file the present action. WHEREFORE, the decision appealed from is affirmed, with costs against petitioner. Bengzon, C.J., Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala, Makalintal, Bengzon, J.P. and Zaldivar JJ., concur.

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SUPREME COURT REPORTS ANNOTATED Roldan vs. Lim No. 11325. December 7, 1917 MONICO G. ROLDAN, plaintiff and appellant, vs. LIM PONzo & Co., defendant and appellee.

COMMON CARRIERS; DAMAGES FOR FAILURE TO DELIVER GOODS.Article 366 of the Commercial Code is limited to cases of claims for damages to goods actually received by the consignee; it has no application in cases wherein the goods entrusted to the carrier are not delivered to the consignee by the carrier in pursuance of the terms of the carriage contract.

CARSON, J.: Plaintiff in this action seeks to recover damages in the sum of P3,780.12 for the alleged failure of the defendant company to live up to its contract for the transportation of 2,244 packages of sugar from the plaintiff's hacienda to Iloilo. Defendants admits the execution of the contract, the receipt from the plaintiff of 2,244 packages of sugar for transportation, and the loss of a part of this sugar. Counsel for defendant insists, however, that it should not be held responsible for its failure to carry out the contract, because, as it alleges, the sugar was lost in a wreck in the river of Jalaud, without fault on the part of the owner, the patron, or the crew of the vessel. There would not appear to be much question as to the fact that the defendant company's lorcha was wrecked in the river Jalaud, and that of the 2,244 packages of plaintiff's sugar aboard the vessel, only 1,022 packages were saved in a more or less damaged condition. At the trial in the court below, the plaintiff undertook to establish the facts upon which he based his claim for damages and introduced evidence tending to disclose that the lorcha had been wrecked and the sugar lost through the negligence and lack of skill of the master of the lorcha in the management of his vessel. After the plaintiff had submitted all his evidence and before the defendant company had called any of its witnesses, the trial judge peremptorily dismissed the complaint on the ground that it was neither alleged or proved that the plaintiff had complied with the provisions of section 366 of the Commercial Code. That section is as follows: Within the twenty-four hours following the receipt of the merchandise a claim may be brought against the carrier on account of damage or average found therein on opening the packages, provided that the indication of the damage of average giving rise to the claim cannot be case said claim would only admitted on the receipt of the packages.
l a wp h i 1 .n et

After the periods mentioned have elapsed, or after the transportation charges have been paid, no claim whatsoever shall be admitted against the carrier with regards to the condition in which the goods transported were delivered. We agree with plaintiff's counsel that the dismissal of the complaint on this ground was error which necessitates the return of the record to the court below. Article 366 of the Commercial Code is limited to cases of claims for damage goods actually turned over by the crrier and received by the consignee, whether those damages be apparent from the examination of the packages in which the goods are delivered, or of such a character that the nature and extent of the damage is not apparent until the packages are opened and the contents examined. Clearly it has no application in such cases wherein the goods entrusted to the carrier are not delivered by the carrier to the

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consignee. In such cases there can be no question of a claim for damages suffered by the goods while in transport, since the claim for damages arises exclusively out of the failure to make delivery. The object sought to be attained by the requirement of the submission of claims in pursuance of this article is to compel the consignee of goods entrusted to a carrier to make prompt demand for settlement of alleged damages suffered by the goods while in transport, so that the carrier will be enabled to verify all such claims at the time of delivery or within twenty-four hours thereafter, and if necessary fix responsibility and secure evidence as to the nature and extent of the alleged damages to the goods while the matter is still fresh in the minds of the parties. To this end of provision is made in article 367 of the Code for the prompt settlement of disputes as to the nature and extent of the alleged damages, and for the final disposition of the damaged gokods, which is wholly inconsistent with the contention that these articles are applicable in cases wherein the claim against the carrier is founded upon his failure to make delivery of the goods entrusted to him. Article 367 of the Commercial Code is as follows: If there should occur doubts and disputes between the consignee and the carrier with regard to the condition of goods transported at the time of their delivery to the former, the said goods shall be examined by the experts appointed by the parties, and a third one, in case of disagreement, appointed by the judicial authority, the result of the examination always being reduced to writing; and if the persons interested should not agree to the report of the experts and could not reach an agreement, said judicial authority shall have the merchandise deposited in a safe warehouse, and the parties interested shall make use of their rights in the proper manner. It is very clear, then, that in so far as this action seeks to recover damages for defendant's failure to deliver 1,222 packages or bayones of sugar, the failure to make claim for such damages under the provisions of article 366 of the Commercial Code in no wise affects the respective rights of the parties. In so far as this action is founded on a claim for damages resulting from the wetting of the 1,022 packages of sugar which were saved from the wreck, it seems clear that if these 1,022 packages of sugar were delivered by the carrier and received by the consignee under and in pursuance of the terms of the contract, this claim for damages would be defeated by the plaintiff's failure to make claim therefor in accordance with the terms of article 366 of the Code. We are of opinion, however, that the necessity for making the claim in accordance with that article did not arise if, as it is alleged, these 1,022 packages of sugar were recovered from the wreck by the plaintiff, himself, in an effort, by his own activities, to save his property from total loss. The measures to be taken under the terms of article 367 of the Code when the parties are unable to arrive at an amicable settlement of claims for damages set up in accordance with article 366, quite clearly indicate that the necessity for the presentation of claims under this article arises only in those cases wherein the carrier makes delivery and the consignee receives the goods in pursuance of the terms of the contract. Until the defendant has had an opportunity to submit his evidence it is impossible to determine under what conditions these 1,022 packages of sugar came into the possession of the plaintiff, or to determine whether his claim for damages by the wetting of this sugar, if well founded in every other respect, is or should be defeated by his failure to make claim for such damages in the manner and form indicated in article 366 of the Commercial Code. We conclude that the judgment entered in the court below should be reversed and the record remanded to the court below for new trial upon all the issues raised by the pleadings, it being expressly understood, however, that the evidence already in the record may be considered as submitted at the new trial, without prejudice to the right of either party to offer such additional evidence as he may deem proper in support of the allegations set forth in the pleadings. No costs will be taxed in this instance. So ordered. Arellano, C. J., Torres, Johnson, Street, and Malcolm, JJ., concur.

