1 Unsworth Transport Sylvex Purchasing Corp.
delivered to UTI a shipment of 27 drums Issue:
International (Phils.), Inc. v. of various raw materials for pharmaceutical manufacturing on Aug.
CA, G.R. No. 166250, 26 July 31, 1992. UTI issued a Bill of Lading covering the said shipment.
2010 The shipment was insured with private respondent Pioneer
Insurance and Surety Corp. in favor of Unilab against all risk of
P1,779,664.77.
Sylvex to UTI to Unilab On the same day that the bill of lading was issued, the shipment
to Unsworth was loaded in a sealed 1x40 container van boarded on American
President Lines, Ltd. (APL)’s vessel M/V “Pres. Jackson,” Voyage
42, and transshipped to APL’s M/V “Pres. Taft” for delivery to
Oceanica conducted petitioner in favor of the consignee United Laboratories, Inc.
(Unilab)
a stripping survey
The shipment arrived at the port of Manila on Sept. 30, 1992 and
on Oct. 6, 1992, petitioner received the shipment in its warehouse.
On Oct. 9, 1992, Oceanica Cargo Marine Surveyors Corp.
(OCMSC) conducted a stripping survey of the shipment located in
Jardine Davies issued the petitioner’s warehouse. The results shows that everything is in
a gatepass : "22 drums"good order condition and properly sealed except on the 1-steel
drum STC Vitamin B Complex Extract which has a cut/hole on side,
in good condition with approximate spilling of 1%.
On Oct. 15, 1992, arrastre Jardine Davies issued a gate pass which
stated the “22 drums” raw materials were noted to be complete and
in good order. The shipment arrived at the Unilab’s warehouse and
was immediately surveyed by an independent surveyor, J.G Bernas
Adjusters & Surveyors. The result shows that; (1) 1-p/bag torn on
side contents partly spilled, (2) 1-s/drum #7 punctured and retaped
on bottom side lacking and (3) 5-drums shortship/short delivery.
The same independent surveyor conducted final inspection surveys
which yielded the same results.
Unilab filed a formal claim for the damage against the private
respondent and UTI. UTI denied liability on the basis of the gate
pass issued by Jardine that the goods were complete and in good
condition. Pioneer Insurance paid the claim and by virtue of the
Loss and Subrogation Receipt, filed a complaint for damages
against APL, UTI and petitioner with the RTC.
RTC rendered a decision in favor of private respondent. On appeal,
the CA affirned the decision of the RTC.
1. Whether petitioner UTI is a common carrier
2. Whether the Package Limitation Rule under the COGSA applies
Held:
UTI is a common carrier.
Admittedly, petitioner is a freight forwarder. The term freight forwarder"
refers to a firm holding itself out to the general public (other than as a
pipeline, rail, motor, or water carrier) to provide transportation of
property for compensation and, in the ordinary course of its business,
(1) to assemble and consolidate, or to provide for assembling and
consolidating, shipments, and to perform or provide for break-bulk and
distribution operations of the shipments; (2) to assume responsibility for
the transportation of goods from the place of receipt to the place of
destination; and (3) to use for any part of the transportation a carrier
subject to the federal law pertaining to common carriers.
A freight forwarders liability is limited to damages arising from its own
negligence, including negligence in choosing the carrier; however,
where the forwarder contracts to deliver goods to their destination
instead of merely arranging for their transportation, it becomes
liable as a common carrier for loss or damage to goods. A freight
forwarder assumes the responsibility of a carrier, which actually
executes the transport, even though the forwarder does not carry the
merchandise itself.
It is undisputed that UTI issued a bill of lading in favor of Unilab.
Pursuant thereto, petitioner undertook to transport, ship, and deliver the
27 drums of raw materials for pharmaceutical manufacturing to the
consignee.
A bill of lading is a written acknowledgement of the receipt of goods and
an agreement to transport and to deliver them at a specified place to a
person named or on his or her order. It operates both as a receipt and
as a contract. It is a receipt for the goods shipped and a contract to
transport and deliver the same as therein stipulated.
Undoubtedly, UTI is liable as a common carrier. Common carriers, as a
general rule, are presumed to have been at fault or negligent if the
goods they transported deteriorated or got lost or destroyed. That is,
unless they prove that they exercised extraordinary diligence in
transporting the goods. In order to avoid responsibility for any loss or
damage, therefore, they have the burden of proving that they observed
such diligence. Mere proof of delivery of the goods in good order to a
common carrier and of their arrival in bad order at their destination
constitutes a prima facie case of fault or negligence against the carrier.
If no adequate explanation is given as to how the deterioration, loss, or
destruction of the goods happened, the transporter shall be held
responsible.

