G.R. No.

L-69044 May 29, 1987

EASTERN SHIPPING LINES, INC., petitioner, vs.INTERMEDIATE APPELLATE COURT
and DEVELOPMENT INSURANCE & SURETY CORPORATION, respondents.
G.R. No. 71478 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner, vs.THE NISSHIN FIRE AND MARINE
INSURANCE CO., and DOWA FIRE & MARINE INSURANCE CO., LTD., respondents.
MELENCIO-HERRERA, J.:
These two cases, both for the recovery of the value of cargo insurance, arose from the same
incident, the sinking of the M/S ASIATICA when it caught fire, resulting in the total loss of
ship and cargo.
The basic facts are not in controversy:
In G.R. No. 69044, sometime in or prior to June, 1977, the M/S ASIATICA, a vessel operated
by petitioner Eastern Shipping Lines, Inc., (referred to hereinafter as Petitioner Carrier)
loaded at Kobe, Japan for transportation to Manila, 5,000 pieces of calorized lance pipes in
28 packages valued at P256,039.00 consigned to Philippine Blooming Mills Co., Inc., and 7
cases of spare parts valued at P92,361.75, consigned to Central Textile Mills, Inc. Both sets
of goods were insured against marine risk for their stated value with respondent
Development Insurance and Surety Corporation.
In G.R. No. 71478, during the same period, the same vessel took on board 128 cartons of
garment fabrics and accessories, in two (2) containers, consigned to Mariveles Apparel
Corporation, and two cases of surveying instruments consigned to Aman Enterprises and
General Merchandise. The 128 cartons were insured for their stated value by respondent
Nisshin Fire & Marine Insurance Co., for US $46,583.00, and the 2 cases by respondent
Dowa Fire & Marine Insurance Co., Ltd., for US $11,385.00.
Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the total
loss of ship and cargo. The respective respondent Insurers paid the corresponding marine
insurance values to the consignees concerned and were thus subrogated unto the rights of
the latter as the insured.

Page

On May 11, 1978, respondent Development Insurance & Surety Corporation (Development
Insurance, for short), having been subrogated unto the rights of the two insured
companies, filed suit against petitioner Carrier for the recovery of the amounts it had paid
to the insured before the then Court of First instance of Manila, Branch XXX (Civil Case No.
6087).

G.R. NO. 69044

Petitioner-Carrier denied liability mainly on the ground that the loss was due to an
extraordinary fortuitous event, hence, it is not liable under the law.
On August 31, 1979, the Trial Court rendered judgment in favor of Development Insurance
in the amounts of P256,039.00 and P92,361.75, respectively, with legal interest, plus
P35,000.00 as attorney's fees and costs. Petitioner Carrier took an appeal to the then Court
of Appeals which, on August 14, 1984, affirmed.
Petitioner Carrier is now before us on a Petition for Review on Certiorari.
G.R. NO. 71478
On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co. NISSHIN for short), and
Dowa Fire & Marine Insurance Co., Ltd. (DOWA, for brevity), as subrogees of the insured,
filed suit against Petitioner Carrier for the recovery of the insured value of the cargo lost
with the then Court of First Instance of Manila, Branch 11 (Civil Case No. 116151), imputing
unseaworthiness of the ship and non-observance of extraordinary diligence by petitioner
Carrier.
Petitioner Carrier denied liability on the principal grounds that the fire which caused the
sinking of the ship is an exempting circumstance under Section 4(2) (b) of the Carriage of
Goods by Sea Act (COGSA); and that when the loss of fire is established, the burden of
proving negligence of the vessel is shifted to the cargo shipper.
On September 15, 1980, the Trial Court rendered judgment in favor of NISSHIN and DOWA
in the amounts of US $46,583.00 and US $11,385.00, respectively, with legal interest, plus
attorney's fees of P5,000.00 and costs. On appeal by petitioner, the then Court of Appeals
on September 10, 1984, affirmed with modification the Trial Court's judgment by
decreasing the amount recoverable by DOWA to US $1,000.00 because of $500 per package
limitation of liability under the COGSA.
Hence, this Petition for Review on certiorari by Petitioner Carrier.
Both Petitions were initially denied for lack of merit. G.R. No. 69044 on January 16, 1985 by
the First Division, and G. R. No. 71478 on September 25, 1985 by the Second Division. Upon
Petitioner Carrier's Motion for Reconsideration, however, G.R. No. 69044 was given due
course on March 25, 1985, and the parties were required to submit their respective
Memoranda, which they have done.

Page

At the outset, we reject Petitioner Carrier's claim that it is not the operator of the M/S
Asiatica but merely a charterer thereof. We note that in G.R. No. 69044, Petitioner Carrier

On the other hand, in G.R. No. 71478, Petitioner Carrier sought reconsideration of the
Resolution denying the Petition for Review and moved for its consolidation with G.R. No.
69044, the lower-numbered case, which was then pending resolution with the First
Division. The same was granted; the Resolution of the Second Division of September 25,
1985 was set aside and the Petition was given due course.

stated in its Petition:

There are about 22 cases of the "ASIATICA" pending in various courts where various
plaintiffs are represented by various counsel representing various consignees or insurance
companies. The common defendant in these cases is petitioner herein, being the operator
of said vessel. ... 1
Petitioner Carrier should be held bound to said admission. As a general rule, the facts
alleged in a party's pleading are deemed admissions of that party and binding upon it. 2
And an admission in one pleading in one action may be received in evidence against the
pleader or his successor-in-interest on the trial of another action to which he is a party, in
favor of a party to the latter action. 3
The threshold issues in both cases are: (1) which law should govern the Civil Code
provisions on Common carriers or the Carriage of Goods by Sea Act? and (2) who has the
burden of proof to show negligence of the carrier?
On the Law Applicable
The law of the country to which the goods are to be transported governs the liability of the
common carrier in case of their loss, destruction or deterioration. 4 As the cargoes in
question were transported from Japan to the Philippines, the liability of Petitioner Carrier
is governed primarily by the Civil Code. 5 However, in all matters not regulated by said
Code, the rights and obligations of common carrier shall be governed by the Code of
Commerce and by special laws. 6 Thus, the Carriage of Goods by Sea Act, a special law, is
suppletory to the provisions of the Civil Code. 7
On the Burden of Proof
Under the Civil Code, common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence in the vigilance over goods,
according to all the circumstances of each case. 8 Common carriers are responsible for the
loss, destruction, or deterioration of the goods unless the same is due to any of the
following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;

Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event

Page

Petitioner Carrier claims that the loss of the vessel by fire exempts it from liability under
the phrase "natural disaster or calamity. " However, we are of the opinion that fire may not
be considered a natural disaster or calamity. This must be so as it arises almost invariably
from some act of man or by human means. 10 It does not fall within the category of an act
of God unless caused by lightning 11 or by other natural disaster or calamity. 12 It may
even be caused by the actual fault or privity of the carrier. 13

xxx xxx xxx 9

refers to leases of rural lands where a reduction of the rent is allowed when more than onehalf of the fruits have been lost due to such event, considering that the law adopts a
protection policy towards agriculture. 14
As the peril of the fire is not comprehended within the exception in Article 1734, supra,
Article 1735 of the Civil Code provides that all cases than those mention in Article 1734, the
common carrier shall be presumed to have been at fault or to have acted negligently, unless
it proves that it has observed the extraordinary deligence required by law.
In this case, the respective Insurers. as subrogees of the cargo shippers, have proven that
the transported goods have been lost. Petitioner Carrier has also proved that the loss was
caused by fire. The burden then is upon Petitioner Carrier to proved that it has exercised
the extraordinary diligence required by law. In this regard, the Trial Court, concurred in by
the Appellate Court, made the following Finding of fact:
The cargoes in question were, according to the witnesses defendant placed in hatches No, 2
and 3 cf the vessel, Boatswain Ernesto Pastrana noticed that smoke was coming out from
hatch No. 2 and hatch No. 3; that where the smoke was noticed, the fire was already big;
that the fire must have started twenty-four 24) our the same was noticed; that carbon
dioxide was ordered released and the crew was ordered to open the hatch covers of No, 2
tor commencement of fire fighting by sea water: that all of these effort were not enough to
control the fire.
Pursuant to Article 1733, common carriers are bound to extraordinary diligence in the
vigilance over the goods. The evidence of the defendant did not show that extraordinary
vigilance was observed by the vessel to prevent the occurrence of fire at hatches numbers 2
and 3. Defendant's evidence did not likewise show he amount of diligence made by the
crew, on orders, in the care of the cargoes. What appears is that after the cargoes were
stored in the hatches, no regular inspection was made as to their condition during the
voyage. Consequently, the crew could not have even explain what could have caused the
fire. The defendant, in the Court's mind, failed to satisfactorily show that extraordinary
vigilance and care had been made by the crew to prevent the occurrence of the fire. The
defendant, as a common carrier, is liable to the consignees for said lack of deligence
required of it under Article 1733 of the Civil Code. 15
Having failed to discharge the burden of proving that it had exercised the extraordinary
diligence required by law, Petitioner Carrier cannot escape liability for the loss of the cargo.

Page

Nor may Petitioner Carrier seek refuge from liability under the Carriage of Goods by Sea
Act, It is provided therein that:

And even if fire were to be considered a "natural disaster" within the meaning of Article
1734 of the Civil Code, it is required under Article 1739 of the same Code that the "natural
disaster" must have been the "proximate and only cause of the loss," and that the carrier
has "exercised due diligence to prevent or minimize the loss before, during or after the
occurrence of the disaster. " This Petitioner Carrier has also failed to establish
satisfactorily.

Sec. 4(2). Neither the carrier nor the ship shall be responsible for loss or damage arising or
resulting from
(b) Fire, unless caused by the actual fault or privity of the carrier.
xxx xxx xxx
In this case, both the Trial Court and the Appellate Court, in effect, found, as a fact, that
there was "actual fault" of the carrier shown by "lack of diligence" in that "when the smoke
was noticed, the fire was already big; that the fire must have started twenty-four (24)
hours before the same was noticed; " and that "after the cargoes were stored in the hatches,
no regular inspection was made as to their condition during the voyage." The foregoing
suffices to show that the circumstances under which the fire originated and spread are
such as to show that Petitioner Carrier or its servants were negligent in connection
therewith. Consequently, the complete defense afforded by the COGSA when loss results
from fire is unavailing to Petitioner Carrier.
On the US $500 Per Package Limitation:
Petitioner Carrier avers that its liability if any, should not exceed US $500 per package as
provided in section 4(5) of the COGSA, which reads:
(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 lawful money of the United States, or in case of goods not shipped in packages,
per customary freight unit, or the equivalent of that sum in other currency, unless the
nature and value of such goods have been declared by the shipper before shipment and
inserted in bill of lading. This declaration if embodied in the bill of lading shall be prima
facie evidence, but all be conclusive on the carrier.
By agreement between the carrier, master or agent of the carrier, and the shipper another
maximum amount than that mentioned in this paragraph may be fixed: Provided, That such
maximum shall not be less than the figure above named. In no event shall the carrier be
Liable for more than the amount of damage actually sustained.
xxx xxx xxx
Article 1749 of the New Civil Code also allows the limitations of liability in this wise:

Page

It is to be noted that the Civil Code does not of itself limit the liability of the common carrier
to a fixed amount per package although the Code expressly permits a stipulation limiting
such liability. Thus, the COGSA which is suppletory to the provisions of the Civil Code, steps
in and supplements the Code by establishing a statutory provision limiting the carrier's

Art. 1749. A stipulation that the common carrier's liability as limited to the value of the
goods appearing in the bill of lading, unless the shipper or owner declares a greater value,
is binding.

liability in the absence of a declaration of a higher value of the goods by the shipper in the
bill of lading. The provisions of the Carriage of Goods by.Sea Act on limited liability are as
much a part of a bill of lading as though physically in it and as much a part thereof as
though placed therein by agreement of the parties. 16
In G.R. No. 69044, there is no stipulation in the respective Bills of Lading (Exhibits "C-2" and
"I-3") 1 7 limiting the carrier's liability for the loss or destruction of the goods. Nor is there
a declaration of a higher value of the goods. Hence, Petitioner Carrier's liability should not
exceed US $500 per package, or its peso equivalent, at the time of payment of the value of
the goods lost, but in no case "more than the amount of damage actually sustained."
The actual total loss for the 5,000 pieces of calorized lance pipes was P256,039 (Exhibit
"C"), which was exactly the amount of the insurance coverage by Development Insurance
(Exhibit "A"), and the amount affirmed to be paid by respondent Court. The goods were
shipped in 28 packages (Exhibit "C-2") Multiplying 28 packages by $500 would result in a
product of $14,000 which, at the current exchange rate of P20.44 to US $1, would be
P286,160, or "more than the amount of damage actually sustained." Consequently, the
aforestated amount of P256,039 should be upheld.
With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their actual value was
P92,361.75 (Exhibit "I"), which is likewise the insured value of the cargo (Exhibit "H") and
amount was affirmed to be paid by respondent Court. however, multiplying seven (7) cases
by $500 per package at the present prevailing rate of P20.44 to US $1 (US $3,500 x P20.44)
would yield P71,540 only, which is the amount that should be paid by Petitioner Carrier for
those spare parts, and not P92,361.75.
In G.R. No. 71478, in so far as the two (2) cases of surveying instruments are concerned, the
amount awarded to DOWA which was already reduced to $1,000 by the Appellate Court
following the statutory $500 liability per package, is in order.
In respect of the shipment of 128 cartons of garment fabrics in two (2) containers and
insured with NISSHIN, the Appellate Court also limited Petitioner Carrier's liability to $500
per package and affirmed the award of $46,583 to NISSHIN. it multiplied 128 cartons
(considered as COGSA packages) by $500 to arrive at the figure of $64,000, and explained
that "since this amount is more than the insured value of the goods, that is $46,583, the
Trial Court was correct in awarding said amount only for the 128 cartons, which amount is
less than the maximum limitation of the carrier's liability."

Page

In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 (1981), the consignees of
tin ingots and the shipper of floor covering brought action against the vessel owner and
operator to recover for loss of ingots and floor covering, which had been shipped in vessel
supplied containers. The U.S. District Court for the Southern District of New York
rendered judgment for the plaintiffs, and the defendant appealed. The United States Court
of Appeals, Second Division, modified and affirmed holding that:

We find no reversible error. The 128 cartons and not the two (2) containers should be
considered as the shipping unit.

When what would ordinarily be considered packages are shipped in a container supplied
by the carrier and the number of such units is disclosed in the shipping documents, each of
those units and not the container constitutes the "package" referred to in liability limitation
provision of Carriage of Goods by Sea Act. Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A.&
1304(5).
Even if language and purposes of Carriage of Goods by Sea Act left doubt as to whether
carrier-furnished containers whose contents are disclosed should be treated as packages,
the interest in securing international uniformity would suggest that they should not be so
treated. Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A. 1304(5).
... After quoting the statement in Leather's Best, supra, 451 F 2d at 815, that treating a
container as a package is inconsistent with the congressional purpose of establishing a
reasonable minimum level of liability, Judge Beeks wrote, 414 F. Supp. at 907 (footnotes
omitted):
Although this approach has not completely escaped criticism, there is, nonetheless, much to
commend it. It gives needed recognition to the responsibility of the courts to construe and
apply the statute as enacted, however great might be the temptation to "modernize" or
reconstitute it by artful judicial gloss. If COGSA's package limitation scheme suffers from
internal illness, Congress alone must undertake the surgery. There is, in this regard,
obvious wisdom in the Ninth Circuit's conclusion in Hartford that technological
advancements, whether or not forseeable by the COGSA promulgators, do not warrant a
distortion or artificial construction of the statutory term "package." A ruling that these
large reusable metal pieces of transport equipment qualify as COGSA packages at least
where, as here, they were carrier owned and supplied would amount to just such a
distortion.
Certainly, if the individual crates or cartons prepared by the shipper and containing his
goods can rightly be considered "packages" standing by themselves, they do not suddenly
lose that character upon being stowed in a carrier's container. I would liken these
containers to detachable stowage compartments of the ship. They simply serve to divide
the ship's overall cargo stowage space into smaller, more serviceable loci. Shippers'
packages are quite literally "stowed" in the containers utilizing stevedoring practices and
materials analogous to those employed in traditional on board stowage.
In Yeramex International v. S.S. Tando,, 1977 A.M.C. 1807 (E.D. Va.) rev'd on other grounds,
595 F 2nd 943 (4 Cir. 1979), another district with many maritime cases followed Judge
Beeks' reasoning in Matsushita and similarly rejected the functional economics test. Judge
Kellam held that when rolls of polyester goods are packed into cardboard cartons which
are then placed in containers, the cartons and not the containers are the packages.

Eurygenes concerned a shipment of stereo equipment packaged by the shipper into cartons

Page

The case of Smithgreyhound v. M/V Eurygenes, 18 followed the Mitsui test:

xxx xxx xxx

which were then placed by the shipper into a carrier- furnished container. The number of
cartons was disclosed to the carrier in the bill of lading. Eurygenes followed the Mitsui test
and treated the cartons, not the container, as the COGSA packages. However, Eurygenes
indicated that a carrier could limit its liability to $500 per container if the bill of lading
failed to disclose the number of cartons or units within the container, or if the parties
indicated, in clear and unambiguous language, an agreement to treat the container as the
package.
(Admiralty Litigation in Perpetuum: The Continuing Saga of Package Limitations and Third
World Delivery Problems by Chester D. Hooper & Keith L. Flicker, published in Fordham
International Law Journal, Vol. 6, 1982-83, Number 1) (Emphasis supplied)
In this case, the Bill of Lading (Exhibit "A") disclosed the following data:
2 Containers
(128) Cartons)
Men's Garments Fabrics and Accessories Freight Prepaid
Say: Two (2) Containers Only.
Considering, therefore, that the Bill of Lading clearly disclosed the contents of the
containers, the number of cartons or units, as well as the nature of the goods, and applying
the ruling in the Mitsui and Eurygenes cases it is clear that the 128 cartons, not the two (2)
containers should be considered as the shipping unit subject to the $500 limitation of
liability.
True, the evidence does not disclose whether the containers involved herein were carrierfurnished or not. Usually, however, containers are provided by the carrier. 19 In this case,
the probability is that they were so furnished for Petitioner Carrier was at liberty to pack
and carry the goods in containers if they were not so packed. Thus, at the dorsal side of the
Bill of Lading (Exhibit "A") appears the following stipulation in fine print:

Page

The foregoing would explain the use of the estimate "Say: Two (2) Containers Only" in the
Bill of Lading, meaning that the goods could probably fit in two (2) containers only. It
cannot mean that the shipper had furnished the containers for if so, "Two (2) Containers"
appearing as the first entry would have sufficed. and if there is any ambiguity in the Bill of
Lading, it is a cardinal principle in the construction of contracts that the interpretation of
obscure words or stipulations in a contract shall not favor the party who caused the
obscurity. 20 This applies with even greater force in a contract of adhesion where a contract
is already prepared and the other party merely adheres to it, like the Bill of Lading in this
case, which is draw. up by the carrier. 21

11. (Use of Container) Where the goods receipt of which is acknowledged on the face of this
Bill of Lading are not already packed into container(s) at the time of receipt, the Carrier
shall be at liberty to pack and carry them in any type of container(s).

On Alleged Denial of Opportunity to Present Deposition of Its Witnesses: (in G.R. No. 69044
only)
Petitioner Carrier claims that the Trial Court did not give it sufficient time to take the
depositions of its witnesses in Japan by written interrogatories.
We do not agree. petitioner Carrier was given- full opportunity to present its evidence but
it failed to do so. On this point, the Trial Court found:
xxx xxx xxx
Indeed, since after November 6, 1978, to August 27, 1979, not to mention the time from
June 27, 1978, when its answer was prepared and filed in Court, until September 26, 1978,
when the pre-trial conference was conducted for the last time, the defendant had more
than nine months to prepare its evidence. Its belated notice to take deposition on written
interrogatories of its witnesses in Japan, served upon the plaintiff on August 25th, just two
days before the hearing set for August 27th, knowing fully well that it was its undertaking
on July 11 the that the deposition of the witnesses would be dispensed with if by next time
it had not yet been obtained, only proves the lack of merit of the defendant's motion for
postponement, for which reason it deserves no sympathy from the Court in that regard.
The defendant has told the Court since February 16, 1979, that it was going to take the
deposition of its witnesses in Japan. Why did it take until August 25, 1979, or more than six
months, to prepare its written interrogatories. Only the defendant itself is to blame for its
failure to adduce evidence in support of its defenses.
xxx xxx xxx 22
Petitioner Carrier was afforded ample time to present its side of the case. 23 It cannot
complain now that it was denied due process when the Trial Court rendered its Decision on
the basis of the evidence adduced. What due process abhors is absolute lack of opportunity
to be heard. 24
On the Award of Attorney's Fees:
Petitioner Carrier questions the award of attorney's fees. In both cases, respondent Court
affirmed the award by the Trial Court of attorney's fees of P35,000.00 in favor of
Development Insurance in G.R. No. 69044, and P5,000.00 in favor of NISSHIN and DOWA in
G.R. No. 71478.

Page

WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that petitioner Eastern
Shipping Lines shall pay the Development Insurance and Surety Corporation the amount of
P256,039 for the twenty-eight (28) packages of calorized lance pipes, and P71,540 for the
seven (7) cases of spare parts, with interest at the legal rate from the date of the filing of

Courts being vested with discretion in fixing the amount of attorney's fees, it is believed
that the amount of P5,000.00 would be more reasonable in G.R. No. 69044. The award of
P5,000.00 in G.R. No. 71478 is affirmed.

the complaint on June 13, 1978, plus P5,000 as attorney's fees, and the costs.
2) In G.R.No.71478,the judgment is hereby affirmed.
SO ORDERED.
Narvasa, Cruz, Feliciano and Gancayco, JJ., concur.

Separate Opinions

YAP, J., concurring and dissenting:

With respect to G.R. No. 71478, the majority opinion holds that the 128 cartons of textile
materials, and not the two (2) containers, should be considered as the shipping unit for the
purpose of applying the $500.00 limitation under the Carriage of Goods by Sea Act
(COGSA).
The majority opinion followed and applied the interpretation of the COGSA "package"
limitation adopted by the Second Circuit, United States Court of Appeals, in Mitsui & Co., Ltd.
vs. American Export Lines, Inc., 636 F. 2d 807 (1981) and the Smithgreyhound v. M/V
Eurygenes, 666, F 2nd, 746. Both cases adopted the rule that carrier-furnished containers
whose contents are fully disclosed are not "packages" within the meaning of Section 4 (5)
of COGSA.
I cannot go along with the majority in applying the Mitsui and Eurygenes decisions to the
present case, for the following reasons: (1) The facts in those cases differ materially from
those obtaining in the present case; and (2) the rule laid down in those two cases is by no
means settled doctrine.

Page

In the case at bar, there is no evidence showing that the two containers in question were
carrier-supplied. This fact cannot be presumed. The facts of the case in fact show that this
was the only shipment placed in containers. The other shipment involved in the case,
consisting of surveying instruments, was packed in two "cases."

10

In Mitsui and Eurygenes, the containers were supplied by the carrier or shipping company.
In Mitsui the Court held: "Certainly, if the individual crates or cartons prepared by the
shipper and containing his goods can rightly be considered "packages" standing by
themselves, they do not suddenly lose that character upon being stowed in a carrier's
container. I would liken these containers to detachable stowage compartments of the ship."
Cartons or crates placed inside carrier-furnished containers are deemed stowed in the
vessel itself, and do not lose their character as individual units simply by being placed
inside container provided by the carrier, which are merely "detachable stowage
compartments of the ship.

We cannot speculate on the meaning of the words "Say: Two (2) Containers Only, " which
appear in the bill of lading. Absent any positive evidence on this point, we cannot say that
those words constitute a mere estimate that the shipment could fit in two containers,
thereby showing that when the goods were delivered by the shipper, they were not yet
placed inside the containers and that it was the petitioner carrier which packed the goods
into its own containers, as authorized under paragraph 11 on the dorsal side of the bill of
lading, Exhibit A. Such assumption cannot be made in view of the following words clearly
stamped in red ink on the face of the bill of lading: "Shipper's Load, Count and Seal Said to
Contain." This clearly indicates that it was the shipper which loaded and counted the goods
placed inside the container and sealed the latter.
The two containers were delivered by the shipper to the carrier already sealed for
shipment, and the number of cartons said to be contained inside them was indicated in the
bill of lading, on the mere say-so of the shipper. The freight paid to the carrier on the
shipment was based on the measurement (by volume) of the two containers at $34.50 per
cubic meter. The shipper must have saved on the freight charges by using containers for
the shipment. Under the circumstances, it would be unfair to the carrier to have the
limitation of its liability under COGSA fixed on the number of cartons inside the containers,
rather than on the containers themselves, since the freight revenue was based on the latter.
The Mitsui and Eurygenes decisions are not the last word on the subject. The interpretation
of the COGSA package limitation is in a state of flux, 1 as the courts continue to wrestle with
the troublesome problem of applying the statutory limitation under COGSA to
containerized shipments. The law was adopted before modern technological changes have
revolutionized the shipping industry. There is need for the law itself to be updated to meet
the changes brought about by the container revolution, but this is a task which should be
addressed by the legislative body. Until then, this Court, while mindful of American
jurisprudence on the subject, should make its own interpretation of the COGSA provisions,
consistent with what is equitable to the parties concerned. There is need to balance the
interests of the shipper and those of the carrier.

Page

In our view, under the circumstances, the container should be regarded as the shipping
unit or "package" within the purview of COGSA. However, we realize that this may not be
equitable as far as the shipper is concerned. If the container is not regarded as a "package"
within the terms of COGSA, then, the $500.00 liability limitation should be based on "the
customary freight unit." Sec. 4 (5) of COGSA provides that in case of goods not shipped in
packages, the limit of the carrier's liability shall be $500.00 "per customary freight unit." In
the case at bar, the petitioner's liability for the shipment in question based on "freight unit"
would be $21,950.00 for the shipment of 43.9 cubic meters.

11

In the case at bar, the shipper opted to ship the goods in two containers, and paid freight
charges based on the freight unit, i.e., cubic meters. The shipper did not declare the value of
the shipment, for that would have entailed higher freight charges; instead of paying higher
freight charges, the shipper protected itself by insuring the shipment. As subrogee, the
insurance company can recover from the carrier only what the shipper itself is entitled to
recover, not the amount it actually paid the shipper under the insurance policy.

I concur with the rest of the decision.

Sarmiento, J., concur.
G.R. No. 89757 August 6, 1990
ABOITIZ SHIPPING CORPORATION, petitioner, vs.COURT OF APPEALS AND
GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION, LTD., respondents.
Sycip, Salazar, Hernandez & Gatmaitan for petitioner.
Dollete, Blanco, Ejercito & Associates for private respondent.
GANCAYCO, J.:
The extent of the liability of a carrier of goods is again brought to the fore in this
case.
On October 28, 1980, the vessel M/V "P. Aboitiz" took on board in Hongkong for
shipment to Manila some cargo consisting of one (1) twenty (20)-footer container
holding 271 rolls of goods for apparel covered by Bill of Lading No. 515-M and one
(1) forty (40)-footer container holding four hundred forty- seven (447) rolls, ten
(10) bulk and ninety-five (95) cartons of goods for apparel covered by Bill of Lading
No. 505-M. The total value, including invoice value, freightage, customs duties, taxes
and similar imports amounts to US$39,885.85 for the first shipment while that of the
second shipment amounts to US$94,190.55. Both shipments were consigned to the
Philippine Apparel, Inc. and insured with the General Accident Fire and Life
Assurance Corporation, Ltd. (GAFLAC for short). The vessel is owned and operated by
Aboitiz Shipping Corporation (Aboitiz for short).
On October 31, 1980 on its way to Manila the vessel sunk and it was declared lost
with all its cargoes. GAFLAC paid the consignee the amounts US$39,885.85 or
P319,086.80 and US$94,190.55 or P753,524.40 for the lost cargo. As GAFLAC was
subrogated to all the rights, interests and actions of the consignee against Aboitiz, it
filed an action for damages against Aboitiz in the Regional Trial Court of Manila
alleging that the loss was due to the fault and negligence of Aboitiz and the master
and crew of its vessel in that they did not observe the extraordinary diligence
required by law as regards common carriers.

Page

PREMISES CONSIDERED, the Court finds in favor of the plaintiff and against the
defendant, ordering the latter to pay the former actual damages in the sum of
P1,072,611.20 plus legal interest from the date of the filing of the complaint on
October 28, 1981, until full payment thereof, attorney's fees in the amount of 20% of
the total claim and to pay the costs.

12

After the issues were joined and the trial on the merits a decision was rendered by
the trial court on June 29, 1985, the dispositive part of which reads as follows:

SO ORDERED. 1
Not satisfied therewith, Aboitiz appealed to the Court of Appeals wherein in due
course a decision was rendered on March 9, 1989 affirming in toto the appealed
decision, with costs against defendant Aboitiz . 2
A motion for reconsideration of said decision filed by Aboitiz was denied in a
resolution dated August 15, 1989.
Hence the herein petition for review alleging that the Court of Appeals decided the
case not in accordance with law when
1. The Court of Appeals held that "findings of administrative bodies are not always
binding on court . This is especially so in the case at bar where GAFLAC was not a
party in the BMI proceedings and which proceedings was not adversary in
characther." This ruling is contrary to the principle established in Vasquez vs. Court
of Appeals (138 SCRA 559), where it was held that since the BMI possesses the
required expertise in shipping matters and is imbued with quasi-judicial powers, its
factual findings are conclusive and binding on the court. Likewise, the case of Timber
Export Inc. vs. Retla Steamship Co. (CA-G.R. No. 66143-R) also established the rule that
decision of BMI must be given "great materiality and weight to the determination
and resolution of the case."
2. The Court of Appeals also held that the trial court did not err when it fixed the
liability of Aboitiz not on the basis of the stipulation in the bills of lading at
US$500.00 per package/container but on the actual value of the shipment lost
notwithstanding the long line of cases decided by this Honorable Supreme Court
holding a contrary opinion, as shown below.
3. The Court of Appeals also held that the trial court did not abuse its discretion in
granting GAFLAC's motion for execution pending appeal notwithstanding the
absence of reasonable and justifiable grounds to support the same. 3
Under the first issue petitioner state that the sinking of the vessel M/V "P. Aboitiz"
was the subject of an administrative investigation conducted by the Board of Marine
Inquiry (BMI) whereby in a decision dated December 26, 1984, it was found that the
sinking of the vessel may be attributed to force majeure on account of a typhoon.
Petitioner contends that these findings are conclusive on the courts.