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SUPREME COURT REPORTS ANNOTATED New Zealand Ins. Co., Ltd. vs. Choa Joy, etc. No. L-7311. September 30, 1955

NEW ZEALAND INSURANCE Co., LTD., plaintiff and appellant, vs. ADRIANO CHOA JOY, ETC., defendant and appellee.

1.COMMON CARRIERS; DAMAGES; REQUISITES BEFORE CLAIM FOR DAMAGES MAY BE DEMANDED. In order that the condition provided in Article 366 of the Code of Commerce may be demanded there should be a consignment of goods, through a common carrier, by a consignor in one place to a consignee in another place, and the delivery of the merchandise by the carrier to the consignee at the place of destination. In the instant case, the consignor is the branch office of Lee Teh & Co., Inc. at Catarman, Samar, which placed the cargo on board the ship Jupiter, and the consignee, its main office at Manila. The cargo never reached Manila, its destination, "nor was it ever delivered to the consignee, the office of the shipper in Manila, because the ship ran aground upon entering Laoang Bay, Samar on the same day of the shipment. Such being the case, Article 366 does not have application because the cargo was never received by the consignee. Moreover, under the bill of lading issued by the carrier (Exhibit C), it was the latter's undertaking to bring the cargo to its destinationManila,and deliver it to its consignee, which undertaking was never complied with. The carrier, therefore, breached its contract, and, as such, it forefeited its right to invoke in its favor the condition required by Article 366. 2.ID.; ID.; ID.; LIABILITY OF CARRIER TO BE DETERMINED BY CARRIAGE CONTRACT. The liability of the carrier must be determined in the light of the carriage contract. Where the contract calls for reciprocal obligations, the carrier cannot demand fulfillment of its part from the shipper or consignee unless it first complies with its own obligation. (Article 1100, old Civil Code). The fact that the consignor is but the branch office of the company that shipped the goods, and the consignee is the main office at Manila, is of no moment, because the duties of each party under the law are different. Moreover, even if the consignor and the consignee be considered as one and the same party, still the carrier cannot disclaim responsibility under its contract for the simple reason that it failed to comply with its obligation to bring the cargo to its destination. This breach alone justifies its liability under the carriage contract.

BAUTISTA ANGELO, J.: This is an action for the recovery of the sum of P5,196.20 with legal interest thereon from the date of the filing of the complaint. On May 20, 1950, the ship "Jupiter", on her voyage No. 149, received on board at Carangian, Samar, in good order and condition, 107 bundles of first class loose weight hemp weighing 8,273 kilos, of 130.80 piculs, valued at P6,736.20, from Lee Teh & Co., Inc., for transportation and delivery to Manila, under a bill of lading issued by the carrier to the shipper. The ship was owned by Adriano Choa Joy, doing business under the name of South Sea Shipping Line, while the cargo was shipped by the branch office of Lee Teh & Co., Inc. at Carangian, Samar, for transportation and delivery to its main office at Manila. The cargo failed to arrive in Manila because the vessel ran aground while entering the Laoang Bay, Samar, on May 20, 1950, due to the negligence of its captain, Jose Molina, who, in the investigation conducted by the Marine Board of Inquiry, was found negligent of his duties and was suspended from office for a period of three months. Of the