2 ACE NAVIGATION vs FGU  Cardia Limited (CARDIA) shipped on board the vessel M/V
PAKARTI TIGA at Shanghai Port China 165,200 bags of
Grey Portland Cement
 It was to be discharged at the Port of Manila and delivered to
its consignee, Heindrich Trading Port (HEINDRICH)
 The subject shipment was insured with FGU Insurance Corp
(FGU) and Pioneer Insurance and Surety Corp (PIONEER),
against all risk
o Under a Marine Open Policy for the amount of P18M
PAKARTI (owner) -> SHINWA -> SKY-agent/KEE YEH-
principal -> REGENCY -> HEINDRICH
 The vessel is owned by P.T. Pakarti Tata (PAKARTI)
 PAKARTI chartered the vessel to Shinwa Kaiun Kaisha, Ltd.
(SHINWA)
 Representing itself as owner of the vessel SHINWA entered
into a charter party contract with Sky International, Inc. (SKY)
 SKY is an agent of Kee Yeh Maritime Co. (KEE YEH)
 KEE YEH chartered the vessel to Regency Express Lines
S.A. (REGENCY)
YES. The Package Limitation Rule under the COGSA applies.
It is to be noted that the Civil Code does not limit the liability of the
common carrier to a fixed amount per package. In all matters not
regulated by the Civil Code, the rights and obligations of common
carriers are governed by the Code of Commerce and special laws.
Section 4(5) of the COGSA provides: (5) Neither the carrier nor the ship
shall in any event be or become liable for any loss or damage to or in
connection with the transportation of goods in an amount exceeding
$500 per package of lawful money of the United States, or in case of
goods not shipped in packages, per customary freight unit, or the
equivalent of that sum in other currency, unless the nature and value of
such goods have been declared by the shipper before shipment and
inserted in the bill of lading. This declaration, if embodied in the bill of
lading, shall be prima facie evidence, but shall not be conclusive on the
carrier.
In the present case, the shipper did not declare a higher valuation of the
goods to be shipped. Contrary to the CA’s conclusion, the insertion of
the words “L/C No. LC No. 1-187-008394/NY 69867 covering shipment
of raw materials for pharmaceutical Mfg. x x x” cannot be the basis of
petitioner’s liability. Furthermore, the insertion of an invoice number
does not in itself sufficiently and convincingly show that petitioner had
knowledge of the value of the cargo. Petitioners liability should be limited
to $500 per steel drum. In this case, as there was only one drum lost,
private respondent is entitled to receive only $500 as damages for the
loss.
Whether ACENAV may be held liable to FGU and PIONEER for
30% of their claim - NO
BILL OF LADING
 an instrument in writing, signed by a carrier or his agent,
describing the fright so as to identify it, stating the name of the
consignor, the terms of the contract of carriage, and agreeing or
directing that the freight to be delivered to the order or assigns of
a specified person at a specified place
 operates both as a receipt and as a contract
 RECEIPT
o Because it recites the date and place of shipment,
describes the goods as to quantity, weight, dimensions,
identification marks and condition, quality, and value
 CONTRACT
o Because it names the contracting parties, which include
the consignee, fixes the route, destination, and freight
rates or charges, and stipulates the rights and obligations
assumed by the parties.
  It was REGENCY that directly dealt with consignee
HEINDRICH
 when the vessel arrived at the Port of Manila, HEINDRICH
and Ace Navigation Co., Inc (ACENAV, agent of CARDIA)
found that out of 165,200 bags, 43,905 bags were in bad
order and condition
 unable to collect the sustained damages= P1,423,454.60
FGU and Pioneer from CARDIA (shipper) and REGENCY (charterer), the FGU
and PIONEER each paid consignee HEINDRICH and
paid the consignee consequently became subrogated to all the rights and causes
of action accruing to HEINDRICH
 Thus, FGU and PIONEER filed a complaint for damages
against
o REGENCY
o PAKARTI TIGA
o SKY
o ACENAV
 PAKARTI and SHINWA alleged that the suits against them
cannot prosper because they were not named as parties in
the bill of lading
 ACENAV claimed that it was not a real party-in-interest from
whom the respondents can demand compensation because it
is not privy to the bill of lading
 SKY denied having acted as agent of charterer KEE YEH
 RTC dismissed the complaint
 CA found the following solidarily liable for 70% of the claims
of FGU and PIONEER
o PAKARTI
o SHINWA
o KEE YEK and its agent SKY
 CA then found CARDIA and ACENAV solidarily liable for the
remaining 30%
 CA found that the parties entered into a time charter party,
not a demise or bareboat charter where the owner completely
