Belgian Overseas Chartering vs. Phil. First Insurance Co.

, 383 SCRA 23

Facts:

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

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

Impugning the propriety of the suit against them, defendants-appellees imputed that the damage
and/or loss was due to pre-shipment damage, to the inherent nature, vice or defect of the goods, or
to perils, danger and accidents of the sea, or to insufficiency of packing thereof, or to the act or
omission of the shipper of the goods or their representatives. In addition thereto, defendants-
appellees argued that their liability, if there be any, should not exceed the limitations of liability
provided for in the bill of lading and other pertinent laws. Finally, defendants-appellees averred that,
in any event, they exercised due diligence and foresight required by law to prevent any damage/loss to
said shipment. RTC dismissed. CA reversed that petitioners were liable for the loss or the damage of
the goods shipped, because they had failed to overcome the presumption of negligence imposed on
common carriers.

Issue:

Whether the package limitation of liability is applicable (MAIN ISSUE)

Held:

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

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

It is to be noted, however, that the Civil Code does not limit the liability of the common carrier to a
fixed amount per package. In all matters not regulated by the Civil Code, the right and the obligations
of common carriers shall be governed by the Code of Commerce and special laws. Thus, the COGSA,
which is suppletory to the provisions of the Civil Code, supplements the latter by establishing a
statutory provision limiting the carriers liability in the absence of a shippers declaration of a higher
value in the bill of lading. The provisions on limited liability are as much a part of the bill of lading as
though physically in it and as though placed there by agreement of the parties.

In the case before us, there was no stipulation in the Bill of Lading limiting the carriers liability. Neither
did the shipper declare a higher valuation of the goods to be shipped. This fact notwithstanding, the
insertion of the words L/C No. 90/02447 cannot be the basis for petitioners liability.
in Keng Hua Paper Products v. Court of Appeals, we held that a bill of lading was separate from the
Other Letter of Credit arrangements. We ruled thus:

(T)he contract of carriage, as stipulated in the bill of lading in the present case, must be treated
independently of the contract of sale between the seller and the buyer, and the contract of issuance
of a letter of credit between the amount of goods described in the commercial invoice in the
contract of sale and the amount allowed in the letter of credit will not affect the validity and
enforceability of the contract of carriage as embodied in the bill of lading. As the bank cannot be
expected to look beyond the documents presented to it by the seller pursuant to the letter of credit,
neither can the carrier be expected to go beyond the representations of the shipper in the bill of
lading and to verify their accuracy vis--vis the commercial invoice and the letter of credit. Thus, the
discrepancy between the amount of goods indicated in the invoice and the amount in the bill of
lading cannot negate petitioners obligation to private respondent arising from the contract of
transportation.

In the light of the foregoing, petitioners liability should be computed based on US$500 per package
and not on the per metric ton price declared in the Letter of Credit.

In Eastern Shipping Lines, Inc. v. Intermediate Appellate Court we explained the meaning of package:

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

National Development Company vs. Ca, Aug. 19, 1988

Facts:

The evidence before us shows that in accordance with a memorandum agreement entered into
between defendants NDC and MCP on September 13, 1962, defendant NDC as the first preferred
mortgagee of three ocean going vessels including one with the name 'Dona Nati' appointed defendant
MCP as its agent to manage and operate said vessel for and in its behalf and account (Exh. A). Thus, on
February 28, 1964 the E. Philipp Corporation of New York loaded on board the vessel "Dona Nati" at
San Francisco, California, a total of 1,200 bales of American raw cotton consigned to the order of
Manila Banking Corporation, Manila and the People's Bank and Trust Company acting for and in behalf
of the Pan Asiatic Commercial Company, Inc., who represents Riverside Mills Corporation (Exhs. K-2 to
K7-A & L-2 to L-7-A). Also loaded on the same vessel at Tokyo, Japan, were the cargo of Kyokuto
Boekui, Kaisa, Ltd., consigned to the order of Manila Banking Corporation consisting of 200 cartons of
sodium lauryl sulfate and 10 cases of aluminum foil (Exhs. M & M-1). En route to Manila the vessel
Dofia Nati figured in a collision at 6:04 a.m. on April 15, 1964 at Ise Bay, Japan with a Japanese vessel
'SS Yasushima Maru' as a result of which 550 bales of aforesaid cargo of American raw cotton were
lost and/or destroyed, of which 535 bales as damaged were landed and sold on the authority of the
General Average Surveyor for Yen 6,045,-500 and 15 bales were not landed and deemed lost (Exh. G).
The damaged and lost cargoes was worth P344,977.86 which amount, the plaintiff as insurer, paid to
the Riverside Mills Corporation as holder of the negotiable bills of lading duly endorsed (Exhs. L-7-A, K-
8-A, K-2-A, K-3-A, K-4-A, K-5-A, A- 2, N-3 and R-3}. Also considered totally lost were the aforesaid
shipment of Kyokuto, Boekui Kaisa Ltd., consigned to the order of Manila Banking Corporation, Manila,
acting for Guilcon, Manila, The total loss was P19,938.00 which the plaintiff as insurer paid to Guilcon
as holder of the duly endorsed bill of lading (Exhibits M-1 and S-3). Thus, the plaintiff had paid as
insurer the total amount of P364,915.86 to the consignees or their successors-in-interest, for the said
lost or damaged cargoes. Hence, plaintiff filed this complaint to recover said amount from the
defendants-NDC and MCP as owner and ship agent respectively, of the said 'Dofia Nati' vessel. (Rollo,
L-49469, p.38)
On April 22, 1965, the Development Insurance and Surety Corporation filed before the then Court of
First Instance of Manila an action for the recovery of the sum of P364,915.86 plus attorney's fees of
P10,000.00 against NDC and MCP

