JETHRO

Eastern Shipping v. Court of Appeals

G.R. No. 94151 April 30, 1991

EASTERN SHIPPING LINES, INC., petitioner,
vs.
THE COURT OF APPEALS and THE FIRST NATIONWIDE ASSURANCE
CORPORATION, respondents.

FACTS:

Carrier Eastern Shipping Lines Inc

Shipper/Consignee Stresstek Post Tensioning Philippines Inc

Insurer - First Nationwide Assurance Corporation

Arrastre Operator E. Razon Inc. (not significant)

Eastern Shipping Lines Inc shipped uncoated 7-wire stress relieved wire strand for
prestressed concrete were shipped on board the vessel "Japri Venture,". Upon
arrival at the port of Manila, it discharged the cargo to the custody of the
defendant E. Razon, Inc. from whom the consignee's customs broker received it for
delivery to the consignee's warehouse. First Nationwide Assurance, indemnified the
consignee in the amount of P171,923.00 for damage and loss to the insured cargo,
whereupon the former was subrogated for the latter. The insurer now seeks to
recover from the defendants what it has indemnified the consignee. The petitioner
protested alleging that it should not be hel liable to answer for damages for the
event that caused the rusting of the goods was due to the encountered very
rough seas and stormy weather classified as force majeure, hence relieving them
of any liability. Aggrieved, respondent filed a case against petitioner.

RTC dismissed the case

CA set aside RTCs decision and ordered petitioner to pay respondent

ISSUE:
W/N petitioner was negligent and should be held liable for the payment of
damages.

HELD:
YES. Plainly, the heavy seas and rains referred to in the master's report were
not caso fortuito, but normal occurrences that an ocean-going vessel, particularly in the
month of September which, in our area, is a month of rains and heavy seas would
encounter as a matter of routine. They are not unforeseen nor unforeseeable. These are
conditions that ocean-going vessels would encounter and provide for, in the ordinary
course of a voyage. That rain water (not sea water) found its way into the holds of
the Jupri Venture is a clear indication that care and foresight did not attend the closing of
the ship's hatches so that rain water would not find its way into the cargo holds of the
ship.
Moreover, under Article 1733 of the Civil Code, common carriers are bound to
observe "extra-ordinary vigilance over goods . . . .according to all circumstances of each
case," and Article 1735 of the same Code states, to wit:
Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of
the preceding article, if the goods are lost, destroyed or deteriorated, common
carriers are presumed to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence as required in article 1733.
Since the carrier has failed to establish any caso fortuito, the presumption by law
of fault or negligence on the part of the carrier applies; and the carrier must present
evidence that it has observed the extraordinary diligence required by Article 1733 of the
Civil Code in order to escape liability for damage or destruction to the goods that it had
admittedly carried in this case. No such evidence exists of record. Thus, the carrier
cannot escape liability.
The presumption, therefore, that the cargo was in apparent good condition when it
was delivered by the vessel to the arrastre operator by the clean tally sheets has been
overturned and traversed. The evidence is clear to the effect that the damage to the
cargo was suffered while aboard petitioner's vessel.

Philippine Charter Insurance Corp. v. Unknown Owner of Vessel M/V National

Honor, National Shipping Corp. and International Container Services, Inc.

[G.R. No. 161833. July 8, 2005]

PHILIPPINE CHARTER INSURANCE CORPORATION, petitioner,

vs
UNKNOWN OWNER OF THE VESSEL M/V NATIONAL HONOR,
NATIONAL SHIPPING CORPORATION OF THE PHILIPPINES and
INTERNATIONAL CONTAINER SERVICES, INC., respondents.

FACTS:

Carrier - National Shipping Corporation of the Philippines (NSCP)

Consignee - Blue Mono International Company, Incorporated (BMICI)

Insurer - Philippine Charter Insurance Corporation (PCIC)

Arrastre Operator - International Container Terminal Services, Incorporated (ICTSI)

On November 5, 1995, J. Trading Co. Ltd. of Seoul, Korea, loaded a shipment of

four units of parts and accessories in the port of Pusan, Korea, on board the vessel
M/V National Honor, represented in the Philippines by its agent, National
Shipping Corporation of the Philippines (NSCP). The goods were to be
delivered to the ultimate consignee Blue Mono International Company,
Incorporated (BMICI). The shipment was contained in two wooden crates,
namely, Crate No. 1 and Crate No. 2, complete and in good order condition. There
were no markings on the outer portion of the crates except the name of the
consignee.[7]
Crate No. 1 measured 24 cubic meters and weighed 3,620 kgs. On the
flooring of the wooden crates were three wooden battens placed side by
side to support the weight of the cargo.
Crate No. 2, on the other hand, measured 10 cubic meters and weighed
2,060 kgs.

It was insured for P2,547,270.00 with the Philippine Charter Insurance

Corporation (PCIC). Upon arrival, the International Container Terminal
Services, Incorporated (ICTSI) was furnished with a copy of the crate cargo list
and bill of lading, and it knew the contents of the crate. [11] The following day, the
vessel started discharging its cargoes using its winch crane. Claudio Cansino, the
stevedore of the ICTSI, placed two sling cables on each end of Crate No. 1. [15] No
sling cable was fastened on the mid-portion of the crate. In Dauzs experience,
this was a normal procedure. [16] As the crate was being hoisted from the vessels
hatch, the mid-portion of the wooden flooring suddenly snapped in the air, about
five feet high from the vessels twin deck, sending all its contents crashing down
hard,[17]resulting in extensive damage to the shipment. BMICIs customs broker,
JRM Incorporated, took delivery of the cargo in such damaged condition. [18] Upon
receipt of the damaged shipment, BMICI found that the same could no longer be
used for the intended purpose. ]BMICI subsequently filed separate claims against
the NSCP,[20] the ICTSI,[21] and its insurer, the PCIC,[22] for US$61,500.00. When the
other companies denied liability, PCIC paid the claim and was issued a
Subrogation Receipt[23] for P1,740,634.50. On March 22, 1995, PCIC, as
subrogee, filed with the RTC of Manila, Branch 35, a Complaint for
Damages[24] against the Unknown owner of the vessel M/V National Honor, NSCP
and ICTSI, as defendants. PCIC alleged that the loss was due to the fault and
negligence of the defendants.

RTC - rendered judgment for PCIC and ordered the complaint dismissed.
The loss was due to the internal defect and weakness of the materials
used in the fabrication of the crates. The middle wooden batten had a
hole (bukong-bukong).

CA affirmed in toto the RTCs decision

The loss of the shipment was due to an excepted cause [t]he character
of the goods or defects in the packing or in the containers and the failure
of the shipper to indicate signs to notify the stevedores that extra care
should be employed in handling the shipment.

ISSUE:
W/N respondents should be held liable for the damage of the goods.

HELD:

NO. Common carriers, from the nature of their business and for reasons of public
policy, are mandated to observe extraordinary diligence in the vigilance over the goods
and for the safety of the passengers transported by them, according to all the
circumstances of each case.The extraordinary diligence in the vigilance over the goods
tendered for shipment requires the common carrier to know and to follow the required
precaution for avoiding damage to, or destruction of the goods entrusted to it for sale,
carriage and delivery. It requires common carriers to render service with the greatest
skill and foresight and to use all reasonable means to ascertain the nature and
characteristic of goods tendered for shipment, and to exercise due care in the handling
and stowage, including such methods as their nature requires.[42]
The common carriers duty to observe the requisite diligence in the shipment of
goods lasts from the time the articles are surrendered to or unconditionally placed in the
possession of, and received by, the carrier for transportation until delivered to, or until
the lapse of a reasonable time for their acceptance, by the person entitled to receive
them.[43] When the goods shipped are either lost or arrive in damaged condition, a
presumption arises against the carrier of its failure to observe that diligence, and there
need not be an express finding of negligence to hold it liable. [44] To overcome the
presumption of negligence in the case of loss, destruction or deterioration of the goods,
the common carrier must prove that it exercised extraordinary diligence.[45]
However, under Article 1734 of the New Civil Code, the presumption of negligence
does not apply to any of the following causes:
1. Flood, storm, earthquake, lightning or other natural disaster or calamity;
2. Act of the public enemy in war, whether international or civil;
3. Act or omission of the shipper or owner of the goods;
4.

The character of the goods or defects in the packing or in the

containers;

5. Order or act of competent public authority.

Defect is the want or absence of something necessary for completeness or
perfection; a lack or absence of something essential to completeness; a deficiency in
something essential to the proper use for the purpose for which a thing is to be used.
[48]
On the other hand, inferior means of poor quality, mediocre, or second rate. [49] A thing
may be of inferior quality but not necessarily defective. In other words, defectiveness
is not synonymous with inferiority.
In the present case, the trial court declared that based on the record, the loss of the
shipment was caused by the negligence of the petitioner as the shipper:

The case at bar falls under one of the exceptions mentioned in Article 1734 of the Civil
Code, particularly number (4) thereof, i.e., the character of the goods or defects in the
packing or in the containers. The trial court found that the breakage of the crate was not
due to the fault or negligence of ICTSI, but to the inherent defect and weakness of the
materials used in the fabrication of the said crate.
It appears that the wooden batten used as support for the flooring was not made of good
materials, which caused the middle portion thereof to give way when it was lifted. The
shipper also failed to indicate signs to notify the stevedores that extra care should be
employed in handling the shipment.
The petitioner failed to rebut the evidence of respondent, that the crates were sealed
and that the contents thereof could not be seen from the outside. [52] While it is true that
the crate contained machineries and spare parts, it cannot thereby be concluded that
the respondents knew or should have known that the middle wooden batten had a hole,
or that it was not strong enough to bear the weight of the shipment.

Lorenzo Shipping v. BJ Marthel

(ewan ko bakit to sinali ni sir eh mas marunong pa si ate Jackie, yung binigay niyang
Lorenzo case, pang-transpo talaga, ito pang-oblicon!!! Wag niyo to masyadong
damdamin na case )

G.R. No. 145483

November 19, 2004
LORENZO SHIPPING CORP., petitioner,
vs.
BJ MARTHEL INTERNATIONAL, INC., respondent.
FACTS
Petitioner Lorenzo Shipping Corporation is a domestic corporation engaged in
coastwise shipping. Respondent BJ Marthel International, Inc. is an importer and
distributor of different brands of engines and spare parts.
Respondent supplied petitioner with spare parts for the latter's marine engines.
According to the quotation it sent, deliveries of such items are within 2 months
after receipt of firm order. Petitioner thereafter issued to respondent Purchase
Order No. 13839 for the procurement of one set of cylinder liner, valued at
P477,000, to be used for M/V Dadiangas Express. The purchase order was cosigned by Jose Go, Jr., petitioner's vice-president, and Henry Pajarillo, respondents
sales manager.
Instead of paying the 25% down payment (indicated in the purchase order) for the
first cylinder liner, petitioner issued in favor of respondent ten postdated checks.

The checks were supposed to represent the full payment of the aforementioned
cylinder liner.
Subsequently, petitioner issued Purchase Order No. 14011, for another unit of
cylinder liner. This purchase order stated the term of payment to be "25% upon
delivery, balance payable in 5 bi-monthly equal installments." Like the first
purchase order, the second purchase order did not state the date of the cylinder
liner's delivery.
On 26 January 1990, respondent deposited petitioner's check that was postdated
18 January 1990, however, the same was dishonored by the drawee bank due to
insufficiency of funds. The remaining nine postdated checks were eventually
returned by respondent to petitioner.
Petitioner claimed that it replaced said check with a good one, the proceeds of
which were applied to its other obligation to respondent. For its part, respondent
insisted that it returned said postdated check to petitioner.
On 20 April 1990, Pajarillo delivered the two cylinder liners at petitioner's
warehouse in Manila. The sales invoices evidencing the delivery of the cylinder
liners both contain the notation "subject to verification" under which the signature
of petitioner's warehouseman, appeared.
Respondent sent a Statement of Account and respondent's vice-president sent a
demand letter dated to petitioner requiring the latter to pay. Petitioner sent the
former a letter offering to pay only P150,000 for the cylinder liners. In said letter,
petitioner claimed that as the cylinder liners were delivered late and due to the
scrapping of the M/V Dadiangas Express, it (petitioner) would have to sell the
cylinder liners in Singapore and pay the balance from the proceeds of said sale.
Respondent filed an action for sum of money and damages before the RTC. Prior to
the filing of a responsive pleading, respondent filed an amended complaint with
preliminary attachment. The amendments also pertained to the issuance by
petitioner of the postdated checks and the amounts of damages claimed.
RTC - granted respondent's prayer for the issuance of a preliminary attachment.
Petitioner filed an Urgent Ex-Parte Motion to Discharge Writ of Attachment
attaching thereto a counter-bond which the RTC allowed.
Petitioner afterwards filed its Answer alleging therein that time was of the essence
in the delivery of the cylinder liners and that the delivery on 20 April 1990 of said
items was late as respondent committed to deliver said items "within two (2)
months after receipt of firm order."
Respondent filed a Second Amended Complaint with Preliminary Attachment which
dealt solely with the number of postdated checks issued by petitioner as full
payment for the first cylinder liner it ordered from respondent. (In the first
amended complaint, only nine postdated checks were involved, in its second
amended complaint, there were ten postdated checks).
Petitioner filed a Motion alleging therein that the cylinder liners run the risk of
obsolescence and deterioration to the prejudice of the parties to this case. Thus,
petitioner prayed that it be allowed to sell the cylinder liners at the best possible
price and to place the proceeds of said sale in escrow. This motion was granted.
The RTC dismissed the complaint which ordered the plaintiff to pay P50,000.00 to
the defendant. It held respondent bound to the quotation it submitted to petitioner
particularly with respect to the terms of payment and delivery of the cylinder
liners. It also declared that respondent had agreed to the cancellation of the
contract of sale when it returned the postdated checks issued by petitioner.
CA - reversed the decision of the RTC.

ISSUES
1. Whether or not respondent incurred delay in performing its obligation under the
contract of sale - NO
2. Whether or not said contract was validly rescinded by petitioner. NO
HELD:
Petitioner maintains that its obligation to pay fully the purchase price was
extinguished because the adverted contract was validly terminated due to respondent's
failure to deliver within the two-month period. The threshold question, then, is: Was there
late delivery of the subjects of the contract of sale to justify petitioner to disregard the
terms of the contract considering that time was of the essence thereof? In determining
whether time is of the essence in a contract, the ultimate criterion is the actual or
apparent intention of the parties and before time may be so regarded by a court, there
must be a sufficient manifestation, either in the contract itself or the surrounding
circumstances of that intention. Petitioner insists that although its purchase orders did
not specify the dates when the cylinder liners were supposed to be delivered,
nevertheless, respondent should abide by the term of delivery appearing on the
quotation it submitted to petitioner. Petitioner theorizes that the quotation embodied the
offer from respondent while the purchase order represented its (petitioner's) acceptance
of the proposed terms of the contract of sale. Thus, petitioner is of the view that these
two documents "cannot be taken separately as if there were two distinct contracts." We
do not agree.
While this Court recognizes the principle that contracts are respected as the law
between the contracting parties, this principle is tempered by the rule that the intention
of the parties is primordial and "once the intention of the parties has been ascertained,
that element is deemed as an integral part of the contract as though it has been
originally expressed in unequivocal terms."
In the present case, we cannot subscribe to the position of petitioner that the
documents, by themselves, embody the terms of the sale of the cylinder liners. One can
easily glean the significant differences in the terms as stated in the formal quotation and
Purchase Order No. 13839 with regard to the due date of the down payment for the first
cylinder liner and the date of its delivery as well as Purchase Order No. 14011 with
respect to the date of delivery of the second cylinder liner. While the quotation provided
by respondent evidently stated that the cylinder liners were supposed to be delivered
within two months from receipt of the firm order of petitioner and that the 25% down
payment was due upon the cylinder liners' delivery, the purchase orders prepared by
petitioner clearly omitted these significant items. The petitioner's Purchase Order No.
13839 made no mention at all of the due dates of delivery of the first cylinder liner and
of the payment of 25% down payment. Its Purchase Order No. 14011 likewise did not
indicate the due date of delivery of the second cylinder liner.
In the instant case, the formal quotation provided by respondent represented the
negotiation phase of the subject contract of sale between the parties. As of that time,
the parties had not yet reached an agreement as regards the terms and conditions of the
contract of sale of the cylinder liners. Petitioner could very well have ignored the offer or
tendered a counter-offer to respondent while the latter could have, withdrawn or
modified the same. The parties were at liberty to discuss the provisions of the contract of
sale prior to its perfection. In this connection, we turn to the testimonies of Pajarillo and
Kanaan, Jr., that the terms of the offer were, indeed, renegotiated prior to the issuance of
Purchase Order No. 13839

The law implies, however, that if no time is fixed, delivery shall be made within a
reasonable time, in the absence of anything to show that an immediate delivery
intended.
We also find significant the fact that while petitioner alleges that the cylinder liners
were to be used for dry dock repair and maintenance of its M/V Dadiangas Express
between the later part of December 1989 to early January 1990, the record is bereft of
any indication that respondent was aware of such fact. The failure of petitioner to notify
respondent of said date is fatal to its claim that time was of the essence in the subject
contracts of sale.
Finally, the ten postdated checks issued in November 1989 by petitioner and
received by the respondent as full payment of the purchase price of the first cylinder
liner supposed to be delivered on 02 January 1990 fail to impress. It is not an indication
of failure to honor a commitment on the part of the respondent. The earliest maturity
date of the checks was 18 January 1990. As delivery of said checks could produce the
effect of payment only when they have been cashed, respondent's obligation to deliver
the first cylinder liner could not have arisen as early as 02 January 1990 as claimed by
petitioner since by that time, petitioner had yet to fulfill its undertaking to fully pay for
the value of the first cylinder liner. As explained by respondent, it proceeded with the
placement of the order for the cylinder liners with its principal in Japan solely on the
basis of its previously harmonious business relationship with petitioner.
in the subject contracts, time was not of the essence. The delivery of the cylinder
liners on 20 April 1990 was made within a reasonable period of time considering that
respondent had to place the order for the cylinder liners with its principal in Japan and
that the latter was, at that time, beset by heavy volume of work.
There having been no failure on the part of the respondent to perform its
obligation, the power to rescind the contract is unavailing to the petitioner.