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cargo, only 7,590 kilos, or 120 piculs of hemp, were saved and because of their damaged condition, they were sold for the sum of P2,040, the consignor having spent P500 for their salvage, thereby causing Lee Teh & Co., Inc. losses in the sum of P5,196.20. The cargo was insured by the New Zealand Insurance Co., Ltd., and because of the damage caused to said cargo while in transit, the losses were paid by said company to the shipper. The carrier having refused to reimburse these damages despite demands made to that effect, the insurance company, as subrogee of the shipper instituted the present action before the Court of First Instance of Manila. After the parties had presented their evidence, the court found that, while the shipper had suffered damages because of the inability of the carrier to transport the cargo as agreed upon, however, the liability of the carrier did not attach because of the failure of the shipper or of the consignee to file its claim for damages within 24 hours from receipt of the cargo as required by law. Consequently, the court dismissed the case, with costs against the plaintiff. Plaintiff brought this case on appeal directly to this Court. Appellant poses in this appeal the following issue: "Whether Lee Teh & Co., Inc, of Manila, as consignee, or Lee Teh & Co., Inc. of Catarman, Samar, as consignor, should have filed its claim for damages to the cargo with the shipping company, herein defendant, within twenty four hours from the date the said cargo was salvaged by the consignor, in accordance with Article 366 of the Code of Commerce for this action to prosper, or that neither the said consignee nor the said consignor was under the obligation to file the said claim within the said period, as they are not bound by the provisions of Article 366 of the Code of Commerce." Article 366 of the Code of Commerce, which was applied by the court, provides: Within twenty-four hours following the receipt of the merchandise, the claim against the carrier for damage or average which may be found therein upon opening the packages, may be made, provided that the indications of the damage or average which gives rise to the claim cannot be ascertained from the outside part of such packages, in which case the claim shall be admitted only at the time of receipt. After the periods mentioned have elapsed, or the transportation charges have been paid, no claim shall be admitted against the carrier with regard to the condition in which the goods transported were delivered. It would appear from the above that in order that the condition therein provided may be demanded there should be a consignment of goods, through a common carrier, by a consignor in one place to a consignee in another place. And said article provides that the claim for damages must be made "within twenty-four hours following the receipt of the merchandise" by the consignee from the carrier. In other words, there must be delivery of the merchandise by the carrier to the consignee at the place of destination. In the instant case, the consignor is the branch office of Lee Teh & Co., Inc., at Catarman, Samar, which placed the cargo on board the ship Jupiter, and the consignee, its main office at Manila. The lower court found that the cargo never reached Manila, its destination, nor was it ever delivered to the consignee, the office of the shipper in Manila, because the ship ran aground upon entering Laoang Bay, Samar on the same day of the shipment. Such being the case, it follows that the aforesaid article 366 does not have application because the cargo was never received by the consignee. Moreover, under the bill of lading issued by the carrier (Exhibit C), it was the letter's undertaking to bring the cargo to its destination Manila,and deliver it to consignee, which undertaking was never complied with. The carrier, therefore, breached its contract, and, as such, it forfeited its right to invoke in its favor the conditions required by article 366. One case parallel to the present is Roldan vs. Lim Ponzo & Co., 37 Phil., 285. In that case, plaintiff sought to recover damages for failure of defendant to transport 2,244 packages of sugar from plaintiff's hacienda to Iloilo. It was proven that the cargo did not reach its destination because the lorcha carrying it was wrecked in the river Jalaud through the negligence and lack of skill of the master of the lorcha. And of the total cargo of 2,244 packages of sugar, only 1,022 were saved in damaged condition through the efforts made by the shipper. Because plaintiff failed to comply with the requirement of article 366 of the Code of Commerce, the lower court found for defendant and dismissed the case. But this Court held that said article "is limited to cases of claims for damages to goods actually received by the consignee; it has no application in cases wherein the goods entrusted to the carrier are not delivered to the consignee by the carrier in pursuance of the terms of the carriage contract." Elaborating on this point, this Court commented:

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Article 366 of the Commercial Code is limited to cases of claims for damages to goods actually turned over by the carrier and received by the consignee, whether those damages be apparent from an examination of the packages in which the goods are delivered, or of such character that the nature and extend of the damage is not apparent until the packages are opened and the contents examined. Clearly it has no application in cases wherein the goods entrusted to the carrier are not delivered by the carrier to the consignee. In such cases there can be no question of a claim for damages suffered by the goods while in transport, since the claim for damages arises exclusively out of the failure to make delivery. . . . We are of opinion, however, that the necessity for making the claim in accordance with that article did not arise if, as it is alleged, these 1,022 packages, of sugar were recovered from the wreck by the plaintiff, himself, in an effort, by his own activities, to save his property from total loss. The measures to be taken under the terms of Article 367 of the Code when the parties are unable to arrive at an amicable settlement of claims for damages set up in accordance with Article 366, quite clearly indicate that the necessity for the presentation of claims under this article arises only in those cases wherein the carrier makes delivery and the consignee receives the goods in pursuance of the terms of the contract. It is true that in the instant case there is some disagreement as to whether the salvage of the portion of the cargo that was saved was due to the efforts of the carrier itself or to the combined efforts of the latter and the shipper as a result of which the salvaged cargo was placed in possession of the shipper who sold it and deducted its proceeds from the liability of the carrier. But this discrepancy, in our opinion, would seem to be immaterial because the law as well as the contract contemplates delivery of the cargo to the consignee at its port of destination in order that the benefit of the law may be availed of. The liability of the carrier must be determined in the light of the carriage contract, and since that contract calls for reciprocal obligations, the carrier cannot demand fulfillment of its part from the shipper or consignee unless it first complies with its own obligation. (Article 1100, old Civil Code.) The fact that the consignor is but the branch office of the company that shipped the goods, and the consignee is the main office at Manila, is of no moment, because the duties of each party under the law are different. Moreover, even if the consignor and the consignee be considered as one and the same party, still the carrier cannot disclaim responsibility under its contract for the simple reason that it failed to comply with its obligation to bring the cargo to its destination. This breach alone justifies its liability under the carriage contract. Wherefore, the decision appealed from is hereby reversed, and another one will be entered ordering the defendant to pay the plaintiff the sum of P5,196.20, with legal interest thereon from the filing of the complaint, with costs against appellee.
1 wp h l . nt

Bengzon, Acting C. J., Padilla, Montemayor, Jugo, Labrador, Concepcion, and Reyes, J. B. L., JJ., concur.