and exclusively relinquishes possession, command and
navigation to the charterer
 CA affirmed that the RTC did not acquire jurisdiction over
REGENCY for defective service of summons
 PAKARTI, SHINWA, SKY, and ACENAV appealed but the
first three withdrew their petitions.
 ACENAV maintains that
o it was not a party to the bill of lading and hence
cannot be held liable for the damages sought to be
collected
o since its principal CARDIA was not impleaded as
party-defendant/responded, no liability can therefore
attach to ACENAV as a mere agent
oas such, it shall only be binding upon the parties
who make them, their assigns and heirs
ORIGINAL PARTIES TO THE BILL OF LADING
 CARDIA (shipper)
 PAKARTI (carrier)
 HEINDRICH (carrier)
However, by virtue of their relationship with PAKARTI under
separate charter arrangements, the following became parties to
the bill of lading
 SHINWA
 KEE YEH and its agent SKY
ACENAV, as admitted agent of CARDIA, also became a party to the
said contract of carriage
FGU and PIONEER contend that ACENAV is a SHIP AGENT and
not a mere agent of CARDIA as found by the CA and RTC – SC
DISAGREES
“ART. 586, CODE OF COMMERCE. The shipowner and the ship
agent shall be civilly liable for the acts of the captain and for the
obligations contracted by the latter to repair, equip, and provision the
vessel, provided the creditor proves that the amount claimed was
invested therein.
By ship agent is understood the person entrusted with the
provisioning of a vessel, or who represents her in the port in which she
may be found.”
 Records show that ACENAV’s obligation was limited to informing
consignee HEINDRICH of the arrival of the vessel
 No evidence was offered to establish that ACENAV had a hand in
the provisioning of the vessel or that it represented the carrier, its
charterers, or the vessel at any time during the unloading of the
goods
Clearly, ACENAV’s participation was simply to assume responsibility
over the cargo when they were unloaded from the vessel
Re: ACENAV’s being a MERE AGENT (not SHIP AGENT)
 Article 1897 of the Civil Code provides that an agent is not
personally liable to the party with whom he contracts, unless he
expressly binds himself or exceeds the limits of his authority
without giving such party sufficient notice of his powers.
 Records are bereft of any showing that ACENAV exceeded its
authority
 Neither was it alleged, much less proved, that ACENAV’s limited
obligation as agent of the shipper, CARDIA, was not known to
HEINDRICH
 o there is dearth of evidence showing that it was
responsible for the supposed defective packing of
the goods upon which the award was based
3 Saludo v. CA, G.R. No. Crispina Galdo Saludo, mother of the petitioners, died in Chicago,
95536, 23 March 1992 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
carrier’s 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 mother’s remains. But she
was told they did not know anything about it. She then called
Pomierski that her mother’s 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.
 since CARDIA was not impleaded as a party in the instant
suit, the liability attributed upon it by the CA on the basis of
its finding that the damage sustained by the cargo was due to
improper packing cannot be borne by ACENAV
 As mere agent, ACENAV cannot be made responsible or held
accountable for the damage supposedly caused by its
principal
Were the two airline companies (TWA and PAL) liable? YES.
Nature of bill of lading
 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.
 The two-fold character of a bill of lading is all too familiar: it is
a receipt as to the quantity and description of the goods shipped
and a contract to transport the goods to the consignee or other
person therein designated, on the terms specified in such
instrument.
Designation of bill of lading immaterial
 The designation is immaterial. Such instrument may be called a
shipping receipt, forwarder’s receipt and receipt for transportation.
 Freight tickets for bus companies as well as receipts for cargo
transported by all forms of transportation, whether by sea or land,
fall within the definition. Under the Tariff and Customs Code, a bill
of lading includes airway bills of lading.
When bill of lading issued; Inverse order not prohibited by law
 Since a bill of lading acknowledges receipt of goods to be
transported, delivery of the goods to the carrier normally precedes
the issuance of the bill; or, to some extent, delivery of the goods
and issuance of the bill are regarded in commercial practice as
simultaneous acts.
 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.
Receipt a prima facie evidence of delivery to 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.