Saludo v. Court of Appeals

G.R. No. 95536 March 23, 1992

ANICETO G. SALUDO, JR., MARIA SALVACION SALUDO, LEOPOLDO G. SALUDO
and SATURNINO G. SALUDO, petitioners,
vs.
HON. COURT OF APPEALS, TRANS WORLD AIRLINES, INC., and PHILIPPINE
AIRLINES, INC., respondents.

FACTS:

Shipper - Pomierski and Son Funeral Home

Consignee Maria Saludo

Carrier - Transworld Airlines (TWA) Chicago San Francisco, and Philippine Airlines
(PAL)- San Francisco Manila

After the death of petitioner's mother, Crispina Galdo Saludo, in Chicago Illinois,
Pomierski and Son Funeral Home of Chicago, made the necessary preparations
and arrangements for the shipment, of the remains from Chicago to the
Philippines. Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at
the Pomierski & Son Funeral Home, sealed the shipping case containing a
hermetically sealed casket that is airtight and waterproof wherein was contained
the remains of Crispina Saludo Galdo). On the same date, October 26, 1976,
Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air Services) at
the airport (Chicago) which made the necessary arrangements such as flights,
transfers, etc.; C.M.A.S. is a national service used by undertakers to throughout
the nation (U.S.A.). C.M.A.S. booked the shipment with PAL thru the carrier's agent
Air Care International, with Pomierski F.H. as the shipper and Mario (Maria) Saludo
as the consignee. The requested routing was from Chicago to San Francisco on
board TWA Flight 131 of October 27, 1976 and from San Francisco to Manila on
board PAL Flight No. 107 of the same date, and from Manila to Cebu on board PAL
Flight 149 of October 29, 1976. Maria Saludo upon arriving at San Francisco
Airport, she then called Pomierski that her mother's remains were not at the West
Coast terminal, and Pomierski immediately called C.M.A.S., which in a matter of 10
minutes informed him that the remains were on a plane to Mexico City, that there
were two bodies at the terminal, and somehow they were switched. The following
day October 28, 1976, the shipment or remains of Crispina Saludo arrived (in) San
Francisco from Mexico on board American Airlines. This shipment was transferred
to or received by PAL at 1945H or 7:45 p.m. (Exh. 2-PAL, Exh. 2-a-PAL). This casket
bearing the remains of Crispina Saludo, which was mistakenly sent to Mexico and
was opened (there), was resealed by Crispin F. Patagas for shipment to the
Philippines (See Exh. B-1). The shipment was immediately loaded on PAL flight for
Manila that same evening and arrived (in) Manila on October 30, 1976, a day after
its expected arrival on October 29, 1976. Aggrieved by the incident, the
petitioners instituted an action against respondents and were asked to pay for
damages.

Petitioner allege that private respondents received the casketed remains of

petitioners' mother on October 26, 1976, as evidenced by the issuance of PAL Air
Waybill No. 079-01180454 18 by Air Care International as carrier's agent; and from
said date, private respondents were charged with the responsibility to exercise
extraordinary diligence so much so that for the alleged switching of the caskets on
October 27, 1976, or one day after private respondents received the cargo, the
latter must necessarily be liable.

RTC - absolved the two respondent airlines companies of liability.

CA - affirmed the decision of the lower court in toto, and in a subsequent

resolution, 7 denied herein petitioners' motion for reconsideration for lack of merit.

ISSUE
W/N the delay in the delivery of the casketed remains of petitioners' mother was due
to the fault of respondent airline companies,

HELD:
NO. A bill of lading is a written acknowledgment of the receipt of the goods
and an agreement to transport and deliver them at a specified place to a
person named or on his order. According to foreign and local jurisprudence, "the
issuance of a bill of lading carries the presumption that the goods were delivered to the
carrier issuing the bill, for immediate shipment, and it is nowhere questioned that a bill
of lading is prima facie evidence of the receipt of the goods by the carrier. . . . In the
absence of convincing testimony establishing mistake, recitals in the bill of lading
showing that the carrier received the goods for shipment on a specified date controls.
However, except as may be prohibited by law, there is nothing to prevent an
inverse order of events, that is, the execution of the bill of lading even prior to actual
possession and control by the carrier of the cargo to be transported. There is no law
which requires that the delivery of the goods for carriage and the issuance of the
covering bill of lading must coincide in point of time or, for that matter, that the former
should precede the latter.
As between the shipper and the carrier, when no goods have been delivered for
shipment no recitals in the bill can estop the carrier from showing the true facts . . .
Between the consignor of goods and receiving carrier, recitals in a bill of lading as to the
goods shipped raise only a rebuttable presumption that such goods were delivered for
shipment. As between the consignor and a receiving carrier, the fact must outweigh the
recital."
In the case at bar, it was on October 26, 1976 the cargo containing the casketed
remains of Crispina Saludo was booked for PAL Flight Number PR-107 leaving San
Francisco for Manila on October 27, 1976, PAL Airway Bill No. 079-01180454 was issued,
not as evidence of receipt of delivery of the cargo on October 26, 1976, but merely as a
confirmation of the booking thus made for the San Francisco-Manila flight scheduled on

October 27, 1976. Actually, it was not until October 28, 1976 that PAL received physical
delivery of the body at San Francisco.
Explicit is the rule under Article 1736 of the Civil Code that the extraordinary
responsibility of the common carrier begins from the time the goods are delivered to the
carrier. This responsibility remains in full force and effect even when they are temporarily
unloaded or stored in transit, unless the shipper or owner exercises the right of
stoppagein transitu, 29 and terminates only after the lapse of a reasonable time for the
acceptance, of the goods by the consignee or such other person entitled to receive
them. 30 And, there is delivery to the carrier when the goods are ready for and have been
placed in the exclusive possession, custody and control of the carrier for the purpose of
their immediate transportation and the carrier has accepted them. 31 Where such a
delivery has thus been accepted by the carrier, the liability of the common carrier
commences eo instanti.
As already demonstrated, the facts in the case at bar belie the averment that there
was delivery of the cargo to the carrier on October 26, 1976. Rather, as earlier explained,
the body intended to be shipped as agreed upon was really placed in the possession and
control of PAL on October 28, 1976 and it was from that date that private respondents
became responsible for the agreed cargo under their undertakings in PAL Airway Bill No.
079-01180454. Consequently, for the switching of caskets prior thereto which was not
caused by them, and subsequent events caused thereby, private respondents cannot be
held liable.

Sealoader Shipping Corporation vs Grand Cement Manufacturing Corp.

G.R. No. 167363

December 15, 2010

SEALOADER SHIPPING CORPORATION, Petitioner,

vs.
GRAND CEMENT MANUFACTURING CORPORATION, JOYCE LAUNCH & TUG CO.,
INC., ROMULO DIANTAN & JOHNNY PONCE, Respondents.
G.R. No. 177466
TAIHEIYO CEMENT PHILIPPINES, INC. (Formerly Grand Cement Manufacturing
Corporation), Petitioner,
vs.
SEALOADER SHIPPING CORPORATION, JOYCE LAUNCH & TUG CO., INC., ROMULO
DIANTAN & JOHNNY PONCE, Respondents.

FACTS:
Carrier - Sealoader Shipping Corporation
Shipper - Grand Cement Manufacturing Corp.
Sealoader executed a Time Charter Party Aggrement with Joyce Launch for the
chartering of MT Viper in order to tow its unpropelled barges for a minimum of 15
days. Sealoder entered into a contract with Grand Cement for the loading of
cement clinkers and the delivery thereof to Manila. On March 31, 1994, Sealoders
barge arrived at the wharf of Grand Cement tugged by MT Viper. It was not
immediately loaded as the employees of Grand Cement were loaded another
vessel. On April 4, typhoon Bising struck Cebu area. The barge was still docked at
the wharf of Grand Cement. As it became stronger, MT Viper tried to tow the barge
away but it was unsuccessful because the towing line connecting the vessels
snapped since the mooring lines was not cast off, which is the ultimate cause.
Hence, the barge rammed the wharf causing significant damage. Grand Cement
filed a complaint for damages (P2.4M) since Sealoader ignored its demands. They
allege that Sealoader was negligent when it ignored its employees advice to move
the vessels after it had received weather updates. Sealoader filed a motion to
dismiss on the ground that Joyce Launch is the one liable since it was the owner of
MT Viper, whos employees were manning the vessel. Sealoader filed a cross-claim
against Joyce Launch. Joyce maintains that the damages were due to force majeure
and faulted Grand Cements employees for abandoning the wharf leaving them
helpless and for not warning them early on.
Sealoader contends that Grand Cement had the last clear chance to prevent the
damage to the latters wharf. Had Grand Cement cast off the mooring lines
attached to the D/B Toploader early on, the barge could have been towed away
from the wharf and the damage thereto could have been avoided.
RTC in favor of Grand Cement holding the two companies liable since there was
complete disregard of the storm signal, the captain of the vessel was not present
and the vessel was not equipped with a radio or any navigational facility, which is
mandatory. Joyce launch did not appeal.
CA - affirmed the decision but on MR, it partly reversed its decision finding Grand
Cement to be guilty of contributory negligence since it was found that it was still
loading the other vessel at the last minute just before the storm hit, hence
Sealodersvessel did not move. Damages were reduced to 50%. Hence, petition for
review to SC.
ISSUE
W/N Sealoader should be held liable for the damages incurred by Grand Cement.
HELD;
YES. The doctrine of last clear chance states that where both parties are negligent
but the negligent act of one is appreciably later than that of the other, or where it is
impossible to determine whose fault or negligence caused the loss, the one who had the
last clear opportunity to avoid the loss but failed to do so, is chargeable with the loss.
Stated differently, the antecedent negligence of plaintiff does not preclude him from

recovering damages caused by the supervening negligence of defendant, who had the
last fair chance to prevent the impending harm by the exercise of due diligence.
Negligence on the part of Sealoader PROVEN. After a thorough review of the
records of this case, the Court finds that Sealoader was indeed guilty of negligence in the
conduct of its affairs during the incident in question on the following grounds:

Lack of a radio or any navigational communication facility aboard the D/B

Toploader.

manifest laxity of the crew of the D/B Toploader in monitoring the weather. Despite
the apparent difficulty in receiving weather bulletins from the head office of
Sealoader, the evidence on record suggests that the crew of the D/B Toploader
failed to keep a watchful eye on the prevailing weather conditions.

Unmistakably, the crew of the D/B Toploader and the M/T Viper were caught unawares
and unprepared when Typhoon Bising struck their vicinity. Sealoader cannot pass to
Grand Cement the responsibility of casting off the mooring lines connecting the D/B
Toploader to the wharf. The people at the wharf could not just cast off the mooring lines
without any instructions from the crew of the D/B Toploader and the M/T Viper. As the D/B
Toploader was without an engine, casting off the mooring lines prematurely might send
the barge adrift or even run the risk of the barge hitting the wharf sure enough. Thus,
Sealoader should have taken the initiative to cast off the mooring lines early on or, at the
very least, requested the crew at the wharf to undertake the same. In failing to do so,
Sealoader was manifestly negligent.
Article 2179 of the Civil Code defines the concept of contributory negligence as
follows:
Art. 2179. When the plaintiffs own negligence was the immediate and
proximate cause of his injury, he cannot recover damages. But if his negligence
was only contributory, the immediate and proximate cause of the injury being the
defendants lack of due care, the plaintiff may recover damages, but the courts
shall mitigate the damages to be awarded.
Contributory negligence is conduct on the part of the injured party, contributing as
a legal cause to the harm he has suffered, which falls below the standard to which he is
required to conform for his own protection.76
Negligence on the part of Grand Cement NOT PROVEN. Grand Cement was not
guilty of negligent acts, which contributed to the damage that was incurred on its wharf.
The Court holds that Sealoader had the responsibility to inform itself of the prevailing
weather conditions in the areas where its vessel was set to sail. Sealoader cannot merely
rely on other vessels for weather updates and warnings on approaching storms, as what
apparently happened in this case. Common sense and reason dictates this. To do so

would be to gamble with the safety of its own vessel, putting the lives of its crew under
the mercy of the sea, as well as running the risk of causing damage to the property of
third parties for which it would necessarily be liable.Be that as it may, the records of the
instant case reveal that Grand Cement timely informed the D/B Toploader of the
impending typhoon.
Therefore the doctrine of Last Clear Chance clearly does not apply in the instant
case and it is but right and proper to hold sealoader liable for the damages incurred by
Grand Cement.

Delsan Transport v. American Home

G.R. No. 149019,

15 August 2006

DELSAN TRANSPORT LINES INC. petitioner

AMERICAN HOME ASSURANCE CORPORATION, respondent

FACTS:

Carrier Delsan Transport Lines Inc.

Shipper Caltex Philippines

Insurer American Home Assurance Corporation

Delsan Transport was hired by Caltex to transport its cargo of diesel oil from
Bataan Refinery Corporation to the bulk depot in Bacolod City through a Contract
of Affreightment. Upon the arrival of MT Larusan which carried the cargo in its
destination, unloading operations commenced. Thereafter the discharging had to
be stopped on account of the discovery that the port bow mooring of the vessel
was intentionally cut or stolen by unknown persons. Because there was nothing
holding it, the vessel drifted westward, dragged and stretched the flexible rubber
hose attached to the riser, broke the elbow into pieces, severed completely the
rubber hose connected to the tanker from the main delivery line at sea bed level
and ultimately caused the diesel oil to spill into the sea. Unaware of what
happened, the shore tender, thinking that the vessel would, at any time, resume
pumping, did not shut the storage tank gate valve. As all the gate valves remained

open, the diesel oil that was earlier discharged from the vessel into the shore tank
backflowed. In short, there was spillage and backflow of the diesel cargo. As a
result of spillage and backflow of diesel oil, Caltex sought recovery of the loss from
Delsan, but the latter refused to pay. As insurer, AHAC paid Caltex the sum
of P479,262.57 for spillage, pursuant to Marine Risk Note No. 34-5093-6,
and P1,939,575.37 for backflow of the diesel oil pursuant to Inland Floater Policy
No. AH-1F64-1011549P. AHiAC as subrogee asked Delsan to compensate it for the
amount paid, but to no avail, AHAc instituted an action against Delsan.

RTC ruled in favor of AHAC nad held Delsan liable for the loss of the cargo due to
its negligence as a common carrier

CA affirmed RTC - Delsan failed to exercise the extraordinary diligence of a good

father of a family in the handling of its cargo. Applying Article 1736 [4] of the Civil
Code, the CA ruled that since the discharging of the diesel oil into Caltex bulk
depot had not been completed at the time the losses occurred, there was no
reason to imply that there was actual delivery of the cargo to Caltex, the consignee

ISSUE:
W/N petitioner should be held liable for both spillage and backflow that caused the
loss of the cargo.

HELD:
YES. Common carriers are bound to observe extraordinary diligence in the
vigilance over the goods transported by them. They are presumed to have been at fault
or to have acted negligently if the goods are lost, destroyed or deteriorated. [6] To
overcome the presumption of negligence in case of loss, destruction or deterioration of
the goods, the common carrier must prove that it exercised extraordinary
diligence. There are, however, exceptions to this rule found in Article 1734 of the NCC.
In the case at bar, it had been established that the proximate cause of the spillage
and backflow of the diesel oil was due to the severance of the port bow mooring line
of the vessel and the failure of the shore tender to close the storage tank gate valve
even as a check on the drain cock showed that there was still a product on the pipeline.
The crew of the vessel should have promptly informed the shore tender that the port
mooring line was cut off. However, Delsan did not do so on the lame excuse that there
was no available banca. The crew of the vessel should have exerted utmost effort to
immediately inform the shore tender that the port bow mooring line was severed.
To be sure, Delsan, as the owner of the vessel, was obliged to prove that the loss
was caused by one of the excepted causes if it were to seek exemption from

responsibility.[7] Unfortunately, it miserably failed to discharge this burden by the

required quantum of proof.
Delsans argument that it should not be held liable for
the
loss
of diesel oil due to backflow because
the
same
had
already
been
actually and legally delivered to Caltex at the time it entered the shore tank holds no
water. It had been settled that the subject cargo was still in the custody of Delsan
because the discharging thereof has not yet been finished when the backflow
occurred. Since the discharging of the cargo into the depot has not yet been
completed
at
the
time
of
the
spillage
when the backflow occurred, there is no reason to imply that there was actual
delivery of the cargo to the consignee. Delsan is straining the issue by insisting that
when the diesel oil entered into the tank of Caltex on shore, there was legally, at that
moment, a complete delivery thereof to Caltex. To be sure, the extraordinary
responsibility of 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 a
person who has the right to receive them.[8] The discharging of oil products
to Caltex Bulk Depot has not yet been finished, Delsan still has the duty to guard
and to preserve the cargo. The carrier still has in it the responsibility to guard and
preserve the goods, a duty incident to its having the goods transported.
Hence, having not overturned the presumption of negligence, it is but right and
proper to held petitioner liable for the loss of the cargo.

Delsan Transport Lines v. CA

G.R. No. 127897

November 15, 2001

DELSAN TRANSPORT LINES, INC., petitioner,

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

FACTS;

Carrier Delsan Transport Lines Inc.

Shipper Caltex Philippines

Insurer American Home Assurance Corporation

Caltex entered into a contract with Delsan Transport Lines to transport ots
petroleum goods from its Batangas Bataan Refinery to Zamboanga City. The
shipment was insured by private respondent American Home Assurance Corp. MT
Maysum set sail from Batangas for Zamboanga City. Unfortunately, the vessel sank
in the early morning of August 16, 1986 near Panay Gulf in the Visayas taking with
it the entire cargo of fuel oil. Subsequently, private respondent paid Caltex the sum
of (P5,096,635.67) representing the insured value of the lost cargo. Exercising its
right of subrogation, the private respondent demanded of the petitioner the same
amount it paid to Caltex. Delsan failed to pay its obligation the American Home
Assurance Corp. Hence, the latter institutes an action to recover the amount paid.