Separate Opinions REYES, A., J., dissenting: I dissent. While there is dispute as to whether the cargo of hemp was salvage through the effort of the shipper or through those of the carrier, the lower court found that what was saved of the hemp was actually received by the shipper's agent at Catarman, who, however, did not file a claim for damages within 24 hours thereafter as provided in Article 366 of the Code of Commerce. The appellant contends that this article did not apply because "there was no delivery of goods by the carrier to the consignee." Upholding the contention, the majority opinion holds that the article has application only when the goods transported are delivered to the consignee at the port of destination but not otherwise, this on the theory that where the carrier breaches his contract by failing to take the goods to their destination he forfeits his right to invoke the article. To this I cannot agree. The Article reads:

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ART. 366. Within the twenty-four hours following the receipt of the merchandise, the claim against the carrier for damages or average which may be found therein upon opening of the packages, may be made, provided that the indications of the damage or average which gives rise to the claim cannot be ascertained from the outside part of such packages in which case the claim shall be admitted only at the time of receipt. After the periods mentioned have elapsed, or the transportation charges have been paid, no claim shall be admitted against the carrier with regard to the condition in which the goods transported were delivered. Nowhere in this article is it said or even hinted that prompt claim with regard to the condition in which the goods transported were delivered is required only when the delivery is made to the consignee at destination. And on principle I do not see why the article should not apply also where delivery is made to the shipper or consignor whether at the port of destination or of embarkation or at any other place where the cargo is discharged. Especially would this be true in the present case where consignor and consignee are the same person or entity and where damage to the cargo was not necessarily to be expected because the ship did not sink but merely ran aground, so that if any such damages was in fact noted upon delivery the same should have been promptly brought to the attention of the carrier. The majority cites the case of Roldan vs. Lim Ponzo, 37 Phil., 255. That case should be authority against rather than in favor of their conclusion. For it is to be noted that in that case the claim was for 2,244 bayones of sugar of which 1,222 bayones did not reach destination because the lorcha on which it was loaded was wrecked on the way, while the remaining 1,022 bayones were saved in a more or less damage condition, and this Court there held that as to the part of the sugar totally lost article 366 did not apply, but that as to be the 1,022 bayones of sugar that were saved, although in a damaged condition, there was need for determining under what conditions the same came into the possession of the plaintiff, because while there was allegation that the said 1,022 bayones of sugar "were recovered from the wreck by the plaintiff himself, in an effort, by his own activities, to save his property from total loss", the defendant had not had an opportunity to submit his evidence to the court. This court, therefor, remanded the case to the court below for a new trial in order to determine whether it was the carrier or the shipper that salvaged the sugar. The reason for this is to be found in the following excepts from the decision: In so far as this action is founded on a claim for damages resulting from the wetting of the 1,022 packages of sugar which were saved from the wreck, it seems clear that if these 1,022 packages of sugar were delivered by the carrier and received by the consignee under and in pursuance of the terms of the contract, this claim for damages could be defeated by the plaintiff's failure to make claim therefor in accordance with the term of article 366 of the Code. xxx xxx xxx

Until the defendant has had an opportunity to submit his evidence it is impossible to determine under what conditions these 1,022 packages of sugar came into the possession of the plaintiff, or to determine whether his claims for damages by the wetting of this sugar, if well founded in every other respect, is or should be defeated by his failure to make claim for such damages in the manner and from indicated in Article 366 of the Commercial Code. If we really mean to follow the decision of this Court in that former case, I think the proper thing to do is to first determine whether the hemp in this case was salvaged by the carrier or by the shipper. But as that is a disputed question of fact, the case should be certified to the Court of Appeals since it does not involve a purely legal question.

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SUPREME COURT REPORTS ANNOTATED Macam vs. Court of Appeals G.R. No. 125524. August 25, 1999.* BENITO MACAM doing business under the name and style BEN-MAC ENTERPRISES, petitioner, vs. COURT OF APPEALS, CHINA OCEAN SHIPPING CO., and/or WALLEM PHILIPPINES SHIPPING, INC., respondents.

Common Carriers; 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.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.

DECISION
BELLOSILLO, J.:

On 4 April 1989 petitioner Benito Macam, doing business under the name and style Ben-Mac Enterprises, shipped on board the vessel Nen Jiang, owned and operated by respondent China Ocean Shipping Co., through local agent respondent Wallem Philippines Shipping, Inc. (hereinafter WALLEM), 3,500 boxes of watermelons valued at US$5,950.00 covered by Bill of Lading No. HKG 99012 and exported through Letter of Credit No. HK 1031/30 issued by National Bank of Pakistan, Hongkong (hereinafter PAKISTAN BANK) and 1,611 boxes of fresh mangoes with a value of US$14,273.46 covered by Bill of Lading No. HKG 99013 and exported through Letter of Credit No. HK 1032/30 also issued by PAKISTAN BANK. The Bills of Lading contained the following pertinent provision: "One of the Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery order."[1] The shipment was bound for Hongkong with PAKISTAN BANK as consignee and Great Prospect Company of Kowloon, Hongkong (hereinafter GPC) as notify party. On 6 April 1989, per letter of credit requirement, copies of the bills of lading and commercial invoices were submitted to petitioner's depository bank, Consolidated Banking Corporation (hereinafter SOLIDBANK), which paid petitioner in advance the total value of the shipment of US$20,223.46. Upon arrival in Hongkong, the shipment was delivered by respondent WALLEM directly to GPC, not to PAKISTAN BANK, and without the required bill of lading having been surrendered. Subsequently, GPC failed to pay PAKISTAN BANK such that the latter, still in possession of the original bills of lading, refused to pay petitioner through SOLIDBANK. Since SOLIDBANK already pre-paid petitioner the value of the shipment, it demanded payment from respondent WALLEM through five (5) letters but was refused. Petitioner was thus allegedly constrained to return the amount involved to SOLIDBANK, then demanded payment from respondent WALLEM in writing but to no avail.