Bill of lading vis-à-vis estoppel

 An airway bill estops the carrier from denying receipt of goods of
the quantity and quality described in the bill.
 However, a bill of lading may contain constituent elements of
estoppel and thus become something more than a contract
between the shipper and the carrier.
 However, 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 a 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.

Explanation overcoming presumption that remains were delivered

and received by TWA and PAL
 Herein, Philippine Vice Consul in Chicago, Illinois, Bienvenido M.
Llaneta, at 3:00 p.m. on 26 October 1976 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 Galdo Saludo.
 On the same date, 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 throughout the
nation (U.S.A.), they furnish the air pouch which the casket is
enclosed in, and they see that the remains are taken to the proper
air freight terminal.
 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. PAL Airway Bill 079- 01180454
Ordinary was issued wherein the requested routing was from
Chicago to San Francisco on board TWA Flight 131 of 27 October
1976, and from San Francisco to Manila on board PAL Flight 107
of the same date, and from Manila to Cebu on board PAL Flight 149
of 29 October 1976.

PAL’s explanation
 On 26 October 1976 the cargo containing the casketed remains of
Crispina Saludo was booked for PAL Flight PR-107 leaving San
Francisco for Manila on 27 October 1976.
 PAL Airway Bill 079 01180454 was issued, not as evidence of
receipt of delivery of the Cargo on 26 October 1976, but merely as
a confirmation of the booking thus made for the San Francisco-
Manila flight scheduled on 27 October 1976.
 Actually, it was not until 28 October 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 7:45 p.m. on
said date. 11.

 Article 1736 NCC; Period where extraordinary responsibility

observed by common carrier; When delivery made 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.

PAL and TWA not liable for switching of caskets prior to their
receipt of agreed cargo
 While 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.
 Herein, the body intended to be shipped as agreed upon was really
placed in the possession and control of PAL on 28 October 1976
and it was from that date that TWA and PAL became responsible
for the agreed cargo under their undertakings in PAL Airway Bill
079-01180454.
 Consequently, for the switching of caskets prior thereto which was
not caused by them., and subsequent events caused thereby, TWA
and PAL cannot be held liable.

TWA without authority, even prohibited, to verify contents of

casket
 When the cargo was received from C.M.A.S. at the Chicago airport
terminal for shipment, which was supposed to contain the remains
of Crispina Saludo, Air Care International and/or TWA, had no way
of determining its actual contents, since the casket was
hermetically sealed by the Philippine Vice-Consul in Chicago and
in an air pouch of C.M.A.S.,
 to the effect that Air Care International and/or TWA had to rely
on the information furnished by the shipper regarding the cargo’s
content. Neither could Air Care International and/or TWA open the
casket for further verification, since they were not only without
authority to do so, but even prohibited.