RTC - ruled in favor of petitioner with the following reasons:

MT Maysum, was seaworthy as certified by Philippine Coastguard
the incident was caused by unexpected inclement weather condition or force
majeure.

CS reversed trial courts decision on the following reasons:

gave credence to the weather report issued by the PAG-ASA that the sea
was calm during the voyage

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

HELD;
YES. From the nature of their business and for reasons of public policy, common
carriers are bound to observe extraordinary diligence in the vigilance over the goods and
for the safety of passengers transported by them, according to all the circumstance of
each case.11 In the event of loss, destruction or deterioration of the insured goods,
common carriers shall be responsible unless the same is brought about, among others,
by flood, storm, earthquake, lightning or other natural disaster or calamity. 12 In all other
cases, if the goods are lost, destroyed or deteriorated, common carriers are presumed to
have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence.
The tale of strong winds and big waves by the said officers of the petitioner
however, was effectively rebutted and belied by the weather report 15 from the PAGASA,

showing that from 2:00 oclock to 8:00 oclock in the morning on August 16, 1986, the
wind speed remained at ten (10) to twenty (20) knots per hour while the height of the
waves ranged from .7 to two (2) meters in the vicinity of Cuyo East Pass and Panay Gulf
where the subject vessel sank. Thus, as the appellate court correctly ruled, petitioners
vessel, MT Maysun, sank with its entire cargo for the reason that it was not seaworthy.
There was no squall or bad weather or extremely poor sea condition in the vicinity when
the said vessel sank.
Thus not having overturned the evidence presented, (that it observed
extraordinary diligence) the presumption of negligence stands, and therefore it is but
right and proper to rule that petitioner should be held liable for damages.

Maersk Lines v. Court of Appeals

G.R. No. 94761 May 17, 1993

MAERSK LINE, petitioner,
vs.
COURT OF APPEALS AND EFREN V. CASTILLO, doing business under the name
and style of Ethegal Laboratories, respondents.

FACTS:
Maersk Lines Carrier; petitioner
Eli Lilly Inc. Shipper
Efren Castillo consignee; proprietor of Ethegal Laboratories; private respondent
Private respondent ordered from Eli Lilly. Inc. of Puerto Rico through its (Eli Lilly,
Inc.'s) agent in the Philippines, Elanco Products, 600,000 empty gelatin
capsules for the manufacture of his pharmaceutical products. The goods were
shipped via MV Anders Maerskline with a specified date of arrival to be April 3,
1977. For reasons unknown, said cargo of capsules were mishipped and
diverted to Richmond, Virginia, USA and then transported back Oakland,
Califorilia. The goods finally arrived in the Philippines on June 10, 1977 or
after two (2) months from the date specified in the memorandum. As a
consequence, private respondent as consignee refused to take delivery of
the goods on account of its failure to arrive on time. Private respondent
alleging gross negligence and undue delay in the delivery of the goods, filed an
action before the court a quo for rescission of contract with damages against
petitioner and Eli Lilly, Inc. The issues having been joined, private respondent
moved for the dismissal of the complaint against Eli Lilly, Inc.on the ground that

the evidence on record shows that the delay in the delivery of the shipment was
attributable solely to petitioner. The lower court ruled in favor of private
respondent which was affirmed with some modification by the CA.
ISSUE:
W/N petitioner was negligent and should be held liable for damages.

HELD:
YES. While it is true that common carriers are not obligated by law to carry and to
deliver merchandise, and persons are not vested with the right to prompt delivery,
unless such common carriers previously assume the obligation to deliver at a given date
or time, delivery of shipment or cargo should at least be made within a reasonable time.
An examination of the subject bill of lading shows that the subject shipment was
estimated to arrive in Manila on April 3, 1977. While there was no special contract
entered into by the parties indicating the date of arrival of the subject shipment,
petitioner nevertheless, was very well aware of the specific date when the goods were
expected to arrive as indicated in the bill of lading itself. In this regard, there arises no
need to execute another contract for the purpose as it would be a mere superfluity.
In the case before us, we find that a delay in the delivery of the goods spanning a
period of two (2) months and seven (7) days falls was beyond the realm of
reasonableness. Described as gelatin capsules for use in pharmaceutical products,
subject shipment was delivered to, and left in, the possession and custody of petitionercarrier for transport to Manila via Oakland, California. But through petitioner's negligence
was mishipped to Richmond, Virginia. Petitioner's insitence that it cannot be held liable
for the delay finds no merit.

GRACE
FGU INSURANCE CORPORATION, Petitioners, vs.
THE COURT OF APPEALS, SAN MIGUEL CORPORATION, and ESTATE OF ANG GUI,
represented by LUCIO, JULIAN, and JAIME, all surnamed ANG, and CO TO, Respondents.
CHICO-NAZARIO, J.:
FACTS:
Carrier: ANCO (Anco Enterprises Company) Owned M/T ANCO tugboat and D/B Lucio
barge (had no engine of its own)
Shipper: San Miguel Corporation. Cases are to be delivered in Iloilo and Antique.

Upon arrival at San Jose, Antique, M/T ANCO tugboat left D/B Lucio barge. Moreover, the
clouds were dark and the waves are big. SMCs District Sales Supervisor requested
ANCOs representative to transfer the barge to a safer place because the vessel might
not be able to withstand the big waves. ANCOs representative did not heed because he
was confident that the barge could withstand the waves. All other vessels left the wharf
to seek shelter. Due to the waves not all the cases of beer were discharged into the
custody of the arrastre operator.
The crew of D/B Lucio abandoned the vessel because the barges rope attached to the
wharf was cut off by the big waves. The barge run aground and was broken and the
cargoes of beer were swept away.
SMC filed a complaint for Breach of Contract of Carriage and Damages against ANCO.
(Important facts ung blue)
OPTIONAL!!! Di namannatouchsa ruling ng Court. Pero for more kabidahanala Ms.
Andres, GO!
///Claim of ANCO: There is an agreement with SMC that ANCO would not be liable for any
loses or damages by reason of fortuitous event. The cases were lost by reason of a
storm, a fortuitous event. Moreover, an agreement that SMC shall insure the cargoes in
order to recover indemnity in case of loss. Cases were insured with FGU Insurance
Corporation. Subsequently, ANCO filed a Third-Party Complaint against FGU.
Claim of FGU: The alleged loss of the cargoes covered by the said insurance policy
cannot be attributed directly or indirectly to any risks insured. ANCO and SMC failed to
exercise ordinary diligence or the diligence of a good father of the family in the care and
supervision of the cargoes insured to prevent its loss and/ or destruction.
RTC: Indeed lost to fortuitous event, there was failure on ANCOs part, through their
representatives, to observe the degree of diligence required that would exonerate them
from liability. Moreover, it is the sense of this Court that the risk insured against was the
cause of the loss. FGU shall bear 53% of the loss.
CA affirmed in toto.///
ISSUES:
1. W/N ANCO should be liable and the negligence of the crewmembers was the
proximate cause
2. W/N FGU is liable
RULING:
1. Question of fact. Findings of fact by the trial court are entitled to great weight on
appeal and should not be disturbed unless for strong and cogent reasons.
But the Court finds that since it is the duty of the defendant to exercise and
observe extraordinary diligence in the vigilance over the cargo of the plaintiff, the
patron or captain of M/T ANCO, representing the defendant could have placed D/B
Lucio in a very safe location before they left knowing or sensing at that time the
coming of a typhoon. The presence of big waves and dark clouds could have
warned the patron or captain of M/T ANCO to insure the safety of D/B Lucio
including its cargo. D/B Lucio being a barge, without its engine, as the patron or
captain of M/T ANCO knew, could not possibly maneuver by itself. Had the patron

or captain of M/T ANCO, the representative of the defendants observed

extraordinary diligence in placing the D/B Lucio in a safe place, the loss to the
cargo of the plaintiff could not have occurred. In short, therefore, defendants
through their representatives, failed to observe the degree of diligence required of
them under the provision of Art. 1733 of the Civil Code of the Philippines.
The Civil Code provides:
Art. 1733. Common carriers, from the nature of their business and for reasons of public
policy are bound to observe extraordinary diligence in the vigilance over the goods and
for the safety of the passengers transported by them, according to all the circumstances
of each case.
Such extraordinary diligence in vigilance over the goods is further expressed in Articles
1734, 1735, and 1745 Nos. 5, 6, and 7 . . .
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of
the goods, unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity.
Art. 1739. In order that the common carrier may be exempted from
responsibility, the natural disaster must have been the proximate and only
cause of the loss.
To be exempt from liability because of an act of God, the tug must be free from any
previous negligence or misconduct by which that loss or damage may have been
occasioned. there was blatant negligence on the part of M/T ANCOs
crewmembers, first in leaving the engine-less barge D/B Lucio at the mercy of the
storm without the assistance of the tugboat, and again in failing to heed the
request of SMCs representatives to have the barge transferred to a safer place, as
was done by the other vessels in the port; thus, making said blatant negligence the
proximate cause of the loss of the cargoes.
2. One of the purposes for taking out insurance is to protect the insured against the
consequences of his own negligence and that of his agents. But loss has occurred
due to causes which could not have been prevented by the insured, despite the
exercise of due diligence. When evidence show that the insureds negligence or
recklessness is so gross as to be sufficient to constitute a willful act, the insurer
must be exonerated. The blatant negligence of ANCOs employees is of such gross
character that it amounts to a wrongful act which must exonerate FGU from
liability under the insurance contract.
SUPER SHORT VERSION. 2 boats owned by ANCO. Boat 1- no engine. Hired by SMC. Upon
arrival boat 2 left. Storm. Boat 1 damaged including cargoes. W/N liable although storm
is fortuitous. Yes. There is negligence when boat 2 left knowing there is a storm and
when refused to heed to the request to move on a safer place. Additional langung
liability ni FGU. Actually may res judicata pa pero wag na un haha.

DSR-SENATOR LINES AND C.F. SHARP AND COMPANY, INC., petitioners, vs.
FEDERAL PHOENIX ASSURANCE CO., INC., respondent.
SANDOVAL-GUTIERREZ, J.:
FACTS:
Shipper: Berde Plants, Inc.
Subject: 632 units of artificial trees
Carrier: C.F. Sharp and Company, Inc.- General Ship Agent of DSR-Senator Lines
Consignee: Al-Mohr International Group in Riyadh, Saudi Arabia
Insurer: Federal Phoenix Assurance
Vessel from Manila arrived in KhorFakkan Port and was reloaded on board DSR-Senator
Lines feeder vessel bound for Port Dammam, Saudia Arabia. While in transit, the vessel
and its cargo caught fire. Federal paid Berde. Federal demanded payment from CF Sharp
but denied liability due to the fire.
Federal Phoenix filed a complaint in RTC. RTC rendered decision in favor of Federal. CA
affirmed.
ISSUE: W/N CF Sharp is liable despite the fire
RULING: Fire is not one of those enumerated under Article 1734 which exempts a carrier
from liability for loss or destruction of the cargo. Common carrier shall be presumed to
have been at fault or to have acted negligently, unless it proves that it has observed the
extraordinary diligence required by law. Petitioners failed to overcome it by sufficient
proof of extraordinary diligence.
Even if fire were to be considered a natural disaster within the purview of Article 1734, it
is required under Article 1739of 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.
SHORTER VERSION: YAN NA UN! Basta may fire! And fire is not included in the
enumeration.
PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC., petitioner, vs.
COURT OF APPEALS and TRANSPACIFIC TOWAGE, INC., respondents.
PADILLA, J.:
FACTS:
Shipper: Davao Union Marketing Corporation
Subject: 9,750 sheets of union brand GI sheets andunion Pozzolan and union Portland
Cement Carrier: Transpacific Towage, Inc.- M/V Crazy Horse
Insurer: Philippine American General Insurance Co., Inc.
M/V Crazy Horse arrived on September 7, 1985 as scheduled in the port of Camarines
Sur. The shipmaster notified the consignee's "Notify-Party" that the vessel was already

(sic) to discharge the cargo. The discharging could not be affected immediately and
continuously because of certain reasons. (Pasadahanniyolang to, bakabiglatanunginni Sir
kasi covered to sa ruling) First, the buoys were installed only on 11 September
1985; second, the consignee secured the discharge permit only on 13 September
1985; third, a wooden catwalk had to be installed and the extension of the wharf had to
be made, which was completed only on 16 September 1985; fourth, there were
intermittent rains and the stevedores supplied by the consignee did not work during the
town fiesta of the Virgin of Penafrancia, hence, the unloading was not continuous.
On October 16, 1985, a super typhoon came. The discharging of the cargo had to be
suspended due to the heavy downpour, strong winds, and turbulent sea. Not all cargoes
was discharged.
Important facts that would determine the presence of negligence later:
(1) at 5:20 a.m. of 18 October 1985, as typhoon "Saling" continued to batter the Pasacao
area, the shipmaster tried to maneuver the vessel amidst strong winds and rough seas;
(2) when water started to enter the engine room and later the engine broke down, the
shipmaster ordered the ship to be abandoned, but he sought police assistance to prevent
pilferage of the vessel and its cargo;
(3) after the vessel broke into two (2) parts and sank partially, the shipmaster reported
the incident to the Philippine Coast Guard, but unfortunately, despite the presence of
three (3) coast guards, nothing could be done to stop the pilferage as almost the entire
barrio folk came to loot the vessel and its cargo, including the G.I. sheets.

Philippine American General Insurance Co., Inc. paid the shipper. But carrier refused to
pay insurer upon demand. Insurer filed a complaint. (The usual) The lower court found
that although the immediate cause of the loss may have been due to an act of God, the
defendant carrier had exposed the property to the accident.
CA reversed. It was solely a fortuitous event.
ISSUE: Whether the delay involved in the unloading of the goods is deemed negligently
incurred in, so as not to free private respondent from liability
RULING: NO. There was indeed delay. 40 days had lapsed. (More than enough time to
unload the cargoes) However, neither parties could be faulted for such delay. Delay was
not due to negligence but to several factors.
The cargo having been lost due to typhoon "Saling", and the delay incurred in its
unloading not being due to negligence, private respondent is exempt from liability for the
loss of the cargo, pursuant to Article 1740 of the Civil Code.
Moreover, the records also show that before, during and after the occurrence of typhoon
"Saling", private respondent through its shipmaster exercised due negligence to prevent
or minimize the loss of the cargo. (Refer to the facts) The diligence exercised by the
shipmaster further supports the exemption of private respondent from liability for the
loss of the cargo, in accordance with Article 1739 of the Civil Code.

SHORTER VERSION: Arrived. Delay in unloading. Typhoon. Shipmaster prepared. Vessel

broke. Cargoes lost. Delay not negligence of parties. Shipmaster exercised diligence to
prevent or minimize loss.

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

TRANSPORT SERVICES, INC., petitioners,
vs.
PHILIPPINE FIRST INSURANCE CO., INC., respondents.
PANGANIBAN, J.:
DOCTRINE: 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.
FACTS:
Shipper: CMC Trading A.G.
Carrier: BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V.
Subject: coils of various Prime Cold Rolled Steel sheets
Consignee: Philippine Steel Trading Corporation
Insurer: PHILIPPINE FIRST INSURANCE CO., INC.
Goods found to be in bad order. Belgian refused to pay. Thus, Phil First did. 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.
RTC dismissed. CA ruled that Belgian liable. Failed to overcome presumption of
negligence. Belgian inadequately proven petitioners' claim that the loss or the
deterioration of the goods was due to pre-shipment damage.
ISSUES: Whether petitioners have overcome the presumption of negligence of a common
carrier
RULING:
No. A review of the records and more so by the evidence shows
First, as stated in the Bill of Lading, petitioners received the subject shipment in good
order and condition in Hamburg, Germany.
Second, prior to the unloading of the cargo, an Inspection Report 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. 154979 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.
Fourth, the Certificate of Analysis 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 letter 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.
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.
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. 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.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.
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
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.Theaforecitedexception
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. 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.
May 2nd at 3rd issue pa pero di konasinama. Notice of loss. Dapat within 3 days
dawsiyanagfile, 1 yr prescription if there was an inspection. Limited liability. No
stipulation in the bill of lading, Letter of credit attached to the bill of lading does not
count.

EDGAR COKALIONG SHIPPING LINES, INC., petitioner, vs.

UCPB GENERAL INSURANCE COMPANY, INC., respondent.
PANGANIBAN, J.:
DOCTRINE: The liability of a common carrier for the loss of goods may, by stipulation in
the bill of lading, be limited to the value declared by the shipper. On the other hand, the
liability of the insurer is determined by the actual value covered by the insurance policy
and the insurance premiums paid therefor, and not necessarily by the value declared in
the bill of lading.
FACTS:
Shipper: ZosimaMercardo, Nestor Amelia
Carrier: EDGAR COKALIONG SHIPPING LINES, INC.
Vessel: M/V Tandag
Insurer: UCPB General Insurance Co. Inc. (Feliciana Legaspi insured the cargoes)
Event: FIRE
Edgar did not pay UCPB. UCPB filed a complaint. RTC absolved Edgar of any liability. CA
affirmed.
ISSUE: 1. W/N Edgar is liable
2. What is the basis of liability? Amount in the bill of lading or actual amount?
RULING:
1. Yes. The uncontroverted findings of the Philippine Coast Guard show that the M/V
Tandag sank due to a fire, which resulted from a crack in the auxiliary engine fuel oil
service tank. Fuel spurted out of the crack and dripped to the heating exhaust manifold,
causing the ship to burst into flames. The crack was located on the side of the fuel oil
tank, which had a mere two-inch gap from the engine room walling, thus precluding
constant inspection and care by the crew.
Having originated from an unchecked crack in the fuel oil service tank, the fire could not
have been caused by force majeure. May refer to Eastern Shipping Lines, Inc. v.
Intermediate Appellate Court.
A stipulation that limits liability is valid as long as it is not against public policy.