Page

But over and above all these considerations, the trial court did not err in not giving
weight to the finding of the BMI that the vessel sank due to a fortuitous event.
Findings of administrative bodies are not always binding on courts. This is especially
so in the case at bar where plaintiff was not a party in the BMI proceedings and
which proceeding was not adversary in character. 4

13

In rejecting the evidence offered by the petitioner the appellate court ruled

As a general rule, administrative findings of facts are not disturbed by the courts
when supported by substantial evidence unless it is tainted with unfairness or
arbitrariness that would amount to abuse of discretion or lack of jurisdiction. 5 Even
in Vasquez vs. Court of Appeals, 6 which is cited by petitioner, this Court ruled that We
nevertheless disagree with the conclusion of the BMI exonerating the captain from
any negligence "since it obviously had not taken into account the legal responsibility
of a common carrier towards the security of the passengers involved."
This case was brought to court on October 28, 1981. The trial court was never
informed of a parallel administrative investigation that was being conducted by the
BMI in any of the pleadings of the petitioner. It was only on March 22, 1985 when
petitioner revealed to the trial court the decision of the BMI dated December 26,
1984 (one day after Christmas day). 7 The said decision appears to have been
rendered over three (3) years after the case was brought to court.
Moreover, said administrative investigation was conducted unilaterally. Private
respondent GAFLAC was not notified or given an opportunity to participate therein.
It cannot thereby be bound by said findings and conclusions of the BMI.
The trial court and the appellate court found that the sinking of the M/V "P. Aboitiz"
was not due to the waves caused by tropical storm "Yoning" but due to the fault and
negligence of petitioner, its master and crew. The court reproduces with approval
said findings
xxx xxx xxx
After a careful examination of the evidence, the Court is convinced in the plaintiffs
claim that the M/V "Aboitiz" and its cargo were not lost due to fortuitous event or
force majeure.
To begin with, paragraph 4 of the marine protest (Exh. "4", also Exhibit "M"), which is
defendant's own evidence, shows that the wind force when the ill-fated ship
foundered was 10 to 15 knots. According to the Beaufort Scale (Exhibit "I"), which is
admittedly an accurate reference for measuring wind velocity, the wind force of 10
to 15 knots is classified as scale No. 4 and described as "moderate breeze," small
waves, becoming longer, fairly frequent white horses. Meteorologist Justo Iglesias, Jr.
himself affirms the above description of a wind force of 10 to 15 knots and adds that
the weather condition prevailing under said wind force is usual and forseeable. Thus
Iglesias, Jr. testified:

Q. What is the basis of your answer?

Page

A. It will be under Force 4 of the Beaufort Scale.

14

Q. In the marine protest of the master of the vessel of Aboitiz, there is reference to
wind force from ten to 15 knots. In this Beaufort Scale, will you be able to clarify
what this wind force of 10 to 15 as stated in the marine protest?

A. 10 to 15 falls within this scale of the Beaufort Scale, Force 4.

Atty. Dollete:
May I read into the records, Your Honor. Force 4, descriptive term moderate breeze.
Near velocity in knots 11-16 meters per second, 5.5-7.9 in kilometers per hour to 20
to 28 kilometers per hour and 13 to 18 miles per hour. Sea the description of this will
be small waves becoming longer fairly frequent white horse (sic).
Q. In the layman's language how do you interpret this white horses?
A. It means white forms. At the top of the crest they were beginning to form white
foams.
Q. How about this moderate breeze as described under this Force 4 of the Beaufort
Scale, how will you interpret that?
A. Moderate breeze will only give winds of 29 kilometers per hour which is
equivalent to just extending your hand out of a running car at that speed.
Q. This weather condition between October 28 and November 1, 1980, will you
classify this as extraordinary or ordinary?
A. It was ordinary.
Q. When you said ordinary, was it usual or unusual?
A. It is usual.
Q. When you said it is usual it is foreseeable and predictable?
A. For an experienced meteorologist like a ship captain, it is foreseeable.
Q. When it is foreseeable, necessarily it follows that the weather could be predicted
based on the weather bulletin or report?
A. Yes, sir.
Q. And usually the bulletin states the condition in other words, this weather
condition which you testified to and reflected in your Exhibit "7" is an ordinary
occurrence within that area of Philippine responsibility?

A. It is a regular occurrence.

Page

Q. And in fact this weather condition is to be anticipated at that time of the year with
respect to weather condition which is reflected in Exhibit "7"?

15

A. Yes, sir.

xxx xxx xxx

Moreover, Capt. Racines again admitted in Court that his ill-fated vessel was 200
miles away from the storm 'Yoning when it sank. Said Capt. Racines:
Q. How far were you from this depression or weather disturbance on October 30,
1980?
A. Two hundred miles.
xxx xxx xxx
Q. In other words, this depression was far from your route because it took a northern
approach whereas you were towards the south approach?
A. As I have said, I was 200 miles away from the disturbance.
xxx xxx xxx
Considering the foregoing reasons, the Court holds that the vessel M/V "Aboitiz" and
its cargo were not lost due to fortuitous event or force majeure.
In accordance with Article 1732 of the Civil Code, the defendant common carrier,
from the nature of its business and for reasons of public policy, is bound to observe
extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by it according to all the circumstances of each case. While
the goods are in the possession of the carrier, it is but fair that it exercise extra
ordinary diligence in protecting them from loss or damage, and if its occurs the law
presumes that it was due to the carrier's fault or negligence; that is necessary to
protect the interest of the shipper which is at the mercy of the carrier (Article 1756,
Civil Code; Anuran vs. Puno, 17 SCRA 224; Nocum vs. Laguna Tayabas Bus Co., 30
SCRA 69; Landigan vs. Pangasinan Transportation Company, 88 SCRA 284). In the
case at bar, the defendant failed to prove that the loss of the subject cargo was not
due to its fault or negligence. 8
The said factual findings of the appellate court and the trial court are finding on this
Court. Its conclusion as to the negligence of the petitioner is supported by the
evidence.

Page

While it is true that in the bill of lading there is such stipulation that the liability of
the carrier is US$500.00 per package/container/customary freight, there is an
exception, that is, when the nature and value of such goods have been declared by
the shipper before shipment and inserted in the bill of lading. This is provided for in

16

The second issue raised to the effect that the liability of the petitioner should be
fixed at US$500.00 per package/container, as stipulated in the bill of lading and not
at the actual value of the cargo, should be resolved against petitioner.

Section 4(5) of the Carriage of Goods by Sea Act to wit

(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 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.
By agreement between the carrier, master or agent of the carrier, and the shipper
another maximum amount than that mentioned in this paragraph may be fixed:
Provided, that such maximum shall not be less than the figure above named. In no
event shall the carrier be liable for more than the amount of damage actually
sustained.
Neither the carrier nor the ship shall be responsible in any event for loss or damage
to or in connection with the transportation of the goods if the nature or value thereof
has been knowingly and fraudulently mis-stated by the shipper in the bill of lading.
(Emphasis supplied.)
In this case the description of the nature and the value of the goods shipped are
declared and reflected in the bills of lading. Thus, it is the basis of the liability of the
carrier as the actual value of the loss.
Moreover, it is absurd to interpret "container," as provided in the bill of lading to be
valued at US$500.00 each, to refer to the container which is the modern substitute
for the hold of the vessel. 9 The package/container contemplated by the law to limit
the liability of the carrier should be sensibly related to the unit in which the shipper
packed the goods and described them, not a large metal object, functionally a part of
the ship, in which the carrier used them to be contained. 10 Such "container" must be
given the same meaning and classification as a "package" and "customary freight
unit."

Page

Third. Still it is contended that the carrier's liability is limited to $500.00, pursuant to
section 8 of the Bill of Lading which provides that 'The liability of the Carrier for any
loss or damage to the goods shall in no case exceed the sum of U.S. $500.00 per
package/container/customary freight unit, unless the value of the goods has been
correctly declared and extra freight paid, prior to the shipment and a signed
declaration to this effect appears in the bill of lading, duly confirmed by the Carrier.
... It is contended that the Bill of Lading does not indicate the value of the goods. Nor
was the corresponding freight ... paid prior to shipment.

17

The appellate court in disposing this issue quoted its decision in Allied Guarantee
Insurance Co. Inc. vs. Aboitiz Shipping Corporation, CA GR. CV No. 04121, March 23,
1987, viz;

Generally speaking a stipulation, limiting the common carrier's liability to the value
of the goods appearing in the bill of lading, unless the shipper or owner declares a
greater value, is valid. (Civil Code, Art. 1749). Such stipulation, however, must be
reasonable and just under the circumstances and must have been fairly and freely
agreed upon. (St. Paul Fire & Marine Insurance Co. vs. Macondray Co., 70 SCRA
122, 126-127 (1976) In the case at bar, the goods shipped on the M/V "P. Aboitiz"
were insured for P278,530.50, which may be taken as their value. To limit the
liability of the carrier to $500.00 would obviously put it in its power to have taken
the whole cargo. In Juan Ysmael & Co. vs. Gabino Barreto & Co., 51 Phil. 90 (1927), it
was held that a stipulation limiting the carrier's liability to $500.00 per package of
silk when the value of such package was P2,500.00 unless the true value had been
declared and the corresponding freight paid was "void as against public policy." That
ruling applies to this case.
Moreover, by the weight of modern authority, a carrier cannot limit its liability for
injury or loss of goods shipped where such injury or loss was caused by its own
negligence. (Juan Ysmael & Co. v. Gabino Barreto & Co., supra) Here to limit the
liability of Aboitiz Shipping to $500.00 would nullify the policy of the law imposing
on common carriers the duty to observe extraordinary diligence in the carriage of
goods.
Indeed, it is even doubtful whether the word "container" in section 8 of the Bill of
Lading includes containers which are a substitute for the hold of a vessel. This
provision limits the carrier's liability to "the sum of US$500.00 per package
/container customary freight unit." By the rule of noscitur a sociis the word
"container" must be given the same meaning as package and customary freight unit
and therefore cannot possibly refer to modern containers which are used for
shipment of goods in bulk. 11
In the same light, the third issue questioning the order of execution pending appeal
of the trial court must be resolved against petitioner as well.

Page

Aside from the fact that petitioner can easily post a supersedeas bond to stay
execution, still other circumstances are present peculiar in the incident of the
sinking of M/V P. Aboitiz which would justify the issuance of execution pending
appeal. There are other decided cases adjudging petitioner liable in the lower court
in the same incident. Other cases are on appeal, upcoming and about to be decided.
The value of cargo loss caused by the sinking of petitioner's vessel is in the tune of no
less than fifty million pesos inclusive of interests fees and all claims. Its insurer has
gone bankrupt and petitioner alone must face and answer for all these claims. In one
branch of the Regional Trial Court of Manila alone there are twenty five (25) cases
pending against petitioner involving the same loss of cargoes aboard M/V "P.
Aboitiz" as per certification herewith attached as Annex "A". This claim do not

18

The averments in the motion for execution pending appeal dated December 8, 1985
are as follows

include others, pending in various courts in Metro Manila which would have to be
satisfied ultimately by petitioner, it being a common carrier which failed to exercise
extraordinary diligence over the goods lost. The judgment sought to be enforced may
indeed be rendered imminently ineffectual in the ultimate analysis.
The purpose of Sec. 2 Rule 39 would not be achieved or execution pending appeal
would not be achieved if insolvency would still be awaited. The remedy is available
to petitioner under Sec. 3 Rule 39 of the Rules of Court but to place insolvency as a
condition to issuance of a writ of execution pending appeal would render it illusory
and ineffectual.
Justice and equity therefore dictates, that as a consequence of the bond posted by
private respondent and there being several other cases against petitioner, decided
as well as pending, the totality of which claims may render the appealed decision
imminently ineffectual and the further fact that the appeal being interposed is
evidently for delay as a consequence of the several adverse decisions against it as a
common carrier in the lower court, a reconsideration of the decision dated
November 25, 1985 of the Honorable Court will be in consonance with law,
jurisprudence and equity.
In order to erase all apprehensions that the aforesaid judgment award will wind up
ineffectual when not immediately executed, it is most respectfully prayed that herein
respondent be required to post a supersedeas bond. The statutory undertaking of
posting a bond will then achieve a three-pronged direction of justice, (1) it will cast
no doubt on the solvency of the herein petitioner; (2) it will not defeat or render
phyrric a just resolution of the case whichever party prevails in the end or in the
main case on appeal, since both of their claims are secured by their corresponding
bonds; and (3) it will put to equitable operation Sec. 3 Rule 39 of the Revised Rules of
Court. 12
The foregoing allegations which were not traversed that petitioner is facing many
law suits arising from said sinking of its vessel involving cargo loss of no less than 50
million pesos, in some cases of which judgment had been rendered against Aboitiz,
and considering that its insurer is now bankrupt, leaving Aboitiz alone to face and
answer the suits, which may render any judgment for GAFLAC ineffectual, that the
appeal is interposed manifestly for delay and the willingness of GAFLAC to put up a
bond certainly are cogent bases for the issuance of an order of execution pending
appeal.

Page

The appellate court affirmed the decision of the lower court based on its findings
that the cause of sinking of the vessel was due to its unseaworthiness and the failure

19

Finally, in a similar case for damages arising from the same incident entitled Aboitiz
Shipping Corporation vs. Honorable Court of Appeals and Allied Guaranteed Insurance
Company, Inc., G.R. No. 88159, this Court in a resolution dated November 13, 1989
dismissed the petition for lack of merit. Therein this Court held in part

of its crew and the master to exercise extraordinary diligence.

The petitioner, however, contends that the appellate court erred on this matter and
insists that the contrary findings of the Board of Marine Inquiry (BMI), which
conducted a separate investigation to the effect that the proximate cause of the
sinking of the vessel was due to force majeure and that the officers and crew had
exhausted all preventive measures to save the vessel and her cargo but to no avail,
should prevail. This, according to the petitioner is based on the doctrine of primary
administrative jurisdiction.
This argument is untenable.
A cursory reading of the decision and resolution of the appellate court shows that the
same took into consideration not only the findings of the lower court but also the
findings of the BMI. Thus, the appellate court stated:
Indeed, the decision of the Board was based simply on its finding that the Philippine
Coast Guard had certified the vessel to be seaworthy and that it sank because it was
exposed later to an oncoming typhoon plotted within the radius where the vessel
was positioned. This generalization certainly cannot prevail over the detailed
explanation of the trial court in this case as basis for its contrary conclusion. (Rollo,
at p. 42)
We find no cogent reason to deviate from the factual findings of the appellate court
and rule that the doctrine of primary administrative jurisdiction is not applicable in
the case at bar.
The other issue raised is whether or not the carrier's liability is limited to $500.00
pursuant to section 8 of the Bill of Lading. The petitioner claims that the appellate
court erred in disregarding the limitation of liability stipulated in the bill of lading. It
argues that the consignee agreed to this amount (and) therefore is bound by this rate
and that there is no basis for the appellate court's finding that the rate is
unreasonable.

Page

Generally speaking any stipulation, limiting the common carrier's liability to the
value of the goods appearing in the bill of lading, unless the shipper or owner
declares a greater value is valid. (Civil Code, Art. 1749) Such stipulation, however,
must be reasonable and just under the circumstances and must have been fairly and
freely agreed upon. (St. Paul Fire & Marine Insurance Co. v. Macondray & Co., 70
SCRA 122, 126-127 [1976] In the case at bar, the goods shipped on the M/V "P.
Aboitiz" were insured for P278,536.50, which may be taken as their value. To limit
the liability of the carrier to $500.00 would obviously put in its power to have taken
the whole cargo. In Juan Ysmael & Co. v. Gabino Barretto & Co., 51 Phil. 90 [1927], it
was held that a stipulation limiting the carrier's liability to P300.00 per package of
silk, when the value of such package was P2,500.00, unless the true value had been

20

The argument is not well-taken. As aptly stated by the appellate court:

declared and the corresponding freight paid; was void as against public policy. That
ruling applies to this case.
As argued by the respondent, a limitation of liability in this case would render
inefficacious the extraordinary diligence required by law of common carriers. 13
The motion for reconsideration of said resolution filed by petitioner was denied with
finality in a resolution dated January 8, 1990. Said resolution of the case had become
final and executory, entry of judgment having been made and the records remanded
for execution on March 22, 1990.
Said case is now the law of the case applicable to the present petition.
WHEREFORE, the petition is dismissed with costs against petitioner.
SO ORDERED.

Page

21

Narvasa (Chairman), Cruz, Grio-Aquino and Medialdea, JJ., concur.

Page

22

Page

23

EASTERN AND AUSTRALIAN STEAMSHIP CO., LTD. AND F. E. ZUELLIG, INC., petitioners,

24
Page

G.R. No. L-37604 October 23, 1981

vs.GREAT AMERICAN INSURANCE CO. and COURT OF FIRST INSTANCE OF MANILA,

BRANCH XIII, respondents.
DE CASTRO, * J.:
This is a petition for review on certiorari of the decision of the Court of First Instance of
Manila, Branch XIII, dated July 25, 1973, in Civil Case No. 88985, entitled "Great American
Insurance Co., plaintiff, vs. Eastern & Australian Steamship Co., Ltd. and/or F.E. Zuellig, Inc.,
defendants," the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered, finding the defendants liable to the plaintiff in
the amount of $500.00, or its peso equivalent of P 3,217.50, with legal interest thereon
from November 20, 1972; and to further pay to the plaintiff an amount equivalent to
twenty-five per centum (25%) thereof by way of damages as and for attorney's fees.
The facts of the case are as follows:
On December 10, 1971, the Jackson and Spring (Sydney) Pty. Ltd. shipped from Sydney,
Australia, one (1) case of impellers for warman pump on board the SS "Chitral," a vessel
owned and operated in the Philippines by Eastern & Australian Steamship Co., Ltd., thru its
agent F.E. Zuellig, Inc. under Bill of Lading No. 31, for delivery to Manila, Philippines in
favor of consignee Benguet Consolidated, Inc. The shipment was insured with Great
American Insurance, Co. for P 35,921.81 against all risks. On December 22, 1971 the SS
"Chitral" arrived in Manila but failed to discharge the shipment or any part thereof.
Demand was made on herein petitioners for the delivery of said shipment, but having failed
to make delivery, a claim was presented against them for the value of the shipment.
Petitioners, likewise, failed to make good the claim. As a consequence of the loss of the
shipment, private respondent Great American Insurance Co. was compelled to pay the
consignee P 35,921,81. As subrogee, said private respondent filed a complaint dated Nov.
20, 1972 against herein petitioners for recovery of the said amount with legal interest and
attorney's fees.
In the answer dated Nov. 27, 1972 petitioners alleged that their liability for the loss of the
shipment is only limited to L100 Sterling or its peso equivalent of P1,544.40 as per
stipulation in the Bill of Lading and that even before the filing of the complaint, petitioners
have signified their willingness to pay the claim up to their limit of liability as stipulated in
the Bill of Lading.

Page

The Court a quo found that under Section 4 (5) of the Carriage of Goods by Sea Act, the
carrier and the shipper may, in the absence of a declaration in the Bill of Lading of the value
of the goods shipped, fix a maximum liability of the shipper for the cargo lost or damages,

25

During the pre-trial on may 28, 1973, the loss of the subject shipment was admitted, and
the parties submitted the case for decision on one issue: whether petitioner's liability is
limited to L100 Sterling or its peso equivalent of P1,544.40 as stipulated in Clause 17 of the
Bill of Lading 1 or whether petitioner's liability should be $500 or its peso equivalent in the
sum of P3,217.50 pursuant to Sec. 4 (5) of the Carriage of Goods by Sea Act. 2

but such maximum shall not be less than $500.00 per package. Consequently, the
agreement for a maximum liability of only L100 Sterling contained in Clause 17 of the Bill
of Lading was declared void for being contrary to law and as adverted to above, petitioners
were held liable.
From the decision of the lower court the present petition for review was instituted by
petitioners assigning the following errors:
I
THAT RESPONDENT CFI ERRED IN DECIDING THAT THE LIMIT OF LIABILITY IN THE SUM
OF L100 STERLING OR ITS PESO EQUIVALENT OF THE VESSEL/CARRIER, PER PACKAGE,
AS STIPULATED IN CLAUSE 17 OF THE BILL OF LADING, IS CONTRARY TO LAW, AND,
THEREFORE, VOID, and
II
THAT RESPONDENT COURT ERRED IN AWARDING ATTORNEY'S FEES AND COSTS IN
FAVOR OF PRIVATE RESPONDENT AND AGAINST THE HEREIN PETITIONERS.
Petitioners contend that the first paragraphs of Section 4(5) of the Carriage of Goods by Sea
Act prescribes a maximum liability of the vessel/carrier in the amount of $500.00 per
package; that said maximum liability, however, is not applicable in a shipment wherein the
nature and a higher valuation of the goods are indicated in the Bill of Lading; that the
second paragraph refers to an agreement of the shipper and the carrier which provides for
another maximum necessarily higher than $500.00 and that said proviso should not be
read in connection with stipulations in Bills of Lading limiting the vessel's liability to less
than $500.00 per package, otherwise, the very intent of the law setting the sum of $500.00
as the maximum liability of the carrier, per package, in the absence of a higher valuation of
the goods as indicated in the Bill of Lading would be nullified, for it would thereby become
not the maximum, but the minimum liability of the carrier.
Petitioners also contend that the New Civil Code, particularly Articles 1749 3 and 1750, 4
expressly allow the limitation of the carrier's liability, provided it is just and reasonable.
Hence, the limitation of petitioners' liability to L100 Sterling or its peso equivalent as
stipulated in the Bill of Lading is perfectly legal and binding to the parties.

Page

Respondent believes that an agreement limiting the carrier's liability does not per se give
validity thereto but it must be shown, among others, that the amount agreed upon is just
and reasonable under the circumstances.

26

Private respondent alleges that Article 1749 imposes certain conditions for the validity of a
stipulation limiting the carrier's liability. These conditions are: (1) it must be in writing,
signed by the shipper or owner; (2) it must be supported by a valuable consideration other
than the service rendered by the carrier and (3) it must be reasonable, just and not
contrary to public policy.

There is no inconsistency between Section 4 (5) of the Carriage of Goods by Sea Act and
Clause 17 of the Bill of Lading. The first part of the provision of Section 4 (5) of the Carriage
of Goods by Sea Act limits the melee, amount that may be recovered by the shipper in the
absence of an agreement as to the nature and value of goods shipped. Said provision does
not prescribe the minimum and hence, it could be any amount which is below $500.00.
Clause 17 of the questioned Bill of Lading also provides the melee, for which the carrier is
liable. It prescribes that the carrier may only be held liable for an amount not more than
L100 Sterling which is below the melee, limit required in the Carriage of Goods by Sea Act.
It should be noted that both the Carriage of Goods by Sea Act and Clause 17 of the Bill of
Lading allow the payment beyond the respective melee, limit imposed therein, provided
that the value of the goods have been declared in the Bin of Lading.
The second paragraph of Section 4 (5) of the Carriage of Goods by Sea Act prescribing the
melee, amount shall not be less than $500.00 refers to a situation where there is an
agreement other than set forth in the Bill of Lading providing for a melee, higher than
$500.00 per package. In the case at bar, it is apparent that there had been no agreement
between the parties, and hence, Clause 17 of the Bin of Lading shall prevail.
Petitioners' stand that the condition imposed in Clause 17 of the Bill of Lading should not
be read in the light of second paragraph of Section 4 (5) of the Carriage of Goods by Sea Act,
is well taken. Indeed, it would be to render ineffective the very intent of the law setting the
sum of $500.00 as the melee, liability of the vessel/carrier, per package, in the, absence of a
higher valuation of the goods as indicated in the Bail of Lading By providing that $500.00 is
the maximum liability, the law does not disallow an agreement for liability at a lesser
amount.
Significantly, Article 1749 of the New Civil Code expressly allow the limitation of the
carrier's liability.
Art. 1749 A stipulation that the common carrier's liability is limited to the value of the
goods appearing in the bill of lading, unless the shipper or owner declares a greater value,
is binding.
Thus, in the case of Northern Motors, Inc. Prince Line, 5 We said:
This Court has held as valid and binding a similar provision in a bill of lading limiting the
carrier's liability to a specific amount unless the shipper expressly declares a higher
valuation and pays the corresponding rate thereon.

A stipulation in a contract of carriage that the carrier will not be liable beyond a specified

Page

The right of the carrier to limit its liability has been recognized not only in Our jurisdiction
but also in American jurisprudence:

27

Again, in Phoenix Assurance Company vs. Macondray & Co., Inc. 6, We are reiterating the
validity of a stipulation limiting the carrier's liability.

amount unless the shipper declares the goods to have a greater value is generally deemed
to be valid and will operate to limit the carrier's liability, even if the loss or damage results
from the carrier's negligence. Pursuant to such provision, where the shipper is silent as to
the value of his goods, the carrier's liability for loss or damage thereto is limited to the
amount specified in the contract of carriage and where the shipper states the value of his
goods, the carrier's liability for loss or damage thereto is limited to that amount. Under a
stipulation such as this, it is the duty of the shipper to disclose, rather than the carrier's to
demand the true value of the goods and silence on the part of the shipper will be sufficient
to limit recovery in case of loss to the amount stated in the contract of carriage. 7
In view of the above findings, it is no longer necessary to discuss the second assignment of
error.
WHEREFORE, the decision of the court a quo is hereby reversed and another one is entered
finding petitioners liable to private respondent in the amount of L100 Sterling or its peso
equivalent of P1,544.40. Without pronouncement as to costs.
SO ORDERED.
Makasiar, Fernandez, Guerrero and Melencio-Herrera, JJ., concur.

Page

28

Teehankee (Chairman), concur in the result.

F. H. STEVENS & CO., INC., plaintiff-appellant, vs.NORDDEUSCHER LLOYD, defendantappellee.

Delgado, Flores, Macapagal and Dizon for plaintiff-appellant.Ross, Selph and Carrascoso for
defendant-appellee.

29

September 29, 1962

Page

G.R. No. L-17730

CONCEPCION, J.:
This is an appeal from an order granting defendant's motion to dismiss and, accordingly,
dismissing the case without any pronouncement as to costs.
Plaintiff commenced this action in the Court of First Instance of Manila on June 24, 1960. It
alleged in the complaint that on March 28, 1959, it had shipped from Hamburg to Manila,
aboard the "MS SCHWABENSTEIN", a vessel of defendant Norddeuscher Lloyd, 2,000
pieces of prismatical thermometers valued at $650; that on May 15, 1959, said vessel
arrived at Manila; that on May 21, 1959, the master of said vessel notified the plaintiff, thru
its broker, of the delivery of said goods; that, upon examination of the case containing the
same, it turned out that 1,154 pieces of said thermometers valued at $342.74, were missing
and/or destroyed; that plaintiff immediately filed the corresponding notice of loss and/or
short delivery, followed by the corresponding notice and formal claim for loss and/or short
delivery; that, despite several demands, defendant had refused and failed to pay said sum
of $342.74; that, as a consequence, plaintiff had, also, incurred damages in the sums of
P1,000, as attorney's fees, and P664.70, as unrealized profits; and that an action instituted
in the Municipal Court of Manila on April 27, 1960 seemingly, for the recovery of the
value of said thermometers and the amount of said damages was dismissed by said
court on June 13, 1960, without any trial on the merits, upon the ground of lack of
jurisdiction over the subject-matter of the case, inasmuch as the same involved the exercise
of admiralty and maritime jurisdiction. Plaintiff prayed for judgment for said sums of
$342.74, P1,000 and P664.70, plus costs.
On July 8, 1960, defendant moved to dismiss the complaint upon the ground that plaintiff's
causes of action had prescribed, it having been filed on June 24, 1960, or more than a year
from May 21, 1959, when plaintiff was notified of the delivery of the case containing the
thermometers in question. This motion having been granted and the complaint dismissed,
plaintiff interposed this appeal, maintaining that the period of one (1) year prescribed in
Commonwealth Act No. 65, in relation to Carriage of Goods by Sea Act within which the
liability of carriers, based upon a contract of carriage goods by sea, may be enforced by suit
was suspended by the commencement of the first action in the municipal court, on April
27, 1960; that the running of said period was resumed or continued on June 13, 1960,
when said action was dismissed; and that, excluding said period from April 27, 1960 to
June 13, 1960, or forty-seven (47) days, less than one (1) year has elapsed from May 21,
1959 to June 24, 1960, when this case was filed in the court of first instance. In support of
this pretense, plaintiff invokes Article 1155 of the Civil Code of the Philipines, reading:

Page

Upon mature deliberation, we are of the opinion, and so hold, that the order appealed from
should be reversed, not only because of the operation of said Article 1155 of our Civil Code,
but, also, in view of the provisions section 49 of Act No. 190, pursuant to which:

30

The prescription of actions is interrupted when they filed before the court, when there is a
written extrajudicial command by the creditors, and when there is any written
acknowledged judgment of the debt by the debtor.