On November 12, 1969, after DISC and MCP presented their respective evidence, the trial court
rendered a decision ordering the defendants MCP and NDC to pay jointly and solidarity to DISC the
sum of P364,915.86 plus the legal rate of interest to be computed from the filing of the complaint on
April 22, 1965, until fully paid and attorney's fees of P10,000.00.

Issue:

Whether the Carriage of Goods by Sea Act should apply to the case at bar and not the Civil Code or
the Code of Commerce.

Held:

This issue has already been laid to rest by this Court of Eastern Shipping Lines Inc. v. IAC (1 50 SCRA
469-470 [1987]) where it was held under similar circumstance "that the law of the country to which
the goods are to be transported governs the liability of the common carrier in case of their loss,
destruction or deterioration" (Article 1753, Civil Code). Thus, the rule was specifically laid down that
for cargoes transported from Japan to the Philippines, the liability of the carrier is governed
primarily by the Civil Code and in all matters not regulated by said Code, the rights and obligations
of common carrier shall be governed by the Code of commerce and by laws (Article 1766, Civil
Code). Hence, the Carriage of Goods by Sea Act, a special law, is merely suppletory to the provision
of the Civil Code.

In the case at bar, it has been established that the goods in question are transported from San
Francisco, California and Tokyo, Japan to the Philippines and that they were lost or due to a collision
which was found to have been caused by the negligence or fault of both captains of the colliding
vessels. Under the above ruling, it is evident that the laws of the Philippines will apply, and it is
immaterial that the collision actually occurred in foreign waters, such as Ise Bay, Japan.

Under Article 1733 of the Civil Code, common carriers from the nature of their business and for
reasons of public policy are bound to observe extraordinary diligence in the vigilance over the goods
and for the safety of the passengers transported by them according to all circumstances of each case.
Accordingly, under Article 1735 of the same Code, in all other than those mentioned is Article 1734
thereof, the common carrier shall be presumed to have been at fault or to have acted negigently,
unless it proves that it has observed the extraordinary diligence required by law.

It appears, however, that collision falls among matters not specifically regulated by the Civil Code, so
that no reversible error can be found in respondent courses application to the case at bar of Articles
826 to 839, Book Three of the Code of Commerce, which deal exclusively with collision of vessels.

More specifically, Article 826 of the Code of Commerce provides that where collision is imputable to
the personnel of a vessel, the owner of the vessel at fault, shall indemnify the losses and damages
incurred after an expert appraisal. But more in point to the instant case is Article 827 of the same
Code, which provides that if the collision is imputable to both vessels, each one shall suffer its own
damages and both shall be solidarily responsible for the losses and damages suffered by their cargoes.

Significantly, under the provisions of the Code of Commerce, particularly Articles 826 to 839, the
shipowner or carrier, is not exempt from liability for damages arising from collision due to the fault or
negligence of the captain. Primary liability is imposed on the shipowner or carrier in recognition of the
universally accepted doctrine that the shipmaster or captain is merely the representative of the owner
who has the actual or constructive control over the conduct of the voyage (Y'eung Sheng Exchange
and Trading Co. v. Urrutia & Co., 12 Phil. 751 [1909]).
There is, therefore, no room for NDC's interpretation that the Code of Commerce should apply only to
domestic trade and not to foreign trade. Aside from the fact that the Carriage of Goods by Sea Act
(Com. Act No. 65) does not specifically provide for the subject of collision, said Act in no uncertain
terms, restricts its application "to all contracts for the carriage of goods by sea to and from Philippine
ports in foreign trade." Under Section I thereof, it is explicitly provided that "nothing in this Act shall
be construed as repealing any existing provision of the Code of Commerce which is now in force, or as
limiting its application." By such incorporation, it is obvious that said law not only recognizes the
existence of the Code of Commerce, but more importantly does not repeal nor limit its application.