Art. 1749. A stipulation that the common carriers liability is limited to the value of the
goods appearing in the bill of lading, unless the shipper or owner declares a greater
value, is binding.
Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for
the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just
under the circumstances, and has been freely and fairly agreed upon.
2. Bill of lading. The bill of lading subject of the present controversy specifically provides,
among others:
18. All claims for which the carrier may be liable shall be adjusted and settled on the
basis of the shippers net invoice cost plus freight and insurance premiums, if paid, and
in no event shall the carrier be liable for any loss of possible profits or any consequential
loss.
The carrier shall not be liable for any loss of or any damage to or in any connection with,
goods in an amount exceeding One Hundred Thousand Yen in Japanese Currency
(100,000.00) or its equivalent in any other currency per package or customary freight
unit (whichever is least) unless the value of the goods higher than this amount is
declared in writing by the shipper before receipt of the goods by the carrier and inserted
in the Bill of Lading and extra freight is paid as required.
In the present case, the stipulation limiting petitioners liability is not contrary to public
policy. In fact, its just and reasonable character is evident. The shippers/consignees may
recover the full value of the goods by the simple expedient of declaring the true value of
the shipment in the Bill of Lading. Other than the payment of a higher freight, there was
nothing to stop them from placing the actual value of the goods therein. In fact, they
committed fraud against the common carrier by deliberately undervaluing the goods in
their Bill of Lading, thus depriving the carrier of its proper and just transport fare.
It is well to point out that, for assuming a higher risk (the alleged actual value of the
goods) the insurance company was paid the correct higher premium by Feliciana
Legaspi; while petitioner was paid a fee lower than what it was entitled to for
transporting the goods that had been deliberately undervalued by the shippers in the Bill
of Lading. Between the two of them, the insurer should bear the loss in excess of the
value declared in the Bills of Lading.

CASE TITLE: Sarkies Tours Phils. V. IAC

KEYWORD: DAMAGES
PONENTE: ROMERO, J
DOCTRINE: Kinds of damages to be awarded
Facts:
On August 31, 1984, Fatima boarded petitioners bus from Manila to Legazpi. Her
belongings consisting of 3 bags were kept at the baggage compartment of the bus, but
during the stopover in Daet, it was discovered that only one remained. The others might
have dropped along the way. Other passengers suggested having the route traced, but
the driver ignored it. Fatima immediately told the incident to her mother, who went to
petitioners office in Legazpi and later in Manila. Petitioner offered P1,000 for each bag,
but she turned it down. Disapointed, she sought help from Philtranco bus drivers and
radio stations. One of the bags was recovered. She was told by petitioner that a team is
looking for the lost luggage. After nine months of fruitless waiting, respondents filed a
case to recover the lost items, as well as moral and exemplary damages, attorneys fees
and expenses of litigation. The trial court ruled in favor of respondents, which decision
was affirmed with modification by the Court of Appeals awarding P30,000.00 for the lost
items and P30,000.00 for the transportation expenses, moral and exemplary damages in
the amount of P20,000.00 and P5,000.00, respectively.
PETITIONERS CONTENTIONS:
1)
Fatima did not bring any piece of luggage with her, and even if she did, none was
declared at the start of the trip.
2)
petitioner questions the award of actual damages to respondent
RESPONDENTS CONTENTION: Extraordinary diligence on the part of petitioner;
Issues:
(1) Whether petitioner is liable for the loss of the luggage
(2) Whether the damages sought should be recovered

RULING:
(1) The cause of the loss in the case at bar was petitioner's negligence in not ensuring
that the doors of the baggage compartment of its bus were securely fastened. As a result
of this lack of care, almost all of the luggage was lost, to the prejudice of the paying
passengers.
(2) There is no dispute that of the three pieces of luggage of Fatima, only one was
recovered. Respondents had to shuttle between Bicol and Manila in their efforts to be
compensated for the loss. During the trial, Fatima and Marisol had to travel from the
United States just to be able to testify. Expenses were also incurred in reconstituting their
lost documents. Under these circumstances, the Court agrees with the Court of Appeals
in awarding P30,000.00 for the lost items and P30,000.00 for the transportation
expenses, but disagrees with the deletion of the award of moral and exemplary damages
which, in view of the foregoing proven facts, with negligence and bad faith on the fault of
petitioner having been duly established, should be granted to respondents in the amount
of P20,000.00 and P5,000.00, respectively.

Valenzuela Hardwood and Industrial Supply vs. CA

FACTS: On January 16, 1984 plaintiff Valenzuela Hardwood and Industrial Supply Inc.
entered into an agreement with the defendant Seven Brothers whereby the latter
undertook to load on board its vessel the formers lavan round logs. On January 20, 1984
plaintiff insured the loss and/or damages with defendant South Sea Surety and insured
company for 2 million pesos on January 24, 1984, plaintiff gave the check in payment of
the premium on the insurance policy. In the meantime, the said vessel sank on January
25, 1984 resulting in the loss of the plaintiffs insured logs. Plaintiff demanded payment
of the proceeds and lost claim for the value of the lost logs to insurance company and
Seven Brothers Shipping Corporation respectively to which both of them denied liability.
After due hearing, the RTC rendered judgment in favor of plaintiff. Both defendants
appealed. The CA affirmed in part the RTC judgment by sustaining liability of South Sea
Surety but modified it by holding that the Seven Brothers was not liable for the lost of
the cargo. The CA held that the stipulation in the character party that the ship owner
would be exempted from liability in case of loss or even for negligence of its agent is
valid.

ISSUE: Whether or not patrimonial rights may be waived.

HELD: As a general rule, patrimonial rights may be waived. In the case at bar, the
waiver of petitioner per contractual stipulation and that it is solely responsible for any
damage to the cargo, thereby exempting the private carrier from any responsibility for
loss or damage thereto. The Supreme Court cited Article 6 of the Civil Code which states
that rights may be waived unless the waiver is contrary to law, public order, public
policy, morals or good customs or prejudicial to a person of a right recognized by law.

YOBIDO vs. CA and TUMBOY

G.R. No. 113003 October 17, 1997
Facts:
Spouses Tito and LenyTumboy and their minor children boarded at Mangagoy, Surigaodel
Sur a Yobido Liner bus bound for Davao City. Along Picop Road in, the left front tire of the
bus exploded. The bus fell into a ravine and struck a tree. The incident resulted in the
death of Tito Tumboy and physical injuries to other passengers.
The winding road was not cemented and was wet due to the rain; it was rough with
crushed rocks. The bus which was full of passengers had cargoes on top. Leny testified
that it was running fast and she cautioned the driver to slow down but he merely stared
at her through the mirror.
However, Salce, the bus conductor, testified that the bus was running speed for only 5060 kmh. The left front tire that exploded was a brand new Goodyear tire that he mounted

on the bus only 5 days before the incident. She stated that all driver applicants in Yobido
Liner underwent actual driving tests before they were employed.
The defendant is invoking that the tire blowout was a casofortuito.
Issues:
1. WON the tire blowout was purely casofotuito? NO
2. WON the defendant bus liner is liable for damages resulting from the death of Tito?
YES
Held:
1.
The explosion of the tire is not in itself a fortuitous event. The cause of the blow-out, if
due to a factory defect, improper mounting, excessive tire pressure, is not an
unavoidable event. On the other hand, there may have been adverse conditions on the
road that were unforeseeable and/or inevitable, which could make the blow-out a
casofortuito. The fact that the cause of the blow-out was not known does not relieve the
carrier of liability.
There are human factors involved in the situation. The fact that the tire was new did not
imply that it was entirely free from manufacturing defects or that it was properly
mounted on the vehicle. Neither may the fact that the tire bought and used in the
vehicle is of a brand name noted for quality, resulting in the conclusion that it could not
explode within five days use. Be that as it may, it is settled that an accident caused
either by defects in the automobile or through the negligence of its driver is not a
casofortuito that would exempt the carrier from liability for damages.
2.
A common carrier may not be absolved from liability in case of force majeure or
fortuitous event alone. The common carrier must still prove that it was not negligent in
causing the death or injury resulting from an accident. Having failed to discharge its duty
to overthrow the presumption of negligence with clear and convincing evidence,
petitioners are hereby held liable for damages.
Moral damages are generally not recoverable in culpa contractual except when bad faith
had been proven. However, the same damages may be recovered when breach of
contract of carriage results in the death of a passenger. Because petitioners failed to
exercise the extraordinary diligence required of a common carrier, which resulted in the
death of Tito Tumboy, it is deemed to have acted recklessly (Article 1756).

CENTRAL SHIPPING COMPANY, INC., petitioner, vs. INSURANCE COMPANY OF

NORTH AMERICA, respondent.
DOCTRINE: A common carrier is presumed to be at fault or negligent. It shall be liable
for the loss, destruction or deterioration of its cargo, unless it can prove that the sole and
proximate cause of such event is one of the causes enumerated in Article 1734 of the
Civil Code, or that it exercised extraordinary diligence to prevent or minimize the loss. In
the present case, the weather condition encountered by petitioners vessel was not a
storm or a natural disaster comprehended in the law. Given the known weather
condition prevailing during the voyage, the manner of stowage employed by the carrier
was insufficient to secure the cargo from the rolling action of the sea. The carrier took a
calculated risk in improperly securing the cargo. Having lost that risk, it cannot now
disclaim any liability for the loss.
FACTS:
Carrier: CENTRAL SHIPPING COMPANY, INC
Vessel: M/V Central Bohol
Subject: 376 pieces of Philippine Apitong Round Logs
Consignee: Alaska Lumber Co. Inc.
The vessel listed up to 15 degrees. (Tumagilidata) The ship captain ordered his men to
abandon ship and the vessel completely sank.
Petitioner raised as its main defense that the proximate and only cause of the sinking of
its vessel and the loss of its cargo was a natural disaster, a tropical storm which neither
[petitioner] nor the captain of its vessel could have foreseen. RTC ruled in favor of
respondent. CA affirmed. It found that the southwestern monsoon encountered by the
vessel was not unforeseeable. Given the season of rains and monsoons, the ship captain

and his crew should have anticipated the perils of the sea. The appellate court further
held that the weather disturbance was not the sole and proximate cause of the sinking of
the vessel, which was also due to the concurrent shifting of the logs in the hold that
could have resulted only from improper stowage.
ISSUE: W/N petitioner is liable
RULING: Even if the weather encountered by the ship is to be deemed a natural disaster
under Article 1739 of the Civil Code, petitioner failed to show that such natural disaster
or calamity was the proximate and only cause of the loss. Human agency must be
entirely excluded from the cause of injury or loss. In other words, the damaging effects
blamed on the event or phenomenon must not have been caused, contributed to, or
worsened by the presence of human participation. The defense of fortuitous event or
natural disaster cannot be successfully made when the injury could have been avoided
by human precaution.
According to the boatswains testimony, the logs were piled properly, and the entire
shipment was lashed to the vessel by cable wire. The ship captain testified that out of
the 376 pieces of round logs, around 360 had been loaded in the lower hold of the vessel
and 16 on deck. The logs stored in the lower hold were not secured by cable wire,
because they fitted exactly from floor to ceiling. However, while they were placed side
by side, there were unavoidable clearances between them owing to their round shape.
Those loaded on deck were lashed together several times across by cable wire, which
had a diameter of 60 millimeters, and were secured from starboard to port.
It is obvious, as a matter of common sense, that the manner of stowage in the lower hold
was not sufficient to secure the logs in the event the ship should roll in heavy weather.
Notably, they were of different lengths ranging from 3.7 to 12.7 meters. Being clearly
prone to shifting, the round logs should not have been stowed with nothing to hold them
securely in place. Each pile of logs should have been lashed together by cable wire, and
the wire fastened to the side of the hold. Considering the strong force of the wind and
the roll of the waves, the loose arrangement of the logs did not rule out the possibility of
their shifting. By force of gravity, those on top of the pile would naturally roll towards
the bottom of the ship.
The evidence indicated that strong southwest monsoons were common occurrences
during the month of July. Thus, the officers and crew of M/V Central Bohol should have
reasonably anticipated heavy rains, strong winds and rough seas. They should then
have taken extra precaution in stowing the logs in the hold, in consonance with their
duty of observing extraordinary diligence in safeguarding the goods. But the carrier took
a calculated risk in improperly securing the cargo. Having lost that risk, it cannot now
escape responsibility for the loss.
The doctrine of limited liability under Article 587 of the Code of Commerce is not
applicable to the present case. This rule does not apply to situations in which the loss or
the injury is due to the concurrent negligence of the shipowner and the captain.

EVERETT STEAMSHIP vs. CA

FACTS
Hernandez trading company imported three crates of bus spare parts marked as Marco
12, Marco 13, Marco 14 from its supplier Maruman trading company.
Said crates were shipped from Japan to Manila on noard the vessel owned by Everette
Orient Lines. Upon arrival in Manila, it was discovered that Marco 14 was missing.
Hernandez makes a formal claim to Everette in an amount of 1 mill ++ Yen, which is the
amount of the cargo lost.
However, Everett offers an amount of 100k because it is the amount that was stipulated
in its Bill of Lading.
Hernandez files a case at the RTC of Caloocan, RTC rules 1 in favor of Hernandez holding
Everett liable for the amount of !mill ++ Yen.
THE CA affirmed the RTCs ruling and made an additional observation that since
Hernandez is not a privy to the contract in the bill of lading ( the contract was entered by
1Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction or

deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely
agreed upon.It is required, however, that the contract must be reasonable and just under the circumstances and has
been fairly and freely agreed upon.XXX
the Court is of the view that the requirements of said article have not been met. The fact that those conditions are
printed at the back of the bill of lading in letters so small that they are hard to read would not warrant the presumption
that the plaintiff or its supplier was aware of these conditions such that he had fairly and freely agreed to these
conditions. It can not be said that the plaintiff had actually entered into a contract with the defendant, embodying the
conditions as printed at the back of the bill of lading that was issued by the defendant to plaintiff.

Everett and Maruman trading [shipper]), and so the 100k limit stipulated will not bind
Hernandez making Everett liable for the full amount of 1mill ++ Yen.
ISSUE
1 Is Everett liable for the full amount or the amount that was stipulated in the
contract?- what was stipulated in the contract
2 Is Hernandez a privy to the contract which says that Petitioner is liable only for
100k? Yes
RULING
1 Controlling provisions for this issue would be 1749 and 1750 of the Civil Code.

In Sea Land Service, Inc. vs Intermediate Appellate Court

That said stipulation is just and reasonable is arguable from the fact that it echoes Art.
1750 itself in providing a limit to liability only if a greater value is not declared for the
shipment in the bill of lading. To hold otherwise would amount to questioning the
justness and fairness of the law itself, and this the private respondent does not pretend
to do. But over and above that consideration, the just and reasonable character of such
stipulation is implicit in it giving the shipper or owner the option of avoiding accrual of
liability limitation by the simple and surely far from onerous expedient of declaring the
nature and value of the shipment in the bill of lading
The clause of the contract goes:
The carrier shall not be liable for any loss of or any damage to or in any
connection with, goods in an amount exceeding One Hundred Thousand Yen in
Japanese Currency (Y100,000.00) or its equivalent in any other currency per
package or customary freight unit (whichever is least) unless the value of the
goods higher than this amount is declared in writing by the shipper before receipt
of the goods by the carrier and inserted in the Bill of Lading and extra freight is
paid as required. (Emphasis supplied)
The shipper, Maruman Trading, had the option to declare a higher valuation if the
value of its cargo was higher than the limited liability of the carrier.
Considering that the shipper did not declare a higher valuation, it had itself to
blame for not complying with the stipulations.
The trial courts ratiocination that private respondent could not have fairly and
freely agreed to the limited liability clause in the bill of lading because the said
conditions were printed in small letters does not make the bill of lading invalid.
In Ong Yiu VS. CA the court said that
2 ART. 1749. A stipulation that the common carriers liability is limited to the value of the goods appearing in the bill of lading,
unless the shipper or owner declares a greater value, is binding.ART. 1750. A contract fixing the sum that may be recovered by the
owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and
has been freely and fairly agreed upon.

 contracts of adhesion wherein one party imposes a ready-made form of

contract on the other, as the plane ticket in the case at bar, are contracts
not entirely prohibited
A contract limiting liability upon an agreed valuation does not offend
against the policy of the law forbidding one from contracting against his
own negligence
The shipper, Maruman Trading, we assume, has been extensively engaged in the trading
business. It can not be said to be ignorant of the business transactions it entered into
involving the shipment of its goods to its customers. The shipper could not have known,
or should know the stipulations in the bill of lading and there it should have declared a
higher valuation of the goods shipped. Moreover, Maruman Trading has not been heard
to complain that it has been deceived or rushed into agreeing to ship the cargo in
petitioners vessel.
2 Even if the consignee was not a signatory to the contract of carriage between the
shipper and the carrier.
The consignee can still be bound by the contract. private respondent (Hernandez)
formally claimed reimbursement for the missing goods from petitioner and
subsequently filed a case against the latter based on the very same bill of lading, it
(private respondent) accepted the provisions of the contract and thereby made itself
a party thereto, or at least has come to court to enforce it. Thus, private respondent
cannot now reject or disregard the carriers limited liability stipulation in the bill of
lading. In other words, private respondent is bound by the whole stipulations in the
bill of lading and must respect the same.
TAMMY
SWEET LINES, INC. V. HON. BERNARDO TEVES
G.R. No. L-37750, May 19, 1978
FACTS:
Private respondents Atty. Leovigildo Tandog and Rogelio Tiro bought tickets for
Voyage 90 on Dec. 31, 1971 at the CDO branch office of petitioner, a shipping
company transporting inter-island passengers and cargoes.
Respondents were to board petitioners vessel M/S Sweet Hope bound for
Tagbilaran City via the port of Cebu.
Upon learning that the vessel was not proceeding to Bohol, private respondents,
per advice, went to the branch office for proper relocation to M/S Sweet Town.
Since the said vessel was already filled to capacity, they were forced to agree to
hide at the cargo section to avoid inspection of the officers of the Phil. Coastguard.
Private respondents alleged that they were exposed to scorching heat and dust
coming from the cargo, and the tickets they bought at CDO for Tagbilaran were not
honored and they were constrained to pay for other tickets.
Private respondents sued petitioner for damages and for breach of contract of
carriage before CFI Misamis Oriental.
Petitioner moved to dismiss the complaint on the ground of improper venue.