If, in an action commenced, in due time, a judgment for the plaintiff be reversed, or if the
plaintiff fail otherwise than upon the merits, and the time limited for the commencement of
such action has, at the date of such reversal or failure, expired, the plaintiff, or, if he die and
the cause of action survive, his representatives may commence a new action within one
year after such date, and this provision shall apply to any claim asserted in any pleading by
a defendant.
The action commenced by the plaintiff in the Municipal Court of Manila, on April 27, 1960,
was dismissed June 13, 1960, or over twenty (20) days after the expiration of the period of
one (1) year, beginning from May 21, 1959, within which plaintiff's action could be brought
pursuant to Commonwealth Act No. 65, in relation to the Carriage of Goods by Sea Act.
Under said section of Act No. 190, the period within which plaintiff could initiate the
present case was renewed, therefore, for another year, beginning from June 14, 1960
(Tolentino Vitug, 39 Phil., 126; Smith vs. McNeal, 100 U.S. 426, 27 L. ed. 986). The case at
bar was commenced on June 24, 1960, or within the period last mentioned.
The cases of Oriental Commercial Co. vs. Jureidini (71 Phil., 25) and Conspecto vs. Fruto (31
Phil., 144), in which it was held that:
. . . Cuando se entabia una accion dentro del plazo de prescripcion y se desiste de ella
despues, o se sobresee sin condiciones, por una razon u otra, no hace que la accion que se
entable mas tarde pero ya fuera del periodo de prescripcion, se pueda considerar como
presentada detro de dicho periodo porque quiere contrase con la accion entablada con
anterioridad. La falta de gestion de la recurrente por cuya causa se desestimaron sus
demandas segunda y tercera, no puede interpretarse sino como una renuncia de su parte y,
al ejercitar su ultima accion no se ha colocado en la misma situacion en que antes se hallaba
al ejercitar sus tres anteriores acciones. Este es el mismo criterio que expresamos cuando
se nos presents una cuestion aniloga en la causa de Conspecto contra Fruto, 31 Jur. Fil 155.
(Emphasis supplied.)1awphl.nt
are not in point, for the dismissal of the herein plaintiff's complaint in the municipal court
was not due to its desistance or voluntary abandonment.
Insofar as inconsistent with the conclusion we have thus reached, the view adopted in Chua
Kuy vs. Everett Steamship Corp., L-5534 (May 27, 1953) and Yek Tong Lin Fire & Marine
Insurance Co. vs. American President Lines, Inc., L-11081 (April 30, 1958) should be, as it is
hereby, modified accordingly.

Page

Bengzon, C.J., Padilla, Bautista Angelo, Barrera, Paredes, Dizon, Regala and Makalintal, JJ.,
concur.Labrador, J., concurs in the result.Reyes, J.B.L., took no part.

31

WHEREFORE, the order appealed from is reversed and this case remanded to the lower
court for further proceedings, with costs of this instance against defendant Norddeuscher
Lloyd. It is so ordered.

G.R. No. L-61352 February 27, 1987

DOLE PHILIPPINES, INC., plaintiff-appellant, vs.MARITIME COMPANY OF THE
PHILIPPINES, defendant-appellee.
Domingo E. de Lara & Associates for plaintiff-appellant.
Bito, Misa and Lozada Law Office for defendant-appellee.
NARVASA, J.:
This appeal, which was certified to the Court by the Court of Appeals as involving only
questions of law, 1 relates to a claim for loss and/or damage to a shipment of machine parts
sought to be enforced by the consignee, appellant Dole Philippines, Inc. (hereinafter caged
Dole) against the carrier, Maritime Company of the Philippines (hereinafter called
Maritime), under the provisions of the Carriage of Goods by Sea Act. 2
The basic facts are succinctly stated in the order of the Trial Court 3 dated March 16, 1977,
the relevant portion of which reads:
xxx xxx xxx
Before the plaintiff started presenting evidence at today's trial at the instance of the Court
the lawyers entered into the following stipulation of facts:
1. The cargo subject of the instant case was discharged in Dadiangas unto the custody of the
consignee on December 18, 1971;
2. The corresponding claim for the damages sustained by the cargo was filed by the plaintiff
with the defendant vessel on May 4, 1972;

Page

4. On December 11, 1974, Judge Serafin Cuevas issued an Order in Civil Case No. 91043
dismissing the first two causes of action in the aforesaid case with prejudice and without
pronouncement as to costs because the parties had settled or compromised the claims
involved therein. The third cause of action which covered the cargo subject of this case now

32

3. On June 11, 1973 the plaintiff filed a complaint in the Court of First Instance of Manila,
docketed therein as Civil Case No. 91043, embodying three (3) causes of action involving
three (3) separate and different shipments. The third cause of action therein involved the
cargo now subject of this present litigation;

was likewise dismissed but without prejudice as it was not covered by the settlement. The
dismissal of that complaint containing the three causes of action was upon a joint motion to
dismiss filed by the parties;
5. Because of the dismissal of the (complaint in Civil Case No. 91043 with respect to the
third cause of action without prejudice, plaintiff instituted this present complaint on
January 6, 1975.
xxx xxx xxx 4
To the complaint in the subsequent action Maritime filed an answer pleading inter alia the
affirmative defense of prescription under the provisions of the Carriage of Goods by Sea
Act, 5 and following pre-trial, moved for a preliminary hearing on said defense. 6 The Trial
Court granted the motion, scheduling the preliminary hearing on April 27, 1977. 7 The
record before the Court does not show whether or not that hearing was held, but under
date of May 6, 1977, Maritime filed a formal motion to dismiss invoking once more the
ground of prescription. 8 The motion was opposed by Dole 9 and the Trial Court, after due
consideration, resolved the matter in favor of Maritime and dismissed the complaint 10
Dole sought a reconsideration, which was denied, 11 and thereafter took the present appeal
from the order of dismissal.
The pivotal issue is whether or not Article 1155 of the Civil Code providing that the
prescription of actions is interrupted by the making of an extrajudicial written demand by
the creditor is applicable to actions brought under the Carriage of Goods by Sea Act which,
in its Section 3, paragraph 6, provides that:
*** the carrier and the ship shall be discharged from all liability in respect of loss or
damage unless suit is brought within one year after delivery of the goods or the date when
the goods should have been delivered; Provided, That, if a notice of loss or damage, either
apparent or conceded, is not given as provided for in this section, that fact shall not affect
or prejudice the right of the shipper to bring suit within one year after the delivery of the
goods or the date when the goods should have been delivered.

Page

Dole concedes that its action is subject to the one-year period of limitation prescribe in the
above-cited provision. 12 The substance of its argument is that since the provisions of the
Civil Code are, by express mandate of said Code, suppletory of deficiencies in the Code of
Commerce and special laws in matters governed by the latter, 13 and there being "*** a
patent deficiency *** with respect to the tolling of the prescriptive period ***" provided for
in the Carriage of Goods by Sea Act, 14 prescription under said Act is subject to the
provisions of Article 1155 of the Civil Code on tolling and because Dole's claim for loss or
damage made on May 4, 1972 amounted to a written extrajudicial demand which would
toll or interrupt prescription under Article 1155, it operated to toll prescription also in
actions under the Carriage of Goods by Sea Act. To much the same effect is the further
argument based on Article 1176 of the Civil Code which provides that the rights and
obligations of common carriers shag be governed by the Code of Commerce and by special

33

xxx xxx xxx

laws in all matters not regulated by the Civil Code.

These arguments might merit weightier consideration were it not for the fact that the
question has already received a definitive answer, adverse to the position taken by Dole, in
The Yek Tong Lin Fire & Marine Insurance Co., Ltd. vs. American President Lines, Inc. 15
There, in a parallel factual situation, where suit to recover for damage to cargo shipped by
vessel from Tokyo to Manila was filed more than two years after the consignee's receipt of
the cargo, this Court rejected the contention that an extrajudicial demand toiled the
prescriptive period provided for in the Carriage of Goods by Sea Act, viz:
In the second assignment of error plaintiff-appellant argues that it was error for the court a
quo not to have considered the action of plaintiff-appellant suspended by the extrajudicial
demand which took place, according to defendant's own motion to dismiss on August 22,
1952. We notice that while plaintiff avoids stating any date when the goods arrived in
Manila, it relies upon the allegation made in the motion to dismiss that a protest was filed
on August 22, 1952 which goes to show that plaintiff-appellant's counsel has not been
laying the facts squarely before the court for the consideration of the merits of the case. We
have already decided that in a case governed by the Carriage of Goods by Sea Act, the
general provisions of the Code of Civil Procedure on prescription should not be made to
apply. (Chua Kuy vs. Everett Steamship Corp., G.R. No. L-5554, May 27, 1953.) Similarly, we
now hold that in such a case the general provisions of the new Civil Code (Art. 1155) cannot
be made to apply, as such application would have the effect of extending the one-year
period of prescription fixed in the law. It is desirable that matters affecting transportation
of goods by sea be decided in as short a time as possible; the application of the provisions
of Article 1155 of the new Civil Code would unnecessarily extend the period and permit
delays in the settlement of questions affecting transportation, contrary to the clear intent
and purpose of the law. * * *

Page

Dole's contention that the prescriptive period "*** remained tolled as of May 4, 1972 ***
(and that) in legal contemplation *** (the) case (Civil Case No. 96353) was filed on January
6, 1975 *** well within the one-year prescriptive period in Sec. 3(6) of the Carriage of
Goods by Sea Act." 16 equates tolling with indefinite suspension. It is clearly fallacious and
merits no consideration.

34

Moreover, no different result would obtain even if the Court were to accept the proposition
that a written extrajudicial demand does toll prescription under the Carriage of Goods by
Sea Act. The demand in this instance would be the claim for damage-filed by Dole with
Maritime on May 4, 1972. The effect of that demand would have been to renew the oneyear prescriptive period from the date of its making. Stated otherwise, under Dole's theory,
when its claim was received by Maritime, the one-year prescriptive period was interrupted
"tolled" would be the more precise term and began to run anew from May 4, 1972,
affording Dole another period of one (1) year counted from that date within which to
institute action on its claim for damage. Unfortunately, Dole let the new period lapse
without filing action. It instituted Civil Case No. 91043 only on June 11, 1973, more than
one month after that period has expired and its right of action had prescribed.

WHEREFORE, the order of dismissal appealed from is affirmed, with costs against the
appellant, Dole Philippines, Inc.
SO ORDERED.

Page

35

Yap (Chairman), Melencio-Herrera, Cruz, Feliciano, Gancayco and Sarmiento, JJ., concur.

Page

36

Page

37

G.R. No. L-24515

November 18, 1967

THE AMERICAN INSURANCE COMPANY, plaintiff-appellant, vs.COMPAIA MARITIMA,

ET AL., defendants.
William H. Quasha & Associates for plaintiff-appellant.Ross, Selph & Carrascoso and Salcedo
for defendant-appellee.
MAKALINTAL, J.:
Appeal from the order of the Court of First Instance of Manila (Civil Case No. 55056)
dismissing, on the ground of prescription, the amended complaint of plaintiff-appellant,
The American Insurance Company as against alternative defendant Macondray & Co., Inc.
On August 11, 1962, a certain cargo insured with plaintiff corporation was shipped in New
York, U.S. aboard "M/S TOREADOR", of which the general agent in the Philippines is
appellee Macondray & Co., Inc. (hereinafter referred to as Macondray). The cargo, with an
invoice value of $3,539.61 CIF Cebu, was consigned to the order of the importer Atlas
Consolidated Mining and Development Corporation.
Inasmuch as the final port of call of the " M/S TOREADOR" was Manila, the carrier, in
accepting the cargo at the point of shipment, agreed to transship the same, after its
discharge in Manila, aboard an inter-island vessel to its destination in Cebu.
On September 18, 1962, the " M/S TOREADOR" arrived at the port of Manila and on the
same date discharged the cargo in question. Pursuant to the arrangement the cargo was
subsequently loaded aboard the "SS SIQUIJOR", an inter-island vessel. The shipment was
finally discharged in Cebu on September 24, 1962.

Page

In view of Maritima's allegation in its answer that the lost merchandise had not actually
been delivered to it, plaintiff filed on November 6, 1964 a motion to admit its amended
complaint impleading Macondray and Luzon Brokerage Corporation as additional
defendants and eliminating the Visayan Cebu Terminal Co., Inc. According to plaintiff, "the
amended complaint is necessary in view of defendant Maritima's assertion and records

38

When the consignee took delivery of the shipment it was found to be short of two (2)
pieces of tractor parts worth $2,834.88, or P11,063.12 at the exchange rate of P3.9025.
Plaintiff paid the insured value of the lost merchandise to the consignee. To recover the
said sum of P11,063.12 plaintiff, as subrogee of the consignee rights, filed on September 24,
1963 a complaint against the Compaia Maritima and the Visayan Cebu Terminal Co., Inc.
as alternative defendants. The former was sued as operator and owner of "SS SIQUIJOR"
and the latter as operator of the arrastre service at the port of Cebu charged with the care
and custody of all cargo discharged there.

tending to show that the lost merchandise was not delivered to it, contrary to Macondray's
representation, even after the filing of the original complaint, that the cargo was delivered
to Maritima." The amended complaint was admitted on November 14, 1964.
On December 23, 1964 Macondray moved to dismiss the amended complaint against it on
the ground that plaintiff's action had already prescribed under the provisions of the
Carriage of Goods by Sea Act1 which provides in section 3 (6):
In any event, the carrier and the ship shall be discharged from all liability in respect of loss
or damage unless suit is brought within one year after delivery of the goods or the date when
the goods shall have been delivered: . . .
Macondray contended that since the amended complaint in which it was impleaded for the
first time was filed only on November 6, 1964 and admitted on November 14, 1964, the
period of one year had expired whether reckoned from one or the other of two dates,
namely September 18, 1962, when the "M/S TOREADOR" arrived at the port of Manila and
discharged the cargo for transshipment to Cebu on board the "SS SIQUIJOR," and
September 24, 1962, when the shipment finally arrived in Cebu and was discharged the
same day.
The motion to dismiss was granted and plaintiff interposed the present appeal from the
order of dismissal. Plaintiff avers that the one year prescriptive period provided for in the
Carriage of Goods by Sea Act does not apply in this case, which should be governed by the
statute of limitations in the Civil Code. In support of this contention it is pointed out that
the cargo in question was transshipment cargo; that the discharge thereof in Manila
terminated the obligation of Macondray as carrier; and that its obligation to transship the
cargo to Cebu was merely that of a "forwarding agent" of the shipper. Reliance is placed on
Clause 11 of the bill of lading which states:
This carrier, in making arrangements for any transshipping or forwarding vessel or means
of transportation not operated by this carrier shall be considered solely the forwarding
agent of the shipper and without any other responsibility.

Page

1. This bill of lading shall have effect subject to the provisions of the Carriage of Goods by
Sea Act of the United States of America, approved April 16, 1936, which shall be deemed to
be incorporated herein and nothing herein contained shall be deemed a surrender by the
Carrier of any of its rights or immunities or an increase of any of its responsibilities or
liabilities under said Act. The provisions stated in said Act (except as may be otherwise
specifically provided herein) shall govern before the goods are loaded on and after they are
discharged from the ship and throughout the entire time the goods are in the custody of the

39

We do not see that the use of the term "forwarding agent of the shipper" is decisive of the
issue. According to paragraph 4 of the amended complaint the cargo was loaded on board
the "M/S TOREADOR" in New York, "freight prepaid to Cebu City . . . pursuant to the bill of
lading No. 13." In other words, the action is based on the contract of carriage up to the final
port of destination, which was Cebu City, for which the corresponding freight had been
prepaid. The following provisions of the bill of lading are the ones directly in point:

Carrier. . . .
19. In any event the Carrier and the ship shall be discharged from all liability in respect of
loss or damage unless suit is brought within one year after delivery of the goods or the date
when the goods should have been delivered. . . .
The transshipment of the cargo from Manila to Cebu was not a separate transaction from
that originally entered into by Macondray, as general agent for the "M/S TOREADOR". It
was part of Macondray's obligation under the contract of carriage and the fact that the
transshipment was made via an inter-island vessel did not operate to remove the
transaction from the operation of the Carriage of Goods by Sea Act. (See Go Chang & Co.,
Inc. vs. Aboitiz & Co., Inc., 98 Phil. 197).
WHEREFORE, the order appealed from is hereby affirmed, with costs. Concepcion, C.J.,
Reyes, J.B.L., Dizon, Bengzon, J.P., Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.
G.R. No. L-25266 January 15, 1975
AETNA INSURANCE COMPANY, plaintiff-appellant, vs.BARBER STEAMSHIP LINES,
INC., and/or LUZON STEVEDORING CORPORATION and/or LUZON BROKERAGE
CORPORATION, defendants-appellees.
Camacho, Zapa Andaya and Associates for plaintiff-appellant.
Rose, Selph, Salcedo, Del Rosario, Bito and Mesa for defendant-appellee Barber Steamship
Lines, Inc.
H. San Luis and L. V. Simbulan for defendant-appellee Luzon Stevedoring Corporation.
Jalandoni and Jamir for defendant-appellee Luzon Brokerage Corporation.
AQUINO, J.:
Aetna Insurance Company appealed on a legal question from the order of the Court of First
Instance of Manila, dismissing its amended complaint against Barber Line Far East Service
on the ground of prescription.
The facts are as follows:

It sought to recover from the defendants the sum of P12,100.06 as the amount of the
damages which were caused to a cargo of truck parts shipped on the SS Turandot. The
insurer paid the damages to Manila Trading & Supply Company, the consignee.

40

In a manifestation dated March 31, 1965, Barber Steamship Lines, Inc., without submitting

Page

On February 22, 1965 Aetna Insurance Company, as insurer, filed a complaint against
Barber Steamship Lines, Inc., Luzon Stevedoring Corporation and Luzon Brokerage
Corporation.

to the court's jurisdiction, alleged that it was a foreign corporation not licensed to do
business in the Philippines, that it was not engaged in business here, that it had no
Philippine agent and that it did not own nor operate the SS Turandot.
On April 5, 1965 Barber Steamship Lines, Inc., again with the caveat that it was not
submitting to the court's jurisdiction, filed a motion to dismiss on the grounds of (a) lack of
jurisdiction over the person and (b) that it was not the real party in interest.
Barber Steamship Lines, Inc. alleged that the service of summons was not effected upon it
in accordance with section 14, Rule 14 of the Rules of Court. It clarified that the summons
intended for it was served upon Macondray & Co., Inc. which was not its agent.
It asserted that it was not the real party in interest because according to the bill of lading
annexed to the complaint the owner of the SS Turandot, the carrying vessel, was the Wilh,
Wilhemsen Group. (Note, however, that the same bill of lading indicated that Barber
Steamship Lines, Inc. was the vessel's agent).
Two days later, or on April 7, 1965 plaintiff Aetna Insurance Company filed a manifestation
stating that the name of defendant Barber Steamship Lines, Inc. was incorrect and that the
correct name was Barber Line Far East Service. Attached to the manifestation was an
amended complaint containing the correction. Aetna Insurance Company manifested that
copies of the amended complaint would be served on the parties by means of alias
summons.
On April 20, 1965 Aetna Insurance Company filed a motion for the admission of its
amended complaint. Barber Steamship Lines, Inc. opposed the motion. It contended that its
pending motion to dismiss the original complaint should first be resolved before the
amended complaint may be admitted.
Judge Ramon O. Nolasco in an order dated April 19, 1965 dismissed the complaint against
Barber Steamship Lines, Inc. and directed that alias summonses be issued to the defendants
named in the amended complaint.

Judge Nolasco in his order of July 7, 1965 ruled that inasmuch as according to the
complaint the shipment arrived in Manila on February 22, 1964 and the amended
complaint, impleading Barber Line Far East Service, was filed on April 7, 1965, or beyond
the one-year period fixed in the Carriage of Goods by Sea Act, the action had already
prescribed. The case was dismissed as to Barber Line Far East Service.

41

The legal question under the above facts is whether the action of Aetna Insurance Company

Page

On May 19, 1965 Barber Line Far East Service, supposedly without admitting to the court's
jurisdiction, moved for the dismissal of the amended complaint on the grounds (1) that it is
not a juridical person and, hence, it could not be sued; (2) that the court had no jurisdiction
over its person; (3) that it was not the real party in interest and (4) that the action had
prescribed according to the bill of lading and the Carriage of Goods by Sea Act. Aetna
Insurance Company opposed the motion.

against Barber Line Far East Service, as ventilated in its amended complaint, which was
filed on April 7, 1965, had prescribed.
As previously stated, the action was for the recovery of damages to a cargo of truck parts
which was insured by Aetna Insurance Company and which arrived in Manila on the SS
Turandot and were delivered in bad order to the consignee on February 25, 1968 (4 Record
on Appeal).
The bill of lading covering the shipment provides:
19. In any event the Carrier and the ship shall be discharged from all liability in respect of
loss or damage unless suit is brought within one year after the delivery of the goods or the
dates when the goods should have been delivered. Suit shall not be deemed brought until
jurisdiction shall have been obtained over the Carrier and/or the ship by service of process
or by an agreement to appear.
On the other hand, the Carriage of Goods by Sea Act, Commonwealth Act No. 65 (Public Act
No. 521 of the 74th Congress of the United States) provides:
RESPONSIBILITIES AND LIABILITIES
Section 3. xxx xxx xxx
(6) xxx xxx xxx
In any event the carrier and the ship shall be discharged from all liability in respect of loss
or damage unless suit is brought within one year after delivery of the goods or the date
when the goods should have been delivered: Provided, That, if a notice of loss or damage,
either apparent or concealed, is not given as provided for in this section, that fact shall not
affect or prejudice the right of the shipper to bring suit within one year after the delivery of
the goods or the date when the goods should have been delivered.
Aetna Insurance Company contends in this appeal that the trial court erred (1) in holding
that the Barber Line Far East Service was substituted for Barber Steamship Lines, Inc. and
(2) in dismissing the action on the ground of prescription.

Page

Appellant company invokes the rule that where the original complaint states a cause of
action but does it imperfectly, and afterwards an amended complaint is filed, correcting the
defect, the plea of prescription will relate to the time of the filing of the original complaint
(Pangasinan Transportation Co. vs. Phil. Farming Co., Ltd., 81 Phil. 273). It contends that

42

There is no merit in the appeal. The trial court correctly held that the one-year statutory
and contractual prescriptive period had already expired when appellant company filed on
April 7, 1965 its action against Barber Line Far East Service. The one year period
commenced on February 25, 1964 when the damaged cargo was delivered to the
consignee. (See Chua Kuy vs. Everrett Steamship Corporation, 93 Phil. 207; Yek Tong Fire &
Marine Insurance Co., Ltd. vs. American President Lines, Inc., 103 Phil. 1125).

inasmuch as the original complaint was filed within the one year period, the action had not
prescribed.
That ruling would apply to defendants Luzon Stevedoring Corporation and Luzon
Brokerage Corporation. But it would not apply to Barber Line Far East Service which was
impleaded for the first time in the amended complaint.
It should be recalled that the original complaint was dismissed as to Barber Steamship
Lines, Inc. in the lower court's order of April 19, 1965. New summons had to be issued to
Barber Line Far East Service which had replaced Barber Steamship Lines, Inc. as a
defendant.
The filing of the original complaint interrupted the prescriptive period as to Barber
Steamship Lines, Inc. but not as to Barber Line Far East Service, an entity supposedly
distinct from the former. Appellant's contention that there was merely a correction in the
name of a party-defendant is untenable. *
In view of the foregoing considerations, the lower court's order of dismissal is affirmed.
Costs against the plaintiff-appellant.
SO ORDERED.

Page

43

Fernando (Chairman), Barredo, Antonio and Fernandez, JJ., concur.

Page

44

Del Rosario & Del Rosario Law Office for petitioner. Quasha, Asperilla, Ancheta, Pea, Marcos
& Nolasco for private respondents.

Page

UNIVERSAL SHIPPING LINES, INC., petitioner, vs.INTERMEDIATE APPELATE COURT

and ALLIANCE ASSURANCE COMPANY, LTD., respondents.

45

G.R. No. 74125 July 31, 1990

GRIO-AQUINO, J.:
In this appeal by certiorari, the petitioner seeks to set aside the decision of the then
Intermediate Appellate Court, now Court of Appeals, promulgated on March 25, 1986 in
AC-G.R. CV No. 69824, affirming with modification the decision of the former Court of First
Instance of Manila dated February 4, 1981, against the herein petitioner, Universal
Shipping Lines, Inc., the defendant in the trial court.
On or about March 22,1974, SEVALCO Limited, owned and operated by the petitioner,
shipped from Rotterdam Netherlands, to Bangkok, Thailand, aboard its M/V "TAIWAN",
two (2) cargoes of 50 palletized cartons consisting of 2,000 units of 25-kilogram bags of
State R Brand carton black, with a declared gross weight of 53,000 kilos each. They were
respectively consigned to S. Lersen Company, Ltd. and Muang Ngarm Retreads,Ltd., per
Bills of Lading Nos. RB-15 (Exh. A) and RB-16 (Exh. B). Both shipments were insured with
the private respondent, Alliance Assurance Company, Ltd., a foreign insurance company
domiciled in London, England, which had withdrawn from the Philippine market on June
30, 1951 yet.
Despite the arrival of the vessel on June 28, 1974 at Bangkok, the cargo covered by Bill of
Lading No. RB-15 was not unloaded nor delivered to the consignee, S. Lersen Company, Ltd.
The shipment under Bill of Lading No. RB-16 was delivered to Muang Ngarm Retreads, Ltd.
with a total weight shortage of 11,070 kilos because the cargoes had been either totally or
partially dissolved in saltwater which flooded Hatch No. 2 of the vessel where they had
been stored.
Upon arrival in Manila on July 4, 1974, Arturo C. Saavedra, master of M/V "TAIWAN" filed a
marine protest (Exh. H), pertinent portions of which read:
By investigation, the source of the water could not be definitely ascertained where it comes
from. However, the bilge pump was employed to pump out continue working for almost 12
hours No. 2. The bilge pump was employed every other day to pump out the water, but it
was seems to be almost same soundings. Suspecting of some leakage of suction pipes.
That the hold No. 2 cannot be inspected on account of the full cargoes inside the hold,
rendering it to be inaccessible.
Suspecting that the water comes from outside passing through some loosen rivets on
starboard side of the ship. (sic.)

Page

The consignees, S. Lersen Co., Ltd. and Muang Ngarm Retreads, Inc., filed their respective
formal claims for loss and damage to their cargoes on August 7, 1974 (Exhs. N and N-1) and
on November 12,1974 (Exh. M). (p. 24, Rollo.) The insurer paid both claims in the amounts
of I2,180 and 2,547.18 for the loss and damage to their cargoes.

46

That the pumping out the water from the hold was done by shore help upon arrival at
Bangkok. (sic.) (pp. 23-24, Rollo.)

On June 25, 1976, private respondent, as insurer-subrogee, filed an action in the Court of
First Instance of Manila to recover from the petitioner and its Manila agent, Carlos Go
Thong & Company, what it paid the consignees of the cargo.
After trial, the court a quo rendered judgment for the private respondent, the dispositive
portion of which reads:
PREMISES CONSIDERED, judgment is hereby rendered ordering defendants Universal
Shipping Lines, Inc. and Carlos Go Thong & Co., jointly and severally, to pay plaintiff
Alliance Asurance Co., Ltd., under the first cause of action, the sum of 12,180.00 or the
peso equivalent thereof, and under the second cause of action, the sum of 2,547.18 or the
peso equivalent thereof, both with legal interest thereon from June 25, 1976, the date of the
filing of the present action, until said obligations are fully paid, plus attorney's fees in the
sum of P10,000.00, with costs. (pp. 24-25, Rollo.)
On appeal to the Court of Appeals, the decision was affirmed after exculpating petitioner's
ship-agents in Manila (Go Thong) from any liability on the ground that it had no
participation in the shipment of the cargo which had been loaded and discharged in places
other than Manila (p. 28, Rollo).itc-asl
In this appeal by certiorari, petitioner alleges that respondent court erred:
1. in holding petitioner liable for the damage/loss suffered by the subject shipments;
2. in holding that private respondent has capacity to sue in this jurisdiction;
3. in finding that private respondent's cause of action has not yet prescribed; and
4. in awarding attorney's fees without stating any factual, legal and equitable justification.
The petition is not meritorious.
The first assignment of error raises a factual issue which we decline to review as this Court
may review only legal issues which must be distinctly set forth in the petition (Sec. 2, Rule
45, Rules of Court). In any event, the Court of Appeals committed no reversible error in
holding, as the trial court did, that:

Page

On the issue of jurisdiction, we uphold the appellate court's ruling that the private
respondent may sue in Philippine courts upon the marine insurance policies issued by it

47

... It was incumbent upon the defendants to prove that the losses and damages were due to
causes other than the negligence or fault of their employees. Said defendants have not
adduced proof on this point. It having been shown that the losses and damages were
incurred while the shipments were in the custody of the M/V' Taiwan' the liability of its
owner/operator and shipping agent is clear-they must pay for the losses and damages
sustained by the consignees as a consequence of the breach of contract of water
transportation. (pp. 27-28, Rollo.)

abroad to cover international-bound cargoes shipped by a Philippine carrier, even if it has

no license to do business in this country, for it is not the lack of the prescribed license (to
do business in the Philippines) but doing business without such license, which bars a
foreign corporation from access to our courts. (Pacific Vegetable Oil Corporation vs.
Singzon L-7919, April 29, 1955; Eastboard Navigation, Ltd. vs. J. Ysmael & Co., Inc., L-9090,
Sept. 10, 1957.)
Anent the issue of prescription of the action under Section 3(6), Title I, of the Carriage of
Goods by Sea Act (Commonwealth Act No. 65) which provides that:
... the carrier and the ship shall be discharged from all liability in respect of loss or damage
unless suit is brought within one year after delivery of the goods or the date when the
goods should have been delivered. ...
This provision of the law admits of an xception: if the one-year period is suspended by
express agreement of the parties (Chua Kay vs. Everett Steamship Corporation, L-5554, May
27,1953; Tan Liao vs. American President Lines, Ltd., L-7280, January 20, 1956) for in such
a case, their agreement becomes the law for them. (Phoenix Assurance Co., Ltd. vs. United
States Lines, 22 SCRA 674; Baluyot vs. Venegas, 22 SCRA 412; Lazo vs. Republic Surety &
Insurance, Co., Inc., 31 SCRA 329; Philippine American General Insurance Co., Inc. vs.
Mutuc, 61 SCRA 22-23).
The
exchange
of
correspondence
between
the
parties
and/or
their
associates/representatives (Exhs. R, S, S-1, T, T-1 and T-2) shows that the parties had
mutually agreed to extend the time within which the plaintiff or its predecessors-ininterest may file suit until December 27,1976. When the complaint was filed on June 25,
1976, that deadline had not yet expired.
An award of attorney's fees lies within the discretion of the court and depends upon the
circumstances of each case (Medco Industrial Corp., et al. vs. Court of Appeals, et al., 167
SCRA 838).itc-asl In this case, the award of P10,000 as attorney's fees was reasonable
and justified because the defendant's rejection of the private respondent's demand,
compelled the latter to litigate and incur expenses to protect and enforce its just and valid
claim.
WHEREFORE, the petition for review is denied for lack of merit. Costs against the
petitioner.
SO ORDERED.

Page

48

Narvasa (Chairman), Cruz, Gancayco and Medialdea, JJ., concur.