Pomierski & Son delivered casket to CMAS, and not to TWA

 It was not to TWA, but to C.M.A.S. that the Pomierski & Son Funeral
Home delivered the casket containing the remains of Crispina
Saludo.
 TWA would have no knowledge therefore that the remains of
Crispina Saludo were not the ones inside the casket that was being
presented to it for shipment.
 TWA would have to rely on the representations of C.M.A.S. The
casket was hermetically sealed and also sealed by the Philippine
Vice Consul in Chicago.
 TWA or any airline for that matter would not have opened such
sealed casket just for the purpose of ascertaining whose body was
inside and to make sure that the remains inside were those of the
particular person indicated to be by C.M.A.S.
 TWA had to accept whatever information was being furnished by
the shipper or by the one presenting the casket for shipment.
 And so as a matter of fact, TWA carried to San Francisco and
transferred to defendant PAL a shipment covered by or under PAL
Airway Bill 079-ORD-01180454, the airway bill for the shipment of
the casketed remains of Crispina Saludo.
 Only, it turned out later, while the casket was already with PAL, that
what was inside the casket was not the body of Crispina Saludo so
much so that it had to be withdrawn by C.M.A.S. from PAL.
 The body of Crispina Saludo had been shipped to Mexico.
 The casket containing the remains of Crispina Saludo was
transshipped from Mexico and arrived in San Francisco the
following day on board American Airlines. It was immediately
loaded by PAL on its flight for Manila.
 The foregoing points at C.M.A.S. as the one responsible for the
switching or mix-up of the two bodies at the Chicago Airport
terminal, and started a chain reaction of the misshipment of
the body of Crispina Saludo and a one-day delay in the delivery
thereof to its destination.

Right of carrier to require good faith on part of persons delivering

goods; Right of carrier to know contents when it has reasonable
ground to suspect goods are dangerous or of illegal character
 It is the right of the carrier to require good faith on the part of those
persons who deliver goods to be carried, and enter into contracts
with it, and inasmuch as the freight may depend on the value of the
article to be carried, the carrier ordinarily has the right to inquire as
to its value.
 Ordinarily, too, it is the duty of the carrier to make inquiry as to the
general nature of the articles shipped and of their value before it
consents to carry them; and its failure to do so cannot defeat the
shipper’s right to recovery of the full value of the package if
lost, in the absence of showing of fraud or deceit on the part
of the shipper.
 In the absence of more definite information, the carrier has the right
to accept shipper’s marks as to the contents of the package offered
for transportation and is not bound to inquire particularly about them
in order to take advantage of a false classification and where a
shipper expressly represents the contents of a package to be of a
designated character, it is not the duty of the carrier to ask for a
repetition of the statement nor disbelieve it and open the box and
see for itself.
 However, where a common carrier has reasonable ground to
suspect that the offered goods are of a dangerous or illegal
character, the carrier has the right to know the character of such
goods and to insist on an inspection, if reasonable and practical
 under the circumstances, as a condition of receiving and
transporting such goods.

Common carrier entitled to fair representation of nature and value

of goods to be carried; Right of carrier to conduct an inspection
 A common carrier is entitled to fair representation of the nature and
value of the goods to be carried, with the concomitant right to rely
thereon, and further noting at this juncture that a carrier has no
obligation to inquire into the correctness or sufficiency of such
information.
 The consequent duty to conduct an inspection thereof arises in the
event that there should be reason to doubt the veracity of such
representations.
 Therefore, to be subjected to unusual search, other than the
routinary inspection procedure customarily undertaken, there must
exist proof that would justify cause for apprehension that the
baggage is dangerous as to warrant exhaustive inspection, or even
refusal to accept carriage of the same; and it is the failure of the
carrier to act accordingly in the face of such proof that constitutes
the basis of the common carrier’s liability.