Condition No. 14 (printed at the back of the tickets): It is hereby agreed and
understood that any and all actions arising out of the conditions and provisions of
this ticket, irrespective of where it is issued, shall be filed in the competent courts
in Cebu City.
Trial court denied the motion.
Petitioner contends that Condition No. 14 is valid and enforceable since private
respondents acceded to it when they purchased passage tickets; venue may be validly
waived since it is printed in bold and capital letters and not in fine print; Condition No. 14
is unequivocal and mandatory; and the respondent judge acted with or in excess of his
jurisdiction.
Private respondents claim that Condition No. 14 is not valid, that the same is not an
essential element of the contract of carriage, being in itself a different agreement which
requires the mutual consent of the parties.
ISSUE: Is Condition No. 14 printed at the back of the petitioners passage tickets
purchased by private respondents, which limits the venue of actions arising from the
contract of carriage to the CFI Cebu, valid and enforceable?
HELD:No. Condition No. 14 is a contract of adhesion (drafted only by one party
(corporation), and is sought to be accepted or adhered by the other party who cannot
change the same and who are thus made to adhere thereto on the take it or leave it
basis). The validity and enforceability of a contract of adhesion will have to be
determined by the peculiar circumstances and the nature of the conditions or terms
sought to be enforced. Condition No. 14 is void and unenforceable: 1. It is not just and
fair to bind passengers to the terms of conditions printed at the back of the tickets; 2. It
subverts the public policy on transfer of venue of proceedings, since it will prejudice
rights and interests of innumerable passengers located in different places of the country
who will have to file suits against petitioner only in Cebu City. The philosophy underlying
the provisions on transfer of venue of actions is the convenience of the plaintiffs as well
as his witnesses and to promote the ends of justice.
JUAN YSMAEL & CO, INC. V. GABINO BARRETTO & CO., LTD., ET. AL
G.R. No. L-28028, Nov. 25, 1927
FACTS:
Plaintiff seeks to recover from the defendants P 9,940.95, the alleged value of 4
cases of merchandise which it delivered to the steamship Andres on October 25,
1922, at Manila to be shipped to Surigao, but which were never delivered to
Salomon Sharuff, the consignee, or returned to the plaintiff.
The defendants denied all the material allegations of the complaint and as special
defense, alleged that the 4 cases of merchandise were never delivered to them,
and that under paragraph 7 of the printed conditions appearing at the back of the
bill of lading, plaintiffs right of action is barred because it was not brought within
60 days from the time the cause of action accrued.
Defendants further alleged that under the provision 12 of the bill of lading, the
defendants are not liable in excess of P300 for any package of silk unless the value
and contents of such packages are correctly declared in the bill of lading at the
time of shipment.
The lower court rendered judgment for the plaintiff for the full amount of its claim.
Defendants appealed.
ISSUES:

1. Whether or not the plaintiffs right of action is barred because it was not brought
within 60 days from the time the cause of action accrued. (paragraph 7)
2. Whether or not the carrier shall not be liable for the loss or damage from any cause or
for any reason to an amount of P300 for any single package of silk or other valuable
cargo.
HELD:
1. No. The goods in question were shipped from Manila on October 25, 1922, to be
delivered to Salomon Sharuff in Surigao, plaintiffs original complaint was filed on
April 17, 1923, or a little less than 6 months after the shipment was made.The
action was brought with a reasonable time. It is true that both the plaintiff and
the defendants are residents of Manila, but it is also true that Surigao where the
goods in question were to be delivered is one of the most distant places from
Manila. In the very nature of the things, plaintiff would not want to commence its
action until such time as it had made a full and careful investigation of all of the
material facts and even the law of the case, so as to determine whether or not
defendants were liable for its loss.
2. No. The validity of the stipulations limiting carriers liability is to be determined by
their reasonableness and their conformity to the sound public policy. It cannot
lawfully stipulate for exemption from liability, unless such exemption is just and
reasonable, and unless the contract is freely and fairly made.
The evidence shows that 164 cases were shipped, and that the value of each case
was very near P2,500. In this situation, the limit of defendants liability for each
case of silk for loss or damage from any cause or for any reason would put it in the
power of the defendants to have taken the whole cargo of 164 cases of silk at a
valuation of P300 for each case, or less that 1/8 of its actual value. If that rule
should be sustained, no silk would ever be shipped from one island to another in
the Philippines. Such limitation of value is unconscionable and void as against
public policy.
PARMANAND SHEWARAM V. PAL
G.R. No. L-20099, July 7, 1966
FACTS:
Shewaram was a paying passenger on defendants aircraft from Zamboanga City
bound for Manila.
He checked in 3 pieces of baggages- a suitcase and 2 other pieces. The suitcase
was mistagged by defendants personnel in Zamboanga as IGN (Iligan) instead of
MNL (Manila).
Plaintiff made a claim with defendants personnel in Manila airport and another
suitcase similar to his own which was the only baggage left for that flight was
given to the plaintiff for him to take delivery but he refused to take the delivery of
the same because it was not his, alleging that all his clothes were white and the
National transistor 7 and a Rollflex camera were not found inside the suitcase, and
moreover, it contained a pistol which he did not have nor placed it inside the
suitcase.
It was found out that the suitcase shown to and given to the plaintiff belonged to a
certain Del Rosario who was bound for Iligan in the same flight with Shewaram.
Shewaram made demand for these 2 items or for the value thereof but the same
was not complied with by defendant.

The municipal trial court rendered decision in favor of plaintiff. The said court had
found that the suitcase of the appellee was tampered and the transistor radio and
the camera contained therein were lost, and that the loss of those articles was due
to the negligence of the employees of the appellant.
ISSUE: Whether or not the limited liability rule applies.
HELD: No. Article 1750 of the NCC provides that the pecuniary liability of a common
carrier may, by contract, be limited to a fixed amount. It is required, however, that the
contract must be reasonable and just under the circumstances and has been fairly
agreed upon. In the case at bar, the requirements have not been met. It cannot be said
that the appellee had actually entered into a contract with the appellant, embodying the
conditions as printed at the back of the ticket stub that was issued by the appellant to
the appellee. The fact that those conditions are printed at the back of the tickets stub in
letters so small that they are hard to read would not warrant the presumption that the
appellee was aware of those conditions such that he had fairly and freely agreed to those
conditions.
The liability of the appellant should be governed by the provisions of Article 1734 and
1735 of the NCC. It having been clearly found by the trial court that the transistor radio
and the camera of the appellee were lost as a result of the negligence of the appellant as
a common carrier, the liability of the appellant is clear- it must pay the appellee the
value of those articles.
ONG YIU V. CA AND PAL
G.R. No. L-40597, June 29, 1979
FACTS:
On August 26, 1967, petitioner, a practicing lawyer and businessman, was a fare
paying passenger of respondent PAL on board a flight from Cebu bound for Butuan
City. He was scheduled to attend a trial in CFI Butuan on August 28-31, 1967.He
checked in a blue maleta.Upon arrival in Butuan, petitioner claimed his luggage
but it could not be found.
PAL Butuan sent a message to PAL Cebu inquiring about the missing luggage. It
was later on relayed to PAL Manila.PAL Manila wired PAL Cebu advising that the
luggage had been over carried to Manila and it would be forwarded to Cebu.
Instructions were also given that the luggage be immediately forwarded to Butuan
on the first available flight. At 5 PM, PAL Cebu sent a message to PAL Butuan that
the luggage would be forwarded the following day, August 27, 1967. However, this
message was not received by PAL Butuan as all personnel had already left since
there were no more incoming flights that afternoon.
Petitioner was worried about the missing luggage because it contained vital
documents needed for trial. Petitioner wired PAL Cebu demanding the delivery of
his baggage before noon the next day otherwise he would hold PAL liable for
damages. This telegram was received by the PAL Cebu supervisor but the latter felt
no need to wire the petitioner that his luggage had already been forwarded on the
assumption that by the time the message reached Butuan City, the luggage would
have arrived.
On August 27, 1967, petitioner went to Bancasi Airport. He did not wait for the
morning flight which arrived at 10 AM. The porter paged petitioner but the latter
had already left. A certain Emilio Dagorro, a driver who used to drive the petitioner,
volunteered to take the luggage to petitioner. As Maximo Gomez knew Dagorro to
be the same driver used by petitioner whenever the latter was in Butuan City,

Gomez took that luggage and placed it on the counter. Dagorro examined the lock,
pressed it, and it opened. After calling the attention of Gomez, Gomez took a look
at its contents, but did not touch them.
Dagorro delivered the maleta to petitioner, informing him that the lock was open.
Upon inspection, petitioner found that the folder containing documents in civil case
were missing, aside from 2 gift items for his parents-in-law. Petitioner refused to
accept the luggage. Dagorro returned it to the porter clerk who sealed it and
forwarded the same to PAL Cebu.
Petitioner asked for postponement of the hearing due to the loss of his documents,
which was granted by the court. He returned to Cebu. In a letter to PAL Cebu, he
demanded that his luggage be produced intact, and that he be compensated for
damages. Petitioner sent a letter to PAL Cebu inquiring the results of the
investigation to pinpoint responsibility for the unauthorized opening of the maleta.
PAL Cebu failed to found the lost folder and failed to pinpoint the personnel who
allegedly pilfered the baggage.
Petitioner filed a complaint against PAL for damages for breach of contract of
transportation. The trial court found PAL to have acted in bad faith and with malice
and declared petitioner entitled to damages. CA found that PAL was guilty only of
simple negligence.
ISSUE: Whether or not PAL acted in bad faith.
HELD:No. Bad faith means a breach of a known duty though some motive of interest or
ill will. It was the duty of PAL to look for petitioners luggage which had been miscarried.
PAL exerted due diligence in complying with such duty. In the absence of a wrongful act
or omission or fraud or bad faith, petitioner is not entitled to moral damages. Petitioner is
neither entitled to exemplary damages. It can be granted if the defendant acted in a
wanton, fraudulent, reckless, oppressive, or malevolent manner, which has not been
proven in this case.
Petitioner further contends that respondent court committed grave error when it limited
PALs carriage liability to the amount of P100 as stipulated at the back of the ticket; and
that there is nothing in the evidence to show that he actually entered into a contract with
PAL limiting the latters liability for the loss or delay of the baggage of its passengers.
While it may be true that petitioner had not signed the plane ticket, he is nevertheless
bound by the provisions thereof. Such provisions have been held to be part of the
contract of carriage and valid and binding upon the passenger regardless of the latters
lack of knowledge or assent to the regulation. It is what is known as contract of adhesion
wherein one party imposes a readymade form of contract on the other. The one who
adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his
consent.
SEA-LAND SERVICE, INC. V. IAC
G.R. No. 75118, August 31, 1987
FACTS:
Sea-Land received from Seaborne Trading Company in California a shipment
consigned to Sen Hiap Hing the business name used by Paulino Cue in the
wholesale and retail trade which operated out of an establishment located in Cebu
City.
The shipper not having declared the value of the shipment, no value was indicated
in the bill of lading. The shipment was loaded on board the MS Patriot, owned and
operated by Sea-Land, for discharge at the port of Cebu.

The shipment arrived in Manila. Sometime between February 13 and 16, 1981,
while awaiting trans-shipment to Cebu, the shipment was stolen and has never
been recovered.
Paulino Cue made a formal claim upon Sea-Land for the value of the lost shipment
amounting to P179,643.48. Sea-Land offered $4,000 or P30,600 asserting that said
amount represented its maximum liability for the loss of the shipment under the
package limitation clause in the covering bill of lading. Cue rejected the offer and
filed for damages.
Trial court rendered judgment in favor of Cue. IAC affirmed the decision of the trial
court.
ISSUE: Whether or not the consignee of seaborne freight is bound by stipulations in the
covering bill of lading limiting to a fixed amount the liability of the carrier for loss or
damage to the cargo where its value is not declared in the bill.
HELD:Yes. There is no question of the right of a consignee in a bill of lading to recover
from the carrier or shipper for loss or damage of goods being transported under said bill,
although that document may have been drawn up only by the consignor and the carrier
without the intervention of the consignee. The right of a party to recover for loss of a
shipment consigned to him under the bill of lading drawn up only between the shipper
and the carrier springs from either a relation of agency that may exist between him and
the shipper or consignor, or his status as a stranger in whose favor some stipulation is
made in said contract, and who becomes a party when he demands fulfilment of that
stipulation. There can be no doubt about the validity and enforceability of freely-agreedupon stipulations in an bill of lading limiting the liability of the carrier to an agreed
valuation unless the shipper declares a higher value and inserts it into said contract or
bill.
Since the liability of a common carrier for loss of damage to goods transported by it
under a contract of carriage is governed by the laws of the country in destination, the
liability of Sea-Land to the consignee is governed primarily by the Civil Code and
suppletorily by the Code of Commerce and special laws such as the Carriage of Goods by
Sea Act.
The stipulation in the questioned bill of lading limiting Sea-Lands liability for loss or
damage to the shipment covered by said bill to $500 per package is held valid and
binding on private respondent.
CITADEL LINES, INC. V. CA AND MANILA WINE MERCHANTS
G.R. No. 88092, April 25, 1990
FACTS:
Petitioner Citadel (Carrier) is the general agent of the vessel Cardigan Bay/Strait
Enterprise, while respondent Manila Wine Merchants (Consignee) is the importer of
the subject shipment of Dunhill cigarettes from England.
180 Filbrite cartons of mixed British manufactured cigarettes were loaded on the
said vessel at England for carriage to Manila. The shipment arrived at Manila in
container van, which was received by E. Razon, Inc. (Arrastre)
On April 30, 1979, the container van, which contained 2 shipments, was stripped.
One shipment was delivered and the other shipment consisting of the imported
British manufactured cigarettes was palletized.
Due to lack of space at the Special Cargo Coral, the cigarettes were placed in 2
containers with 2 pallets in container No. BENU 204850-9 (original container) and 4

pallets in container No. BENU 201009-9, with both containers duly padlocked and
sealed by the representative of the Carrier.
On May 1, 1979, the Carriers head checker discovered that container No. BENU
201009-9 had a different padlock and the seal was tampered with. It was found out
that 90 cases of imported British cigarettes were missing.
According to the investigation of the Arrastre, the cargo was not formally turned
over to it by the Carrier but was kept inside the container van No. BENU 201009-9
which was padlocked and sealed by the representatives of the Carrier without any
participation of the Arrastre.
When the Consignee learned that 90 cases were missing, it filed a formal claim
with the Carrier. The Carrier admitted the loss but alleged that the same occurred
at Pier 13, an area absolutely under the control of Arrastre. In view thereof, the
Consignee filed a formal claim with the Arrastre, demanding payment of the value
of the goods but said claim was denied.
The trial court rendered a decision exonerating the Arrastre of any liability on the
ground that the container van was not formally turned over to its custody, and
adjudging the Carrier liable for the missing cargoes. CA affirmed the decision.
ISSUE: Whether the stipulation limiting the liability of the carrier contained in the bill of
lading is binding on the consignee.
HELD:Yes. A stipulation limiting the liability of the carrier to the value of goods
appearing in the bill of lading, unless the shipper or owner declares a greater value, is
binding. Further, a contract fixing the sum that may be recovered by the owner or
shipper for the loss, destruction or deterioration of the goods is valid, if it is reasonable
and just under the circumstances, and has been fairly and freely agreed upon. The
Consignee itself admits in its memorandum that the value of goods shipped does not
appear in the bills of lading. Hence, the stipulation on the carriers limited liability
applies.
LOADSTAR SHIPPING CO, INC. V. CA
G.R. No. 131621, September 28, 1999
FACTS:
Loadstar received on board M/V Cherokee goods amounting to P6,067,178. The
goods were insured for the same amount with Manila Insurance Co. (MIC) against
various risks including TOTAL LOSS BY TOTAL LOSS OF THE VESSEL.
The vessel was insured by Prudential Guarantee & Assurance, Inc. (PGAI) for P4M.
On November 20, 1984, the vessel, along with its cargo, sank off Limasawa Island.
The consignee made a claim with Loadstar which ignored the same. MIC paid to
the insured the full settlement of its claim.
MIC filed a complaint against Loadstar and PGAI, alleging that the sinking of the
vessel was due to the fault and negligence of Loadstar and its employees; that
PGAI be ordered to pay the insurance of the vessel directly to MIC, to be deducted
from MICs claim from Loadstar.
Loadstar denied liability for the loss of goods and claimed that the sinking was due
to force majeure. PGAI averred that MIC had no cause of action against it, Loadstar
being the party insured. PGAI was later on dropped as defendant.
Trial court rendered judgment in favor of MIC. CA affirmed the decision in toto.
ISSUES:
1. Is the M/V Cherokee a private or common carrier?
2. Did Loadstar observe due and/or ordinary diligence in these premises?