Page

49

Page

50

G.R. No. L-27798 June 15, 1977

UNION CARBIDE PHILIPPINES, INC. (formerly National Carbon Philippines, Inc.),
plaintiff-appellant, vs.MANILA RAILROAD CO., substituted by the PHILIPPINE
NATIONAL RAILWAYS, MANILA PORT SERVICE and AMERICAN STEAMSHIP
AGENCIES, INC., defendants- appellees.
Solicitor General Antonio P. Barredo and Solicitor Buenaventura J. Guerrero for appellants.
Salcedo, Del Rosario, Bito & Misa for appellee.
AQUINO, J.:

On January 20 and February 6 and 8, 1962 eight hundred ninety-eight (898) bags of resin

Page

On the following day, December 19, that cargo was delivered to the Manila Port Service in
good order and condition except for twenty- five bags which were in bad order (Par. IV and
Annexes C to C-25 of Stipulation of Facts).

51

This is an admiralty and arrastre case. On December 18, 1961 the vessel Daishin Maru
arrived in Manila with a cargo of 1,000 bags of synthetic resin consigned to General Base
Metals, Inc. which later sold the cargo to Union Carbide Philippines, Inc.

(out of the 1,000 bags) were delivered by the customs broker to the consignee. One
hundred two bags were missing. The contents of twenty-five bags were damaged or
pilfered while they were in the custody of the arrastre operator (Par. XII and Annexes D
and H of Stipulation of Facts All in all fifty bags out of the 898 bags were damaged (Annex
D-5).
The 152 bags of resin (102 missing and 50 damaged) were valued at $12.65 a bag or a total
value of $1,992.80, which amount at the prevailing rate of exchange of P3.85 to the
American dollar, is equivalent to P7,402.78 (Annex I of Stipulation of Facts).
The consignee, through the customs broker, filed on January 3, 1962 with the Manila Port
Service, as arrastre operator, and the American Steamship Agencies, Inc., as agent of the
carrier, a provisional claim advising them that the shipment in question was "shorthanded,
short delivered and/or landed in bad order" (Annexes E and F of Stipulation of Facts).
Formal claims dated June 11, 1962 were made by the consignee with the arrastre operator
and the agent of the carrier (Annexes I and I-1 of Stipulation of Facts The claims were
reiterated by the consignee's lawyer in his letters dated September 26, 1962 which were
received by the carrier's agent and the arrastre operator on October 4, 1962 (Annexes J and
J-1 of Stipulation of Facts).
As the claims were not paid, Union Carbide Philippines, Inc. filed a complaint on December
21, 1962 in the Court of First Instance of Manila against the Manila Railroad Company, the
Manila Port Service and the American Steamship Agencies, Inc. for the recovery of damages
amounting to P7,402.78 as the value of the undelivered 102 bags of resin and the damaged
50 bags plus legal rate of interest from the filing of the complaint and P1,000 as attorney's
fees.
Union Carbide's complaint was a double-barrelled action or a joinder of two causes of
action. One was an action in admiralty under the Carriage of Goods by Sea Act against the
carrier's agent for the recovery of P1,217.56 as the value of twenty-five bags of resin which
were damaged before they were landed (Annex C-25).

The case was submitted for decision on the basis of a stipulation of facts. The trial court in
its decision of January 15, 1964 dismissed the case as to the carrier's agent on the ground
that the action had already prescribed because it was not "brought within one year after
delivery of the goods", as contemplated in section 3(6) of the Carriage of Goods by Sea Act.
The one-year period was counted from December 19, 1961 when the cargo was delivered
to the arrastre operator. As above stated, the action was brought on December 21, 196'2 or
two days late, according to the trial court's reckoning (Civil Case No. 52562).

52

With respect to the consignee's claim against the arrastre operator, the trial court found

Page

The other was an action under the management contract between the Bureau of Customs
and the Manila Port Service, a subsidiary of the Manila Railroad Company, for the recovery
of P6,185.22 as the value of the undelivered 102 bags of resin and twenty-five bags, the
contents of which were damaged or pilfered while in the custody of the arrastre operator.

that the provisional claim was filed within the fifteen-day period fixed in paragraph 15 of
the arrastre contract. Yet, in spite of that finding, the trial court dismissed the action
against the arrastre operator (p. 65, Record on Appeal).
Union Carbide appealed to the Court of Appeals on questions of fact and of law, That
Appellate Court elevated the case to this Court because in its opinion the appeal raises only
the legal issue of prescription (Resolution of May 10, 1967 in CA-G. R. No. 33743-R).
Union Carbide contends that the trial court erred (1) in finding that its action was barred
by the statute of limitations and (2) in not holding that the carrier and the arrastre
operator were liable for the value of the undelivered and damaged cargo.
Claim against the carrier's agent.-There is no question that, as shown in the twenty-five
tally sheets, 975 bags of resin were delivered by the carrier in good order to the arrastre
operator and that only twenty-five (25) bags were damaged while in the carrier's custody
(Annexes C to C-25 and K-1 of Stipulation of Facts).
The one-year period within which the consignee should sue the carrier is computed from
"the delivery of the goods or the date when the goods should have been delivered". The
Carriage of Goods by Sea Act provides:
RESPONSIBILITIES AND LIABILITIES
SEC. 3. xxx xxx xxx
(6) Unless notice of loss or damage and the general nature of such loss or damage be given
in writing to the carrier or hi agent at the port of discharge before or at the time of the
removal of the goods into the custody of the person entitled to delivery thereof under the
contract of carriage, such removal shall be prima facie evidence of the delivery by the
carrier of the goods as described in the bill of lading. If the loss or damage is not apparent,
the notice must be given within three days of the delivery.
Said notice of loss or damage may be endorsed upon the receipt for the goods given by the
person taking delivery thereof.
The notice in writing need not be given if the state of the goods has at the time of their
receipt been the subject of joint survey or inspection.

Page

Provided, That if a notice of loss or damage, either apparent or concealed, is not given as
provided for in this section, that fact shall not affect or prejudice the right of the shipper to
bring suit within one year after the delivery of the goods or the date when the goods should
have been delivered.

53

In any event the carrier and the ship shall be discharged from all liability in respect of loss
or damage unless suit is brought within one year after delivery of the goods or the date
when the goods should have been delivered:

In the case of any actual or apprehended loss or damage the carrier and the receiver shall
give all reasonable facilities to each other for inspecting and tallying the goods.
(Commonwealth Act No. 65, adopting U.S. Public Act No. 521 of April 16,1936).
What is the meaning of "delivery" in section 3(6) of the Carriage of Goods by Sea Act The
trial court construed delivery as referring to the discharge or landing of the cargo.
Union Carbide contends that "delivery" does not mean the discharge of goods or the
delivery thereof to the arrastre operator but the actual delivery of the goods to the
consignee by the customs broker.
The carrier contends that delivery means discharge from the vessel into the custody of the
customs arrastre operator because under sections 1201 and 1206 of the Tariff and Customs
Code merchandise cannot be directly delivered by the carrier to the consignee but should
first pass through the customhouse at a port of entry for the collection of customs duties.
The carrier cites the following provisions of the bill of lading to support its contention:
9. Delivery. The Carrier retains the option of delivery at all times from ship's side or from
craft, hulk, custom house, warehouse, wharf or quay at the risk of the shippers, consignees
or owners of the goods, and all expenses incurred by delivery otherwise than from ship's
side shall be borne by the shippers, consignee or owners of the goods.
11. Discharge of Goods. The goods may be discharge without notice, as soon as the ship is
ready to unload, continuously day and night, Sundays and holidays included, on to wharf or
quay or into warehouse, or into hulk, lazaretto or craft or on any other place and be stored
there at the risk and expense of the shippers, consignees or owners of the goods, any
custom of the port to the contrary notwithstanding. In any case, the Carrier's liability is to
cease as soon as the goods are lifted from ship's deck or leave the ship's tackle, any custom
of the port to the contrary notwithstanding. Consignees to pay charges for sorting and
stocking the goods on wharf or in shed.
If the consignees fail to take delivery of their goods immediately the ship is ready to
discharge them, the Carrier shall be at liberty to land and warehouse or discharge the said
goods into hulk or craft, or at any other place at the risk and expense of the shippers,
consignees or owners of the goods without notice.

Page

Suit for the recovery of loss or damage shall not in any event be maintainable against the
Carrier or the ship unless instituted within one year after the delivery of the written notice
above specified. The amount of claim shall be restricted to the Cash Value of the goods at
the place and time of original shipment plus all charges actually paid thereon, and all claims

54

15. Notice of Claim. Any claim for loss of or damage to the goods must be preferred in
writing to the Carrier's Agents at the place of delivery within 3 days after the ship's
discharge thereof, and before the goods are removed from the quay or ship's " or place of
discharge, and in the event of such claim not being preferred as above specified, the claim
shall be deemed as waived, and the Carrier shall be discharged therefrom.

for either partial or total loss or damage shall be entertained and adjusted upon this basis
of value. (Annex B).
In this connection, it is pertinent to state that the Tarifff and Customs Code allows the
delivery of imported merchandise to the arrastre operator:
SEC. 1213. Receiving Handling Custody and Delivery of Articles. The Bureau of Customs
shall have "elusive supervision and control over the receiving, handling, custody and
delivery of articles on the wharves and piers at all ports of entry and in the exercise of its
functions it is hereby authorized to acquire, take over, operate and superintend such plants
and facilities as may be necessary for the receiving, handling, custody and delivery of
articles, and the convenience and comfort of passengers and the handling of baggage, as
well as to acquire fire protection equipment for use in the piers:
Provided, That whenever in his judgment the receiving, handling, custody and delivery of
articles can be carried on by private parties with greater efficiency, the Commissioner may,
after public bidding and subject to the approval of the department head, contract with any
private party for the service of receiving, handling, custody and delivery of articles, and in
such event, the contract may include the sale or lease of government-owned equipment and
facilities used in such service.
The sensible and practical interpretation is that delivery within the meaning of section 3(6)
of the Carriage of Goods by Sea Law means delivery to the arrastre operator. That delivery is
evidenced by tally sheets which show whether the goods were landed in good order or in
bad order, a fact which the consignee or shipper can easily ascertain through the customs
broker.
To use as basis for computing the one-year period the delivery to the consignee would be
unrealistic and might generate confusion between the loss or damage sustained by the
goods while in the carrier's custody and the loss or damage caused to the goods while in
the arrastre operator's possession.

Under the facts of this case, we held that the one-year period was correctly reckoned by the
trial court from December 19, 1961, when, as agreed upon by the parties and as shown in

Page

In the Tan Hi case, it was held that a requirement of Philippine law that all cargo unloaded
at Manila be delivered to the consignee through the arrastre operator acting as customs'
agent was not unreasonable. The common-law requirements as to the proper delivery of
goods by water carrier apply only when customs regulations at the port of destination do
not otherwise provide. The delivery must be in accordance with the usages of the port in
order that such delivery would discharge the carrier of responsibility. (Notes 50 and 51, 80
C.J.S. 922; 58 C. J. 372 note 24. See 70 Am. Jur 2nd 613, note 19).

55

Apparently, section 3(6) adheres to the common-law rule that the duty imposed water
carriers was merely to transport from wharf to wharf and that the carrier was not bound to
deliver the goods at the warehouse of the consignee (Tan Hi vs. United States, 94 Fed. Supp.
432,435).

the tally sheets, the cargo was discharged from the carrying vessel and delivered to the
Manila Port Service. That one-year period expired on December 19, 1962. Inasmuch as the
action was filed on December 21, 1962, it was barred by the statute of limitations.
Defendant American Steamship Agencies, Inc., as agent of the carrier, has no more liability
to the consignee's assignee, Union Carbide Philippines, Inc., in connection with the
damaged twenty-five bags of resin.
Prescription was duly pleaded by the said defendant in its answer and motion to dismiss.
That defense was correctly entertained by trial court.
Claim against the arrastre operator. The liability of the arrastre contractor has a factual
and legal basis different from that of the carrier's. The management contract between the
Manila Port Service and the Bureau of Customs provides:
15. ... ; in any event the CONTRACTOR hall be relieved and released of any and all
responsibility or liability for loss, damage, misdelivery, and/or non-delivery of goods,
unless suit in the court of proper jurisdiction is brought within a period of one (1) year
from the date of the discharge of the goods, or from the date when the claim for the value of
such goods have been rejected or denied by the CONTRACTOR, provided that such claim
shall have been filed with the CONTRACTOR within fifteen (15) days from the date of
discharge of the last package from the carrying vessel. ... (Annex A of Stipulation of Facts
Under the foregoing contractual provisions, the action against the arrastre operator to
enforce liability for loss of the cargo or damage thereto should be filed within one year
from the date of the discharge of the goods or from the date when the claim for the value of
such goods has been rejected or denied by the arrastre operator.
However, before such action can be filed a condition precedent should be complied with
and that is, that a claim (provisional or final) shall have been previously filed with the
arrastre operator within fifteen days from the date of the discharge of the last package
from the carrying vessel (Continental Insurance Company vs. Manila Port Service, L-22208,
March 30,1966,16 SCRA 425).

Having complied with the condition precedent for the filing of a claim within the fifteenday period, Union Carbide could file the court action within one year, either from December
19, 1961 or from December 19, 1962. This second date is regarded as the expiration of the
period within which the Manila Port Service should have acted on the claim (Philippine
Education Co., Inc. vs. Manila Port Service, L-24091, 21 SCRA, 174, 178).

56

In other words, the claimant or consignee has a two-year prescriptive period, counted from

Page

In this case, the consignee's customs broker filed with the Manila Port Service as
provisional claim advising the latter that the cargo was "short, short delivered and/or
landed in bad order". That claim was filed on January 3, 1962 or on the fifteenth day
following December 19, 1961, the date of the discharge of the last package from the
carrying vessel. That claim was never formally rejected or denied by the Manila Port Service.

the date of the discharge of the goods, within which to file the action in the event that the
arrastre contractor, as in this case, has not rejected nor admitted liability (Continental
Insurance Company vs. Manila Port Service, supra. Philippine Education Company vs.
Manila Port Service, L-23444, October 29, 1971, 42 SCRA 31).
Since the action in this case against the arrastre operator was filed on December 21, 1962,
or within the two-year period expiring on December 19, 1963, that action was filed on time.
The trial court erred in dismissing the action against the Manila Port Service and its
principal, the Manila Railroad Company.
As shown in the statement of facts, the arrastre operator is responsible for the value of 102
bags of resin which were not delivered, and twenty-five bags, which were damaged, or a
total of one hundred twenty-seven bags valued at P6,185.22.
The arrastre operator should pay attorney's fees to the plaintiff for not having satisfied its
plainly valid, just and demandable claim (Art. 2208, Civil Code). We fix the attorney's fees
and the litigation expenses in the sum of one thousand pesos.
WHEREFORE, the trial court's judgment is affirmed insofar as it dismissed plaintiffappellant's claim against defendant American Steamship Agencies, Inc. on the ground of
prescription.
The trial court's decision is reversed insofar as it dismissed plaintiff's claim against the
Manila Railroad Company, as arrastre operator. The Philippine National Railways, as the
successor of the Manila Railroad Company (See. 22, Republic Act No. 4156), is hereby
ordered to pay plaintiff Union Carbide Philippines, Inc. the sum of P6,185.22, as the value of
the 127 bags of resin (102 bags missing and 25 bags damaged), with legal rate of interest
from the filing of the complaint on December 21, 1962 up to the date of payment, Plus
P1,000 as attorney's fees and litigation expenses, and the costs.
SO ORDERED.
Fernando (Chairman), Barredo, Antonio and Fernandez, JJ., concur.
Concepcion Jr., J., is on leave.

Page

57

Fernandez J., was designated to sit in the Second Davison.

G.R. No. 161849

July 9, 2010

WALLEM PHILIPPINES SHIPPING, INC., Petitioner, - versus - S.R. FARMS, INC.,

Respondent.

PERALTA, J.:
Assailed in the present petition for review on certiorari are the Decision[1] and
Resolution[2] of the Court of Appeals (CA) dated June 2, 2003 and January 15, 2004,
respectively, in CA-G.R. CV No. 65857. The CA Decision reversed and set aside the
Decision[3] dated October 8, 1999 of the Regional Trial Court (RTC) of Manila, Branch 11,
in Civil Case No. 93-65021, while the CA Resolution denied petitioners Motion for
Reconsideration.

Page

x x x On March 25, 1992, Continental Enterprises, Ltd. loaded

on board the vessel M/V Hui Yang, at Bedi Bunder, India, a shipment of
Indian Soya Bean Meal, for transportation and delivery to Manila, with
plaintiff [herein respondent] as consignee/notify party. The said
shipment is said to weigh 1,100 metric tons and covered by Bill of
Lading No. BEDI 4 dated March 25, 1992 (Exhibit A; also Exhibit I). The

58

The facts of the case, as found by the RTC and affirmed by the CA, are as follows:

vessel is owned and operated by defendant Conti-Feed, with defendant

[herein petitioner] Wallem as its ship agent.

The subject cargo is part of the entire shipment of Indian Soya

Bean Meal/India Rapeseed Meal loaded in bulk on board the said vessel
for delivery to several consignees. Among the consignees were San
Miguel Corporation and Vitarich Corporation, including the herein
plaintiff (Exhibit A; Exhibits 1 to 6; TSN, p. 13, June 28, 1996).

On April 11, 1992, the said vessel, M/V Hui Yang arrived at
the port of Manila, Pier 7 South Harbor. Thereafter, the shipment was
discharged and transferred into the custody of the receiving barges, the
NorthFront-333 and NorthFront-444. The offloading of the shipment
went on until April 15, 1992 and was handled by [Ocean Terminal
Services, Inc.] OTSI using its own manpower and equipment and without
the participation of the crew members of the vessel. All throughout the
entire period of unloading operation, good and fair weather condition
prevailed.

Page

Upon discovery thereof, the vessel chief officer was

immediately notified of the said short shipment by the cargo surveyor,
who accordingly issued the corresponding Certificate of Discharge dated
April 15, 1992 (Exhibit D). The survey conducted and the resultant
findings thereon are embodied in the Report of Superintendence dated
April 21, 1992 (Exhibits C to C-2) and in the Barge Survey Report both
submitted by Lorenzo Bituin (Exhibits C-3 and C-4). As testified to by
Lorenzo Bituin, this alleged shortage of 80.467 metric tons was arrived
at using the draft survey method which calls for the measurement of the
light and loaded condition of the barge in relation to the weight of the
water supposedly displaced.[4]

59

At the instance of the plaintiff, a cargo check of the subject

shipment was made by one Lorenzo Bituin of Erne Maritime and Allied
Services, Co. Inc., who noted a shortage in the shipment which was
placed at 80.467 metric tons based on draft survey made on the
NorthFront-33 and NorthFront-444 showing that the quantity of cargo
unloaded from the vessel was only 1019.53 metric tons. Thus, per the
bill of lading, there was an estimated shortage of 80.467.

Petitioner then filed a Complaint for damages against Conti-Feed & Maritime Pvt. Ltd.,
a foreign corporation doing business in the Philippines and the owner of M/V Hui Yang;
RCS Shipping Agencies, Inc., the ship agent of Conti-Feed; Ocean Terminal Services, Inc.
(OTSI), the arrastre operator at Anchorage No. 7, South Harbor, Manila; and Cargo Trade,
the customs broker.[5]

On June 7, 1993, respondent filed an Amended Complaint impleading herein petitioner

as defendant alleging that the latter, and not RCS, was the one which, in fact, acted as ContiFeeds ship agent.[6]

On June 22,
1993, the complaint against Cargo Trade was dismissed at the
instance of respondent on the ground that it has no cause of action against the former.[7]

Subsequently, upon motion of RCS, the case against it was likewise dismissed for lack
of cause of action.[8]

Meanwhile, defendant OTSI filed its Answer with Counterclaim and Crossclaim[9]
denying the material allegations of the Complaint and alleging that it exercised due care
and diligence in the handling of the shipment from the carrying vessel unto the lighters; no
damage or loss whatsoever was sustained by the cargo in question while being discharged
by OTSI; petitioners claim had been waived, abandoned or barred by laches or estoppels;
liability, if any, is attributable to its co-defendants.

Page

Conti-Feed did not file an Answer.

60

For its part, petitioner denied the allegations of respondent claiming, among
others, that it is not accountable nor responsible for any alleged shortage sustained by the
shipment while in the possession of its co-defendants; the alleged shortage was due to
negligent or faulty loading or unloading of the cargo by the stevedores/shipper/consignee;
the shortage, if any, was due to pre-shipment damage, inherent nature, vice or defect of the
cargo for which herein petitioner is not liable; respondents claim is already barred by
laches and/or prescription.[10]

Pre-Trial Conference was conducted, after which trial ensued.

On October 8, 1999, the RTC rendered its Decision[11] dismissing respondents

complaint, as well as the opposing parties counterclaims and crossclaims.

Aggrieved by the RTC Decision, respondent filed an appeal with the CA.

On June 2, 2003, the CA rendered its presently assailed Decision disposing as follows:

WHEREFORE, the decision appealed from is hereby REVERSED

and SET ASIDE and another one entered ordering defendants-appellees
Conti-Feed and Maritime Pvt. Ltd. and Wallem Philippines Shipping, Inc.,
to pay the sum representing the value of the 80.467 metric tons of
Indian Soya Beans shortdelivered, with legal interest from the time the
judgment becomes final until full payment, plus attorneys fees and
expenses of litigation of P10,000.00, as well as the cost of suit.

SO ORDERED.[12]

Petitioner filed a Motion for Reconsideration.

On July 8, 2003, respondent filed a Motion for a More Definite Dispositive Portion[13]
praying that the value of the 80.467 metric tons of Indian Soya Beans, which petitioner and
Conti-Feed were ordered to pay, be specified in the dispositive portion of the CA Decision.

Page

On January 15, 2004, the CA issued a Resolution denying petitioners Motion for
Reconsideration and modifying the dispositive portion of its Decision, thus:

61

Petitioner filed its Comment/Opposition[14] to private respondents Motion.

WHEREFORE, the decision appealed from is hereby REVERSED

and SET ASIDE and another one entered ordering defendants-appellees
Conti-Feed and Maritime Pvt. Ltd. and Wallem Shipping, Inc., to pay the
sum of $19,070.06 representing the value of the 80.467 metric tons of
Indian Soya Beans shortdelivered, with legal interest from the time the
judgment becomes final until full payment, plus attorneys fees and
expenses of litigation of P10,000.00, as well as the costs of suit.

SO ORDERED.[15]

Hence, the instant petition based on the following Assignment of Errors:

THE COURT OF APPEALS ERRED IN APPLYING THE PRESUMPTION OF

NEGLIGENCE UNDER ARTICLE 1735 OF THE CIVIL CODE. THIS
PROVISION DOES NOT APPLY IN THIS CASE BECAUSE THERE WAS NO
LOSS OR SHORTAGE OR SHORTDELIVERY.

II

Page

A.
THE CLAIM WAS ALREADY TIME-BARRED
WHEN THE CASE WAS FILED AGAINST HEREIN
PETITIONER ON 8 MAY 1993, AS PROVIDED IN
SECTION 3 (6) OF THE COGSA. THE ONE-YEAR
PRESCRIPTIVE PERIOD COMMENCED ON 15 APRIL
1992 WHEN THE SUBJECT SHIPMENT WAS
DELIVERED TO PRIVATE RESPONDENT AND LAPSED
ON 15 APRIL 1993; AND

62

THE COURT OF APPEALS ERRED IN GIVING DUE COURSE TO THE CASE

CONSIDERING THAT:

B.
[RESPONDENT] WAIVED ITS RIGHT OF
ACTION WHEN IT DID NOT GIVE A WRITTEN NOTICE
OF LOSS TO THE PETITIONER WITHIN THREE (3)
DAYS FROM DISCHARGE OF THE SUBJECT
SHIPMENT AS PROVIDED IN SECTION 3 (6) OF THE
COGSA.

III

IN THE REMOTE POSSIBILITY OF LOSS OR SHORTAGE OR

SHORTDELIVERY, THE COURT OF APPEALS ERRED IN IMPUTING
NEGLIGENCE AGAINST THE PETITIONER WHICH WAS NOT
RESPONSIBLE IN LOADING AND/OR DISCHARGING THE SUBJECT
SHIPMENT.

IV

THE COURT OF APPEALS ERRED IN GRANTING [RESPONDENTS]

MOTION FOR A MORE DEFINITE DISPOSITIVE PORTION WITHOUT
STATING IN THE DECISION, THE LEGAL BASES FOR DOING SO.

Page

THE COURT OF APPEALS ERRED IN GRANTING THE MOTION FOR A

MORE DEFINITE DISPOSITIVE PORTION BECAUSE [RESPONDENT]
FILED SAID MOTION MORE THAN FIFTEEN (15) DAYS AFTER
[RESPONDENT] RECEIVED THE DECISION OF THE COURT OF APPEALS.
THE COURT OF APPEALS FURTHER ERRED IN INSERTING A DEFINITE
MONETARY VALUE OF THE ALLEGED SHORTAGE BECAUSE THERE
WAS NO FACTUAL FINDING, BOTH IN THE TRIAL COURT AND IN THE
COURT OF APPEALS, AS TO THE SPECIFIC AMOUNT OF THE ALLEGED
SHORTDELIVERED CARGO.[16]

63

The Court finds it proper to resolve first the question of whether the claim against
petitioner was timely filed.

With respect to the prescriptive period involving claims arising from shortage,
loss of or damage to cargoes sustained during transit, the law that governs the instant case
is the Carriage of Goods by Sea Act[17] (COGSA), Section 3 (6) of which provides:
Unless notice of loss or damage and the general nature of such
loss or damage be given in writing to the carrier or his agent at the port
of discharge or at the time of the removal of the goods into the custody
of the person entitled to delivery thereof under the contract of carriage,
such removal shall be prima facie evidence of the delivery by the carrier
of the goods as described in the bill of lading. If the loss or damage is not
apparent, the notice must be given within three days of delivery.

Said notice of loss or damage may be endorsed upon the

receipt for the goods given by the person taking delivery thereof.

The notice in writing need not be given if the state of the goods
has at the time of their receipt been the subject of joint survey or
inspection.

In any event, the carrier and the ship shall be discharged from all
liability in respect of loss or damage unless suit is brought within one
year after delivery of the goods or the date when the goods should have
been delivered; Provided, That, if a notice of loss or damage, either
apparent or concealed, is not given as provided for in this section, that
fact shall not affect or prejudice the right of the shipper to bring suit
within one year after the delivery of the goods or the date when the
goods should have been delivered.

Page

64

In the case of any actual or apprehended loss or damage, the

carrier and the receiver shall give all reasonable facilities to each other
for inspecting and tallying the goods.

Petitioner claims that pursuant to the above-cited provision, respondent should

have filed its Notice of Loss within three days from delivery. It asserts that the cargo was
fully discharged from the vessel on April 15, 1992, but that respondent failed to file any
written notice of claim. Petitioner also avers that, pursuant to the same provision of the
COGSA, respondents claim had already prescribed because the complaint for damages was
filed more than one year after the shipment was discharged.

The Court agrees.

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

Under the same provision, however, a failure to file a notice of claim within three
days will not bar recovery if a suit is nonetheless filed within one year from delivery of the
goods or from the date when the goods should have been delivered.[18]

In Loadstar Shipping Co., Inc. v. Court of Appeals,[19] the Court ruled that a claim is
not barred by prescription as long as the one-year period has not lapsed. Thus, in the
words of the ponente, Chief Justice Hilario G. Davide Jr.:

Page

In the instant case, the Court is not persuaded by respondents claim that the
complaint against petitioner was timely filed. Respondent argues that the suit for damages
was filed on March 11, 1993, which is within one year from the time the vessel carrying the
subject cargo arrived at the Port of Manila on April 11, 1993, or from the time the shipment

65

Inasmuch as neither the Civil Code nor the Code of Commerce

states a specific prescriptive period on the matter, the Carriage of Goods
by Sea Act (COGSA) -- which provides for a one-year period of limitation
on claims for loss of, or damage to, cargoes sustained during transit -may be applied suppletorily to the case at bar.[20]

was completely discharged from the vessel on April 15, 1992.

There is no dispute that the vessel carrying the shipment arrived at the Port of
Manila on April 11, 1992 and that the cargo was completely discharged therefrom on April
15, 1992. However, respondent erred in arguing that the complaint for damages, insofar as
the petitioner is concerned, was filed on March 11, 1993.

As the records would show, petitioner was not impleaded as a defendant in the
original complaint filed on March 11, 1993.[21] It was only on June 7, 1993 that the
Amended Complaint, impleading petitioner as defendant, was filed.

Respondent cannot argue that the filing of the Amended Complaint against
petitioner should retroact to the date of the filing of the original complaint.

The settled rule is that the filing of an amended pleading does not retroact to the
date of the filing of the original; hence, the statute of limitation runs until the submission of
the amendment.[22] It is true that, as an exception, this Court has held that an amendment
which merely supplements and amplifies facts originally alleged in the complaint relates
back to the date of the commencement of the action and is not barred by the statute of
limitations which expired after the service of the original complaint.[23] The exception,
however, would not apply to the party impleaded for the first time in the amended
complaint.[24]

Page

In the instant case, petitioner was only impleaded in the amended Complaint of
June 7, 1993, or one (1) year, one (1) month and twenty-three (23) days from April 15,

66

The rule on the non-applicability of the curative and retroactive effect of an

amended complaint, insofar as newly impleaded defendants are concerned, has been
established as early as in the case of Aetna Insurance Co. v. Luzon Stevedoring
Corporation.[25] In the said case, the defendant Barber Lines Far East Service was
impleaded for the first time in the amended complaint which was filed after the one-year
period of prescription. The order of the lower court dismissing the amended complaint
against the said defendant on ground of prescription was affirmed by this Court.

1992, the date when the subject cargo was fully unloaded from the vessel. Hence, reckoned
from April 15, 1992, the one-year prescriptive period had already lapsed.

Having ruled that the action against petitioner had already prescribed, the Court no
longer finds it necessary to address the other issues raised in the present petition.

WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court of

Appeals dated June 2, 2003 and its Resolution dated January 15, 2004 in CA-G.R. CV No.
65857 are MODIFIED by dismissing the complaint against petitioner. In all other respects,
the challenged Decision and Resolution of the CA are AFFIRMED.

SO ORDERED.