CMAS classified as forwarder, is an agent of the shipper and not

of the carrier
 While the actual participation of CMAS has been sufficiently and
correctly established, to hold that it acted as agent for TWA and
PAL would be both an inaccurate appraisal and an unwarranted
categorization of the legal position it held in the entire transaction.
 It bears repeating that CMAS was hired to handle all the necessary
shipping arrangements for the transportation of the human remains
of Crispina Saludo to Manila.
Hence, it was to CMAS that the Pomierski & Son Funeral Home, as
shipper, brought the remains of Saludo for shipment, with Maria Saludo
as consignee.
 Thereafter, CMAS booked the shipment with PAL through the
carrier’s agent, Air Care International.
 With its functions, CMAS may accordingly be classified as a
forwarder which, by accepted commercial practice, is regarded as an
agent of the shipper and not of the carrier.
 As such, it merely contracts for the transportation of goods by
carriers, and has no interest in the freight but receives compensation
from the shipper as his agent.

CMAS is actual culprit

 The facts of the case would point to CMAS as the culprit. Equally
telling of the more likely possibility of CMAS’ liability is the Saludos’
letter to and demanding an explanation from CMAS, regarding the
statement of TWA and PAL laying the blame on CMAS for the
incident, clearly allude to CMAS as the party at fault.
 This is tantamount to an admission by the Saludos that they
consider TWA and PAL without fault, or is at the very least
indicative of the fact that the Saludos entertained serious doubts as
to whether TWA and PAL were responsible for the unfortunate turn
of events.

Court cannot grant damages at expense of TWA and PAL; Possible

liability of CMAS best deferred to another time and addressed to
another forum
 The Saludos’ grief over the death of their mother was aggravated
by the unnecessary inconvenience and anxiety that attended their
efforts to bring her body home for a decent burial.
 But, as much as the Court would like to give them consolation for
their undeserved distress, the Court is barred by the inequity of
allowing recovery of the damages prayed for by them at the
expense of TWA and PAL whose fault or negligence in the very acts
imputed to them has not been convincingly and legally
demonstrated.
 Neither was the Court prepared to delve into, much less definitively
rule on, the possible liability of CMAS as the evaluation and
adjudication of the same is not what is presently at issue and is best
deferred to another time and addressed to another forum.

Carrier did not undertake to carry cargo aboard any specified

aircraft
 The carrier did not undertake to carry the cargo aboard any
specified aircraft, in view of the condition on the back of the airway
bill which provides that:
i. “It is agreed that no time is fixed for the completion of
carriage hereunder and that Carrier may without notice
substitute alternate carriers or aircraft.
ii. Carrier assumes no obligation to carry the goods by any
specified aircraft or over any particular route or routes or
to make connection at any point according to any
particular schedule, and
iii. Carrier is hereby authorized to select, or deviate from the
route or routes of shipment, notwithstanding that the
same may be stated on the face hereof. The shipper
guarantees payment of all charges and advances.”
 Hence, when TWA shipped the body on an earlier flight and on a
different aircraft, it was acting well within its rights. TWA can use
substitute aircraft even without notice and without the assumption
of any obligation whatsoever to carry the goods on any specified
aircraft is clearly sanctioned by the contract of carriage as
specifically provided for under the conditions thereof.

Terms clear, no interpretation needed

 The terms are clear enough as to preclude the necessity to probe
beyond the apparent intendment of the contractual provisions.
 There is no ambiguity in the terms of the airway bill to warrant the
application of the rules on interpretation of contracts and
documents.

Statement on the face of the airway bill

The statement on the face of the airway bill properly and completely
reads “Carrier certifies goods described below were received for
carriage subject to the Conditions on the reverse hereof the goods then
being in apparent good order and condition except as noted hereon.”

Carrier not an insurer against delay in transportation of goods in

absence of a special contract
 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 is to be determined from the circumstances surrounding
the case and by application of the ordinary rules for the
interpretation of contracts.
Mendoza vs. PAL; Delayed delivery of air cargo
 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 therefore,”
o The 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).