HELD:
1. Loadstar is a common carrier. It is not necessary that the carrier be issued a
certificate of public convenience, and this public character is not altered by the
fact that the carriage of the goods in question was periodic, occasional, episodic or
unscheduled. The records do not disclose that the M/V Cherokee undertook to carry
a special cargo or was chartered to a special person only. The bill of lading failed to
show any special arrangement, but only general provision that the said vessel was
a general cargo carrier. At that time, the vessel was also carrying passengers.
2. No. The M/V Cherokee was not seaworthy. The vessel was not even sufficiently
manned. For a vessel to be seaworthy, it must be adequately equipped for the
voyage and manned with a sufficient number of competent officers and crew.
Loadstar argued that any agreement limiting its liability is valid. Since the cargo
was being shipped at owners risk, Loadstar was not liable for any loss or
damage to the same. MIC, on the other hand, argued that the limited liability
theory is not applicable because Loadstar was at fault or negligent, and because it
failed to maintain a seaworthy vessel. Authorizing the voyage notwithstanding the
knowledge of a typhoon is tantamount to negligence. SC affirmed MICs argument.
QUISUMBING, SR. V. CA
G.R. No. L-50076, September 14, 1990
FACTS:
Norberto Quisumbing, Sr. and Gunther Leoffler were among the passengers of
PALs plane from Mactan City to Manila.
Florencio Villarin, a Senior NBI agent who was also a passenger of the plane,
noticed a certain Zaldy, a suspect in the killing of Judge Valdez. Soon thereafter,
Zaldy announced to the passengers and the pilots that it was a hold-up and
ordered the pilot not to send any SOS. The hold-uppers divested passengers of
their belongings including Quisumbing who was divested of jewelries and cash; and
Leoffler who was divested of a wrist watch, cash and wallet. Upon landing at
Manila, Zaldy and his 3 companions succeeded in escaping.
Quisumbing and Leoffler made demands to PAL to indemnify them but PAL refused
averring that it is not liable to them.
Plaintiffs filed a suit against PAL contending that the loss is a result of breach of
PALs contractual obligation to carry them and their belongings and effects to
Manila without loss or damage, and constitutes a serious dereliction of PALs legal
duty to exercise extraordinary diligence.
PAL denied liability alleging that the robbery constitute force majeure, and neither
of the plaintiffs had notified PAL that they were in possession of cash and valuable
jewelries and watches or surrendered said items to the crew on board the aircraft.
Trial court dismissed plaintiffs complaint because they did not notify defendant
that they were in possession of the cash, jewelries and wallet they are claiming;
and that the robbery is a force majeure for which the defendant is not liable
because robbers were able to gain entrance to the plane with the guns they used
already in their possession, which fact could not have been prevented nor avoided
by the defendant since it was not authorized to search its passengers for firearms
and deadly weapons.

CA affirmed the trial courts decision. PAL could not be faulted for want of diligence
for failing to take positive measures to implement regulations prohibiting civilians
from carrying firearms on board aircrafts.
ISSUE: Whether or not there is negligence of the part of the PAL crew occurring before
and exposing them to hijacking.
HELD: No.Hijackers do not board an airplane through blatant display of firepower.
Firearms and grenades are brought to the plane surreptitiously. The use of the most
sophisticated electronic detection devices may have minimized hijacking but still
ineffective against truly determined hijackers. The evidence fail to prove any want of
diligence on the part of PAL or it had failed to comply with the applicable regulations or
universally accepted and observed procedures to preclude highjacking; and the
particular act singled out by the petitioners is not negligent acts sufficient to overcome
the force majeure nature of armed robbery.
PAN AMERICAN WORLD AIRWAYS, INC. V. JOSE RAPADAS
G.R. No. 60673, May 19, 1992
FACTS:
Private respondent Rapadas held Passenger ticket and Baggage claim check for
petitioners flight from Guam to Manila. Rapadas was ordered by petitioners
handcarry control agent to check in his Samsonite attache case. Rapadas
protested pointing to the fact that other passengers were permitted to handcarry
bulkier baggages. He stepped out of the line. However, the same man in charge
did not fail to notice him and ordered him again to register his attache case. For
fear that he would miss his flight, he acceded to checking in. He gave his attache
case to his brother who happened to be around and who checked in for him, but
without declaring its contents or the value of its contents.
Upon arriving in Manila, Rapadas claimed and was given all his checked-in
baggages except the attache case. Petitioner exerted efforts to locate the luggage
through the Pan American World Airways Baggage Service.
Rapadas received a letter from petitioners counsel offering to settle the claim for
the sum of $160 representing the petitioners alleged limit of liability for loss or
damage to a passengers property under the contract of carriage.
Rapadas refused to accept the settlement and filed an instant action for damages
alleging that PAN AM discriminated or singled him out in ordering that his luggage
to be checked in; that PAN AM neglected its duty in the handling and safekeeping
of his attache case.
Petitioner acknowledged responsibility for the loss of the attache case but asserted
that the claim was subject to the Notice of Baggage Liability Limitations allegedly
attached to and forming part of the passenger ticket.
The trial court ruled in favor of Rapadas after finding no stipulation giving notice to
the baggage liability limitation. The court rejected the claim of PAN AM that its
liability under the terms of the passenger ticket is only up to $160. However, it
discredited insufficient evidence to show discriminatory acts or bad faith on the
part of PAN AM.
CA affirmed the trial court decision.
ISSUE: Whether or not a passenger is bound by the terms of a passenger ticket
declaring that the limitations of liability set forth in the Warsaw Convention shall apply in
case of loss, damage, or destruction to a registered luggage of a passenger.

HELD:Yes. There is no dispute that there was such a Notice appearing on page 2 of the
airline ticket stating that the Warsaw Convention governs in case of death or injury to a
passenger or of loss, damage or destruction to a passengers luggage. The Convention
governs the availment of the liability limitations where the baggage check is combined
with or incorporated in the passenger ticket. In the case at bar, the baggage check is
combined with the passenger ticket in one document.
The passenger, upon contracting with the airline and receiving the plane ticket, was
expected to be vigilant insofar as his luggage is concerned. If the passenger fails to
adduce evidence to overcome the stipulations, he cannot avoid the application of liability
limitations. The facts show that Rapadas actually refused to register the attache case
despite having ordered by the PAN AM agent. The private respondent manifested a
disregard of the airline rules. The alleged lack of enough time for him to make a
declaration of a higher value and to pay the supplementary charges cannot justify failure
to comply with the requirement that will exclude the application of limited liability.
Passengers are also allowed one handcarried bag each provided it conforms to certain
prescribed dimensions. If Rapadas was not allowed to handcarry his lost attache case,
this means that he was carrying more than the allowable weight for all his luggages or
more than the allowable number of handcarried items or more than the prescribed
dimension for the bag.
We are not by any means suggesting that passengers are always bound to the stipulated
amounts printed on a ticket, found in a contract of adhesion. The reason behind
stipulations on liability limitations arise from the difficulty of establishing with clear
preponderance of evidence the contents of a lost suitcase. Unless the contents are
declared, it will always be the word of the passenger against that of the airline. If the loss
of life or property is caused by the gross negligence or arbitrary acts of the airline, the
Court will not hesitate to disregard the contract of adhesion.
BRITISH AIRWAYS V. CA
G.R. No. 121824, January 29, 1998
FACTS:
Mahtani decided to visit his relatives in Bombay, India. He obtained services of Mr.
Gumar to prepare his travel plans. The latter purchased a ticket from British
Airways (BA).
Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight
to HongKong via PAL , and upon arrival in HK he had to take a connecting flight to
Bombay on board BA.
Mahtani checked in at the PAL counter in Manila his 2 pieces of luggage containing
his clothing and personal effects, confident that upon reaching HK, the same would
be transferred to the BA flight bound for Bombay.
When Mahtani arrived in Bombay, he discovered that his luggage was missing and
that upon inquiry from the BA representatives, he was told that the same might be
diverted to London. After one week, BA finally advised him to file a claim by
accomplishing the Property Irregularity Report.
Back in the Philippines, Mahtani filed his claim for damages against BA and Mr.
Gumar. BA contended that Mahtani did not have cause of action against it. BA also
filed a third party complaint against PAL alleging that the reason for the nontransfer of the luggage was due to the latters late arrival in HK, thus leaving
hardly any time for the proper transfer of Mahtanis luggage to the BA aircraft
bound for Bombay.

PAL disclaimed liability arguing that there was adequate time to transfer the
luggage to BA facilities in HK.
Trial court rendered its decision in favor of Mahtani. The third party complaint
against PAL was dismissed for lack of cause of action. CA affirmed in toto.
ISSUES:
1. Whether or not BA is liable for compensatory damages and attorneys fees.
2. Whether or not the dismissal of the third party complaint is correct.
HELD:
1. Yes. In determining compensatory damages, it is vital that the claimant
satisfactorily prove during the trial the existence of the factual basis of the
damages and its causal connection to the defendants acts. The benefits of limited
liability are subject to waiver such as when the air carrier failed to raise timely
objections during the trial when questions and answers regarding the actual claims
and damages sustained by the passenger were asked.In the case at bar, BA had
waived the defense of limited liability when it allowed Mahtani to testify as to the
actual damages he incurred due to the misplacement of his luggage, without any
objection.
2. No. The contract of air transportation was exclusive between Mahtani and BA. It is
undisputed that PAL, in transporting Mahtani from Manila to HK, acted as the agent
of BA. It is a well-settled rule that an agent is also responsible for any negligence in
the performance of its function and is liable for damages which the principal may
suffer by reason of its negligent act. Since the instant petition was based on breach
of contract of carriage, Mahtani can only sue BA and not PAL, since the latter was
not a party to the contract. However, this is not to say that PAL is relieved from any
liability due to any of its negligent act.
GEM
Trans-Asia Shipping Lines vs. CA
(GR 118126, 4 March 1996)
FACTS: Respondent Atty. Renato Arroyo, a public attorney, bought a ticket from herein
petitioner for the voyage of M/V Asia Thailand vessel to Cagayan de Oro City from Cebu
City on November 12, 1991. At around 5:30 in the evening of November 12, 1991,
respondent boarded the M/V Asia Thailand vessel during which he noticed that some
repairs were being undertaken on the engine of the vessel. The vessel departed at
around 11:00 in the evening with only one (1) engine running. After an hour of slow
voyage, the vessel stopped near Kawit Island and dropped its anchor thereat. After half
an hour of stillness, some passengers demanded that they should be allowed to return to
Cebu City for they were no longer willing to continue their voyage to Cagayan de Oro
City. The captain acceded to their request and thus the vessel headed back to Cebu City.
In Cebu City, plaintiff together with the other passengers who requested to be brought
back to Cebu City, were allowed to disembark. Thereafter, the vessel proceeded to
Cagayan de Oro City. Petitioner, the next day, boarded the M/V Asia Japan for its voyage
to Cagayan de Oro City, likewise a vessel of defendant. On account of this failure of
defendant to transport him to the place of destination on November 12, 1991,
respondent Arroyo filed before the trial court an action for damage arising from bad
faith, breach of contract and from tort, against petitioner. The trial court ruled only for
breach of contract. The CA reversed and set aside said decision on appeal.
ISSUE: Whether or not the petitioner Trans-Asia was negligent?

HELD: Yes. Before commencing the contracted voyage, the petitioner undertook some
repairs on the cylinder head of one of the vessels engines. But even before it could
finish these repairs, it allowed the vessel to leave the port of origin on only one
functioning engine, instead of two. Moreover, even the lone functioning engine was not
in perfect condition as sometime after it had run its course, it conked out. This caused
the vessel to stop and remain adrift at sea, thus in order to prevent the ship from
capsizing, it had to drop anchor. Plainly, the vessel was unseaworthy even before the
voyage began. For a vessel to be seaworthy, it must be adequately equipped for the
voyage and manned with a sufficient number of competent officers and crew.[21] The
failure of a common carrier to maintain in seaworthy condition its vessel involved in a
contract of carriage is a clear breach of is duty prescribed in Article 1755 of the Civil
Code.
Ganzon v. CA
Facts: Tumambing contracted the services of Ganzon for the latter to haul 305 tons of
scrap iron from Mariveles, Bataan to the port of Manila on board the lighter LCT
Batman. Accordingly, Ganzon sent his lighter Batman to Mariveles. Tumambing then
delivered the scrap iron for loading to Filomeno Niza, the lighters captain. However,
when about half of the scrap iron was being loaded, Mayor Advincula of Mariveles,
Bataan, demanded P5,000 from Tumambing. The latter refused, an altercation started,
until Mayor Advincula fired his gun at Tumambing, who was later brought to a hospital in
Balanga, Bataan. After sometime, the loading of the scrap iron resumed. However, Acting
Mayor Basilio Rub, accompanied by 3 policemen, ordered Captain Niza and its crew to
dump the scrap iron where the lighter was docked. The remaining scrap iron was
confiscated and brought to the compound of NASSCO. A receipt was issued by the Acting
Mayor stating that he had taken custody of the scrap iron. Hence, Tumambing filed an
action against Ganzon for damages based on culpa contractual. Ganzon claims that he
should not be liable because the scrap iron has not been unconditionally placed under
his custody and control.
Issue Whether or not Ganzon is liable for Tumambings loss.
Ruling Yes, Ganzon is liable. Ratio Decidendi There is no dispute that the scrap iron was
already delivered to Ganzons carrier and received by Captain Niza and the crew. By the
said act of delivery, the scrap iron was already deemed to be unconditionally placed in
the possession and control of the common carrier and upon their receipt, the contract of
carriage was deemed perfected. Consequently, petitioner-carriers extraordinary
responsibility for the loss or deterioration of the goods commenced. According to Art
1736 of the NCC, such responsibility will only cease upon the actual or constructive
delivery to the consignee or any person who has a right to receive the goods. However,
in this case, the same is not true since the scrap iron remained in the custody and
control of the carrier, albeit still unloaded. Ganzon may be exempt from liability if the
loss of the scrap iron was due to any of the causes enumerated under Art. 1734 of the
NCC. However, Ganzon was not able to prove the same. Art 1743 provides as follows:
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of
the goods, unless the same is due to any of the following causes only: (1) Flood, storm,
earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy
in war, whether international or civil; (3) Act of omission of the shipper or owner of the
goods; (4) The character of the goods or defects in the packing or in the containers; (5)
Order or act of competent public authority. Lastly, the SC cannot sustain Ganzons claim

that the cause of the loss was a caso fortuito considering that in the courts below, his
defense was that the loss of the scrap iron was due to an order or act of a competent
public authority. Such change in theory on appeal cannot be allowed. In any case, the
intervention of the municipal officials is not of such character as would render the
fulfilment of Ganzons obligation impossible. According to the SC, the scrap iron could
have still been delivered in accordance with the contract of carriage after the dispute has
been settled.
8. Saludo Jr. v. CA
Facts: Crispina Galdo Saludo, mother of the petitioners, died in Chicago, Illinois.
Pomierski and Son Funeral Home of Chicago, made the necessary preparations and
arrangements for the shipment of the remains from Chicago to the Philippines. Pomierski
brought the remains to Continental Mortuary Air Services (CMAS) at the Chicago Airport
which made the necessary arrangements such as flights, transfers, etc. CMAS booked
the shipment with PAL thru the carriers agent Air Care International. PAL Airway Bill
Ordinary was issued wherein the requested routing was from Chicago to San Francisco on
board Trans World Airline (TWA) and from San Francisco to Manila on board PAL.
Salvacion (one of the petitioners), upon arrival at San Francisco, went to the TWA to
inquire about her mothers remains. But she was told they did not know anything about
it. She then called Pomierski that her mothers remains were not at the West Coast
terminal. Pomierski immediately called CMAS which informed that the remains were on a
plane to Mexico City, that there were two bodies at the terminal, and somehow they
were switched. CMAS called and told Pomierski that they were sending the remains back
to California via Texas. Petitioners filed a complaint against TWA and PAL fir the
misshipment and delay in the delay of the cargo containing the remains of the late
Crispina Saludo. Petitioners alleged that private respondents received the casketed
remains of Crispina on October 26, 1976, as evidenced by the issuance of PAL Airway Bill
by Air Care and from said date, private respondents were charged with the responsibility
to exercise extraordinary diligence so much so that the alleged switching of the caskets
on October 27, 1976, or one day after the private respondents received the cargo, the
latter must necessarily be liable.
Issues:
Whether or not there was delivery of the cargo upon mere issuance of the airway
bill
Whether or not the delay in the delivery of the casketed remains of petitioners
mother was due to the fault of respondent airline companies
Held: NO to both, but TWA was held to pay petitioners nominal damages of P40,000 for
its violation of the degree of diligence required by law to be exercised by every common
carrier Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier
for transportation but, when issued, is competent and prima facie, but not conclusive,
evidence of delivery to the carrier. A bill of lading, when properly executed and delivered
to a shipper, is evidence that the carrier has received the goods described therein for
shipment. Except as modified by statute, it is a general rule as to the parties to a
contract of carriage of goods in connection with which a bill of lading is issued reciting
that goods have been received for transportation, that the recital being in essence a
receipt alone, is not conclusive, but may be explained, varied or contradicted by parol or
other evidence. In other words, on October 26, 1976 the cargo containing the casketed
remains of Crispina Saludo was booked for PAL Flight Number PR-107 leaving San