G.R. No. 171468

August 24, 2011

NEW WORLD INTERNATIONAL DEVELOPMENT (PHILS.), INC., Petitioner, - versus NYK-FILJAPAN SHIPPING CORP., LEP PROFIT INTERNATIONAL, INC. (ORD), LEP
INTERNATIONAL PHILIPPINES, INC., DMT CORP., ADVATECH INDUSTRIES, INC.,

August 24, 2011

NEW WORLD INTERNATIONAL DEVELOPMENT (PHILS.), INC., Petitioner,- versus -

Page

G.R. No. 174241

67

MARINA PORT SERVICES, INC., SERBROS CARRIER CORPORATION, and SEABOARDEASTERN INSURANCE CO., INC., Respondents.

SEABOARD-EASTERN INSURANCE CO., INC., Respondent.

ABAD, J.:

These consolidated petitions involve a cargo owners right to recover damages from
the loss of insured goods under the Carriage of Goods by Sea Act and the Insurance Code.

The Facts and the Case

Petitioner New World International Development (Phils.), Inc. (New World) bought
from DMT Corporation (DMT) through its agent, Advatech Industries, Inc. (Advatech) three
emergency generator sets worth US$721,500.00.

DMT shipped the generator sets by truck from Wisconsin, United States, to LEP
Profit International, Inc. (LEP Profit) in Chicago, Illinois. From there, the shipment went by
train to Oakland, California, where it was loaded on S/S California Luna V59, owned and
operated by NYK Fil-Japan Shipping Corporation (NYK) for delivery to petitioner New
World in Manila. NYK issued a bill of lading, declaring that it received the goods in good
condition.

Page

Marina Port Services, Inc. (Marina), the Manila South Harbor arrastre or cargohandling operator, received the shipment on October 7, 1993. Upon inspection of the three
container vans separately carrying the generator sets, two vans bore signs of external
damage while the third van appeared unscathed. The shipment remained at Pier 3s
Container Yard under Marinas care pending clearance from the Bureau of Customs.
Eventually, on October 20, 1993 customs authorities allowed petitioners customs broker,
Serbros Carrier Corporation (Serbros), to withdraw the shipment and deliver the same to
petitioner New Worlds job site in Makati City.

68

NYK unloaded the shipment in Hong Kong and transshipped it to S/S ACX Ruby V/72
that it also owned and operated. On its journey to Manila, however, ACX Ruby encountered
typhoon Kadiang whose captain filed a sea protest on arrival at the Manila South Harbor on
October 5, 1993 respecting the loss and damage that the goods on board his vessel
suffered.

An examination of the three generator sets in the presence of petitioner New Worlds
representatives, Federal Builders (the project contractor) and surveyors of petitioner New
Worlds insurer, SeaboardEastern Insurance Company (Seaboard), revealed that all three
sets suffered extensive damage and could no longer be repaired. For these reasons, New
World demanded recompense for its loss from respondents NYK, DMT, Advatech, LEP
Profit, LEP International Philippines, Inc. (LEP), Marina, and Serbros. While LEP and NYK
acknowledged receipt of the demand, both denied liability for the loss.

Since Seaboard covered the goods with a marine insurance policy, petitioner New
World sent it a formal claim dated November 16, 1993. Replying on February 14, 1994,
Seaboard required petitioner New World to submit to it an itemized list of the damaged
units, parts, and accessories, with corresponding values, for the processing of the claim.
But petitioner New World did not submit what was required of it, insisting that the
insurance policy did not include the submission of such a list in connection with an
insurance claim. Reacting to this, Seaboard refused to process the claim.

On October 11, 1994 petitioner New World filed an action for specific
performance and damages against all the respondents before the Regional Trial Court
(RTC) of Makati City, Branch 62, in Civil Case 94-2770.

On August 16, 2001 the RTC rendered a decision absolving the various respondents
from liability with the exception of NYK. The RTC found that the generator sets were
damaged during transit while in the care of NYKs vessel, ACX Ruby. The latter failed,
according to the RTC, to exercise the degree of diligence required of it in the face of a
foretold raging typhoon in its path.

Page

As regards petitioner New Worlds claim against Seaboard, its insurer, the RTC held
that the latter cannot be faulted for denying the claim against it since New World refused to

69

The RTC ruled, however, that petitioner New World filed its claim against the vessel
owner NYK beyond the one year provided under the Carriage of Goods by Sea Act (COGSA).
New World filed its complaint on October 11, 1994 when the deadline for filing the action
(on or before October 7, 1994) had already lapsed. The RTC held that the one-year period
should be counted from the date the goods were delivered to the arrastre operator and not
from the date they were delivered to petitioners job site.[1]

submit the itemized list that Seaboard needed for assessing the damage to the shipment.
Likewise, the belated filing of the complaint prejudiced Seaboards right to pursue a claim
against NYK in the event of subrogation.

On appeal, the Court of Appeals (CA) rendered judgment on January 31, 2006,[2]
affirming the RTCs rulings except with respect to Seaboards liability. The CA held that
petitioner New World can still recoup its loss from Seaboards marine insurance policy,
considering a) that the submission of the itemized listing is an unreasonable imposition
and b) that the one-year prescriptive period under the COGSA did not affect New Worlds
right under the insurance policy since it was the Insurance Code that governed the relation
between the insurer and the insured.

Although petitioner New World promptly filed a petition for review of the CA decision
before the Court in G.R. 171468, Seaboard chose to file a motion for reconsideration of that
decision. On August 17, 2006 the CA rendered an amended decision, reversing itself as
regards the claim against Seaboard. The CA held that the submission of the itemized listing
was a reasonable requirement that Seaboard asked of New World. Further, the CA held
that the one-year prescriptive period for maritime claims applied to Seaboard, as insurer
and subrogee of New Worlds right against the vessel owner. New Worlds failure to
comply promptly with what was required of it prejudiced such right.

Instead of filing a motion for reconsideration, petitioner instituted a second petition

for review before the Court in G.R. 174241, assailing the CAs amended decision.

The Issues Presented

The issues presented in this case are as follows:

Page

b) In G.R. 174241, 1) whether or not the CA erred in ruling that Seaboards request
from petitioner New World for an itemized list is a reasonable imposition and did not

70

a)
In G.R. 171468, whether or not the CA erred in affirming the RTCs release
from liability of respondents DMT, Advatech, LEP, LEP Profit, Marina, and Serbros who
were at one time or another involved in handling the shipment; and

violate the insurance contract between them; and 2) whether or not the CA erred in failing
to rule that the one-year COGSA prescriptive period for marine claims does not apply to
petitioner New Worlds prosecution of its claim against Seaboard, its insurer.

The Courts Rulings

In G.R. 171468 --

Petitioner New World asserts that the roles of respondents DMT, Advatech, LEP,
LEP Profit, Marina and Serbros in handling and transporting its shipment from Wisconsin
to Manila collectively resulted in the damage to the same, rendering such respondents
solidarily liable with NYK, the vessel owner.

But the issue regarding which of the parties to a dispute incurred negligence is
factual and is not a proper subject of a petition for review on certiorari. And petitioner
New World has been unable to make out an exception to this rule.[3] Consequently, the
Court will not disturb the finding of the RTC, affirmed by the CA, that the generator sets
were totally damaged during the typhoon which beset the vessels voyage from Hong Kong
to Manila and that it was her negligence in continuing with that journey despite the adverse
condition which caused petitioner New Worlds loss.

Page

In G.R. 174241 --

71

That the loss was occasioned by a typhoon, an exempting cause under Article
1734 of the Civil Code, does not automatically relieve the common carrier of liability. The
latter had the burden of proving that the typhoon was the proximate and only cause of loss
and that it exercised due diligence to prevent or minimize such loss before, during, and
after the disastrous typhoon.[4] As found by the RTC and the CA, NYK failed to discharge
this burden.

One. The Court does not regard as substantial the question of reasonableness of
Seaboards additional requirement of an itemized listing of the damage that the generator
sets suffered. The record shows that petitioner New World complied with the
documentary requirements evidencing damage to its generator sets.

The marine open policy that Seaboard issued to New World was an all-risk policy.
Such a policy insured against all causes of conceivable loss or damage except when
otherwise excluded or when the loss or damage was due to fraud or intentional misconduct
committed by the insured. The policy covered all losses during the voyage whether or not
arising from a marine peril.[5]

Here, the policy enumerated certain exceptions like unsuitable packaging,

inherent vice, delay in voyage, or vessels unseaworthiness, among others.[6] But Seaboard
had been unable to show that petitioner New Worlds loss or damage fell within some or
one of the enumerated exceptions.

What is more, Seaboard had been unable to explain how it could not verify the
damage that New Worlds goods suffered going by the documents that it already submitted,
namely, (1) copy of the Suppliers Invoice KL2504; (2) copy of the Packing List; (3) copy of
the Bill of Lading 01130E93004458; (4) the Delivery of Waybill Receipts 1135, 1222, and
1224; (5) original copy of Marine Insurance Policy MA-HO-000266; (6) copies of Damage
Report from Supplier and Insurance Adjusters; (7) Consumption Report from the Customs
Examiner; and (8) Copies of Received Formal Claim from the following: a) LEP
International Philippines, Inc.; b) Marina Port Services, Inc.; and c) Serbros Carrier
Corporation.[7] Notably, Seaboards own marine surveyor attended the inspection of the
generator sets.

Page

Further, it appears from the exchanges of communications between Seaboard and

Advatech that submission of the requested itemized listing was incumbent on the latter as
the seller DMTs local agent. Petitioner New World should not be made to suffer for
Advatechs shortcomings.

72

Seaboard cannot pretend that the above documents are inadequate since they
were precisely the documents listed in its insurance policy.[8] Being a contract of
adhesion, an insurance policy is construed strongly against the insurer who prepared it.
The Court cannot read a requirement in the policy that was not there.

Two. Regarding prescription of claims, Section 3(6) of the COGSA provides that
the carrier and the ship shall be discharged from all liability in case of loss or damage
unless the suit is brought within one year after delivery of the goods or the date when the
goods should have been delivered.

But whose fault was it that the suit against NYK, the common carrier, was not
brought to court on time? The last day for filing such a suit fell on October 7, 1994. The
record shows that petitioner New World filed its formal claim for its loss with Seaboard, its
insurer, a remedy it had the right to take, as early as November 16, 1993 or about 11
months before the suit against NYK would have fallen due.

In the ordinary course, if Seaboard had processed that claim and paid the same,
Seaboard would have been subrogated to petitioner New Worlds right to recover from
NYK. And it could have then filed the suit as a subrogee. But, as discussed above, Seaboard
made an unreasonable demand on February 14, 1994 for an itemized list of the damaged
units, parts, and accessories, with corresponding values when it appeared settled that New
Worlds loss was total and when the insurance policy did not require the production of
such a list in the event of a claim.

Page

Section 241 of the Insurance Code provides that no insurance company doing
business in the Philippines shall refuse without just cause to pay or settle claims arising
under coverages provided by its policies. And, under Section 243, the insurer has 30 days
after proof of loss is received and ascertainment of the loss or damage within which to pay
the claim. If such ascertainment is not had within 60 days from receipt of evidence of loss,
the insurer has 90 days to pay or settle the claim. And, in case the insurer refuses or fails to
pay within the prescribed time, the insured shall be entitled to interest on the proceeds of
the policy for the duration of delay at the rate of twice the ceiling prescribed by the
Monetary Board.

73

Besides, when petitioner New World declined to comply with the demand for the
list, Seaboard against whom a formal claim was pending should not have remained
obstinate in refusing to process that claim. It should have examined the same, found it
unsubstantiated by documents if that were the case, and formally rejected it. That would
have at least given petitioner New World a clear signal that it needed to promptly file its
suit directly against NYK and the others. Ultimately, the fault for the delayed court suit
could be brought to Seaboards doorstep.

Notably, Seaboard already incurred delay when it failed to settle petitioner New
Worlds claim as Section 243 required. Under Section 244, a prima facie evidence of
unreasonable delay in payment of the claim is created by the failure of the insurer to pay
the claim within the time fixed in Section 243.

Consequently, Seaboard should pay interest on the proceeds of the policy for the
duration of the delay until the claim is fully satisfied at the rate of twice the ceiling
prescribed by the Monetary Board. The term ceiling prescribed by the Monetary Board
means the legal rate of interest of 12% per annum provided in Central Bank Circular 416,
pursuant to Presidential Decree 116.[9] Section 244 of the Insurance Code also provides
for an award of attorneys fees and other expenses incurred by the assured due to the
unreasonable withholding of payment of his claim.

In Prudential Guarantee and Assurance, Inc. v. Trans-Asia Shipping Lines, Inc.,[10]

the Court regarded as proper an award of 10% of the insurance proceeds as attorneys fees.
Such amount is fair considering the length of time that has passed in prosecuting the
claim.[11] Pursuant to the Courts ruling in Eastern Shipping Lines, Inc. v. Court of
Appeals,[12] a 12% interest per annum from the finality of judgment until full satisfaction
of the claim should likewise be imposed, the interim period equivalent to a forbearance of
credit.

Petitioner New World is entitled to the value stated in the policy which is
commensurate to the value of the three emergency generator sets or US$721,500.00 with
double interest plus attorneys fees as discussed above.

Page

With respect to G.R. 174241, the Court GRANTS the petition and REVERSES and
SETS ASIDE the Court of Appeals Amended Decision of August 17, 2006. The Court
DIRECTS Seaboard-Eastern Insurance Company, Inc. to pay petitioner New World
International Development (Phils.), Inc. US$721,500.00 under Policy MA-HO-000266, with

74

WHEREFORE, the Court DENIES the petition in G.R. 171468 and AFFIRMS the
Court of Appeals decision of January 31, 2006 insofar as petitioner New World
International Development (Phils.), Inc. is not allowed to recover against respondents DMT
Corporation, Advatech Industries, Inc., LEP International Philippines, Inc., LEP Profit
International, Inc., Marina Port Services, Inc. and Serbros Carrier Corporation.

24% interest per annum for the duration of delay in accordance with Sections 243 and 244
of the Insurance Code and attorneys fees equivalent to 10% of the insurance proceeds.
Seaboard shall also pay, from finality of judgment, a 12% interest per annum on the total
amount due to petitioner until its full satisfaction.

Page

75

SO ORDERED.

Page

76

Page

77

G.R. No. 180784

February 15, 2012

INSURANCE COMPANY OF NORTH AMERICA, Petitioner, - versus - ASIAN TERMINALS,

INC., Respondent.
PERALTA, J.:

This is a petition for review on certiorari[1] of the Decision of the Regional Trial
Court (RTC) of Makati City, Branch 138 (trial court) in Civil Case No. 05-809 and its Order
dated December 4, 2007 on the ground that the trial court committed reversible error of
law.

The trial court dismissed petitioners complaint for actual damages on the ground
of prescription under the Carriage of Goods by Sea Act (COGSA).
The facts are as follows:

Page

The carrying vessel arrived at the port of Manila on November 19, 2002, and
when the shipment was discharged therefrom, it was noted that seven (7) packages thereof
were damaged and in bad order.[5] The shipment was then turned over to the custody of
respondent Asian Terminals, Inc. (ATI) on November 21, 2002 for storage and safekeeping

78

On November 9, 2002, Macro-Lite Korea Corporation shipped to San Miguel

Corporation, through M/V "DIMI P" vessel, one hundred eighty-five (185) packages
(231,000 sheets) of electrolytic tin free steel, complete and in good order condition and
covered by Bill of Lading No. POBUPOHMAN20638.[2] The shipment had a declared value
of US$169,850.35[3] and was insured with petitioner Insurance Company of North America
against all risks under Marine Policy No. MOPA-06310.[4]

pending its withdrawal by the consignee's authorized customs broker, R.V. Marzan
Brokerage Corp. (Marzan).

On November 22, 23 and 29, 2002, the subject shipment was withdrawn by
Marzan from the custody of respondent. On November 29, 2002, prior to the last
withdrawal of the shipment, a joint inspection of the said cargo was conducted per the
Request for Bad Order Survey[6] dated November 29, 2002, and the examination report,
which was written on the same request, showed that an additional five (5) packages were
found to be damaged and in bad order.

On January 6, 2003, the consignee, San Miguel Corporation, filed separate

claims[7] against respondent and petitioner for the damage to 11,200 sheets of electrolytic
tin free steel.

Petitioner engaged the services of an independent adjuster/surveyor, BA

McLarens Phils., Inc., to conduct an investigation and evaluation on the claim and to
prepare the necessary report.[8] BA McLarens Phils., Inc. submitted to petitioner an
Survey Report[9] dated January 22, 2003 and another report[10] dated May 5, 2003
regarding the damaged shipment. It noted that out of the reported twelve (12) damaged
skids, nine (9) of them were rejected and three (3) skids were accepted by the consignees
representative as good order. BA McLarens Phils., Inc. evaluated the total cost of damage to
the nine (9) rejected skids (11,200 sheets of electrolytic tin free steel) to be P431,592.14.

The petitioner, as insurer of the said cargo, paid the consignee the amount of
P431,592.14 for the damage caused to the shipment, as evidenced by the Subrogation
Receipt dated January 8, 2004. Thereafter, petitioner, formally demanded reparation
against respondent. As respondent failed to satisfy its demand, petitioner filed an action for
damages with the RTC of Makati City.

Page

The Court finds that the subject shipment indeed suffered

additional damages. The Request for Bad Order Survey No. 56422 shows
that prior to the turn over of the shipment from the custody of ATI to
the consignee, aside from the seven (7) packages which were already

79

The trial court found, thus:

damaged upon arrival at the port of Manila, five (5) more packages were
found with "dent, cut and crumple" while in the custody of ATI. This
document was issued by ATI and was jointly executed by the
representatives of ATI, consignee and customs, and the Shed Supervisor.
Thus, ATI is now estopped from claiming that there was no additional
damage suffered by the shipment. It is, therefore, only logical to
conclude that the damage was caused solely by the negligence of
defendant ATI. This evidence of the plaintiff was refuted by the
defendant by merely alleging that "the damage to the 5 Tin Plates is only
in its external packaging. However, the fact remains that the consignee
has rejected the same as total loss for not being suitable for their
intended purpose. In addition, the photographs presented by the
plaintiff show that the shipment also suffered severe dents and some
packages were even critically crumpled.[11]

As to the extent of liability, ATI invoked the Contract for Cargo Handling Services
executed between the Philippine Ports Authority and Marina Ports Services, Inc. (now
Asian Terminals, Inc.). Under the said contract, ATI's liability for damage to cargoes in its
custody is limited to P5,000.00 for each package, unless the value of the cargo shipment is
otherwise specified or manifested or communicated in writing, together with the declared
Bill of Lading value and supported by a certified packing list to the contractor by the
interested party or parties before the discharge or lading unto vessel of the goods.

Page

Further, the trial court found that there was a valid subrogation between the
petitioner and the assured/consignee San Miguel Corporation. The respondent admitted
the existence of Global Marine Policy No. MOPA-06310 with San Miguel Corporation and
Marine Risk Note No. 3445,[13] which showed that the cargo was indeed insured with
petitioner. The trial court held that petitioners claim is compensable because the
Subrogation Receipt,16 which was admitted as to its existence by respondent, was sufficient

80

The trial court found that there was compliance by the shipper and consignee
with the above requirement. The Bill of Lading, together with the corresponding invoice
and packing list, was shown to ATI prior to the discharge of the goods from the vessel.
Since the shipment was released from the custody of ATI, the trial court found that the
same was declared for tax purposes as well as for the assessment of arrastre charges and
other fees. For the purpose, the presentation of the invoice, packing list and other shipping
documents to ATI for the proper assessment of the arrastre charges and other fees
satisfied the condition of declaration of the actual invoices of the value of the goods to
overcome the limitation of liability of the arrastre operator.[12]

to establish not only the relationship of the insurer and the assured, but also the amount
paid to settle the insurance claim.[14]

However, the trial court dismissed the complaint on the ground that the
petitioners claim was already barred by the statute of limitations. It held that COGSA,
embodied in Commonwealth Act (CA) No. 65, applies to this case, since the goods were
shipped from a foreign port to the Philippines. The trial court stated that under the said
law, particularly paragraph 4, Section 3 (6)[15] thereof, the shipper has the right to bring a
suit within one year after the delivery of the goods or the date when the goods should have
been delivered, in respect of loss or damage thereto.

The trial court held:

In the case at bar, the records show that the shipment was
delivered to the consignee on 22, 23 and 29 of November 2002. The
plaintiff took almost a year to approve and pay the claim of its assured,
San Miguel, despite the fact that it had initially received the latter's claim
as well as the inspection report and survey report of McLarens as early
as January 2003. The assured/consignee had only until November of
2003 within which to file a suit against the defendant. However, the
instant case was filed only on September 7, 2005 or almost three (3)
years from the date the subject shipment was delivered to the consignee.
The plaintiff, as insurer of the shipment which has paid the claim of the
insured, is subrogated to all the rights of the said insured in relation to
the reimbursement of such claim. As such, the plaintiff cannot acquire
better rights than that of the insured. Thus, the plaintiff has no one but
itself to blame for having acted lackadaisically on San Miguel's claim.

Page

Petitioners motion for reconsideration was denied by the trial court in the
Order[17] dated December 4, 2007.

81

WHEREFORE, the complaint and counterclaim are hereby

DISMISSED.[16]

Petitioner filed this petition under Rule 45 of the Rules of Court directly before
this Court, alleging that it is raising a pure question of law:

THE TRIAL COURT COMMITTED A PURE AND SERIOUS ERROR

OF LAW IN APPLYING THE ONE-YEAR PRESCRIPTIVE PERIOD FOR
FILING A SUIT UNDER THE CARRIAGE OF GOODS BY SEA ACT (COGSA)
TO AN ARRASTRE OPERATOR.[18]

Petitioner states that while it is in full accord with the trial court in finding
respondent liable for the damaged shipment, it submits that the trial courts dismissal of
the complaint on the ground of prescription under the COGSA is legally erroneous. It
contends that the one-year limitation period for bringing a suit in court under the COGSA is
not applicable to this case, because the prescriptive period applies only to the carrier and
the ship. It argues that respondent, which is engaged in warehousing, arrastre and
stevedoring business, is not a carrier as defined by the COGSA, because it is not engaged in
the business of transportation of goods by sea in international trade as a common carrier.
Petitioner asserts that since the complaint was filed against respondent arrastre operator
only, without impleading the carrier, the prescriptive period under the COGSA is not
applicable to this case.

Moreover, petitioner contends that the term carriage of goods in the COGSA
covers the period from the time the goods are loaded to the vessel to the time they are
discharged therefrom. It points out that it sued respondent only for the additional five (5)
packages of the subject shipment that were found damaged while in respondents custody,
long after the shipment was discharged from the vessel. The said damage was confirmed by
the trial court and proved by the Request for Bad Order Survey No. 56422.[19]

Page

The main issues are: (1) whether or not the one-year prescriptive period for filing
a suit under the COGSA applies to this action for damages against respondent arrastre
operator; and (2) whether or not petitioner is entitled to recover actual damages in the

82

Petitioner prays that the decision of the trial court be reversed and set aside and a
new judgment be promulgated granting its prayer for actual damages.

amount of P431,592.14 from respondent.

To reiterate, petitioner came straight to this Court to appeal from the decision of
the trial court under Rule 45 of the Rules of Court on the ground that it is raising only a
question of law.

Microsoft Corporation v. Maxicorp, Inc.[20] explains the difference between

questions of law and questions of fact, thus:

The distinction between questions of law and questions of fact is

settled. A question of law exists when the doubt or difference centers on
what the law is on a certain state of facts. A question of fact exists if the
doubt centers on the truth or falsity of the alleged facts. Though this
delineation seems simple, determining the true nature and extent of the
distinction is sometimes problematic. For example, it is incorrect to
presume that all cases where the facts are not in dispute automatically
involve purely questions of law.
There is a question of law if the
issue raised is capable of being resolved without need of reviewing the
probative value of the evidence. The resolution of the issue must rest
solely on what the law provides on the given set of circumstances. Once it
is clear that the issue invites a review of the evidence presented, the
question posed is one of fact. If the query requires a re-evaluation of the
credibility of witnesses, or the existence or relevance of surrounding
circumstances and their relation to each other, the issue in that query is
factual. x x x[21]

Under Section 1, Rule 45, providing for appeals by certiorari before the Supreme

Page

83

In this case, although petitioner alleged that it is merely raising a question of law,
that is, whether or not the prescriptive period under the COGSA applies to an action for
damages against respondent arrastre operator, yet petitioner prays for the reversal of the
decision of the trial court and that it be granted the relief sought, which is the award of
actual damages in the amount of P431,592.14. For a question to be one of law, it must not
involve an examination of the probative value of the evidence presented by the litigants or
any of them.[22] However, to resolve the issue of whether or not petitioner is entitled to
recover actual damages from respondent requires the Court to evaluate the evidence on
record; hence, petitioner is also raising a question of fact.

Court, it is clearly enunciated that only questions of law may be set forth.[23] The Court
may resolve questions of fact only when the case falls under the following exceptions:
(1) when the findings are grounded entirely on speculation, surmises, or
conjectures; (2) when the inference made is manifestly mistaken, absurd,
or impossible; (3) when there is grave abuse of discretion; (4) when the
judgment is based on a misapprehension of facts; (5) when the
findings of fact are conflicting; (6) when in making its findings the Court
of Appeals went beyond the issues of the case, or its findings are contrary
to the admissions of both the appellant and the appellee; (7) when the
findings are contrary to those of the trial court; (8) when the findings are
conclusions without citation of specific evidence on which they are based;
(9) when the facts set forth in the petition as well as in the petitioner's
main and reply briefs are not disputed by the respondent; and (10) when
the findings of fact are premised on the supposed absence of evidence
and contradicted by the evidence on record.[24]

In this case, the fourth exception cited above applies, as the trial court rendered
judgment based on a misapprehension of facts.
We first resolve the issue on whether or not the one-year prescriptive period for
filing a suit under the COGSA applies to respondent arrastre operator.
The Carriage of Goods by Sea Act (COGSA), Public Act No. 521 of the 74th US
Congress, was accepted to be made applicable to all contracts for the carriage of goods by
sea to and from Philippine ports in foreign trade by virtue of CA No. 65.
Section 1 of CA No. 65 states:

Page

84

Section 1. That the provisions of Public Act Numbered Five

hundred and twenty-one of the Seventy-fourth Congress of the United
States, approved on April sixteenth, nineteen hundred and thirty-six, be
accepted, as it is hereby accepted to be made applicable to all
contracts for the carriage of goods by sea to and from Philippine
ports in foreign trade: Provided, That nothing in the Act shall be
construed as repealing any existing provision of the Code of Commerce
which is now in force, or as limiting its application.

Section 1, Title I of CA No. 65 defines the relevant terms in Carriage of Goods by

Sea, thus:
Section 1. When used in this Act -

(a) The term "carrier" includes the owner or the charterer who
enters into a contract of carriage with a shipper.
(b) The term "contract of carriage" applies only to contracts of
carriage covered by a bill of lading or any similar document of title,
insofar as such document relates to the carriage of goods by sea,
including any bill of lading or any similar document as aforesaid issued
under or pursuant to a charter party from the moment at which such bill
of lading or similar document of title regulates the relations between a
carrier and a holder of the same.
(c) The term "goods" includes goods, wares, merchandise, and
articles of every kind whatsoever, except live animals and cargo which by
the contract of carriage is stated as being carried on deck and is so
carried.
(d) The term "ship" means any vessel used for the carriage of
goods by sea.
(e) The term "carriage of goods" covers the period from the
time when the goods are loaded to the time when they are
discharged from the ship.[25]

It is noted that the term carriage of goods covers the period from the time when
the goods are loaded to the time when they are discharged from the ship; thus, it can be
inferred that the period of time when the goods have been discharged from the ship and
given to the custody of the arrastre operator is not covered by the COGSA.

Page

6) Unless notice of loss or damage and the general nature of

such loss or damage be given in writing to the carrier or his agent at the
port of discharge before or at the time of the removal of the goods into

85

The prescriptive period for filing an action for the loss or damage of the goods
under the COGSA is found in paragraph (6), Section 3, thus:

the custody of the person entitled to delivery thereof under the contract
of carriage, such removal shall be prima facie evidence of the delivery by
the carrier of the goods as described in the bill of lading. If the loss or
damage is not apparent, the notice must be given within three days of
the delivery.

Said notice of loss or damage maybe endorsed upon the receipt

for the goods given by the person taking delivery thereof.

The notice in writing need not be given if the state of the goods
has at the time of their receipt been the subject of joint survey or
inspection.
In any event the carrier and the ship shall be discharged
from all liability in respect of loss or damage unless suit is brought
within one year after delivery of the goods or the date when the
goods should have been delivered: Provided, That if a notice of loss or
damage, either apparent or concealed, is not given as provided for in this
section, that fact shall not affect or prejudice the right of the shipper to
bring suit within one year after the delivery of the goods or the date
when the goods should have been delivered.[26]

From the provision above, the carrier and the ship may put up the defense of
prescription if the action for damages is not brought within one year after the delivery of
the goods or the date when the goods should have been delivered. It has been held that
not only the shipper, but also the consignee or legal holder of the bill may invoke the
prescriptive period.[27] However, the COGSA does not mention that an arrastre operator
may invoke the prescriptive period of one year; hence, it does not cover the arrastre
operator.

Page

Section 7.01 Responsibility and Liability for Losses and

Damages; Exceptions - The CONTRACTOR shall, at its own expense,
handle all merchandise in all work undertaken by it hereunder,
diligently and in a skillful, workman-like and efficient manner. The

86

Respondent arrastre operators responsibility and liability for losses and

damages are set forth in Section 7.01 of the Contract for Cargo Handling Services executed
between the Philippine Ports Authority and Marina Ports Services, Inc. (now Asian
Terminals, Inc.), thus:

Page

Based on the Contract above, the consignee has a period of thirty (30) days from
the date of delivery of the package to the consignee within which to request a certificate of
loss from the arrastre operator. From the date of the request for a certificate of loss, the
arrastre operator has a period of fifteen (15) days within which to issue a certificate of nondelivery/loss either actually or constructively. Moreover, from the date of issuance of a
certificate of non-delivery/loss, the consignee has fifteen (15) days within which to file a
formal claim covering the loss, injury, damage or non-delivery of such goods with all
accompanying documentation against the arrastre operator.