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On 25 September 1991 petitioner sought collection of the value of the shipment of US$20,223.46 or its equivalent of P546,033.42 from respondents before the Regional Trial Court of Manila, based on delivery of the shipment to GPC without presentation of the bills of lading and bank guarantee. Respondents contended that the shipment was delivered to GPC without presentation of the bills of lading and bank guarantee per request of petitioner himself because the shipment consisted of perishable goods. The telex dated 5 April 1989 conveying such request read -

AS PER SHPRS REQUEST KINDLY ARRANGE DELIVERY OF A/M SHIPT TO RESPEC TIVE CNEES WITHOUT PRESENTATION OF OB/L[2] and bank guarantee since for prepaid shipt ofrt charges already fully paid our end x x x x[3]
Respondents explained that it is a standard maritime practice, when immediate delivery is of the essence, for the shipper to request or instruct the carrier to deliver the goods to the buyer upon arrival at the port of destination without requiring presentation of the bill of lading as that usually takes time. As proof thereof, respondents apprised the trial court that for the duration of their two-year business relationship with petitioner concerning similar shipments to GPC deliveries were effected without presentation of the bills of lading.[4] Respondents advanced next that the refusal of PAKISTAN BANK to pay the letters of credit to SOLIDBANK was due to the latter's failure to submit a Certificate of Quantity and Quality. Respondents counterclaimed for attorneys fees and costs of suit . On 14 May 1993 the trial court ordered respondents to pay, jointly and severally, the following amounts: (1) P546,033.42 plus legal interest from 6 April 1989 until full payment; (2) P10,000.00 as attorney's fees; and, (3) the costs. The counterclaims were dismissed for lack of merit. [5] The trial court opined that respondents breached the provision in the bill of lading requiring that "one of the Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery order," when they released the shipment to GPC without presentation of the bills of lading and the bank guarantee that should have been issued by PAKISTAN BANK in lieu of the bills of lading. The trial court added that the shipment should not have been released to GPC at all since the instruction contained in the telex was to arrange delivery to the respecti ve consignees and not to any party. The trial court observed that the only role of GPC in the transaction as notify party was precisely to be notified of the arrival of the cargoes in Hongkong so it could in turn duly advise the consignee. Respondent Court of Appeals appreciated the evidence in a different manner. According to it, as established by previous similar transactions between the parties, shipped cargoes were sometimes actually delivered not to the consignee but to notify party GPC without need of the bills of lading or bank guarantee.[6] Moreover, the bills of lading were viewed by respondent court to have been properly superseded by the telex instruction and to implement the instruction, the delivery of the shipment must be to GPC, the real importer/buyer of the goods as shown by the export invoices, [7] and not to PAKISTAN BANK since the latter could very well present the bills of lading in its possession; likewise, if it were the PAKISTAN BANK to which the cargoes were to be strictly delivered it would no longer be proper to require a bank guarantee. Respondent court noted that besides, GPC was listed as a consignee in the telex. It observed further that the demand letter of petitioner to respondents never complained of misdelivery of goods. Lastly, respondent court found that petitioners claim of having reimbursed the amount involved to SOLIDBANK was unsubstantiated. Thus, on 13 March 1996 respondent court set aside the decision of the trial court and dismissed the complaint together with the counterclaims.[8] On 5 July 1996 reconsideration was denied.[9] Petitioner submits that the fact that the shipment was not delivered to the consignee as stated in the bill of lading or to a party designated or named by the consignee constitutes a misdelivery thereof. Moreover, petitioner argues that from the text of the telex, assuming there was such an instruction, the delivery of the
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shipment without the required bill of lading or bank guarantee should be made only to the designated consignee, referring to PAKISTAN BANK. We are not persuaded. The submission of petitioner that the fact that the shipment was not delivered to the consignee as stated in the Bill of Lading or to a party designated or named by the consignee constitutes a misdelivery thereof is a deviatio n from his cause of action before the trial court. It is clear from the allegation in his complaint that it does not deal with misdelivery of the cargoes but of delivery to GPC without the required bills of lading and bank guarantee -

6. The goods arrived in Hongkong and were released by the defendant Wallem directly to the buyer/notify party, Great Prospect Company and not to the consignee, the National Bank of Pakistan, Hongkong, without the required bills of lading and bank guarantee for the release of the shipment issued by the consignee of the goods x x x x [10]
Even going back to an event that transpired prior to the filing of the present case or when petitioner wrote respondent WALLEM demanding payment of the value of the cargoes, misdelivery of the cargoes did not come into the picture -

We are writing you on behalf of our client, Ben-Mac Enterprises who informed us that Bills of Lading No. 99012 and 99013 with a total value of US$20,223.46 were released to Great Prospect, Hongkong without the necessary bank guarantee. We were further informed that the consignee of the goods, National Bank of Pakistan, Hongkong, did not release or endorse the original bills of lading. As a result thereof, neither the consignee, National Bank of Pakistan, Hongkong, nor the importer, Great Prospect Company, Hongkong, paid our client for the goods x x x x [11]
At any rate, we shall dwell on petitioners submission only as a prelude to our discussion on the imputed liability of respondents concerning the shipped goods. Article 1736 of the Civil Code provides -