Francisco for Manila on October 27, 1976, PAL Airway Bill No. 079-01180454 was issued,
not as evidence of receipt of delivery of the cargo on October 26, 1976, but merely as a
confirmation of the booking thus made for the San Francisco-Manila flight scheduled on
October 27, 1976. Actually, it was not until October 28, 1976 that PAL received physical
delivery of the body at San Francisco, as duly evidenced by the Interline Freight Transfer
Manifest of the American Airline Freight System and signed for by Virgilio Rosales at
1945H, or 7:45 P.M. on said date. Explicit is the rule under Article 1736 of the Civil Code
that the extraordinary responsibility of the common carrier begins from the time the
goods are delivered to the carrier. This responsibility remains in full force and effect even
when they are temporarily unloaded or stored in transit, unless the shipper or owner
exercises the right of stoppage in transitu, and terminates only after the lapse of a
reasonable time for the acceptance, of the goods by the consignee or such other person
entitled to receive them. And, there is delivery to the carrier when the goods are ready
for and have been placed in the exclusive possession, custody and control of the carrier
for the purpose of their immediate transportation and the carrier has accepted them.
Where such a delivery has thus been accepted by the carrier, the liability of the common
carrier commences eo instanti. Hence, while we agree with petitioners that the
extraordinary diligence statutorily required to be observed by the carrier instantaneously
commences upon delivery of the goods thereto, for such duty to commence there must
in fact have been delivery of the cargo subject of the contract of carriage. Only when
such fact of delivery has been unequivocally established can the liability for loss,
destruction or deterioration of goods in the custody of the carrier, absent the excepting
causes under Article 1734, attach and the presumption of fault of the carrier under
Article 1735 be invoked. As already demonstrated, the facts in the case at bar belie the
averment that there was delivery of the cargo to the carrier on October 26, 1976. Rather,
as earlier explained, the body intended to be shipped as agreed upon was really placed
in the possession and control of PAL on October 28, 1976 and it was from that date that
private respondents became responsible for the agreed cargo under their undertakings
in PAL Airway Bill No. 079-01180454. Consequently, for the switching of caskets prior
thereto which was not caused by them, and subsequent events caused thereby, private
respondents cannot be held liable. The oft-repeated rule regarding a carrier's liability for
delay is that in the absence of a special contract, a carrier is not an insurer against delay
in transportation of goods. When a common carrier undertakes to convey goods, the law
implies a contract that they shall be delivered at destination within a reasonable time, in
the absence, of any agreement as to the time of delivery. But where a carrier has made
an express contract to transport and deliver property within a specified time, it is bound
to fulfill its contract and is liable for any delay, no matter from what cause it may have
arisen. This result logically follows from the well-settled rule that where the law creates a
duty or charge, and the party is disabled from performing it without any default in
himself, and has no remedy over, then the law will excuse him, but where the party by
his own contract creates a duty or charge upon himself, he is bound to make it good
notwithstanding any accident or delay by inevitable necessity because he might have
provided against it by contract. Whether or not there has been such an undertaking on
the part of the carrier to be determined from the circumstances surrounding the case
and by application of the ordinary rules for the interpretation of contracts. Echoing the
findings of the trial court, the respondent court correctly declared that In a similar
case of delayed delivery of air cargo under a very similar stipulation contained in the
airway bill which reads: "The carrier does not obligate itself to carry the goods by any
specified aircraft or on a specified time. Said carrier being hereby authorized to deviate
from the route of the shipment without any liability therefor", our Supreme Court ruled
that common carriers are not obligated by law to carry and to deliver merchandise, and

persons are not vested with the right to prompt delivery, unless such common carriers
previously assume the obligation. Said rights and obligations are created by a specific
contract entered into by the parties (Mendoza vs. PAL, 90 Phil. 836). There is no showing
by plaintiffs that such a special or specific contract had been entered into between them
and the defendant airline companies. And this special contract for prompt delivery
should call the attention of the carrier to the circumstances surrounding the case and the
approximate amount of damages to be suffered in case of delay (See Mendoza vs. PAL,
supra). There was no such contract entered into in the instant case. A common carrier
undertaking to transport property has the implicit duty to carry and deliver it within
reasonable time, absent any particular stipulation regarding time of delivery, and to
guard against delay. In case of any unreasonable delay, the carrier shall be liable for
damages immediately and proximately resulting from such neglect of duty. As found by
the trial court, the delay in the delivery of the remains of Crispina Saludo, undeniable
and regrettable as it was, cannot be attributed to the fault, negligence or malice of
private respondents, a conclusion concurred in by respondent court and which we are
not inclined to disturb.
Macam v. CA
Facts: Benito Macam, doing business under name Ben-Mac Enterprises, shipped on board
vessel Nen-Jiang, owned and operated by respondent China Ocean Shipping Co. through
local agent Wallem Philippines Shipping Inc., 3,500 boxes of watermelon covered by Bill
of Lading No. HKG 99012, and 1,611 boxes of fresh mangoes covered by Bill of Lading
No. HKG 99013. The shipment was bound for Hongkong with PAKISTAN BANK as
consignee and Great Prospect Company of Rowloon (GPC) as notify party. Upon arrival in
Hongkong, shipment was delivered by respondent WALLEM directly to GPC, not to
PAKISTAN BANK and without the required bill of lading having been surrendered.
Subsequently, GPC failed to pay PAKISTAN BANK, such that the latter, still in possession
of original bill of lading, refused to pay petitioner thru SOLIDBANK. Since SOLIDBANK
already pre-paid the value of shipment, it demanded payment from respondent WALLEM
but was refused. MACAM constrained to return the amount paid by SOLIDBANK and
demanded payment from WALLEM but to no avail. WALLEM submitted in evidence a telex
dated 5 April 1989 as basis for delivering the cargoes to GPC without the bills of lading
and bank guarantee. The telex instructed delivery of various shipments to the respective
consignees without need of presenting the bill of lading and bank guarantee per the
respective shippers request since for prepaid shipt ofrt charges already fully paid.
MACAM, however, argued that, assuming there was such an instruction, the consignee
referred to was PAKISTAN BANK and not GPC. The RTC ruled for MACAM and ordered
value of shipment. CA reversed RTCs decision.
Issue: Are the respondents liable to the petitioner for releasing the goods to GPC without
the bills of lading or bank guarantee?
Held: It is a standard maritime practice when immediate delivery is of the essence, for
shipper to request or instruct the carrier to deliver the goods to the buyer upon arrival at
the port of destination without requiring presentation of bill of lading as that usually
takes time. Thus, taking into account that subject shipment consisted of perishable
goods and SOLIDBANK pre-paid the full amount of value thereof, it is not hard to believe
the claim of respondent WALLEM that petitioner indeed requested the release of the
goods to GPC without presentation of the bills of lading and bank guarantee. To
implement the said telex instruction, the delivery of the shipment must be to GPC, the

notify party or real importer/buyer of the goods and not the PAKISTANI BANK since the
latter can very well present the original Bills of Lading in its possession. Likewise, if it
were the PAKISTANI BANK to whom the cargoes were to be strictly delivered, it will no
longer be proper to require a bank guarantee as a substitute for the Bill of Lading. To
construe otherwise will render meaningless the telex instruction. After all, the cargoes
consist of perishable fresh fruits and immediate delivery thereof the buyer/importer is
essentially a factor to reckon with. We emphasize that the extraordinary responsibility of
the common carriers lasts until actual or constructive delivery of the cargoes to the
consignee or to the person who has a right to receive them. PAKISTAN BANK was
indicated in the bills of lading as consignee whereas GPC was the notify party. However,
in the export invoices GPC was clearly named as buyer/importer. Petitioner also referred
to GPC as such in his demand letter to respondent WALLEM and in his complaint before
the trial court. This premise draws us to conclude that the delivery of the cargoes to GPC
as buyer/importer which, conformably with Art. 1736 had, other than the consignee, the
right to receive them was proper.
11. Cathay Pacific v. CA
FACTS: Respondent Alcantara was a first class passenger of a Cathay Pacific flight to
Jakarta to attend a business conference with the Director General of Trade of Indonesia.
Upon his arrival in Jakarta, he discovered that his luggage was missing. He was informed
that his luggage was left behind in Hongkong and was offered $20.00 as "inconvenience
money" to buy his immediate personal needs. He had to seek postponement of his prearranged conference. And when his luggage finally reached Jakarta after a day, it was
required to be picked up by an official of the Philippine Embassy. The trial court ordered
Cathay to pay. The CA affirmed but increased the award of damages. SC affirmed but
modified the award of damages. Cathay argues that the one-day delay was not made in
bad faith because it had a mechanical trouble wherein all pieces of luggage on board the
first aircraft bound for Jakarta were unloaded and transferred to the second aircraft which
departed an hour and a half later. Cathay also argues that he was not treated rudely and
arrogantly by its employees. Also, that the CA erred in failing to apply the Warsaw
Convention on the liability of a carrier to its passengers.
ISSUE: W/N Cathay breached its contract of carriage with Alcantara and acted in bad
faith?
HELD: YES. Cathay failed to deliver his luggage at the designated place and time, it
being the obligation of a common carrier to carry its passengers and their luggage safely
to their destination, which includes the duty not to delay their transportation. It was not
even aware that the luggage was left behind until its attention was called by the
Hongkong Customs authorities. It also refused to deliver the luggage at his hotel and
required him to pick it up with an official of the Philippine Embassy The Cathay
employees were also discourteous, rude, and insulting. He was simply advised to buy
anything he wanted with only $20.00 which was certainly not enough to purchase
comfortable clothing appropriate for an executive conference. Cathays agents only
replied, "What can we do, the baggage is missing. I cannot do anything . . . Anyhow, you
can buy anything you need, charged to Cathay Pacific." Moral and exemplary damages
are proper where in breaching the contract of carriage bad faith or fraud is shown. In the
absence of fraud or bad faith, liability is limited to the natural and probable
consequences of the breach of obligation which the parties had foreseen or could have

reasonably foreseen. Further, Cathay contends that the extent of its liability should be
limited absolutely to that set forth in the Warsaw Convention. The said treaty does not
operate as an exclusive enumeration of the instances for declaring a carrier liable for
breach of contract of carriage or as an absolute limit of the extent of that liability. The
Warsaw Convention declares the carrier liable for damages in the enumerated cases and
under certain limitations. However, it must not be construed to preclude the operation of
the Civil Code and other pertinent laws. It does not regulate, much less exempt, the
carrier from liability for damages for violating the rights of its passengers under the
contract of carriage, especially if wilfull misconduct on the part of the carrier's
employees is found or established, as in this case.
9. Macam v. CA
Facts: Benito Macam, doing business under name Ben-Mac Enterprises, shipped on board
vessel Nen-Jiang, owned and operated by respondent China Ocean Shipping Co. through
local agent Wallem Philippines Shipping Inc., 3,500 boxes of watermelon covered by Bill
of Lading No. HKG 99012, and 1,611 boxes of fresh mangoes covered by Bill of Lading
No. HKG 99013. The shipment was bound for Hongkong with PAKISTAN BANK as
consignee and Great Prospect Company of Rowloon (GPC) as notify party. Upon arrival in
Hongkong, shipment was delivered by respondent WALLEM directly to GPC, not to
PAKISTAN BANK and without the required bill of lading having been surrendered.
Subsequently, GPC failed to pay PAKISTAN BANK, such that the latter, still in possession
of original bill of lading, refused to pay petitioner thru SOLIDBANK. Since SOLIDBANK
already pre-paid the value of shipment, it demanded payment from respondent WALLEM
but was refused. MACAM constrained to return the amount paid by SOLIDBANK and
demanded payment from WALLEM but to no avail. WALLEM submitted in evidence a telex
dated 5 April 1989 as basis for delivering the cargoes to GPC without the bills of lading
and bank guarantee. The telex instructed delivery of various shipments to the respective
consignees without need of presenting the bill of lading and bank guarantee per the
respective shippers request since for prepaid shipt ofrt charges already fully paid.
MACAM, however, argued that, assuming there was such an instruction, the consignee
referred to was PAKISTAN BANK and not GPC. The RTC ruled for MACAM and ordered
value of shipment. CA reversed RTCs decision.
Issue: Are the respondents liable to the petitioner for releasing the goods to GPC without
the bills of lading or bank guarantee?
Held: It is a standard maritime practice when immediate delivery is of the essence, for
shipper to request or instruct the carrier to deliver the goods to the buyer upon arrival at
the port of destination without requiring presentation of bill of lading as that usually
takes time. Thus, taking into account that subject shipment consisted of perishable
goods and SOLIDBANK pre-paid the full amount of value thereof, it is not hard to believe
the claim of respondent WALLEM that petitioner indeed requested the release of the
goods to GPC without presentation of the bills of lading and bank guarantee. To
implement the said telex instruction, the delivery of the shipment must be to GPC, the
notify party or real importer/buyer of the goods and not the PAKISTANI BANK since the
latter can very well present the original Bills of Lading in its possession. Likewise, if it
were the PAKISTANI BANK to whom the cargoes were to be strictly delivered, it will no
longer be proper to require a bank guarantee as a substitute for the Bill of Lading. To
construe otherwise will render meaningless the telex instruction. After all, the cargoes

consist of perishable fresh fruits and immediate delivery thereof the buyer/importer is
essentially a factor to reckon with. We emphasize that the extraordinary responsibility of
the common carriers lasts until actual or constructive delivery of the cargoes to the
consignee or to the person who has a right to receive them. PAKISTAN BANK was
indicated in the bills of lading as consignee whereas GPC was the notify party. However,
in the export invoices GPC was clearly named as buyer/importer. Petitioner also referred
to GPC as such in his demand letter to respondent WALLEM and in his complaint before
the trial court. This premise draws us to conclude that the delivery of the cargoes to GPC
as buyer/importer which, conformably with Art. 1736 had, other than the consignee, the
right to receive them was proper. 10. PAL v. CA
12. Trans-Asia Shipping Lines vs. CA
(GR 118126, 4 March 1996)
FACTS: Respondent Atty. Renato Arroyo, a public attorney, bought a ticket from herein
petitioner for the voyage of M/V Asia Thailand vessel to Cagayan de Oro City from Cebu
City on November 12, 1991. At around 5:30 in the evening of November 12, 1991,
respondent boarded the M/V Asia Thailand vessel during which he noticed that some
repairs were being undertaken on the engine of the vessel. The vessel departed at
around 11:00 in the evening with only one (1) engine running. After an hour of slow
voyage, the vessel stopped near Kawit Island and dropped its anchor thereat. After half
an hour of stillness, some passengers demanded that they should be allowed to return to
Cebu City for they were no longer willing to continue their voyage to Cagayan de Oro
City. The captain acceded to their request and thus the vessel headed back to Cebu City.
In Cebu City, plaintiff together with the other passengers who requested to be brought
back to Cebu City, were allowed to disembark. Thereafter, the vessel proceeded to
Cagayan de Oro City. Petitioner, the next day, boarded the M/V Asia Japan for its voyage
to Cagayan de Oro City, likewise a vessel of defendant. On account of this failure of
defendant to transport him to the place of destination on November 12, 1991,
respondent Arroyo filed before the trial court an action for damage arising from bad
faith, breach of contract and from tort, against petitioner. The trial court ruled only for
breach of contract. The CA reversed and set aside said decision on appeal.
ISSUE: Whether or not the petitioner Trans-Asia was negligent?
HELD: Yes. Before commencing the contracted voyage, the petitioner undertook some
repairs on the cylinder head of one of the vessels engines. But even before it could
finish these repairs, it allowed the vessel to leave the port of origin on only one
functioning engine, instead of two. Moreover, even the lone functioning engine was not
in perfect condition as sometime after it had run its course, it conked out. This caused
the vessel to stop and remain adrift at sea, thus in order to prevent the ship from
capsizing, it had to drop anchor. Plainly, the vessel was unseaworthy even before the
voyage began. For a vessel to be seaworthy, it must be adequately equipped for the
voyage and manned with a sufficient number of competent officers and crew.[21] The
failure of a common carrier to maintain in seaworthy condition its vessel involved in a
contract of carriage is a clear breach of is duty prescribed in Article 1755 of the Civil
Code.
Southern Lines v. CA

DOCTRINE:If the fact of improper packing is known to the carrier or his servants, or
apparent upon ordinary observation, but it accepts the goods notwithstanding such
condition, it is not relieved of liability for loss or injury resulting therefrom.
FACTS: - The City of Iloilo requisitioned for rice from the National Rice and Corn
Corporation (NARIC). - NARIC shipped 1,726 sacks of rice consigned to the City of Iloilo
on board of SS General Wright belong to Southern Lines. - The City of Iloilo received the
shipment and paid the amount stated in the bill of lading (around Php 63K). - However,
at the bottom of the bill of lading, it was noted that City of Iloilo received the
merchandise in the same condition as when shipped, except that it received only 1,685
sacks. - Upon actual weighing, it was discovered that the shortage was equal to 41 sacks
of rice. - Thus, the City of Iloilo filed a complaint against NARIC and Southern Lines for
the recovery of the value of the shortage of the shipment of rice (Php 6,486.35). - The
lower court absolved NARIC but sentenced Southern Lines to pay the amount. - CA
affirmed. - Hence, this petition for review. - Southern Lines claims exemption from
liability by contending that the shortage in the shipment of rice was due to such factors
as shrinkage, leakage or spillage of the rice on account of the bad condition of the sacks
at the time it received the same and negligence of the agents of City of Iloilo in receiving
the shipment.
ISSUES:
- Whether Southern Lines is liable for the loss or shortage of the rice shipped.YES
- Whether the City of Iloilo is precluded from filing an action for damages on
account of its failure to present a claim within 24 hours from receipt of the shipment as
stated in the bill of lading.NO
HELD: - YES. The SC held that the contention of Southern Lines with respect to the
improper packing is untenable.Under Art. 361 of the Code of Commerce, the carrier, in
order to free itself from liability, was only obliged to prove that the damages suffered by
the goods were by virtue of the nature or defect of the articles. Under Art. 362, the
plaintiff, in order to hold the defendant liable, was obliged to prove that the damages to
the goods is by virtue of their nature, occurred on account of its negligence or because
the defendant did not take the precaution adopted by careful persons.It held that if the
fact of improper packing is known to the carrier or his servants, or apparent upon
ordinary observation, but it accepts the goods notwithstanding such condition, it is not
relieved of liability for loss or injury resulting therefrom. - NO. The SC noted that
Southern Lines failed to plead this defense in its answer to City of Iloilos complaint and,
therefore, the same is deemed waived and cannot be raised for the first time.The SC also
cited the finding of the CA that City of Iloilo filed the action within a reasonable time; that
the action is one for the refund of the amount paid in excess, and not for damages or the
recovery of shortage; the bill of lading does not at all limit the time for the filing of action
for the refund of money paid in excess.
2. Mitsui Lines v. CA
3. Sulpicio v. First Lepanto
4. Coastwise Lighterage Corporation v. CA
Facts: Pag-asa Sales Inc. entered into a contract to transport molasses from the province
of Negros to Manila with Coastwise Lighterage Corporation (Coastwise for brevity), using
the latter's dumb barges. The barges were towed in tandem by the tugboat MT Marica,
which is likewise owned by Coastwise. Upon reaching Manila Bay, one of the barges,