87

CONTRACTOR shall be solely responsible as an independent

contractor, and hereby agrees to accept liability and to pay to the
shipping company, consignees, consignors or other interested
party or parties for the loss, damage or non-delivery of cargoes in
its custody and control to the extent of the actual invoice value of
each package which in no case shall be more than FIVE THOUSAND
PESOS (P5,000.00) each, unless the value of the cargo shipment is
otherwise specified or manifested or communicated in writing
together with the declared Bill of Lading value and supported by a
certified packing list to the CONTRACTOR by the interested party or
parties before the discharge or loading unto vessel of the goods.
This amount of Five Thousand Pesos (P5,000.00) per package may be
reviewed and adjusted by the AUTHORITY from time to time. The
CONTRACTOR shall not be responsible for the condition or the contents
of any package received, nor for the weight nor for any loss, injury or
damage to the said cargo before or while the goods are being received or
remains in the piers, sheds, warehouses or facility, if the loss, injury or
damage is caused by force majeure or other causes beyond the
CONTRACTOR's control or capacity to prevent or remedy; PROVIDED,
that a formal claim together with the necessary copies of Bill of
Lading, Invoice, Certified Packing List and Computation arrived at
covering the loss, injury or damage or non-delivery of such goods
shall have been filed with the CONTRACTOR within fifteen (15)
days from day of issuance by the CONTRACTOR of a certificate of
non-delivery; PROVIDED, however, that if said CONTRACTOR fails
to issue such certification within fifteen (15) days from receipt of a
written request by the shipper/consignee or his duly authorized
representative or any interested party, said certification shall be
deemed to have been issued, and thereafter, the fifteen (15) day
period within which to file the claim commences; PROVIDED,
finally, that the request for certification of loss shall be made
within thirty (30) days from the date of delivery of the package to
the consignee.[28]

Petitioner clarified that it sued respondent only for the additional five (5)
packages of the subject shipment that were found damaged while in respondents custody,
which fact of damage was sustained by the trial court and proved by the Request for Bad
Order Survey No. 56422.[29]

Petitioner pointed out the importance of the Request for Bad Order Survey by
citing New Zealand Insurance Company Limited v. Navarro.[30] In the said case, the
Court ruled that the request for, and the result of, the bad order examination, which were
filed and done within fifteen days from the haulage of the goods from the vessel, served the
purpose of a claim, which is to afford the carrier or depositary reasonable opportunity and
facilities to check the validity of the claims while facts are still fresh in the minds of the
persons who took part in the transaction and documents are still available. Hence, even if
the consignee therein filed a formal claim beyond the stipulated period of 15 days, the
arrastre operator was not relieved of liability as the purpose of a formal claim had already
been satisfied by the consignees timely request for the bad order examination of the goods
shipped and the result of the said bad order examination.

Page

We took special note of the above pronouncement six (6) years

later in Firemans Fund Insurance Co. v. Manila Port Service Co., et al.
There, fifteen (15) cases of nylon merchandise had been discharged
from the carrying vessel and received by defendant Manila Port Service
Co., the arrastre operator, on 7 July 1961. Out of those fifteen (15) cases,
however, only twelve (12) had been delivered to the consignee in good
condition. Consequently, on 20 July 1961, the consignee's broker
requested a bad order examination of the shipment, which was later
certified by defendant's own inspector to be short of three (3) cases. On
15 August 1961, a formal claim for indemnity was then filed by the
consignee, who was later replaced in the action by plaintiff Fireman's
Fund Insurance Co., the insurer of the goods. Defendant, however,
refused to honor the claim, arguing that the same had not been filed
within fifteen (15) days from the date of discharge of the shipment from
the carrying vessel, as required under the arrastre Management
Contract then in force between itself and the Bureau of Customs. The
trial court upheld this argument and hence dismissed the complaint. On
appeal by the consignee, this Court, speaking through Mr. Justice J.B.L.
Reyes, reversed the trial court and found the defendant arrastre
operator liable for the value of the lost cargo, explaining as follows:

88

To elaborate, New Zealand Insurance Company, Ltd. v. Navarro held:

However, the trial court has overlooked the significance of

the request for, and the result of, the bad order examination, which
were filed and done within fifteen days from the haulage of the goods
from the vessel. Said request and result, in effect, served the purpose
of a claim, which is -

to afford the carrier or depositary

reasonable opportunity and facilities to check the
validity of the claims while facts are still fresh in
the minds of the persons who took part in the
transaction and documents are still available.
(Consunji vs. Manila Port Service, L-15551, 29
November 1960)

Indeed, the examination undertaken by the defendant's own

inspector not only gave the defendant an opportunity to check the
goods but is itself a verification of its own liability x x x.

Page

Relating the doctrine of Fireman's Fund to the case at bar, the

record shows that delivery to the warehouse of consignee Monterey
Farms Corporation of the 5,974 bags of soybean meal, had been

89

In other words, what the Court considered as the crucial factor

in declaring the defendant arrastre operator liable for the loss
occasioned, in the Fireman's Fund case, was the fact that defendant, by
virtue of the consignee's request for a bad order examination, had been
able formally to verify the existence and extent of its liability within
fifteen (15) days from the date of discharge of the shipment from the
carrying vessel -- i.e., within the same period stipulated under the
Management Contract for the consignee to file a formal claim. That a
formal claim had been filed by the consignee beyond the stipulated
period of fifteen (15) days neither relieved defendant of liability
nor excused payment thereof, the purpose of a formal claim, as
contemplated in Consunji, having already been fully served and
satisfied by the consignee's timely request for, and the eventual
result of, the bad order examination of the nylon merchandise
shipped.

completed by respondent Razon (arrastre operator) on 9 July 1974. On

that same day, a bad order examination of the goods delivered was
requested by the consignee and was, in fact, conducted by respondent
Razon's own inspector, in the presence of representatives of both the
Bureau of Customs and the consignee. The ensuing bad order
examination report what the trial court considered a "certificate of
loss confirmed that out of the 5,974 bags of soybean meal loaded on
board the M/S "Zamboanga" and shipped to Manila, 173 bags had been
damaged in transitu while an additional 111 bags had been damaged
after the entire shipment had been discharged from the vessel and
placed in the custody of respondent Razon. Hence, as early as 9 July
1974 (the date of last delivery to the consignee's warehouse),
respondent Razon had been able to verify and ascertain for itself
not only the existence of its liability to the consignee but, more
significantly, the exact amount thereof - i.e., P5,746.61, representing
the value of 111 bags of soybean meal. We note further that such
verification and ascertainment of liability on the part of
respondent Razon, had been accomplished "within thirty (30) days
from the date of delivery of last package to the consignee, broker or
importer" as well as "within fifteen (15) days from the date of
issuance by the Contractor [respondent Razon] of a certificate of
loss, damage or injury or certificate of non-delivery" the periods
prescribed under Article VI, Section 1 of the Management Contract here
involved, within which a request for certificate of loss and a formal
claim, respectively, must be filed by the consignee or his agent.
Evidently, therefore, the rule laid down by the Court in Fireman's Fund
finds appropriate application in the case at bar.[31]

Page

Thus, as early as November 29, 2002, the date of the last withdrawal of the goods
from the arrastre operator, respondent ATI was able to verify that five (5) packages of the
shipment were in bad order while in its custody. The certificate of non-delivery referred to

90

In this case, the records show that the goods were deposited with the arrastre
operator on November 21, 2002. The goods were withdrawn from the arrastre operator on
November 22, 23 and 29, 2002. Prior to the withdrawal on November 29, 2002, the broker
of the importer, Marzan, requested for a bad order survey in the presence of a Customs
representative and other parties concerned. The joint inspection of cargo was conducted
and it was found that an additional five (5) packages were found in bad order as evidenced
by the document entitled Request for Bad Order Survey[32] dated November 29, 2002,
which document also contained the examination report, signed by the Customs
representative, Supervisor/Superintendent, consignees representative, and the ATI
Inspector.

in the Contract is similar to or identical with the examination report on the request for bad
order survey.[33] Like in the case of New Zealand Insurance Company Ltd. v. Navarro,
the verification and ascertainment of liability by respondent ATI had been
accomplished within thirty (30) days from the date of delivery of the package to the
consignee and within fifteen (15) days from the date of issuance by the Contractor
(respondent ATI) of the examination report on the request for bad order survey.
Although the formal claim was filed beyond the 15-day period from the issuance of the
examination report on the request for bad order survey, the purpose of the time limitations
for the filing of claims had already been fully satisfied by the request of the consignees
broker for a bad order survey and by the examination report of the arrastre operator on
the result thereof, as the arrastre operator had become aware of and had verified the facts
giving rise to its liability.[34] Hence, the arrastre operator suffered no prejudice by the lack
of strict compliance with the 15-day limitation to file the formal complaint.[35]

The next factual issue is whether or not petitioner is entitled to actual damages in
the amount of P431,592.14. The payment of the said amount by petitioner to the
assured/consignee was based on the Evaluation Report[36] of BA McLarens Phils., Inc.,
thus:

xxxx

CIRCUMSTANCES OF LOSS

On November 22, 23 and 29, 2002, the subject cargo was withdrawn from

Page

91

As reported, the shipment consisting of 185 packages (344.982 MT)

Electrolytic Tin Free Steel, JISG 3315SPTFS, MRT-4CA, Matte Finish
arrived Manila via Ocean Vessel, M/V DIMI P V-075 on November 9,
2002 and subsequently docked alongside Pier No. 9, South Harbor,
Manila. The cargo of Electrolyic Tin Free Steel was discharged exvessel complete with seven (7) skids noted in bad order condition
by the vessel[s] representative. These skids were identified as nos.
2HD804211, 2HD804460, SHD804251, SHD803784, 2HD803763,
2HD803765 and 2HD803783 and covered with Bad Order Tally
Receipts No. 3709, 3707, 3703 and 3704. Thereafter, the same were
stored inside the warehouse of Pier No. 9, South Harbor, Manila, pending
delivery to the consignees warehouse.

the Pier by the consignee authorized broker, R. V. Marzan Brokerage

Corp. and the same was delivered to the consignees final warehouse
located at Silangan, Canlubang, Laguna complete with twelve (12) skids in
bad order condition.

VISUAL INSPECTION

We conducted an ocular inspection on the reported damaged Electrolytic

Tin Free Steel, Matte Finish at the consignees warehouse located at Brgy.
Silangan, Canlubang, Laguna and noted that out of the reported twelve
(12) damaged skids, nine (9) of them were rejected and three (3)
skids were accepted by the consignees representative as complete
and without exceptions.

xxxx

EVALUATION OF INDEMNITY

We evaluated the loss/damage sustained by the subject

shipments and arrived as follows:

PRODUCT NOS.
PER
LIST
2HD803763

PRODUCTS NAMED

Electrolytic Tin Free

NO. OF SHEETS

1,200

NET WT.
PACKING

1,908

2HD803784
2HD804460

-do-do-do-

1,200

1,908

1,200

1,908

1,400

1,698

Page

2HD803783

92

Steel JISG3315

2HD803765

-do-

1,200

1,908

2HD804522

-do-

1,200

1,987

2HD804461

-do-

1,400

1,698

2HD804540

-do-

1,200

1,987

2HD804549

-do-

1,200

1,987

9 SKIDS

TOTAL

11,200

P9,878,547.58

16,989 kgs.

P478,959.88

------------------ = 42.7643 x 11,200

231,000
Less: Deductible 0.50% based on sum insured
Total
Add: Surveyors Fee
Sub-Total

49,392.74
P429,567.14
2,025.00
P431,592.14

Note: Above evaluation is Assureds tentative liability as the salvage

proceeds on the damaged stocks has yet to be determined.

RECOVERY ASPECT

Page

93

Prospect of recovery would be feasible against the shipping company

and the Arrastre operator considering the copies of Bad Order Tally
Receipts and Bad Order Certificate issued by the subject parties.[37]

To clarify, based on the Evaluation Report, seven (7) skids were damaged upon
arrival of the vessel per the Bad Order Cargo Receipts[38] issued by the shipping company,
and an additional five (5) skids were damaged in the custody of the arrastre operator per
the Bad Order Certificate/Examination Report[39] issued by the arrastre contractor. The
Evaluation Report states that out of the reported twelve damaged skids, only nine were
rejected, and three were accepted as good order by the consignees representative. Out
of the nine skids that were rejected, five skids were damaged upon arrival of the
vessel as shown by the product numbers in the Evaluation Report, which product numbers
matched those in the Bad Order Cargo Receipts[40] issued by the shipping company. It can
then be safely inferred that the four remaining rejected skids were damaged in the
custody of the arrastre operator, as the Bad Order Certificate/Examination Report did
not indicate the product numbers thereof.

Hence, it should be pointed out that the Evaluation Report shows that the claim
for actual damages in the amount of P431,592.14 covers five (5)[41] out of the seven
(7) skids that were found to be damaged upon arrival of the vessel and covered by Bad
Order Cargo Receipt Nos. 3704, 3706, 3707 and 3709,[42] which claim should have been
filed with the shipping company. Petitioner must have realized that the claim for the said
five (5) skids was already barred under COGSA; hence, petitioner filed the claim for actual
damages only against respondent arrastre operator.

Page

Remand of the case to the trial court for the determination of the liability of
respondent to petitioner is not necessary as the Court can resolve the same based on the
records before it.[43] The Court notes that petitioner, who filed this action for damages for
the five (5) skids that were damaged while in the custody of respondent, was not
forthright in its claim, as it knew that the damages it sought in the amount of P431,592.14,
which was based on the Evaluation Report of its adjuster/surveyor, BA McLarens Phils.,
Inc., covered nine (9) skids. Based on the same Evaluation Report, only four of the nine
skids were damaged in the custody of respondent. Petitioner should have been
straightforward about its exact claim, which is borne out by the evidence on record, as
petitioner can be granted only the amount of damages that is due to it.

94

As regards the four (4) skids that were damaged in the custody of the arrastre
operator, petitioner is still entitled to recover from respondent. The Court has ruled that
the Request for Bad Order Survey and the examination report on the said request satisfied
the purpose of a formal claim, as respondent was made aware of and was able to verify that
five (5) skids were damaged or in bad order while in its custody before the last withdrawal
of the shipment on November 29, 2002. Hence, even if the formal claim was filed beyond
the 15-day period stipulated in the Contract, respondent was not prejudiced thereby, since
it already knew of the number of skids damaged in its possession per the examination
report on the request for bad order survey.

Based on the Evaluation Report[44] of BA McLarens Phils., Inc., dated May 5,

2003, the four (4) skids damaged while in the custody of the arrastre operator and the
amount of actual damages therefore are as follows:

PRODUCT NOS. PRODUCTS NAMED

NO. OF SHEETS

NET WT. PER

PACKING LIST

2HD804522

Electrolytic Tin Free

1,200

1,987

Steel JISG3315
2HD804461

-do-

1,400

1,698

2HD804540

-do-

1,200

1,987

2HD804549

-do-

1,200

1,987

---------------------------------------------------------------------------------------------------------4 SKIDS

TOTAL

5,000

P9,878,547.58 (Insured value)[45]

------------------

P213,821.50

= 42.7643 x 5,000

231,000 (Total number of sheets)

Less: Deductible 0.50% based on sum insured[46]
Total

49,392.74
P164,428.76

Page

WHEREFORE, the petition is GRANTED. The Decision of the Regional Trial Court
of Makati City, Branch 138, dated October 17, 2006, in Civil Case No. 05-809, and its Order
dated December 4, 2007, are hereby REVERSED and SET ASIDE. Respondent Asian
Terminals, Inc. is ORDERED to pay petitioner Insurance Company of North America actual

95

In view of the foregoing, petitioner is entitled to actual damages in the amount of

P164,428.76 for the four (4) skids damaged while in the custody of respondent.

damages in the amount of One Hundred Sixty-Four Thousand Four Hundred Twenty-Eight
Pesos and Seventy-Six Centavos (P164,428.76). Twelve percent (12%) interest per annum
shall be imposed on the amount of actual damages from the date the award becomes final
and executory until its full satisfaction.

Costs against petitioner.

SO ORDERED.

G.R. No. L-22491

January 27, 1967

DOMINGO ANG, plaintiff-appellant, vs.AMERICAN STEAMSHIP AGENCIES, INC.,

defendant-appellee.
Juan T. David and M.C. Ginigundo for plaintiff-appellant.Ross, Salcedo, Del Rosario, Bito &
Misa for defendant-appellee.
BENGZON, J.P., J.:

The bill of lading was indorsed to the order of and delivered to Yau Yue by the shipper.

Page

Pursuant to said terms and arrangements, Yau Yue through Tokyo Boeki Ltd. of Tokyo,
Japan, shipped the articles at Yawata, Japan, on April 30, 1961 aboard the S.S. TENSAI
MARU, Manila, belonging to the Nissho Shipping Co., Ltd. of Japan, of which the American
Steamship Agencies, Inc. is the agent in the Philippines, under a shipping agreement, Bill of
Lading No. WM-2 dated April 30, 1961, consigned "to order of the shipper with Herminio G.
Teves as the party to be notified of the arrival of the 140 packages of galvanized steel
durzinc sheets in Manila.

96

Yau Yue Commercial Bank Ltd. of Hongkong, referred to hereafter as Yau Yue agreed to sell
140 packages of galvanized steel durzinc sheets to one Herminio G. Teves (the date of said
agreement is not shown in the record here) for the sum of $32,458.26 (US). Said agreement
was subject to the following terms and arrangements: (a) the purchase price should be
covered by a bank draft for the corresponding amount which should be paid by Herminio G.
Teves in exchange for the delivery to him of the corresponding bill of lading to be deposited
with a local bank, the Hongkong & Shanghai Bank of Manila (b) upon arrival of the articles
in Manila, Teves would be notified and he would have to pay the amount called for in the
corresponding demand draft, after which the bill of lading would be delivered to him; and
(c) Teves would present said bill of lading to the carrier's agent, American Steamship
Agencies, Inc. which would then issue the corresponding "Permit To Deliver Imported
Articles" to be presented to the Bureau of Customs to obtain the release of the articles.

Upon receipt thereof, Yau Yue drew a demand draft together with the bill of lading against
Herminio G. Teves, through the Hongkong & Shanghai Bank.
When the articles arrived in Manila on or about May 9, 1961, Hongkong & Shanghai Bank
notified Teves, the "notify party" under the bill of lading, of the arrival of the goods and
requested payment of the demand draft representing the purchase price of the articles.
Teves, however, did not pay the demand draft, prompting the bank to make the
corresponding protest. The bank likewise returned the bill of lading and demand draft to
Yau Yue which indorsed the said bill of lading to Domingo Ang.
Meanwhile, despite his non-payment of the purchase price of the articles, Teves was able to
obtain a bank guaranty in favor of the American Steamship Agencies, Inc., as carrier's agent,
to the effect that he would surrender the original and negotiable bill of lading duly indorsed
by Yau Yue. On the strength of this guaranty, Teves succeeded in securing a "Permit To
Deliver Imported Articles" from the carrier's agent, which he presented to the Bureau of
Customs which in turn released to him the articles covered by the bill of lading.
Subsequently, Domingo Ang claimed for the articles from American Steamship Agencies,
Inc., by presenting the indorsed bill of lading, but he was informed by the latter that it had
delivered the articles to Teves.
On October 30, 1963 Domingo Ang filed a complaint in the Court of First Instance of Manila
against the American Steamship Agencies, Inc., for having allegedly wrongfully delivered
and/or converted the goods covered by the bill of lading belonging to plaintiff Ang, to the
damage and prejudice of the latter.
On December 2, 1963, defendant filed a motion to dismiss upon the ground that plaintiff's
cause of action has prescribed under the Carriage of Goods by Sea Act (Commonwealth Act
No. 65), more particularly Section 3 (6), paragraph 4, which provides:
In any event, the carrier and the ship shall be discharged from all liability in respect to loss
or damage unless suit is brought within one year, after delivery of the goods or the date
when the goods should have been delivered.

Page

By order dated December 21, 1963, copy of which was received by plaintiff on December
26, 1963, the lower court dismissed the action on the ground of prescription. His motion
for reconsideration dated December 26, 1963 having been denied by the lower court in its
order dated January 13, 1964, plaintiff appealed directly to this Court on a question of law:
Has plaintiff-appellant's cause of action prescribed under Section 3(6), paragraph 4 of the
Carriage of Goods by Sea Act?

97

It argued that the cargo should have been delivered to the person entitled to the delivery
thereof (meaning the plaintiff) on May 9, 1961, the date of the vessel's arrival in Manila,
and that even allowing a reasonable time (even one month) after such arrival within which
to make delivery, still, the action commenced on October 30, 1963 was filed beyond the
prescribed period of one year.

The provision of law involved in this case speaks of "loss or damage". That there was no
damage caused to the goods which were delivered intact to Herminio G. Teves who did not
file any notice of damage, is admitted by both parties in this case. What is to be resolved
in order to determine the applicability of the prescriptive period of one year to the case at
bar is whether or not there was "loss" of the goods subject matter of the complaint.
Nowhere is "loss" defined in the Carriage of Goods by Sea Act. Therefore, recourse must be
had to the Civil Code which provides in Article 18 thereof that, "In matters which are
governed by the Code of Commerce and special laws, their deficiency shall be supplied by
the provisions of this Code."
Article 1189 of the Civil Code defines the word "loss" in cases where conditions have been
imposed with the intention of suspending the efficacy of an obligation to give. The contract
of carriage under consideration entered into by and between American Steamship
Agencies, Inc. and the Yau Yue (which later on endorsed the bill of lading covering the
shipment to plaintiff herein Domingo Ang), is one involving an obligation to give or to
deliver the goods "to the order of shipper", that is, upon the presentation and surrender of
the bill of lading. This being so, said article can be applied to the present controversy, more
specifically paragraph 2 thereof which provides that, "... it is understood that a thing is lost
when it perishes, or goes out of commerce, or disappears in such a way that its existence
unknown or it cannot be recovered."
As defined in the Civil Code and as applied to Section 3 (6) paragraph 4 of the Carriage of
Goods by Sea Act, "loss" contemplates merely a situation where no delivery at all was made
by the shipper of the goods because the same had perished, gone out of commerce, or
disappeared that their existence is unknown or they cannot be recovered. It does not
include a situation where there was indeed delivery but delivery to the wrong person, or
a misdelivery, as alleged in the complaint in this case.

Page

Considering that the bill of lading covering the goods in question has been made to order,
which means that said goods cannot be delivered without previous payment of the value
thereof, it is evident that, the said goods having been delivered to Aldeguer without paying
the price of the same, these facts constitute misdelivery and not nondelivery, because their
was in fact delivery of merchandise. We do not believe it can be seriously and reasonably
argued that what took place, as contended of by the petitioner, is a case of misdelivery with
respect to Aldeguer and at the same time nondelivery with respect to the PNB who had the
bill of lading, because the only thing to consider in this question is whether Enrique
Aldeguer was entitled to get the merchandise or whether, on the contrary, the PNB is the
one entitled thereto. Under the facts, the defendant petitioner should not have delivered
the goods to Aldeguer but to the Philippine National Bank. Having made the delivery to
Aldeguer, the delivery is a case of misdelivery. If the goods have been delivered, it cannot at
the same time be said that they have not been delivered.

98

The distinction between non-delivery and misdelivery has reference to bills of lading. As
this Court shall in Tan Pho vs. Hassamal Dalamal, 67 Phil. 555, 557-558:

According to the bill of lading which was issued in the case at bar to the order of the
shipper, the carrier was under a duty not to deliver the merchandise mentioned in the bill
of lading except upon presentation of the bill of lading duly endorsed by the shipper. (10
C.J., 259) Hence, the defendant-petitioner Tan Pho having delivered the goods to Enrique
Aldeguer without the presentation by the latter of the bill of lading duly endorsed to him by
the shipper, the said defendant made a misdelivery and violated the bill of lading, because his
duty was not only to transport the goods entrusted to him safely, but to deliver them to the
person indicated in the bill of lading. (Emphasis supplied)
Now, it is well settled in this jurisdiction that when a defendant files a motion to dismiss, he
thereby hypothetically admits the truth of the allegations of fact contained in the complaint
(Philippine National Bank v. Hipolito, et al., L-16463, Jan. 30, 1965; Republic v. Ramos, L15484, Jan. 31, 1963; Pascual v. Secretary of Public Works & Communications, L-10405,
Dec. 29, 1960; Pangan v. Evening News Publishing Co., Inc., L-13308, Dec. 29, 1960). Thus,
defendant-appellant having filed a motion to dismiss, it is deemed to have admitted,
hypothetically, paragraphs 6, 7 and 8 of the complaint, and these alleges:
6. That, when the said articles arrived in Manila, the defendant authorized the delivery
thereof to Herminio G. Teves, through the issuance of the corresponding Permit To Deliver
Imported Articles, without the knowledge and consent of the plaintiff, who is the holder in
due course of said bill of lading, notwithstanding the fact that the said Herminio G. Teves
could not surrender the corresponding bill of lading; .
7. That, without any evidence of the fact that Herminio G. Teves is the holder of the
corresponding bill of lading in due course; without the surrender of the bill of lading
without the knowledge and consent of the plaintiff, as holder thereof in due course, and in
violation of the provision on the bill of lading which requires that the articles are only to be
delivered to the person who is the holder in due course of the said bill of lading, or his
order, the defendant issued the corresponding 'Permit To Deliver Imported Articles' in
favor of the defendant, without the knowledge and consent of the plaintiff as holder in due
course of said bill of lading, which, originally was Yau Yue subsequently, the plaintiff
Domingo Ang;
8. That, as a result of the issuance by the defendant of said permit, Herminio G. Teves
was able to secure the release of the articles from the Bureau of Customs, which is not
legally possible without the presentation of said permit to the said Bureau; ...

Page

The point that matters here is that the situation is either delivery or misdelivery, but not
nondelivery. Thus, the goods were either rightly delivered or misdelivered, but they were
not lost. There being no loss or damage to the goods, the aforequoted provision of the

99

From the allegations of the complaint, therefore, the goods cannot be deemed "lost". They
were delivered to Herminio G. Teves, so that there can only be either delivery, if Teves
really was entitled to receive them, or misdelivery, if he was not so entitled. It is not for Us
now to resolve whether or not delivery of the goods to Teves was proper, that is, whether
or not there was rightful delivery or misdelivery.

Carriage of Good by Sea Act stating that "In any event, the carrier and the ship shall be
discharged from all liability in respect of loss or damage unless suit is brought within one
year after delivery of the goods or the date when the goods should have been delivered,"
does not apply. The reason is not difficult to see. Said one-year period of limitation is
designed to meet the exigencies of maritime hazards. In a case where the goods shipped
were neither last nor damaged in transit but were, on the contrary, delivered in port to
someone who claimed to be entitled thereto, the situation is different, and the special need
for the short period of limitation in cases of loss or damage caused by maritime perils does
not obtain.
It follows that for suits predicated not upon loss or damage but on alleged misdelivery (or
conversion) of the goods, the applicable rule on prescription is that found in the Civil Code,
namely, either ten years for breach of a written contract or four years for quasi-delict.
(Arts. 1144[1], 1146, Civil Code) In either case, plaintiff's cause of action has not vet
prescribed, since his right of action would have accrued at the earliest on May 9, 1961
when the ship arrived in Manila and he filed suit on October 30, 1963.
Wherefore, the dismissal order appealed from is hereby reversed and set aside and this
case is remanded to the court a quo for further proceedings. No costs. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Zaldivar, Sanchez and Castro, JJ.,
concur.

G.R. No. L-30805 December 26, 1984

DOMINGO ANG, plaintiff-appellant, vs.COMPANIA MARITIMA, MARITIME COMPANY
OF THE PHILIPPINES and C.L. DIOKNO, defendants-appellees.

Page

This case involves the recovery of damages by the consignee from the carrier in case of
misdelivery of the cargo which action was dismissed by the trial court on the grounds of
lack of cause of action and prescription.

100

AQUINO, J.:

It should be noted that that legal point is already res judicata. In 1967 it was decided in
favor of plaintiff-appellant Domingo Ang in Ang vs. American Steamship Agencies, Inc., 125
Phil. 543 and 125 Phil. 1040, three cases. As observed by Ang's counsel, the facts of those
cases and the instant case are the same mutatis mutandis. It was held that Ang has a cause of
action against the carrier which has not prescribed
In the instant case, Ang on September 26, 1963, as the assignee of a bill of lading held by
Yau Yue Commercial Bank, Ltd. of Hongkong, sued Compania Maritima, Maritime Company
of the Philippines and C.L. Diokno. He prayed that the defendants be ordered to pay him
solidarily the sum of US$130,539.68 with interest from February 9, 1963 plus attorney's
fees and damages.
Ang alleged that Yau Yue Commercial Bank agreed to sell to Herminio G. Teves under
certain conditions 559 packages of galvanized steel, Durzinc sheets. The merchandise was
loaded on May 25, 1961 at Yawata, Japan in the M/S Luzon a vessel owned and operated by
the defendants, to be transported to Manila and consigned "to order" of the shipper, Tokyo
Boeki, Ltd., which indorsed the bill of lading issued by Compania Maritima to the order of
Yau Yue Commercial Bank.
Ang further alleged that the defendants, by means of a permit to deliver imported articles,
authorized the delivery of the cargo to Teves who obtained delivery from the Bureau of
Customs without the surrender of the bill of lading and in violation of the terms thereof.
Teves dishonored the draft drawn by Yau Yue against him.
The Hongkong and Shanghai Banking Corporation made the corresponding protest for the
draft's dishonor and returned the bill of lading to Yau Yue. The bill of lading was indorsed
to Ang.
The defendants filed a motion to dismiss Ang's complaint on the ground of lack of cause of
action. Ang opposed the motion. As already stated, the trial court on May 22, 1964
dismissed the complaint on the grounds of lack of cause of action and prescription since the
action was filed beyond the one-year period provided in the Carriage of Goods by Sea Act.

WHEREFORE, the order of dismissal is reversed and set aside. The case is remanded to the
trial court for further proceedings. Costs against the defendants.

Page

As Ang filed the action less than three years from the date of the alleged misdelivery of the
cargo, it has not yet prescribed. Ang, as indorsee of the bill of lading, is a real party in
interest with a cause of action for damages.

101

In the American Steamship Agencies cases, it was held that the action of Ang is based on
misdelivery of the cargo which should be distinguished from loss thereof. The one-year
period provided for in section 3 (6) of the Carriage of Goods by Sea Act refers to loss of the
cargo. What is applicable is the four-year period of prescription for quasi-delicts prescribed
in article 1146 (2) of the Civil Code or ten years for violation of a written contract as
provided for in article 1144 (1) of the same Code.