Art. 1736. The extraordinary responsibility of the common carriers lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the provisions of article 1738. [12]
We emphasize that the extraordinary responsibility of the common carriers lasts until actual or constructive delivery of the cargoes to the consignee or to the person who has a right to receive them. PAKISTAN BANK was indicated in the bills of lading as consignee whereas GPC was the notify party. However, in the export invoices GPC was clearly named as buyer/importer. Petitioner also referred to GPC as such in his demand letter to respondent WALLEM and in his complaint before the trial court. This premise draws us to conclude that the delivery of the cargoes to GPC as buyer/importer which, conformably with Art. 1736 had, other than the consignee, the right to receive them[13] was proper. The real issue is whether respondents are liable to petitioner for releasing the goods to GPC without the bills of lading or bank guarantee. Respondents submitted in evidence a telex dated 5 April 1989 as basis for delivering the cargoes to GPC without the bills of lading and bank guarantee. The telex instructed delivery of various shipments to the respective consignees without need of presenting the bill of lading and bank guarantee per the respective shippers request since for prepaid shipt ofrt charges already fully paid. Petitioner was named therein as
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shipper and GPC as consignee with respect to Bill of Lading Nos. HKG 99012 and HKG 99013. Petitioner disputes the existence of such instruction and claims that this evidence is self-serving. From the testimony of petitioner, we gather that he has been transacting with GPC as buyer/importer for around two (2) or three (3) years already. When mangoes and watermelons are in season, his shipment to GPC using the facilities of respondents is twice or thrice a week. The goods are released to GPC. It has been the practice of petitioner to request the shipping lines to immediately release perishable cargoes such as watermelons and fresh mangoes through telephone calls by himself or his people. In transacti ons covered by a letter of credit, bank guarantee is normally required by the shipping lines prior to releasing the goods. But for buyers using telegraphic transfers, petitioner dispenses with the bank guarantee because the goods are already fully paid. In his several years of business relationship with GPC and respondents, there was not a single instance when the bill of lading was first presented before the release of the cargoes. He admitted the existence of the telex of 3 July 1989 containing his request to deliver the shipment to the consignee without presentation of the bill of lading[14] but not the telex of 5 April 1989 because he could not remember having made such request. Consider pertinent portions of petitioners testimony Q: Are you aware of any document which would indicate or show that your request to the defendant Wallem for the immediate release of your fresh fruits, perishable goods, to Great Prospect without the presentation of the original Bill of Lading? A: Yes, by telegraphic transfer, which means that it is fully paid. And I requested the immediate release of the cargo because there was immediate payment. Q And you are referring, therefore, to this copy Telex release that you mentioned where your Companys name appears Ben-Mac? Atty. Hernandez: Just for the record, Your Honor, the witness is showing a Bill of Lading referring to SKG (sic) 93023 and 93026 with Great Prospect Company. Atty. Ventura: Q: Is that the telegraphic transfer? A: Yes, actually, all the shippers partially request for the immediate release of the goods when they are perishable. I thought Wallem Shipping Lines is not neophyte in the business. As far as LC is concerned, Bank guarantee is needed for the immediate release of the goods x x x x [15] Q: Mr. Witness, you testified that it is the practice of the shipper of the perishable goods to ask the shipping lines to release immediately the shipment. Is that correct? A: Yes, sir. Q: Now, it is also the practice of the shipper to allow the shipping lines to release the perishable goods to the importer of goods without a Bill of Lading or Bank guarantee? A: No, it cannot be without the Bank Guarantee. Atty. Hernandez: Q: Can you tell us an instance when you will allow the release of the perishable goods by the shipping lines to the importer without the Bank guarantee and without the Bill of Lading? A: As far as telegraphic transfer is concerned. Q: Can you explain (to) this Honorable Court what telegraphic transfer is? A: Telegraphic transfer, it means advance payment that I am already fully paid x x x x

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Q: Mr. Macam, with regard to Wallem and to Great Prospect, would you know and can you recall that any of your shipment was released to Great Prospect by Wallem through telegraphic transfer? A: I could not recall but there were so many instances sir. Q: Mr. Witness, do you confirm before this Court that in previous shipments of your goods through Wallem, you requested Wallem to release immediately your perishable goods to the buyer? A: Yes, that is the request of the shippers of the perishable goods x x x x [16] Q: Now, Mr. Macam, if you request the Shipping Lines for the release of your goods immediately even without the presentation of OBL, how do you course it? A: Usually, I call up the Shipping Lines, sir x x x x [17] Q: You also testified you made this request through phone calls. Who of you talked whenever you made such phone call? A: Mostly I let my people to call, sir. (sic) Q: So everytime you made a shipment on perishable goods you let your people to call? (sic) A: Not everytime, sir. Q: You did not make this request in writing? A: No, sir. I think I have no written request with Wallem x x x x[18]

Against petitioners claim of not remembering having made a request for delivery of subject cargoes to GPC without presentation of the bills of lading and bank guarantee as reflected in the telex of 5 April 1989 are damaging disclosures in his testimony. He declared that it was his practice to ask the shipping lines to immediately release shipment of perishable goods through telephone calls by himself or his people. He no longer required presentation of a bill of lading nor of a bank guarantee as a condition to releasing the goods in case he was already fully paid. Thus, taking into account that subject shipment consisted of perishable goods and SOLIDBANK pre-paid the full amount of the value thereof, it is not hard to believe the claim of respondent WALLEM that petitioner indeed requested the release of the goods to GPC without presentation of the bills of lading and bank guarantee. The instruction in the telex of 5 April 1989 was to deliver the shipment to respective consignees. And so petitioner argues that, assuming there was such an instruction, the consignee referred to was PAKISTAN BANK. We find the argument too simplistic. Respondent court analyzed the telex in its entirety and correctly arrived at the conclusion that the consignee referred to was not PAKISTAN BANK but GPC -