"Coastwise 9", struck an unknown sunken object. The forward buoyancy compartment
was damaged, and water gushed in through a hole "two inches wide and twenty-two
inches long". As a consequence, the molasses at the cargo tanks were contaminated.
Pag-asa filed a claim against Philippine General Insurance Company, the insurer of its
cargo. Philgen paid P700,000 for the value of the molasses lost. Philgen then filed an
action against Coastwise to recover the money it paid, claiming to be subrogated to the
claims which the consignee may have against the carrier. Both the trial court and the
Court
of
Appeals
ruled
against
Coastwise.
Issues:
(1) Whether Coastwise was transformed into a private carrier by virtue of the
contract it entered into with Pag-asa, and whether it exercised the required degree of
diligence
(2) Whether Philgen was subrogated into the rights of the consignee against the
carrier
Held:
(1) Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order to carry
cargo from one point to another, but the possession, command mid navigation of the
vessels remained with petitioner Coastwise Lighterage. Coastwise Lighterage, by the
contract of affreightment, was not converted into a private carrier, but remained a
common carrier and was still liable as such. The law and jurisprudence on common
carriers both hold that the mere proof of delivery of goods in good order to a carrier and
the subsequent arrival of the same goods at the place of destination in bad order makes
for a prima facie case against the carrier. It follows then that the presumption of
negligence that attaches to common carriers, once the goods it is sports are lost,
destroyed or deteriorated, applies to the petitioner. This presumption, which is overcome
only by proof of the exercise of extraordinary diligence, remained unrebutted in this
case. Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was
not licensed. Coastwise Lighterage cannot safely claim to have exercised extraordinary
diligence, by placing a person whose navigational skills are questionable, at the helm of
the vessel which eventually met the fateful accident. It may also logically, follow that a
person without license to navigate, lacks not just the skill to do so, but also the utmost
familiarity with the usual and safe routes taken by seasoned and legally authorized ones.
Had the patron been licensed he could be presumed to have both the skill and the
knowledge that would have prevented the vessel's hitting the sunken derelict ship that
lay on their way to Pier 18. As a common carrier, petitioner is liable for breach of the
contract of carriage, having failed to overcome the presumption of negligence with the
loss and destruction of goods it transported, by proof of its exercise of extraordinary
diligence.
(2) Article 2207 of the Civil Code is founded on the well-settled principle of
subrogation. If the insured property is destroyed or damaged through the fault or
negligence of a party other than the assured, then the insurer, upon payment to the
assured will be subrogated to the rights of the assured to recover from the wrongdoer to
the extent that the insurer has been obligated to pay. Payment by the insurer to the
assured operated as an equitable assignment to the former of all remedies which the
latter may have against the third party whose negligence or wrongful act caused the
loss. The right of subrogation is not dependent upon, nor does it grow out of, any private
of contract or upon written assignment of, claim. It accrues simply upon payment of the
insurance claim by the insurer.
5. First Philippine Insurance v. Wallem

6. Samar Mining Co. v. Nordeutscher Lloyd

FACTS: The case arose from an importation made by Samar Mining Co. Inc. of 1 crate
Optima welded wedge wire sieves through the M/S Schwabenstein, a vessel owned by
Nordeutscher Lloyd, (represented in the Philippines by its agent, C.F. Sharp & Co., Inc.),
which shipment is covered by Bill of Lading No. 18 duly issued to consignee Samar
Mining. Upon arrival of the vessel at the port of Manila, the importation was unloaded
and delivered in good order and condition to the bonded warehouse of AMCYL. The goods
were however never delivered to, nor received by, the consignee at the port of
destination Davao. When the letters of complaint sent to Nordeutscher Lloyd failed to
elicit the desired response, Samar Mining filed a formal claim for P1,691.93, the
equivalent of $424.00 at the prevailing rate of exchange at that time, against the former,
but neither paid. Samar Mining filed a suit to enforce payment. Nordeutscher Lloyd and
CF Sharp & Co. brought in AMCYL as third party defendant. The trial court rendered
judgment in favor of Samar Mining, ordering Nordeutscher Lloyd, et. al. to pay the
amount of P1,691.93 plus attorneys fees and costs. However, the Court stated that
Nordeutscher Lloyd, et. al. may recoup whatever they may pay Samar Mining by
enforcing the judgment against third party defendant AMCYL, which had earlier been
declared in default. Nordeutscher Lloyd and C.F. Sharp & Co. appealed from said
decision. Notes The following are the pertinent ports, as provided in the bill of lading:
Port of Loading: Bremen, Germany Port of discharge from ship: Manila Port of
destination/Port of discharge of the goods: Davao As plainly indicated on the face of the
bill, the vessel M/S Schwabenstein is to transport the goods only up to Manila.
Thereafter, the goods are to be transshipped by the carrier to the port of destination.
ISSUE: Whether or not a stipulation in the bill of lading exempting the carrier from
liability for loss of goods not in its actual custody (i.e., after their discharge from the ship)
is valid.
HELD: It is clear that in discharging the goods from the ship at the port of Manila, and
delivering the same into the custody of AMCYL, the bonded warehouse, appellants were
acting in full accord with the contractual stipulations contained in Bill of Lading No. 18.
The delivery of the goods to AMCYL was part of appellants' duty to transship (meaning to
transfer for further transportation from one ship or conveyance to another) the goods
from Manila to their port of destination-Davao. The extent of appellant carrier's
responsibility and/or liability in the transshipment of the goods in question are spelled
out and delineated under Section 1, paragraph 3 of Bill of Lading No. 18, to wit: the
carrier shall not be liable in any capacity whatsoever for any delay, loss or damage
occurring before the goods enter ship's tackle to be loaded or after the goods leave
ship's tackle to be discharged, transshipped or forwarded. Further, in Section 11 of the
same bill, it was provided that this carrier, in making arrangements for any
transshipping or forwarding vessels or means of transportation not operated by this
carrier shall be considered solely the forwarding agent of the shipper and without any
other responsibility whatsoever even though the freight for the whole transport has been
collected by him Pending or during forwarding or transshipping the carrier may store
the goods ashore or afloat solely as agent of the shipper We find merits in
Nordeutschers contention that they are not liable for the loss of the subject goods by
claiming that they have discharged the same in full and good condition unto the custody
of AMCYL at the port of discharge from ship Manila, and therefore, pursuant to the
aforequoted stipulation (Sec. 11) in the bill of lading, their responsibility for the cargo
had ceased.The validity of stipulations in bills of lading exempting the carrier from
liability for loss or damage to the goods when the same are not in its actual custody has

been upheld by Us in PHOENIX ASSURANCE CO., LTD. vs. UNITED STATES LINES, 22 SCRA
674 (1968), ruling that pursuant to the terms of the Bill of Lading, appellee's
responsibility as a common carrier ceased the moment the goods were unloaded in
Manila and in the matter of transshipment, appellee acted merely as an agent of the
shipper and consignee In the present case, by the authority of the above
pronouncements, and in conformity with the pertinent provisions of the Civil Code,
Section 11 of Bill of Lading No. 18 and the third paragraph of Section 1 thereof are valid
stipulations between the parties insofar as they exempt the carrier from liability for loss
or damage to the goods while the same are not in the latter's actual custody. Acareful
perusal of the provisions of the New Civil Code on common carriers directs our attention
to Article 1736, which reads: 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, without prejudice to the provisions of article 1738. In relation to this,
Article 1738 provides: the extraordinary liability of the common carrier continues to be
operative even during the time the goods are stored in a warehouse of the carrier at the
place of destination, until the consignee has been advised of the arrival of the goods and
has had reasonable opportunity thereafter to remove them or otherwise dispose of
them. Art. 1738 finds no applicability to the instant case. The said article contemplates
a situation where the goods had already reached their place of destination and are
stored in the warehouse of the carrier. The subject goods were still awaiting
transshipment to their port of destination, and were stored in the warehouse of a third
party when last seen and/or heard of. However, Article 1736 is applicable to the instant
suit. Under said article, the carrier may be relieved of the responsibility for loss or
damage to the goods upon actual or constructive delivery of the same by the carrier to
the consignee, or to the person who has a right to receive them. There is actual delivery
in contracts for the transport of goods when possession has been turned over to the
consignee or to his duly authorized agent and a reasonable time is given him to remove
the goods. In the present case, there was actual delivery to the consignee through its
duly authorized agent, the carrier. Lastly, two undertakings are embodied in the bill of
lading: the transport of goods from Germany to Manila, and the transshipment of the
same goods from Manila to Davao, with Samar Mining acting as the agent of the
consignee. The moment the subject goods are discharged in Manila, Samar Minings
personality changes from that of carrier to that of agent of the consignee. Such being the
case, there was, in effect, actual delivery of the goods from appellant as carrier to the
same appellant as agent of the consignee. Upon such delivery, the appellant, as
erstwhile carrier, ceases to be responsible for any loss or damage that may befall the
goods from that point onwards. This is the full import of Article 1736. But even as agent
of the consignee, the appellant cannot be made answerable for the value of the missing
goods. It is true that the transshipment of the goods, which was the object of the agency,
was not fully performed. However, appellant had commenced said performance, the
completion of which was aborted by circumstances beyond its control. An agent who
carries out the orders and instructions of the principal without being guilty of negligence,
deceit or fraud, cannot be held responsible for the failure of the principal to accomplish
the object of the agency.

3. Sulpicio v. First Lepanto

4. Coastwise Lighterage Corporation v. CA

Facts: Pag-asa Sales Inc. entered into a contract to transport molasses from the province
of Negros to Manila with Coastwise Lighterage Corporation (Coastwise for brevity), using
the latter's dumb barges. The barges were towed in tandem by the tugboat MT Marica,
which is likewise owned by Coastwise. Upon reaching Manila Bay, one of the barges,
"Coastwise 9", struck an unknown sunken object. The forward buoyancy compartment
was damaged, and water gushed in through a hole "two inches wide and twenty-two
inches long". As a consequence, the molasses at the cargo tanks were contaminated.
Pag-asa filed a claim against Philippine General Insurance Company, the insurer of its
cargo. Philgen paid P700,000 for the value of the molasses lost. Philgen then filed an
action against Coastwise to recover the money it paid, claiming to be subrogated to the
claims which the consignee may have against the carrier. Both the trial court and the
Court
of
Appeals
ruled
against
Coastwise.
Issues:
(1) Whether Coastwise was transformed into a private carrier by virtue of the
contract it entered into with Pag-asa, and whether it exercised the required degree of
diligence
(2) Whether Philgen was subrogated into the rights of the consignee against the
carrier
Held:
(1) Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order to carry
cargo from one point to another, but the possession, command mid navigation of the
vessels remained with petitioner Coastwise Lighterage. Coastwise Lighterage, by the
contract of affreightment, was not converted into a private carrier, but remained a
common carrier and was still liable as such. The law and jurisprudence on common
carriers both hold that the mere proof of delivery of goods in good order to a carrier and
the subsequent arrival of the same goods at the place of destination in bad order makes
for a prima facie case against the carrier. It follows then that the presumption of
negligence that attaches to common carriers, once the goods it is sports are lost,
destroyed or deteriorated, applies to the petitioner. This presumption, which is overcome
only by proof of the exercise of extraordinary diligence, remained unrebutted in this
case. Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was
not licensed. Coastwise Lighterage cannot safely claim to have exercised extraordinary
diligence, by placing a person whose navigational skills are questionable, at the helm of
the vessel which eventually met the fateful accident. It may also logically, follow that a
person without license to navigate, lacks not just the skill to do so, but also the utmost
familiarity with the usual and safe routes taken by seasoned and legally authorized ones.
Had the patron been licensed he could be presumed to have both the skill and the
knowledge that would have prevented the vessel's hitting the sunken derelict ship that
lay on their way to Pier 18. As a common carrier, petitioner is liable for breach of the
contract of carriage, having failed to overcome the presumption of negligence with the
loss and destruction of goods it transported, by proof of its exercise of extraordinary
diligence.
(2) Article 2207 of the Civil Code is founded on the well-settled principle of
subrogation. If the insured property is destroyed or damaged through the fault or
negligence of a party other than the assured, then the insurer, upon payment to the
assured will be subrogated to the rights of the assured to recover from the wrongdoer to
the extent that the insurer has been obligated to pay. Payment by the insurer to the
assured operated as an equitable assignment to the former of all remedies which the

latter may have against the third party whose negligence or wrongful act caused the
loss. The right of subrogation is not dependent upon, nor does it grow out of, any private
of contract or upon written assignment of, claim. It accrues simply upon payment of the
insurance claim by the insurer.
5. First Philippine Insurance v. Wallem
6. Samar Mining Co. v. Nordeutscher Lloyd
FACTS: The case arose from an importation made by Samar Mining Co. Inc. of 1 crate
Optima welded wedge wire sieves through the M/S Schwabenstein, a vessel owned by
Nordeutscher Lloyd, (represented in the Philippines by its agent, C.F. Sharp & Co., Inc.),
which shipment is covered by Bill of Lading No. 18 duly issued to consignee Samar
Mining. Upon arrival of the vessel at the port of Manila, the importation was unloaded
and delivered in good order and condition to the bonded warehouse of AMCYL. The goods
were however never delivered to, nor received by, the consignee at the port of
destination Davao. When the letters of complaint sent to Nordeutscher Lloyd failed to
elicit the desired response, Samar Mining filed a formal claim for P1,691.93, the
equivalent of $424.00 at the prevailing rate of exchange at that time, against the former,
but neither paid. Samar Mining filed a suit to enforce payment. Nordeutscher Lloyd and
CF Sharp & Co. brought in AMCYL as third party defendant. The trial court rendered
judgment in favor of Samar Mining, ordering Nordeutscher Lloyd, et. al. to pay the
amount of P1,691.93 plus attorneys fees and costs. However, the Court stated that
Nordeutscher Lloyd, et. al. may recoup whatever they may pay Samar Mining by
enforcing the judgment against third party defendant AMCYL, which had earlier been
declared in default. Nordeutscher Lloyd and C.F. Sharp & Co. appealed from said
decision. Notes The following are the pertinent ports, as provided in the bill of lading:
Port of Loading: Bremen, Germany Port of discharge from ship: Manila Port of
destination/Port of discharge of the goods: Davao As plainly indicated on the face of the
bill, the vessel M/S Schwabenstein is to transport the goods only up to Manila.
Thereafter, the goods are to be transshipped by the carrier to the port of destination.
ISSUE: Whether or not a stipulation in the bill of lading exempting the carrier from
liability for loss of goods not in its actual custody (i.e., after their discharge from the ship)
is valid.
HELD: It is clear that in discharging the goods from the ship at the port of Manila, and
delivering the same into the custody of AMCYL, the bonded warehouse, appellants were
acting in full accord with the contractual stipulations contained in Bill of Lading No. 18.
The delivery of the goods to AMCYL was part of appellants' duty to transship (meaning to
transfer for further transportation from one ship or conveyance to another) the goods
from Manila to their port of destination-Davao. The extent of appellant carrier's
responsibility and/or liability in the transshipment of the goods in question are spelled
out and delineated under Section 1, paragraph 3 of Bill of Lading No. 18, to wit: the
carrier shall not be liable in any capacity whatsoever for any delay, loss or damage
occurring before the goods enter ship's tackle to be loaded or after the goods leave
ship's tackle to be discharged, transshipped or forwarded. Further, in Section 11 of the
same bill, it was provided that this carrier, in making arrangements for any
transshipping or forwarding vessels or means of transportation not operated by this
carrier shall be considered solely the forwarding agent of the shipper and without any
other responsibility whatsoever even though the freight for the whole transport has been
collected by him Pending or during forwarding or transshipping the carrier may store
the goods ashore or afloat solely as agent of the shipper We find merits in

Nordeutschers contention that they are not liable for the loss of the subject goods by
claiming that they have discharged the same in full and good condition unto the custody
of AMCYL at the port of discharge from ship Manila, and therefore, pursuant to the
aforequoted stipulation (Sec. 11) in the bill of lading, their responsibility for the cargo
had ceased.The validity of stipulations in bills of lading exempting the carrier from
liability for loss or damage to the goods when the same are not in its actual custody has
been upheld by Us in PHOENIX ASSURANCE CO., LTD. vs. UNITED STATES LINES, 22 SCRA
674 (1968), ruling that pursuant to the terms of the Bill of Lading, appellee's
responsibility as a common carrier ceased the moment the goods were unloaded in
Manila and in the matter of transshipment, appellee acted merely as an agent of the
shipper and consignee In the present case, by the authority of the above
pronouncements, and in conformity with the pertinent provisions of the Civil Code,
Section 11 of Bill of Lading No. 18 and the third paragraph of Section 1 thereof are valid
stipulations between the parties insofar as they exempt the carrier from liability for loss
or damage to the goods while the same are not in the latter's actual custody. Acareful
perusal of the provisions of the New Civil Code on common carriers directs our attention
to Article 1736, which reads: 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, without prejudice to the provisions of article 1738. In relation to this,
Article 1738 provides: the extraordinary liability of the common carrier continues to be
operative even during the time the goods are stored in a warehouse of the carrier at the
place of destination, until the consignee has been advised of the arrival of the goods and
has had reasonable opportunity thereafter to remove them or otherwise dispose of
them. Art. 1738 finds no applicability to the instant case. The said article contemplates
a situation where the goods had already reached their place of destination and are
stored in the warehouse of the carrier. The subject goods were still awaiting
transshipment to their port of destination, and were stored in the warehouse of a third
party when last seen and/or heard of. However, Article 1736 is applicable to the instant
suit. Under said article, the carrier may be relieved of the responsibility for loss or
damage to the goods upon actual or constructive delivery of the same by the carrier to
the consignee, or to the person who has a right to receive them. There is actual delivery
in contracts for the transport of goods when possession has been turned over to the
consignee or to his duly authorized agent and a reasonable time is given him to remove
the goods. In the present case, there was actual delivery to the consignee through its
duly authorized agent, the carrier. Lastly, two undertakings are embodied in the bill of
lading: the transport of goods from Germany to Manila, and the transshipment of the
same goods from Manila to Davao, with Samar Mining acting as the agent of the
consignee. The moment the subject goods are discharged in Manila, Samar Minings
personality changes from that of carrier to that of agent of the consignee. Such being the
case, there was, in effect, actual delivery of the goods from appellant as carrier to the
same appellant as agent of the consignee. Upon such delivery, the appellant, as
erstwhile carrier, ceases to be responsible for any loss or damage that may befall the
goods from that point onwards. This is the full import of Article 1736. But even as agent
of the consignee, the appellant cannot be made answerable for the value of the missing
goods. It is true that the transshipment of the goods, which was the object of the agency,
was not fully performed. However, appellant had commenced said performance, the
completion of which was aborted by circumstances beyond its control. An agent who
carries out the orders and instructions of the principal without being guilty of negligence,

deceit or fraud, cannot be held responsible for the failure of the principal to accomplish
the object of the agency.