SO ORDERED.
Makasiar (Chairman), Concepcion, Jr., Escolin and Cuevas, JJ., concur.

Page

102

Abad Santos, J., took no part.

[G.R. No. 119571. March 11, 1998]

MITSUI O.S.K. LINES LTD., represented by MAGSAYSAY AGENCIES, INC., petitioner, vs.
COURT OF APPEALS and LAVINE LOUNGEWEAR MFG. CORP., respondents.
MENDOZA, J.:
This is a petition for review on certiorari of the January 25, 1995 decision of the Court
of Appeals[1] and its resolution of March 22, 1995 denying petitioners motion for
reconsideration. The appellate court upheld orders of Branch 68 (Pasig) of the Regional
Trial Court, National Capital Judicial Region, denying petitioners motion to dismiss in the
original action filed against petitioner by private respondent.

Page

Petitioner Mitsui O.S.K. Lines Ltd. is a foreign corporation represented in the

Philippines by its agent, Magsaysay Agencies. It entered into a contract of carriage through
Meister Transport, Inc., an international freight forwarder, with private respondent Lavine
Loungewear Manufacturing Corporation to transport goods of the latter from Manila to Le
Havre, France. Petitioner undertook to deliver the goods to France 28 days from initial

103

The facts are not in dispute.[2]

loading. On July 24, 1991, petitioners vessel loaded private respondents container van for
carriage at the said port of origin.
However, in Kaoshiung, Taiwan the goods were not transshipped immediately, with
the result that the shipment arrived in Le Havre only on November 14, 1991. The
consignee allegedly paid only half the value of the said goods on the ground that they did
not arrive in France until the off season in that country. The remaining half was allegedly
charged to the account of private respondent which in turn demanded payment from
petitioner through its agent.
As petitioner denied private respondents claim, the latter filed a case in the Regional
Trial Court on April 14, 1992. In the original complaint, private respondent impleaded as
defendants Meister Transport, Inc. and Magsaysay Agencies, Inc., the latter as agent of
petitioner Mitsui O.S.K. Lines Ltd. On May 20, 1993, it amended its complaint by
impleading petitioner as defendant in lieu of its agent. The parties to the case thus became
private respondent as plaintiff, on one side, and Meister Transport Inc. and petitioner
Mitsui O.S.K. Lines Ltd. as represented by Magsaysay Agencies, Inc., as defendants on the
other.
Petitioner filed a motion to dismiss alleging that the claim against it had prescribed
under the Carriage of Goods by Sea Act.
The Regional Trial Court, as aforesaid, denied petitioners motion as well as its
subsequent motion for reconsideration. On petition for certiorari, the Court of Appeals
sustained the trial courts orders. Hence this petition containing one assignment of error:
THE RESPONDENT COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN
RULING THAT PRIVATE RESPONDENTS AMENDED COMPLAINT IS (sic) NOT PRESCRIBED
PURSUANT TO SECTION 3(6) OF THE CARRIAGE OF GOODS BY SEA ACT.
The issue raised by the instant petition is whether private respondents action is for
loss or damage to goods shipped, within the meaning of 3(6) of the Carriage of Goods by
Sea Act (COGSA).
Section 3 provides:

The notice in writing need not be given if the state of the goods has at the time of their

Page

Said notice of loss or damage may be endorsed upon the receipt for the goods given by the
person taking delivery thereof.

104

(6) Unless notice of loss or damage and the general nature of such loss or damage be given
in writing to the carrier or his agent at the port of discharge or at the time of the removal of
the goods into the custody of the person entitled to delivery thereof under the contract of
carriage, such removal shall be prima facie evidence of the delivery by the carrier of the
goods as described in the bill of lading. If the loss or damage is not apparent, the notice
must be given within three days of the delivery.

receipt been the subject of joint survey or inspection.

In any event the carrier and the ship shall be discharged from all liability in respect of loss
or damage unless suit is brought within one year after delivery of the goods or the date
when the goods should have been delivered: Provided, that, if a notice of loss or damage,
either apparent or concealed, is not given as provided for in this section, that fact shall not
affect or prejudice the right of the shipper to bring suit within one year after the delivery of
the goods or the date when the goods should have been delivered.
In the case of any actual or apprehended loss or damage, the carrier and the receiver shall
give all reasonable facilities to each other for inspecting and tallying the goods.
In Ang v. American Steamship Agencies, Inc., the question was whether an action for
the value of goods which had been delivered to a party other than the consignee is for loss
or damage within the meaning of 3(6) of the COGSA. It was held that there was no loss
because the goods had simply been misdelivered. Loss refers to the deterioration or
disappearance of goods.[3]
As defined in the Civil Code and as applied to Section 3(6), paragraph 4 of the Carriage of
Goods by Sea Act, loss contemplates merely a situation where no delivery at all was made
by the shipper of the goods because the same had perished, gone out of commerce, or
disappeared in such a way that their existence is unknown or they cannot be recovered.[4]
Conformably with this concept of what constitutes loss or damage, this Court held
in another case[5] that the deterioration of goods due to delay in their transportation
constitutes loss or damage within the meaning of 3(6), so that as suit was not brought
within one year the action was barred:
Whatever damage or injury is suffered by the goods while in transit would result in loss or
damage to either the shipper or the consignee. As long as it is claimed, therefore, as it is
done here, that the losses or damages suffered by the shipper or consignee were due to the
arrival of the goods in damaged or deteriorated condition, the action is still basically one
for damage to the goods, and must be filed within the period of one year from delivery or
receipt, under the above-quoted provision of the Carriage of Goods by Sea Act.[6]

The rationale behind limiting the said definitions to such parameters is not hard to
find or fathom. As this Court held in Ang:

Page

There would be some merit in appellants insistence that the damages suffered by him as a
result of the delay in the shipment of his cargo are not covered by the prescriptive
provision of the Carriage of Goods by Sea Act above referred to, if such damages were due,
not to the deterioration and decay of the goods while in transit, but to other causes
independent of the condition of the cargo upon arrival, like a drop in their market value. . .
.[7]

105

But the Court allowed that

Said one-year period of limitation is designed to meet the exigencies of maritime hazards.
In a case where the goods shipped were neither lost nor damaged in transit but were, on
the contrary, delivered in port to someone who claimed to be entitled thereto, the situation
is different, and the special need for the short period of limitation in cases of loss or
damage caused by maritime perils does not obtain.[8]
In the case at bar, there is neither deterioration nor disappearance nor destruction of
goods caused by the carriers breach of contract. Whatever reduction there may have been
in the value of the goods is not due to their deterioration or disappearance because they
had been damaged in transit.
Petitioner contends:
Although we agree that there are places in the section (Article III) in which the phrase need
have no broader meaning than loss or physical damage to the goods, we disagree with the
conclusion that it must so be limited wherever it is used. We take it that the phrase has a
uniform meaning, not merely in Section 3, but throughout the Act; and there are a number
of places in which the restricted interpretation suggested would be inappropriate. For
example Section 4(2) [Article IV(2) (sic) exempts exempts (sic) the carrier, the ship (sic),
from liability loss or damage (sic) resulting from certain courses beyond their control.[9]
Indeed, what is in issue in this petition is not the liability of petitioner for its handling of
goods as provided by 3(6) of the COGSA, but its liability under its contract of carriage with
private respondent as covered by laws of more general application.
Precisely, the question before the trial court is not the particular sense of damages
as it refers to the physical loss or damage of a shippers goods as specifically covered by
3(6) of COGSA but petitioners potential liability for the damages it has caused in the
general sense and, as such, the matter is governed by the Civil Code, the Code of Commerce
and COGSA, for the breach of its contract of carriage with private respondent.
We conclude by holding that as the suit below is not for loss or damage to goods
contemplated in 3(6), the question of prescription of action is governed not by the COGSA
but by Art. 1144 of the Civil Code which provides for a prescriptive period of ten years.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED.
SO ORDERED.

Page

106

Regalado (Chairman), Melo, Puno and Martinez, JJ., concur.

Page

107

Page

108

G.R. No. L-54140 October 14, 1986

FILIPINO MERCHANTS INSURANCE COMPANY, INC., petitioner, vs.HONORABLE JOSE
ALEJANDRO, Presiding Judge of Branch XXVI of the Court of First Instance of Manila
and FROTA OCEANICA BRASILIERA, respondents.
G.R. No. L-62001 October 14, 1986
FILIPINO MERCHANTS INSURANCE COMPANY, INC., petitioner, vs.HONORABLE
ALFREDO BENIPAYO, Presiding Judge of Branch XVI of the Court of First Instance of
Manila and AUSTRALIA-WEST PACIFIC LINE, respondents.
GUTIERREZ, JR., J.:
These consolidated petitions raise the issue of whether or not the one-year period within
which to file a suit against the carrier and theship, in case of damage or loss as provided for
in the Carriage of Goods by Sea Act applies to the insurer of the goods.
On August 3, 1977, plaintiff Choa Tiek Seng filed a complaint, docketed as Civil Case No.
109911, against the petitioner before the then Court of First Instance of Manila for
recovery of a sum of money under the marine insurance policy on cargo. Mr. Choa alleged
that the goods he insured with the petitioner sustained loss and damage in the amount of
P35,987.26. The vessel SS Frotario which was owned and operated by private respondent
Frota Oceanica Brasiliera, (Frota) discharged the goods at the port of Manila on December
13, 1976. The said goods were delivered to the arrastre operator E. Razon, Inc., on
December 17, 1976 and on the same date were received by the consignee-plaintiff.
On December 19, 1977, the petitioner filed its amended answer disclaiming liability,
imputing against the plaintiff the commission of fraud and counterclaiming for damages.
On January 9, 1978, the petitioner filed a third-party complaint against the carrier, private
respondent Frota and the arrastre contractor, E. Razon, Inc. for indemnity, subrogation, or
reimbursement in the event that it is held liable to the plaintiff.
Meanwhile, on August 10, 1977, Joseph Benzon Chua filed a similar complaint against the
petitioner which was docketed as Civil Case No. 110061, for recovery under the marine
insurance policy for cargo alleging that the goods insured with the petitioner sustained loss
and damage in the sum of P55,996.49.

In both cases, the private respondents filed their respective answers and subsequently filed
a motion for preliminary hearing on their affirmative defense of prescription. The private

Page

On May 31, 1978, the petitioner filed its answer. On September 28, 1978, it filed an
amended third-party complaint against respondent carrier, the Australia-West Pacific Line
(Australia-West).

109

The goods were delivered to the plaintiff-consignee on or about January 25-28, 1977.

respondents alleged in their separate answers that the petitioner is already barred from
filing a claim because under the Carriage of Goods by Sea Act, the suit against the carrier
must be filed within one year after delivery of the goods or the date when the goods should
have been delivered...
The petitioner contended that the provision relied upon by the respondents applies only to
the shipper and not to the insurer of the goods.
On April 30, 1980, the respondent judge in Civil Case No. 109911, upheld respondent Frota
and dismissed the petitioner's third-party complaint. Likewise, on August 31, 1982, the
respondent judge in Civil Case No. 110061 dismissed the petitioner's third-party complaint
against respondent Australia-West on the ground that the same was filed beyond the
prescriptive period provide in Section 3 (6) of the Carriage of Goods by Sea Act of 1936.
These both cases, the petitioner appealed to us on a pure question of law, raising the issue
of whether or not the prescriptive period of one year under the said Act also applies to an
insurer such as herein petitioner.
The petitioner maintains that the one-year prescriptive period cannot cover an insurer
which has not settled the claim of its insured because it cannot be considered as the person
referred to in the applicable provision of the said Act that has the duty or right to give
notice of loss or damage to the carrier or to sue such carrier within the period of one year
and that where an insurer does not settle the claim of its insured it cannot be considered as
subrogated to the rights of said insured that would then authorize it to sue the carrier
within the time-bar of one year. The petitioner further contends that the period for the
filing of a third-party complaint must be reckoned from the date when the principal action
was filed, that is, from the time the insured filed a suit against the petitioner, because the
third-party complaint is merely an incident of the main action.
On the other hand, the respondents argue that the one-year prescriptive period within
which to file a case against the carrier also applies to a claim filed by an insurer who stands
as a subrogee to the insured and that the third-party complaint filed by the petitioner
cannot be reckoned from the firing of the main action because such complaint is
independent of, and separate and distinct from the insured's action against the petitioner.
The lower courts did not err.

Said notice of loss or damage may be endorsed upon the receipt for the goods given by the
person taking delivery thereof.

Page

(6) Unless notice of loss or damage and the general nature of such loss or damage be given
in writing to the carrier or his agent at the port of discharge before or at the time of the
removal of the goods into the custody of the person entitled to delivery thereof under the
contract of carriage, such removal shall be prima facie evidence of the delivery by the
carrier of the goods as described in the bill of lading. If the loss or damage is not apparent,
the notice must be given within three days of the delivery.

110

Section 3(b) of the Carriage of Goods by Sea Act provides:

The notice in writing need not be given if the state of the goods has at the time of their
receipt been the subject of joint survey or inspection.
In any event the carrier and the ship shall be discharged from all liability in respect of loss or
damage unless suit is brought within one year after delivery of the goods or the date when the
goods should have been delivered: Provided, that if a notice of loss or damage, either
apparent or concealed, is not given as provided for in this section, that fact shall not affect
or prejudice the right of the shipper to bring the suit within one year after the delivery of
the goods or the date when the goods should have been delivered.
In the case of any actual or apprehended loss or damage, the carrier and the receiver shall
give all reasonable facilities to each other for inspecting and tallying the goods. (Emphasis
supplied) Philippine Permanent and General Statutes (Revised Edition, Vol. 1, pp. 663-666).
Chua Kuy v. Everett Steamship Corporation (93 Phil 207, 213-214), expounds on the extent
of the applicability of the aforequoted provision. We ruled:
Neither do we find tenable the claim that the prescriptive period contained in said act can
only be invoked by the shipper, excluding all other parties to the transaction. While
apparently the proviso contained in the portion of section 3(6) of the act we have quoted
gives the impression that the right to file suit within one year after delivery of the goods
applies to the shipper alone, however, reading the proviso in conjunction with the rest of
section 3(6), it at once becomes apparent that the conclusion drawn by petitioner is
unwarranted. In the first place, said section provides that the notice of loss or damage for
which a claim for indemnity may be made should be given in writing to the carrier at the
port of discharge before or at the time of the removal of the goods, and if the loss or
damage is not apparent said notice should be given 'within three days on delivery.' From
the language of this section, it seems clear that the notice of loss or damage is required to
be filed not necessarily by the shipper but also by the consignee or any legal holder of the
bill of lading. In fact, said section requires that the notice be given at the port of discharge
and the most logical party to file the notice is either the consignee or the endorsee of the
bill of lading. In the second place, a study of the historical background of this particular
provision will show that although the word shipper is used in the proviso referred to by the
petitioner, the intention of the law was not to exclude the consignee or endorsee of the bill
of lading from bringing the action but merely to limit the filing of the same within one year
after the delivery of the goods at the port of discharge. [The Southern Cross, 1940, A. M. C.
59 (SDNY); Lindgren v. Farley, 1938 A. M. C. 805 (SDNY)].
Arnold W. Knauth, an eminent authority on admiralty, commenting on this proviso, says:

Page

It seems evident that this language does not alter the sense of the text of the Hague Rules; it
merely reiterates in another form the rule already laid down. Curiously, the proviso seems
limited to the rights of shippers, and might strictly be construed not to give any rights to
consignees, representatives, or subrogated parties; whereas the Hague Rules phraseology
is broader. As the Act contains both phrases, it would seem to be as broad as the broader of

111

xxx xxx xxx

the two forms of words. (Ocean Bills of Lading, by Knauth, p. 229).

Clearly, the coverage of the Act includes the insurer of the goods. Otherwise, what the Act
intends to prohibit after the lapse of the one-year prescriptive period can be done
indirectly by the shipper or owner of the goods by simply filing a claim against the insurer
even after the lapse of one year. This would be the result if we follow the petitioner's
argument that the insurer can, at any time, proceed against the carrier and the ship since it
is not bound by the time-bar provision. In this situation, the one-year limitation will be
practically useless. This could not have been the intention of the law which has also for its
purpose the protection of the carrier and the ship from fraudulent claims by having
"matters affecting transportation of goods by sea be decided in as short a time as possible"
and by avoiding incidents which would "unnecessarily extend the period and permit delays
in the settlement of questions affecting the transportation." (See The Yek Tong Fire and
Marine Insurance Co., Ltd., v. American President Lines, Inc., 103 Phil. 1125-1126).
In the case of Aetna Insurance Co. v. Luzon Stevedoring Corporation (62 SCRA 11, 15), we
denied the appeal of an insurance company which filed a suit against the carrier after the
lapse of one year. We ruled:
There is no merit in the appeal. The trial court correctly held that the one-year statutory
and contractual prescriptive period had already expired when appellant company filed on
April 7, 1965 its action against Barber Line Far East Service. The one-year period
commenced on February 25, 1964 when the damaged cargo was delivered to the
consignee. (See Chua Kuy v. Everrett Steamship Corporation, 93 Phil. 207; Yek Tong Fire &
Marine Insurance Co., Ltd. v. American President Lines, Inc., 103 Phil. 1125).

Page

In the case at bar, the petitioner's action has prescribed under the provisions of the
Carriage of Goods by Sea Act. Hence, whether it files a third-party complaint or chooses to
maintain an independent action against herein respondents is of no moment. Had the
plaintiffs in the civil cases below filed an action against the petitioner after the one-year
prescriptive period, then the latter could have successfully denied liability on the ground
that by their own doing, the plaintiffs had prevented the petitioner from being subrogated
to their respective rights against the herein respondents by filing a suit after the one-year
prescriptive period. The situation, however, does not obtain in the present case. The
plaintiffs in the civil cases below gave extra-judicial notice to their respective carriers and

112

We likewise agree with the respondents that the third-party complaint of the petitioner
cannot be considered to have been filed upon the filing of the main action because although
it can be said that a third-party complaint is but ancilliary to the main action (Eastern
Assurance and Surety Corporation v. Cui 105 SCRA 622), it cannot abridge, enlarge, nor
modify the substantive rights of any litigant. It creates no substantive rights. Thus, unless
there is some substantive basis for the third-party Plaintiff's claim, he cannot utilized the
filing of such action to acquire any right of action against the third-party defendant. (See
also Francisco, The Revised Rules of Court in the Philippines, Vol. 1, 1973 Ed., p. 507). The
petitioner can only rightfully file a third-party complaint against the respondents if, in the
first place, it can still validly maintain an action against the latter.

filed suit against the petitioner well within one year from their receipt of the goods. The
petitioner had plenty of time within which to act. In Civil Case No. 109911, the petitioner
had more than four months to file a third-party complaint while in Civil Case No. 110061, it
had more than five months to do so. In both instances, however, the petitioner failed to file
the appropriate action.
WHEREFORE, IN VIEW OF THE FOREGOING, the petitions in G. R. No. 54140 and G. R. No.
62001 are hereby DISMISSED for lack of merit. Costs against the petitioner.
SO ORDERED. Feria (Chairman), Fernan, Alampay and Paras, JJ., concur.
G.R. No. 124050 June 19, 1997
MAYER STEEL PIPE CORPORATION and HONGKONG GOVERNMENT SUPPLIES
DEPARTMENT, petitioners, vs.COURT OF APPEALS, SOUTH SEA SURETY AND
INSURANCE CO., INC. and the CHARTER INSURANCE CORPORATION, respondents.
PUNO, J.:
This is a petition for review on certiorari to annul and set aside the Decision of respondent
Court of Appeals dated December 14, 1995 1 and its Resolution dated February 22, 1996 2
in CA-G.R. CV No. 45805 entitled Mayer Steel Pipe Corporation and Hongkong Government
Supplies Department v. South Sea Surety Insurance Co., Inc. and The Charter Insurance
Corporation. 3
In 1983, petitioner Hongkong Government Supplies Department (Hongkong) contracted
petitioner Mayer Steel Pipe Corporation (Mayer) to manufacture and supply various steel
pipes and fittings. From August to October, 1983, Mayer shipped the pipes and fittings to
Hongkong as evidenced by Invoice Nos. MSPC-1014, MSPC-1015, MSPC-1025, MSPC-1020,
MSPC-1017 and MSPC-1022. 4

Petitioners filed a claim against private respondents for indemnity under the insurance
contract. Respondent Charter paid petitioner Hongkong the amount of HK$64,904.75.

Page

Petitioners Mayer and Hongkong jointly appointed Industrial Inspection (International)

Inc. as third-party inspector to examine whether the pipes and fittings are manufactured in
accordance with the specifications in the contract. Industrial Inspection certified all the
pipes and fittings to be in good order condition before they were loaded in the vessel.
Nonetheless, when the goods reached Hongkong, it was discovered that a substantial
portion thereof was damaged.

113

Prior to the shipping, petitioner Mayer insured the pipes and fittings against all risks with
private respondents South Sea Surety and Insurance Co., Inc. (South Sea) and Charter
Insurance Corp. (Charter). The pipes and fittings covered by Invoice Nos. MSPC-1014, 1015
and 1025 with a total amount of US$212,772.09 were insured with respondent South Sea,
while those covered by Invoice Nos. 1020, 1017 and 1022 with a total amount of
US$149,470.00 were insured with respondent Charter.

Petitioners demanded payment of the balance of HK$299,345.30 representing the cost of

repair of the damaged pipes. Private respondents refused to pay because the insurance
surveyor's report allegedly showed that the damage is a factory defect.
On April 17, 1986, petitioners filed an action against private respondents to recover the
sum of HK$299,345.30. For their defense, private respondents averred that they have no
obligation to pay the amount claimed by petitioners because the damage to the goods is
due to factory defects which are not covered by the insurance policies.
The trial court ruled in favor of petitioners. It found that the damage to the goods is not due
to manufacturing defects. It also noted that the insurance contracts executed by petitioner
Mayer and private respondents are "all risks" policies which insure against all causes of
conceivable loss or damage. The only exceptions are those excluded in the policy, or those
sustained due to fraud or intentional misconduct on the part of the insured. The dispositive
portion of the decision states:
WHEREFORE, judgment is hereby rendered ordering the defendants jointly and severally,
to pay the plaintiffs the following:
1. the sum equivalent in Philippine currency of HK$299,345.30, with legal rate of interest
as of the filing of the complaint;
2. P100,000.00 as and for attorney's fees; and
3. costs of suit.
SO ORDERED. 5
Private respondents elevated the case to respondent Court of Appeals.
Respondent court affirmed the finding of the trial court that the damage is not due to
factory defect and that it was covered by the "all risks" insurance policies issued by private
respondents to petitioner Mayer. However, it set aside the decision of the trial court and
dismissed the complaint on the ground of prescription. It held that the action is barred
under Section 3(6) of the Carriage of Goods by Sea Act since it was filed only on April 17,
1986, more than two years from the time the goods were unloaded from the vessel. Section
3(6) of the Carriage of Goods by Sea Act provides that "the carrier and the ship shall be
discharged from all liability in respect of loss or damage unless suit is brought within one
year after delivery of the goods or the date when the goods should have been delivered."
Respondent court ruled that this provision applies not only to the carrier but also to the
insurer, citing Filipino Merchants Insurance Co., Inc. v. Alejandro. 6

Page

1. The respondent Court of Appeals erred in holding that petitioners' cause of action had
already prescribed on the mistaken application of the Carriage of Goods by Sea Act and the
doctrine of Filipino Merchants Co., Inc. v. Alejandro (145 SCRA 42); and

114

Hence this petition with the following assignments of error:

2. The respondent Court of Appeals committed an error in dismissing the complaint. 7

The petition is impressed with merit. Respondent court erred in applying Section 3(6) of
the Carriage of Goods by Sea Act.
Section 3(6) of the Carriage of Goods by Sea Act states that the carrier and the ship shall be
discharged from all liability for loss or damage to the goods if no suit is filed within one
year after delivery of the goods or the date when they should have been delivered. Under
this provision, only the carrier's liability is extinguished if no suit is brought within one
year. But the liability of the insurer is not extinguished because the insurer's liability is
based not on the contract of carriage but on the contract of insurance. A close reading of
the law reveals that the Carriage of Goods by Sea Act governs the relationship between the
carrier on the one hand and the shipper, the consignee and/or the insurer on the other
hand. It defines the obligations of the carrier under the contract of carriage. It does not,
however, affect the relationship between the shipper and the insurer. The latter case is
governed by the Insurance Code.
Our ruling in Filipino Merchants Insurance Co., Inc. v. Alejandro 8 and the other cases 9 cited
therein does not support respondent court's view that the insurer's liability prescribes
after one year if no action for indemnity is filed against the carrier or the insurer. In that
case, the shipper filed a complaint against the insurer for recovery of a sum of money as
indemnity for the loss and damage sustained by the insured goods. The insurer, in turn,
filed a third-party complaint against the carrier for reimbursement of the amount it paid to
the shipper. The insurer filed the third-party complaint on January 9, 1978, more than one
year after delivery of the goods on December 17, 1977. The court held that the insurer was
already barred from filing a claim against the carrier because under the Carriage of Goods
by Sea Act, the suit against the carrier must be filed within one year after delivery of the
goods or the date when the goods should have been delivered. The court said that "the
coverage of the Act includes the insurer of the goods." 10

Page

The ruling in Filipino Merchants should apply only to suits against the carrier filed either
by the shipper, the consignee or the insurer. When the court said in Filipino Merchants that
Section 3(6) of the Carriage of Goods by Sea Act applies to the insurer, it meant that the
insurer, like the shipper, may no longer file a claim against the carrier beyond the one-year
period provided in the law. But it does not mean that the shipper may no longer file a claim
against the insurer because the basis of the insurer's liability is the insurance contract. An
insurance contract is a contract whereby one party, for a consideration known as the
premium, agrees to indemnify another for loss or damage which he may suffer from a
specified peril. 11 An "all risks" insurance policy covers all kinds of loss other than those
due to willful and fraudulent act of the insured. 12 Thus, when private respondents issued

115

The Filipino Merchants case is different from the case at bar. In Filipino Merchants, it was
the insurer which filed a claim against the carrier for reimbursement of the amount it paid
to the shipper. In the case at bar, it was the shipper which filed a claim against the insurer.
The basis of the shipper's claim is the "all risks" insurance policies issued by private
respondents to petitioner Mayer.

the "all risks" policies to petitioner Mayer, they bound themselves to indemnify the latter in
case of loss or damage to the goods insured. Such obligation prescribes in ten years, in
accordance with Article 1144 of the New Civil Code. 13
IN VIEW WHEREOF, the petition is GRANTED. The Decision of respondent Court of Appeals
dated December 14, 1995 and its Resolution dated February 22, 1996 are hereby SET
ASIDE and the Decision of the Regional Trial Court is hereby REINSTATED. No costs.
SO ORDERED.

Page

116

Regalado, Romero, Mendoza and Torres, Jr., JJ., concur.

Page

117

G.R. No. 143133

June 5, 2002

BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES

TRANSPORT SERVICES, INC., petitioners, vs.PHILIPPINE FIRST INSURANCE CO., INC.,
respondents.

Statement of the Case

Page

Proof of the delivery of goods in good order to a common carrier and of their arrival in bad
order at their destination constitutes prima facie fault or negligence on the part of the
carrier. If no adequate explanation is given as to how the loss, the destruction or the
deterioration of the goods happened, the carrier shall be held liable therefor.