Specification of flights does not constitute a special contract

 To countenance a postulate that the specification of the flights and
dates of departures and arrivals constitute a special contract (that
would prevail over the printed stipulations at the back of the airway
bill)
 would unduly burden the common carrier for that would have the
effect of unilaterally transforming every single bill of lading or trip
ticket into a special contract by the simple expedient of filling it up
with the particulars of the flight, trip or voyage, and thereby
imposing upon the carrier duties and/or obligations which it may not
have been ready or willing to assume had it been timely advised
thereof.

Ordinary prudence required of person entering in contract

 The fact that the challenged condition 5 was printed at the back of
the airway bill militate against its binding effect on the Saludos as
parties to the contract, for there were sufficient indications on the
face of said bill that would alert them to the presence of such
additional condition to put them on their guard.
 Ordinary prudence on the part of any person entering or
contemplating to enter into a contract would prompt even a cursory
examination of any such conditions, terms and/or stipulations.

Acceptance of bill of lading without dissent raises presumption

that all terms brought to knowledge of shipper and agreed to by
him
 The acceptance of a bill of lading without dissent raises a
presumption that all terms therein were brought to the knowledge
of the shipper and agreed to by him, and in the absence of fraud or
 mistake, he is estopped from thereafter denying that he assented
to such terms.
 This rule applies with particular force where a shipper accepts a bill
of lading with full knowledge of its contents, and acceptance, under
such circumstances makes it a binding contract.
 In order that any presumption of assent to a stipulation in a bill of
lading limiting the liability of a carrier may arise, it must appear that
the clause containing this exemption from liability plainly formed a
part of the contract contained in the bill of lading.
 A stipulation printed on the back of a receipt or bill of lading or on
papers attached to such receipt will be quite as effective as if
printed on its face, if it is shown that the consignor knew of its terms.
 Thus, where a shipper accepts a receipt which states that its
conditions are to be found on the back, such receipt comes within
the general rule, and the shipper is held to have accepted and to
be bound by the conditions there to be found.

When contract of adhesion void and unenforceable

 A contract of adhesion may be struck down as void and
unenforceable, for being subversive of public policy, only when the
weaker party is imposed upon in dealing with the dominant
bargaining party and is reduced to the alternative of taking it or
leaving it, completely deprived of the opportunity to bargain on
equal footing.

Ong Yiu vs. CA; Contracts of adhesion not entirely prohibited

 The case of Ong Yiu vs. Court of Appeals, et al. instructs that
contracts of adhesion are not entirely prohibited.
 The one who adheres to the contract is in reality free to reject it
entirely; if he adheres, he gives his consent.
 Herein, the Saludos, far from being the weaker party in the
situation, duly signified their presumed assent to all terms of the
contract through their acceptance of the airway bill and are
consequently bound thereby.
 It cannot be gainsaid that the Saludos were not without several
choices as to carriers in Chicago with its numerous airways and
airlines servicing the same.

Condition serves as insulation to liability when flight routes and

schedules change; Changes should be justified
 Although Condition 5 of the airway bill is binding upon the parties
to and fully operative in the present transaction, it does not mean,
that the carriers can at all times whimsically seek refuge from
 liability in the exculpatory sanctuary of Condition 5 or arbitrarily vary
routes, flights and schedules to the prejudice of their customers.
 This condition only serves to insulate the carrier from liability in
those instances when changes in routes, flights and schedules are
clearly justified by the peculiar circumstances of a particular case,
or by general transportation practices, customs and usages, or by
contingencies or emergencies in aviation such as weather
turbulence, mechanical failure, requirements of national security
and the like.
 And even as it is conceded that specific routing and other
navigational arrangements for a trip, flight or voyage, or variations
therein, generally lie within the discretion of the carrier in the
absence of specific routing instructions or directions by the shipper,
it is plainly incumbent upon the carrier to exercise its rights with due
deference to the rights, interests and convenience of its customers.

Common carrier has implicit duty to carry property within

reasonable time and guard against delay; Liability of carrier for
unreasonable delay
 A common carrier undertaking to transport property has the implicit
duty to carry and deliver it within a 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.
 Herein, 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 PAL and TWA.