There is no mistake that the originals of the two (2) subject Bills of Lading are still in the possession of the Pakistani Bank. The appealed decision affirms this fact. Conformably, to implement the said telex instruction, the delivery of the shipment must be to GPC, the notify party or real importer/buyer of the goods and not the Pakistani Bank since the latter can very well present the original Bills of Lading in its possession. Likewise, if it were the Pakistani Bank to whom the cargoes were to be strictly delivered, it will no longer be proper to require a bank guarantee as a substitute for the Bill of Lading. To construe otherwise will render meaningless the telex instruction. After all, the cargoes consist of perishable fresh fruits and immediate delivery thereof to the buyer/importer is essentially a factor to reckon with. Besides, GPC is listed as one among the several consignees in the telex (Exhibit 5-B) and the instruction in the telex was to arrange delivery of A/M shipment (not any party) to respective consignees without presentation of OB/L and bank guarantee x x x x[19]
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Apart from the foregoing obstacles to the success of petitioners cause, petitioner failed to substantiate his claim that he returned to SOLIDBANK the full amount of the value of the cargoes. It is not far-fetched to entertain the notion, as did respondent court, that he merely accommodated SOLIDBANK in order to recover the cost of the shipped cargoes from respondents. We note that it was SOLIDBANK which initially demanded payment from respondents through five (5) letters. SOLIDBANK must have realized the absence of privity of contract between itself and respondents. That is why petitioner conveniently took the cudgels for the bank. In view of petitioners utter failure to establish the liability of respondents over the cargoes, no reversible error was committed by respondent court in ruling against him. WHEREFORE , the petition is DENIED. The decision of respondent Court of Appeals of 13 March 1996 dismissing the complaint of petitioner Benito Macam and the counterclaims of respondents China Ocean Shipping Co. and/or Wallem Philippines Shipping, Inc., as well as its resolution of 5 July 1996 denying reconsideration, is AFFIRMED. SO ORDERED. Mendoza, Quisumbing, and Buena, JJ., concur.

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SUPREME COURT REPORTS ANNOTATED Southern Lines, Inc. vs. Court of Appeals No. L-16629. January 31, 1962. SOUTHERN LINES, INC., petitioner, vs. COURT OF APPEALS and CITY OF ILOILO, respondents. [Southern Lines, Inc. vs. Court of Appeals, 4 SCRA 258(1962)]

Common carriers; Liability for damages to goods; Articles 361 and 362 of the Code of Commerce. Under Article 361 of the Code of Commerce, the defendant-carrier, in order to free itself from liability, was only obliged to prove that the damages suffered by the goods were "by virtue of the nature or defect of the articles." Under the provisions of Article 362, the plaintiff, in order to hold the defendant liable, was obliged to prove that the damages to the goods by virtue of their nature, occurred on account of its negligence or because the defendant did not take the precaution adopted by careful persons. (Government vs. Ynchausti & Co., 40 Phil. 219, 223). Same; Same; Carrier not relieved from liability if improper packing of goods was apparent. If the fa ct proper packing is known to the carrier or his servants, or apparent upon ordinary observation, but it accepts the goods notwithstanding such condition, it is not relieved of liability for loss or injury resulting therefrom. (9 Am. Jur. 869)
DE LEON, J.: This is a petition to review on certiorari the decision of the Court of Appeals in CA-G.R. No. 15579-R affirming that of the Court of First Instance of Iloilo which sentenced petitioner Southern Lines, Inc. to pay respondent City of Iloilo the amount of P4,931.41. Sometime in 1948, the City of Iloilo requisitioned for rice from the National Rice and Corn Corporation (hereafter referred to as NARIC) in Manila. On August 24 of the same year, NARIC, pursuant to the order, shipped 1,726 sacks of rice consigned to the City of Iloilo on board the SS "General Wright" belonging to the Southern Lines, Inc. Each sack of rice weighed 75 kilos and the entire shipment as indicated in the bill of lading had a total weight of 129,450 kilos. According to the bill of lading, the cost of the shipment was P63,115.50 itemized and computed as follows: . Unit Price per bag P36.25 Handling at P0.13 per bag Trucking at P2.50 per bag T o t a l . . . . . .. . . . . P62,567.50 224.38 323.62 63,115.50

On September 3, 1948, the City of Iloilo received the shipment and paid the amount of P63,115.50. However, it was noted that the foot of the bill of lading that the City of Iloilo 'Received the above mentioned merchandise apparently in same condition as when shipped, save as noted below: actually received 1685 sacks with a gross weight of 116,131 kilos upon actual weighing. Total shortage ascertained 13,319 kilos." The shortage was equivalent to 41 sacks of rice with a net weight of 13,319 kilos, the proportionate value of which was P6,486.35. On February 14, 1951 the City of Iloilo filed a complaint in the Court of First Instance of Iloilo against NARIC and the Southern Lines, Inc. for the recovery of the amount of P6,486.35 representing the value of the shortage of the shipment of rice. After trial, the lower court absolved NARIC from the complaint, but sentenced the Southern Lines,