118

PANGANIBAN, J.:

Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the July 15,
1998 Decision1 and the May 2, 2000 Resolution2 of the Court of Appeals3 (CA) in CA-GR CV
No. 53571. The decretal portion of the Decision reads as follows:
"WHEREFORE, in the light of the foregoing disquisition, the decision appealed from is
hereby REVERSED and SET ASIDE. Defendants-appellees are ORDERED to jointly and
severally pay plaintiffs-appellants the following:
'1) FOUR Hundred Fifty One Thousand Twenty-Seven Pesos and 32/100 (P451,027.32) as
actual damages, representing the value of the damaged cargo, plus interest at the legal rate
from the time of filing of the complaint on July 25, 1991, until fully paid;
'2) Attorney's fees amounting to 20% of the claim; and
'3) Costs of suit.'"4
The assailed Resolution denied petitioner's Motion for Reconsideration.
The CA reversed the Decision of the Regional Trial Court (RTC) of Makati City (Branch
134), which had disposed as follows:
"WHEREFORE, in view of the foregoing, judgment is hereby rendered, dismissing the
complaint, as well as defendant's counterclaim."5
The Facts
The factual antecedents of the case are summarized by the Court of Appeals in this wise:
"On June 13, 1990, CMC Trading A.G. shipped on board the M/V 'Anangel Sky' at Hamburg,
Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation to Manila
consigned to the Philippine Steel Trading Corporation. On July 28, 1990, M/V Anangel Sky
arrived at the port of Manila and, within the subsequent days, discharged the subject cargo.
Four (4) coils were found to be in bad order B.O. Tally sheet No. 154974. Finding the four
(4) coils in their damaged state to be unfit for the intended purpose, the consignee
Philippine Steel Trading Corporation declared the same as total loss.1wphi1.nt

Page

"Impugning the propriety of the suit against them, defendants-appellees imputed that the
damage and/or loss was due to pre-shipment damage, to the inherent nature, vice or defect
of the goods, or to perils, danger and accidents of the sea, or to insufficiency of packing
thereof, or to the act or omission of the shipper of the goods or their representatives. In

119

"Despite receipt of a formal demand, defendants-appellees refused to submit to the

consignee's claim. Consequently, plaintiff-appellant paid the consignee five hundred six
thousand eighty six & 50/100 pesos (P506,086.50), and was subrogated to the latter's
rights and causes of action against defendants-appellees. Subsequently, plaintiff-appellant
instituted this complaint for recovery of the amount paid by them, to the consignee as
insured.

addition thereto, defendants-appellees argued that their liability, if there be any, should not
exceed the limitations of liability provided for in the bill of lading and other pertinent laws.
Finally, defendants-appellees averred that, in any event, they exercised due diligence and
foresight required by law to prevent any damage/loss to said shipment."6
Ruling of the Trial Court
The RTC dismissed the Complaint because respondent had failed to prove its claims with
the quantum of proof required by law.7
It likewise debunked petitioners' counterclaim, because respondent's suit was not
manifestly frivolous or primarily intended to harass them.8
Ruling of the Court of Appeals
In reversing the trial court, the CA ruled that petitioners were liable for the loss or the
damage of the goods shipped, because they had failed to overcome the presumption of
negligence imposed on common carriers.
The CA further held as inadequately proven petitioners' claim that the loss or the
deterioration of the goods was due to pre-shipment damage.9 It likewise opined that the
notation "metal envelopes rust stained and slightly dented" placed on the Bill of Lading had
not been the proximate cause of the damage to the four (4) coils.10
As to the extent of petitioners' liability, the CA held that the package limitation under
COGSA was not applicable, because the words "L/C No. 90/02447" indicated that a higher
valuation of the cargo had been declared by the shipper. The CA, however, affirmed the
award of attorney's fees.
Hence, this Petition.11
Issues
In their Memorandum, petitioners raise the following issues for the Court's consideration:
I
"Whether or not plaintiff by presenting only one witness who has never seen the subject
shipment and whose testimony is purely hearsay is sufficient to pave the way for the
applicability of Article 1735 of the Civil Code;

III

Page

"Whether or not the consignee/plaintiff filed the required notice of loss within the time
required by law;

120

II

"Whether or not a notation in the bill of lading at the time of loading is sufficient to show
pre-shipment damage and to exempt herein defendants from liability;
IV
"Whether or not the "PACKAGE LIMITATION" of liability under Section 4 (5) of COGSA is
applicable to the case at bar."12
In sum, the issues boil down to three:
1. Whether petitioners have overcome the presumption of negligence of a common carrier
2. Whether the notice of loss was timely filed
3. Whether the package limitation of liability is applicable
This Court's Ruling
The Petition is partly meritorious.
First Issue:
Proof of Negligence
Petitioners contend that the presumption of fault imposed on common carriers should not
be applied on the basis of the lone testimony offered by private respondent. The contention
is untenable.
Well-settled is the rule that common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence and vigilance with
respect to the safety of the goods and the passengers they transport. 13 Thus, common
carriers are required to render service with the greatest skill and foresight and "to use all
reason[a]ble means to ascertain the nature and characteristics of the goods tendered for
shipment, and to exercise due care in the handling and stowage, including such methods as
their nature requires."14 The extraordinary responsibility lasts from the time the goods are
unconditionally placed in the possession of and received for transportation by the carrier
until they are delivered, actually or constructively, to the consignee or to the person who
has a right to receive them.15

Page

Owing to this high degree of diligence required of them, common carriers, as a general rule,
are presumed to have been at fault or negligent if the goods they transported deteriorated
or got lost or destroyed.18 That is, unless they prove that they exercised extraordinary
diligence in transporting the goods.19 In order to avoid responsibility for any loss or

121

This strict requirement is justified by the fact that, without a hand or a voice in the
preparation of such contract, the riding public enters into a contract of transportation with
common carriers.16 Even if it wants to, it cannot submit its own stipulations for their
approval.17 Hence, it merely adheres to the agreement prepared by them.

damage, therefore, they have the burden of proving that they observed such diligence.20
However, the presumption of fault or negligence will not arise21 if the loss is due to any of
the following causes: (1) flood, storm, earthquake, lightning, or other natural disaster or
calamity; (2) an act of the public enemy in war, whether international or civil; (3) an act or
omission of the shipper or owner of the goods; (4) the character of the goods or defects in
the packing or the container; or (5) an order or act of competent public authority.22 This is
a closed list. If the cause of destruction, loss or deterioration is other than the enumerated
circumstances, then the carrier is liable therefor.23
Corollary to the foregoing, mere proof of delivery of the goods in good order to a common
carrier and of their arrival in bad order at their destination constitutes a prima facie case of
fault or negligence against the carrier. If no adequate explanation is given as to how the
deterioration, the loss or the destruction of the goods happened, the transporter shall be
held responsible.24
That petitioners failed to rebut the prima facie presumption of negligence is revealed in the
case at bar by a review of the records and more so by the evidence adduced by
respondent.25
First, as stated in the Bill of Lading, petitioners received the subject shipment in good order
and condition in Hamburg, Germany.26
Second, prior to the unloading of the cargo, an Inspection Report27 prepared and signed by
representatives of both parties showed the steel bands broken, the metal envelopes ruststained and heavily buckled, and the contents thereof exposed and rusty.
Third, Bad Order Tally Sheet No. 15497928 issued by Jardine Davies Transport Services,
Inc., stated that the four coils were in bad order and condition. Normally, a request for a
bad order survey is made in case there is an apparent or a presumed loss or damage.29
Fourth, the Certificate of Analysis30 stated that, based on the sample submitted and tested,
the steel sheets found in bad order were wet with fresh water.
Fifth, petitioners -- in a letter31 addressed to the Philippine Steel Coating Corporation and
dated October 12, 1990 -- admitted that they were aware of the condition of the four coils
found in bad order and condition.
These facts were confirmed by Ruperto Esmerio, head checker of BM Santos Checkers
Agency. Pertinent portions of his testimony are reproduce hereunder:

BM Santos Checkers Agency, sir.

Q.

How is BM Santos checkers Agency related or connected with defendant Jardine

Page

A.

122

"Q.
Mr. Esmerio, you mentioned that you are a Head Checker. Will you inform the
Honorable Court with what company you are connected?

Davies Transport Services?

A.

It is the company who contracts the checkers, sir.

Q.
You mentioned that you are a Head Checker, will you inform this Honorable Court
your duties and responsibilities?
A.
I am the representative of BM Santos on board the vessel, sir, to supervise the
discharge of cargoes.
xxx

xxx

xxx

Q.
On or about August 1, 1990, were you still connected or employed with BM Santos as
a Head Checker?
A.

Yes, sir.

Q.
And, on or about that date, do you recall having attended the discharging and
inspection of cold steel sheets in coil on board the MV/AN ANGEL SKY?
A.

Yes, sir, I was there.

xxx

xxx

xxx

Q.
Based on your inspection since you were also present at that time, will you inform
this Honorable Court the condition or the appearance of the bad order cargoes that were
unloaded from the MV/ANANGEL SKY?
ATTY. MACAMAY:
Objection, Your Honor, I think the document itself reflects the condition of the cold steel
sheets and the best evidence is the document itself, Your Honor that shows the condition of
the steel sheets.
COURT:
Let the witness answer.

Further, petitioners failed to prove that they observed the extraordinary diligence and
precaution which the law requires a common carrier to know and to follow to avoid
damage to or destruction of the goods entrusted to it for safe carriage and delivery.35

Page

All these conclusively prove the fact of shipment in good order and condition and the
consequent damage to the four coils while in the possession of petitioner,33 who notably
failed to explain why.34

123

A.
The scrap of the cargoes is broken already and the rope is loosen and the cargoes are
dent on the sides."32

True, the words "metal envelopes rust stained and slightly dented" were noted on the Bill
of Lading; however, there is no showing that petitioners exercised due diligence to forestall
or lessen the loss.36 Having been in the service for several years, the master of the vessel
should have known at the outset that metal envelopes in the said state would eventually
deteriorate when not properly stored while in transit.37 Equipped with the proper
knowledge of the nature of steel sheets in coils and of the proper way of transporting them,
the master of the vessel and his crew should have undertaken precautionary measures to
avoid possible deterioration of the cargo. But none of these measures was taken. 38 Having
failed to discharge the burden of proving that they have exercised the extraordinary
diligence required by law, petitioners cannot escape liability for the damage to the four
coils.39
In their attempt to escape liability, petitioners further contend that they are exempted from
liability under Article 1734(4) of the Civil Code. They cite the notation "metal envelopes
rust stained and slightly dented" printed on the Bill of Lading as evidence that the character
of the goods or defect in the packing or the containers was the proximate cause of the
damage. We are not convinced.
From the evidence on record, it cannot be reasonably concluded that the damage to the
four coils was due to the condition noted on the Bill of Lading.40 The aforecited exception
refers to cases when goods are lost or damaged while in transit as a result of the natural
decay of perishable goods or the fermentation or evaporation of substances liable therefor,
the necessary and natural wear of goods in transport, defects in packages in which they are
shipped, or the natural propensities of animals.41 None of these is present in the instant
case.
Further, even if the fact of improper packing was known to the carrier or its crew or was
apparent upon ordinary observation, it is not relieved of liability for loss or injury resulting
therefrom, once it accepts the goods notwithstanding such condition.42 Thus, petitioners
have not successfully proven the application of any of the aforecited exceptions in the
present case.43
Second Issue:
Notice of Loss

Page

We are not persuaded. First, the above-cited provision of COGSA provides that the notice of
claim need not be given if the state of the goods, at the time of their receipt, has been the
subject of a joint inspection or survey. As stated earlier, prior to unloading the cargo, an
Inspection Report46 as to the condition of the goods was prepared and signed by
representatives of both parties.47

124

Petitioners claim that pursuant to Section 3, paragraph 6 of the Carriage of Goods by Sea
Act44 (COGSA), respondent should have filed its Notice of Loss within three days from
delivery. They assert that the cargo was discharged on July 31, 1990, but that respondent
filed its Notice of Claim only on September 18, 1990.45

Second, as stated in the same provision, a failure to file a notice of claim within three days
will not bar recovery if it is nonetheless filed within one year.48 This one-year prescriptive
period also applies to the shipper, the consignee, the insurer of the goods or any legal
holder of the bill of lading.49
In Loadstar Shipping Co., Inc, v. Court of Appeals,50 we ruled that a claim is not barred by
prescription as long as the one-year period has not lapsed. Thus, in the words of the
ponente, Chief Justice Hilario G. Davide Jr.:
"Inasmuch as the neither the Civil Code nor the Code of Commerce states a specific
prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA)--which
provides for a one-year period of limitation on claims for loss of, or damage to, cargoes
sustained during transit--may be applied suppletorily to the case at bar."
In the present case, the cargo was discharged on July 31, 1990, while the Complaint 51 was
filed by respondent on July 25, 1991, within the one-year prescriptive period.
Third Issue:
Package Limitation
Assuming arguendo they are liable for respondent's claims, petitioners contend that their
liability should be limited to US$500 per package as provided in the Bill of Lading and by
Section 4(5)52 of COGSA.53
On the other hand, respondent argues that Section 4(5) of COGSA is inapplicable, because
the value of the subject shipment was declared by petitioners beforehand, as evidenced by
the reference to and the insertion of the Letter of Credit or "L/C No. 90/02447" in the said
Bill of Lading.54

It is to be noted, however, that the Civil Code does not limit the liability of the common
carrier to a fixed amount per package.62 In all matters not regulated by the Civil Code, the
right and the obligations of common carriers shall be governed by the Code of Commerce

Page

Further, a stipulation in the bill of lading limiting to a certain sum the common carrier's
liability for loss or destruction of a cargo -- unless the shipper or owner declares a greater
value58 -- is sanctioned by law.59 There are, however, two conditions to be satisfied: (1) the
contract is reasonable and just under the circumstances, and (2) it has been fairly and
freely agreed upon by the parties.60 The rationale for this rule is to bind the shippers by
their agreement to the value (maximum valuation) of their goods.61

125

A bill of lading serves two functions. First, it is a receipt for the goods shipped.53 Second, it is
a contract by which three parties -- namely, the shipper, the carrier, and the consignee -undertake specific responsibilities and assume stipulated obligations.56 In a nutshell, the
acceptance of the bill of lading by the shipper and the consignee, with full knowledge of its
contents, gives rise to the presumption that it constituted a perfected and binding
contract.57

and special laws.63 Thus, the COGSA, which is suppletory to the provisions of the Civil Code,
supplements the latter by establishing a statutory provision limiting the carrier's liability in
the absence of a shipper's declaration of a higher value in the bill of lading.64 The provisions
on limited liability are as much a part of the bill of lading as though physically in it and as
though placed there by agreement of the parties.65
In the case before us, there was no stipulation in the Bill of Lading66 limiting the carrier's
liability. Neither did the shipper declare a higher valuation of the goods to be shipped. This
fact notwithstanding, the insertion of the words "L/C No. 90/02447 cannot be the basis for
petitioners' liability.
First, a notation in the Bill of Lading which indicated the amount of the Letter of Credit
obtained by the shipper for the importation of steel sheets did not effect a declaration of
the value of the goods as required by the bill.67 That notation was made only for the
convenience of the shipper and the bank processing the Letter of Credit.68
Second, in Keng Hua Paper Products v. Court of Appeals,69 we held that a bill of lading was
separate from the Other Letter of Credit arrangements. We ruled thus:
"(T)he 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 of issuance of a letter of credit between the amount of 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, 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
petitioner's obligation to private respondent arising from the contract of transportation."70
In the light of the foregoing, petitioners' liability should be computed based on US$500 per
package and not on the per metric ton price declared in the Letter of Credit. 71 In Eastern
Shipping Lines, Inc. v. Intermediate Appellate Court,72 we explained the meaning of packages:

WHEREFORE, the Petition is partly granted and the assailed Decision MODIFIED.
Petitioners' liability is reduced to US$2,000 plus interest at the legal rate of six percent

Page

Considering, therefore, the ruling in Eastern Shipping Lines and the fact that the Bill of
Lading clearly disclosed the contents of the containers, the number of units, as well as the
nature of the steel sheets, the four damaged coils should be considered as the shipping unit
subject to the US$500 limitation.1wphi1.nt

126

"When what would ordinarily be considered packages are shipped in a container supplied
by the carrier and the number of such units is disclosed in the shipping documents, each of
those units and not the container constitutes the 'package' referred to in the liability
limitation provision of Carriage of Goods by Sea Act."

from the time of the filing of the Complaint on July 25, 1991 until the finality of this
Decision, and 12 percent thereafter until fully paid. No pronouncement as to costs.
SO ORDERED.

Page

127

Sandoval-Gutierrez, and Carpio, JJ., concur.Puno, J., abroad, on official leave.

Page

128

Page

129

G.R. No. 165647.

March 26, 2009.*

PHILIPPINES FIRST INSURANCE CO., INC., petitioner, vs. WALLEM PHILS. SHIPPING,
INC., UNKNOWN OWNER AND/OR UNKNOWN CHARTERER OF THE VESSEL M/S
OFFSHORE MASTER AND SHANGHAI FAREAST SHIP BUSINESS COMPANY,
respondents.

Page

Before us is a Rule 45 petition[1] which seeks the reversal of the Decision[2] and
Resolution[3] of the Court of Appeals in CA-G.R. No. 61885. The Court of Appeals reversed
the Decision[4] of the Regional Trial Court (RTC) of Manila, Branch 55 in Civil Case No. 9680298, dismissing the complaint for sum of money.

130

TINGA, J.:

The facts of the case follow.[5]

On or about 2 October 1995, Anhui Chemicals Import & Export Corporation

loaded on board M/S Offshore Master a shipment consisting of 10,000 bags of sodium
sulphate anhydrous 99 PCT Min. (shipment), complete and in good order for transportation
to and delivery at the port of Manila for consignee, L.G. Atkimson Import-Export, Inc.
(consignee), covered by a Clean Bill of Lading. The Bill of Lading reflects the gross weight of
the total cargo at 500,200 kilograms.[6] The Owner and/or Charterer of M/V Offshore
Master is unknown while the shipper of the shipment is Shanghai Fareast Ship Business
Company. Both are foreign firms doing business in the Philippines, thru its local ship agent,
respondent Wallem Philippines Shipping, Inc. (Wallem).[7]

On or about 16 October 1995, the shipment arrived at the port of Manila on board
the vessel M/S Offshore Master from which it was subsequently discharged. It was disclosed
during the discharge of the shipment from the carrier that 2,426 poly bags (bags) were in
bad order and condition, having sustained various degrees of spillages and losses. This is
evidenced by the Turn Over Survey of Bad Order Cargoes (turn-over survey) of the arrastre
operator, Asian Terminals, Inc. (arrastre operator).[8] The bad state of the bags is also
evinced by the arrastre operators Request for Bad Order Survey.[9]

Page

On 29 April 1996, the consignee filed a formal claim with Wallem for the value of
the damaged shipment, to no avail. Since the shipment was insured with petitioner
Philippines First Insurance Co., Inc. against all risks in the amount of P2,470,213.50,[12]
the consignee filed a formal claim[13] with petitioner for the damage and losses sustained
by the shipment. After evaluating the invoices, the turn-over survey, the bad order
certificate and other documents,[14] petitioner found the claim to be in order and
compensable under the marine insurance policy. Consequently, petitioner paid the
consignee the sum of P397,879.69 and the latter signed a subrogation receipt.

131

Asia Star Freight Services, Inc. undertook the delivery of the subject shipment
from the pier to the consignees warehouse in Quezon City,[10] while the final inspection
was conducted jointly by the consignees representative and the cargo surveyor. During the
unloading, it was found and noted that the bags had been discharged in damaged and bad
order condition. Upon inspection, it was discovered that 63,065.00 kilograms of the
shipment had sustained unrecovered spillages, while 58,235.00 kilograms had been
exposed and contaminated, resulting in losses due to depreciation and downgrading.[11]

Petitioner, in the exercise of its right of subrogation, sent a demand letter to

Wallem for the recovery of the amount paid by petitioner to the consignee. However,
despite receipt of the letter, Wallem did not settle nor even send a response to petitioners
claim.[15]

Consequently, petitioner instituted an action before the RTC for damages against
respondents for the recovery of P397,879.69 representing the actual damages suffered by
petitioner plus legal interest thereon computed from the time of the filing of the complaint
until fully paid and attorneys fees equivalent to 25% of the principal claim plus costs of
suit.

In a decision[16] dated 3 November 1998, the RTC ordered respondents to pay

petitioner P397,879.69 with 6% interest plus attorneys fees and costs of the suit. It
attributed the damage and losses sustained by the shipment to the arrastre operators
mishandling in the discharge of the shipment. Citing Eastern Shipping Lines, Inc. v. Court of
Appeals,[17] the RTC held the shipping company and the arrastre operator solidarily liable
since both the arrastre operator and the carrier are charged with and obligated to deliver
the goods in good order condition to the consignee. It also ruled that the ship functioned as
a common carrier and was obliged to observe the degree of care required of a common
carrier in handling cargoes. Further, it held that a notice of loss or damage in writing is not
required in this case because said goods already underwent a joint inspection or survey at
the time of receipt thereof by the consignee, which dispensed with the notice requirement.

The Court of Appeals reversed and set aside the RTCs decision.[18] According to
the appellate court, there is no solidary liability between the carrier and the arrastre
operator because it was clearly established by the court a quo that the damage and losses
of the shipment were attributed to the mishandling by the arrastre operator in the
discharge of the shipment. The appellate court ruled that the instant case falls under an
exception recognized in Eastern

Shipping Lines.[19] Hence, the arrastre operator was held solely liable to the consignee.

Whether or not the Court of Appeals erred in not holding that as a common
carrier, the carriers duties extend to the obligation to safely discharge the
cargo from the vessel;

Page

1.

132

Petitioner raises the following issues:

2.

Whether or not the carrier should be held liable for the cost of the damaged
shipment;

3.

Whether or not Wallems failure to answer the extra judicial demand by

petitioner for the cost of the lost/damaged shipment is an implied
admission of the formers liability for said goods;

4. Whether or not the courts below erred in giving credence to the testimony of
Mr. Talens.

It is beyond question that respondents vessel is a common carrier.[20] Thus, the

standards for determining the existence or absence of the respondents liability will be
gauged on the degree of diligence required of a common carrier. Moreover, as the
shipment was an exercise of international trade, the provisions of the Carriage of Goods

by Sea Act[21] (COGSA), together with the Civil Code and the Code of Commerce, shall
apply.[22]
The first and second issues raised in the petition will be resolved concurrently
since they are interrelated.

Page

The trial court, however, found through the testimony of Mr. Maximino Velasquez
Talens, a cargo surveyor of Oceanica Cargo Marine Surveyors Corporation, that the losses
and damage to the cargo were caused by the mishandling of the arrastre operator.
Specifically, that the torn cargo bags resulted from the use of steel hooks/spikes in piling
the cargo bags to the pallet board and in pushing the bags by the stevedores of the arrastre
operator to the tug boats then to the ports.[25] The appellate court affirmed the finding of
mishandling in the discharge of cargo and it served as its basis for exculpating respondents
from liability, rationalizing that with the fault of the arrastre operator in the unloading of

133

It is undisputed that the shipment was damaged prior to its receipt by the insured
consignee. The damage to the shipment was documented by the turn-over survey[23] and
Request for Bad Order Survey.[24] The turn-over survey, in particular, expressly stipulates
that 2,426 bags of the shipment were received by the arrastre operator in damaged
condition. With these documents, petitioner insists that the shipment incurred damage or
losses while still in the care and responsibility of Wallem and before it was turned over and
delivered to the arrastre operator.

the cargo established it should bear sole liability for the cost of the damaged/lost cargo.

While it is established that damage or losses were incurred by the shipment

during the unloading, it is disputed who should be liable for the damage incurred at that
point of transport. To address this issue, the pertinent laws and jurisprudence are
examined.

Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the goods
transported by them.[26] Subject to certain exceptions enumerated under Article 1734[27]
of the Civil Code, common carriers are responsible for the loss, destruction, or
deterioration of the goods. The extraordinary responsibility of the common carrier lasts
from the time the goods are unconditionally placed in the possession of, and received by
the carrier for transportation until the same are delivered, actually or constructively, by the
carrier to the consignee, or to the person who has a right to receive them.[28]

For marine vessels, Article 619 of the Code of Commerce provides that the ship
captain is liable for the cargo from the time it is turned over to him at the dock or afloat
alongside the vessel at the port of loading, until he delivers it on the shore or on the
discharging wharf at the port of unloading, unless agreed otherwise. In Standard Oil Co. of
New York v. Lopez Castelo,[29] the Court interpreted the ship captains liability as
ultimately that of the shipowner by regarding the captain as the representative of the ship
owner.

Lastly, Section 2 of the COGSA provides that under every contract of carriage of
goods by sea, the carrier in relation to the loading, handling, stowage, carriage, custody,
care, and discharge of such goods, shall be subject to the responsibilities and liabilities and
entitled to the rights and immunities set forth in the Act.[30] Section 3 (2) thereof then
states that among the carriers responsibilities are to properly and carefully load, handle,
stow, carry, keep, care for, and discharge the goods carried.

Page

4. PERIOD OF RESPONSIBILITY. The responsibility of the carrier

shall commence from the time when the goods are loaded on board
the vessel and shall cease when they are discharged from the vessel.

134

The above doctrines are in fact expressly incorporated in the bill of lading
between the shipper Shanghai Fareast Business Co., and the consignee, to wit:

The Carrier shall not be liable of loss of or damage to the goods

before loading and after discharging from the vessel, howsoever
such loss or damage arises.[31]

On the other hand, the functions of an arrastre operator involve the handling of
cargo deposited on the wharf or between the establishment of the consignee or shipper
and the ship's tackle.[32] Being the custodian of the goods discharged from a vessel, an
arrastre operator's duty is to take good care of the goods and to turn them over to the party
entitled to their possession.[33]

Handling cargo is mainly the arrastre operator's principal work so its

drivers/operators or employees should observe the standards and measures necessary to
prevent losses and damage to shipments under its custody.[34]

In Firemans Fund Insurance Co. v. Metro Port Service, Inc.[35] the Court explained
the relationship and responsibility of an arrastre operator to a consignee of a cargo, to
quote:

Page

The liability of the arrastre operator was reiterated in Eastern Shipping Lines, Inc.
v. Court of Appeals[36] with the clarification that the arrastre operator and the carrier are
not always and necessarily solidarily liable as the facts of a case may vary the rule.

135

The legal relationship between the consignee and the arrastre

operator is akin to that of a depositor and warehouseman. The
relationship between the consignee and the common carrier is
similar to that of the consignee and the arrastre operator. Since it is
the duty of the ARRASTRE to take good care of the goods that are in
its custody and to deliver them in good condition to the consignee,
such responsibility also devolves upon the CARRIER. Both the
ARRASTRE and the CARRIER are therefore charged with and
obligated to deliver the goods in good condition to the
consignee.(Emphasis supplied) (Citations omitted)

Thus, in this case the appellate court is correct insofar as it ruled that an arrastre
operator and a carrier may not be held solidarily liable at all times. But the precise question
is which entity had custody of the shipment during its unloading from the vessel?

The aforementioned Section 3(2) of the COGSA states that among the carriers
responsibilities are to properly and carefully load, care for and discharge the goods carried.
The bill of lading covering the subject shipment likewise stipulates that the carriers
liability for loss or damage to the goods ceases after its discharge from the vessel. Article
619 of the Code of Commerce holds a ship captain liable for the cargo from the time it is
turned over to him until its delivery at the port of unloading.

In a case decided by a U.S. Circuit Court, Nichimen Company v. M./V. Farland,[37]

it was ruled that like the duty of seaworthiness, the duty of care of the cargo is nondelegable,[38] and the carrier is accordingly responsible for the acts of the master, the
crew, the stevedore, and his other agents. It has also been held that it is ordinarily the duty
of the master of a vessel to unload the cargo and place it in readiness for delivery to the
consignee, and there is an implied obligation that this shall be accomplished with sound
machinery, competent hands, and in such manner that no unnecessary injury shall be done
thereto.[39] And the fact that a consignee is required to furnish persons to assist in
unloading a shipment may not relieve the carrier of its duty as to such unloading.[40]

The exercise of the carriers custody and responsibility over the subject shipment
during the unloading actually transpired in the instant case during the unloading of the
shipment as testified by Mr. Talens, the cargo surveyor, to quote:

Atty. Repol:

Yes, sir.

And, who hired the services of the stevedores?

The checker of the vessel of Wallem, sir.[41]

136

Do you agree with me that Wallem Philippines is a shipping

[company]?

Page

xxx
Q

Mr. Witness, during the discharging operation of this cargo, where was the
master of the vessel?

On board the vessel, supervising, sir.

And, observed the discharging operation?

Yes, sir.

And, what did the master of the vessel do when the cargo was being
unloaded from the vessel?

He would report to the head checker, sir.

He did not send the stevedores to what manner in the discharging of the
cargo from the vessel?

And head checker po and siyang nagpapatakbo ng trabaho sa loob ng barko,

sir.[42]

xxx
Q

Is he [the head checker] an employee of the company?

He is a contractor/checker of Wallem Philippines, sir.[43]

Page

The bad order torn bags, was due to stevedores[] utilizing steel
hooks/spikes in piling the cargo to [the] pallet board at the vessels
cargo holds and at the pier designated area before and after discharged
that cause the bags to torn [sic].[44] (Emphasis supplied)

137

Moreover, the liability of Wallem is highlighted by Mr. Talens notes in the Bad
Order Inspection, to wit:

The records are replete with evidence which show that the damage to the bags happened
before and after their discharge[45] and it was caused by the stevedores of the arrastre
operator who were then under the supervision of Wallem.

It is settled in maritime law jurisprudence that cargoes while being unloaded

generally remain under the custody of the carrier. In the instant case, the damage or losses
were incurred during the discharge of the shipment while under the supervision of the
carrier. Consequently, the carrier is liable for the damage or losses caused to the shipment.
As the cost of the actual damage to the subject shipment has long been settled, the trial
courts finding of actual damages in the amount of P397,879.69 has to be sustained.

On the credibility of Mr. Talens which is the fourth issue, the general rule in
assessing credibility of witnesses is well-settled:

Page

138

x x x the trial court's evaluation as to the credibility of witnesses is

viewed as correct and entitled to the highest respect because it is more
competent to so conclude, having had the opportunity to observe the
witnesses' demeanor and deportment on the stand, and the manner in
which they gave their testimonies. The trial judge therefore can better
determine if such witnesses were telling the truth, being in the ideal
position to weigh conflicting testimonies. Therefore, unless the trial
judge plainly overlooked certain facts of substance and value which, if
considered, might affect the result of the case, his assessment on
credibility must be respected.[46]

Contrary to petitioners stance on the third issue, Wallems failure to respond to

its demand letter does not constitute an implied admission of liability. To borrow the
words of Mr. Justice Oliver Wendell Holmes, thus:

A man cannot make evidence for himself by writing a letter

containing the statements that he wishes to prove. He does not make the
letter evidence by sending it to the party against whom he wishes to
prove the facts [stated therein]. He no more can impose a duty to answer
a charge than he can impose a duty to pay by sending goods. Therefore a
failure to answer such adverse assertions in the absence of further
circumstances making an answer requisite or natural has no effect as an
admission.[47]

With respect to the attorneys fees, it is evident that petitioner was compelled to
litigate this matter to protect its interest. The RTCs award of P20,000.00 as attorneys fees
is reasonable.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals

dated 22 June 2004 and its Resolution dated 11 October 2004 are REVERSED and SET
ASIDE. Wallem is ordered to pay petitioner the sum of P397,879.69, with interest thereon
at 6% per annum from the filing of the complaint on 7 October 1996 until the judgment
becomes final and executory. Thereafter, an interest rate of 12% per annum shall be
imposed.[48] Respondents are also ordered to pay petitioner the amount of P20,000.00 for
and as attorneys fees, together with the costs of the suit.

SO ORDERED.

UNSWORTH TRANSPORT INTERNATIONAL (PHILS.), INC., petitioner, vs. COURT OF

APPEALS and PIONEER INSURANCE AND SURETY CORPORATION, respondents.
NACHURA, J.:

139

July 26, 2010.*

Page

G.R. No. 166250.

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/C15991-2,[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).

Page

2-pallets STC 40 bags Dried Yeast, both in good order condition

and properly sealed

140

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:

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 No. 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]

Page

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:

141

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.

WHEREFORE, judgment is hereby rendered in favor of plaintif

PIONEER INSURANCE & SURETY CORPORATION and against the
defendants AMERICAN PRESIDENT LINES and 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;

fees;

2. The amount equivalent to 25% of the total sum as attorneys

3. Cost of this litigation.

Page

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 Lading, 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 liability 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]

142

SO ORDERED.[20]

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 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.

Page

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.:

143

The petition is partly meritorious.

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 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.[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]

deliver the same as therein stipulated. As a receipt, it recites the date and place of

Page

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

144

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.

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.

Page

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]

145

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, the
OCMSC 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.

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 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. 1187-008394/ 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]

Page

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The

Court of Appeals Decision dated April 29, 2004 and Resolution dated November 26, 2004

146

In light of the foregoing, petitioners 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.

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.

Page

147

SO ORDERED.

Page

148