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Inc. to pay the amount of P4,931.41 which is the difference between the sum of P6,486.35 and P1,554.94 representing the latter's counterclaim for handling and freight. The Southern Lines, Inc. appealed to the Court of Appeals which affirmed the judgment of the trial court. Hence, this petition for review. The only question to be determined in this petition is whether or not the defendant-carrier, the herein petitioner, is liable for the loss or shortage of the rice shipped. Article 361 of the Code of Commerce provides: . ART. 361. The merchandise shall be transported at the risk and venture of the shipper, if the contrary has not been expressly stipulated. As a consequence, all the losses and deteriorations which the goods may suffer during the transportation by reason of fortuitous event, force majeure, or the inherent nature and defect of the goods, shall be for the account and risk of the shipper.
1 wp h 1 . t

Proof of these accidents is incumbent upon the carrier. Article 362 of the same Code provides: . ART. 362. Nevertheless, the carrier shall be liable for the losses and damages resulting from the causes mentioned in the preceding article if it is proved, as against him, that they arose through his negligence or by reason of his having failed to take the precautions which usage his establisbed among careful persons, unless the shipper has committed fraud in the bill of lading, representing the goods to be of a kind or quality different from what they really were. If, notwithstanding the precautions referred to in this article, the goods transported run the risk of being lost, on account of their nature or by reason of unavoidable accident, there being no time for their owners to dispose of them, the carrier may proceed to sell them, placing them for this purpose at the disposal of the judicial authority or of the officials designated by special provisions. Under the provisions of Article 361, the defendant-carrier in order to free itself from liability, was only obliged to prove that the damages suffered by the goods were "by virtue of the nature or defect of the articles." Under the provisions of Article 362, the plaintiff, in order to hold the defendant liable, was obliged to prove that the damages to the goods by virtue of their nature, occurred on account of its negligence or because the defendant did not take the precaution adopted by careful persons. (Government v. Ynchausti & Co., 40 Phil. 219, 223). Petitioner claims exemption from liability by contending that the shortage in the shipment of rice was due to such factors as the shrinkage, leakage or spillage of the rice on account of the bad condition of the sacks at the time it received the same and the negligence of the agents of respondent City of Iloilo in receiving the shipment. The contention is untenable, for, if the fact of improper packing is known to the carrier or his servants, or apparent upon ordinary observation, but it accepts the goods notwithstanding such condition, it is not relieved of liability for loss or injury resulting thereform. (9 Am Jur. 869.) Furthermore, according to the Court of Appeals, "appellant (petitioner) itself frankly admitted that the strings that tied the bags of rice were broken; some bags were with holes and plenty of rice were spilled inside the hull of the boat, and that the personnel of the boat collected no less than 26 sacks of rice which they had distributed among themselves." This finding, which is binding upon this Court, shows that the shortage resulted from the negligence of petitioner. Invoking the provisions of Article 366 of the Code of Commerce and those of the bill of lading, petitioner further contends that respondent is precluded from filing an action for damages on account of its failure to present a claim within 24 hours from receipt of the shipment. It also cites the cases of Government v. Ynchausti & Co., 24 Phil. 315 and Triton Insurance Co. v. Jose, 33 Phil. 194, ruling to the effect that the requirement that the claim for damages must be made within 24 hours from delivery is a condition precedent to the accrual of the right of action to recover

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damages. These two cases above-cited are not applicable to the case at bar. In the first cited case, the plaintiff never presented any claim at all before filing the action. In the second case, there was payment of the transportation charges which precludes the presentation of any claim against the carrier. (See Article 366, Code of Commerce.) It is significant to note that in the American case of Hoye v. Pennsylvania Railroad Co., 13 Ann. Case. 414, it has been said: . ... "It has been held that a stipulation in the contract of shipment requiring the owner of the goods to present a notice of his claim to the carrier within a specified time after the goods have arrived at their destination is in the nature of a condition precedent to the owner's right to enforce a recovery, that he must show in the first instance that be has complied with the condition, or that the circumstances were such that to have complied with it would have required him to do an unreasonable thing. The weight of authority, however, sustains the view that such a stipulation is more in the nature of a limitation upon the owner's right to recovery, and that the burden of proof is accordingly on the carrier to show that the limitation was reasonable and in proper form or within the time stated." (Hutchinson on Carrier, 3d ed., par. 44) Emphasis supplied. In the case at bar, the record shows that petitioner failed to plead this defense in its answer to respondent's complaint and, therefore, the same is deemed waived (Section 10, Rule 9, Rules of Court), and cannot be raised for the first time at the trial or on appeal. (Maxilom v. Tabotabo, 9 Phil. 390.) Moreover, as the Court of Appeals has said: . ... the records reveal that the appellee (respondent) filed the present action, within a reasonable time after the short delivery in the shipment of the rice was made. It should be recalled that the present action is one for the refund of the amount paid in excess, and not for damages or the recovery of the shortage; for admittedly the appellee (respondent) had paid the entire value of the 1726 sacks of rice, subject to subsequent adjustment, as to shortages or losses. The bill of lading does not at all limit the time for filing an action for the refund of money paid in excess. WHEREFORE, the decision of the Court of Appeals is hereby affirmed in all respects and the petition for certioraridenied. With costs against the petitioner. Padilla, Labrador, Concepcion, Reyes, J.B.L., Barrera, and Dizon, JJ., concur. Bengzon, C.J., Bautista Angelo and Paredes, JJ., took no part.

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