TWA knew urgency of shipment and actually carried the remains

on earlier flight
 Herein, TWA knew of the urgency of the shipment by reason of this
notation on the lower portion of the airway bill:
“All documents have been certified.
 Human remains of Cristina (sic) Saludo. Please return bag first
available flight to SFO.” Accordingly, TWA took it upon itself to carry
the remains of Crispina Saludo on an earlier flight, which it could do
under the terms of the airway bill, to make sure that there would be
enough time for loading said remains on the transfer flight on board
PAL.

No showing that personnel treated the Saludos in humiliating or

arrogant manner; What constitutes rude or discourteous conduct
 There was no showing of any humiliating or arrogant manner with
which the personnel of both TWA and PAL treated the Saludos.
 Even their alleged indifference is not clearly established.
 The initial answer of the TWA personnel at the counter that they did
not know anything about the remains, and later, their answer that
they have not heard anything about the remains, and the inability
of the TWA counter personnel to inform the Saludos of the
whereabouts of the remains, cannot be said to be total or complete
indifference to the latter.
 At any rate, it is any rude or discourteous conduct, malfeasance or
neglect, the use of abusive or insulting language calculated to
humiliate and shame passenger or bad faith by or on the part of the
employees of the carrier that gives the passenger an action for
damages against the carrier, and none of the above is obtaining in
the present case.

Although not in bad faith, actuations of TWA’s employees leave

must to be desired
 The manner in which TWA’s employees dealt with the Saludos was
not grossly humiliating, arrogant or indifferent as would assume the
proportions of malice or bad faith and lay the basis for an award of
the damages claimed. It must however, be pointed out that the
lamentable actuations of TWA’s employees leave much to be
desired, particularly so in the face of the Saludos’ grief over the
death of their mother, exacerbated by the tension and anxiety
wrought by the impasse and confusion over the failure to ascertain
over an appreciable period of time what happened to her remains.

Airline companies admonished to require personnel to be more

accommodating towards customers and general public; Contract
of carriage different from other contractual relations, and is not a
mere contract for transportation but also treatment with courtesy
and consideration
 Airline companies are hereby sternly admonished that it is their duty
not only to cursorily instruct but to strictly require their personnel to
be more accommodating towards customers, passengers and the
general public.
 After all, common carriers such as airline companies are in the
business of rendering public service, which is the primary reason
for their enfranchisement and recognition in our law.
 Because the passengers in a contract of carriage do not contract
merely for transportation, they have a right to be treated with
kindness, respect, courtesy and consideration.
 A contract to transport passengers is quite different in kind and
degree from any other contractual relation, and generates a relation
attended with public duty.
 The operation of a common carrier is a business affected with
public interest and must be directed to serve the comfort and
convenience of passengers.
 Passengers are human beings with human feelings and emotions;
they should not be treated as mere numbers or statistics for
revenue.

Apathy not legally reprehensible but is morally deplorable

 Herein, the Saludos were not to be regaled with extra special
attention.
 They were, however, entitled to the understanding and humane
consideration called for by and commensurate with the
extraordinary diligence required of common carriers, and not the
cold insensitivity to their predicament.
 The airline’s counter personnel were totally helpless about the
situation.
 Common Sense could and should have dictated that they exert a
little extra effort in making a more extensive inquiry, by themselves
or through their superiors, rather than just shrug off the problem
with a callous and uncaring remark that they had no knowledge
about it.
 With all the modern communications equipment readily available to
them, which could have easily facilitated said inquiry and which are
used as a matter of course by airline companies in their daily
operations, their apathetic stance while not legally reprehensible is
morally deplorable.

No attribution of discourtesy or indifference against PAL

 No attribution of discourtesy or indifference has been made against
PAL by the Saludos and, in fact, Maria Saludo testified that it was
to PAL that they repaired after failing to receive proper attention
from TWA.
 It was from PAL that they received confirmation that their mother’s
remains would be on the same flight to Manila with them.

When moral and exemplary damages, or attorney’s fees, awarded

 Moral damages may be awarded for willful or fraudulent breach of
contract or when such breach is attended by malice or bad faith.
 However, in the absence of strong and positive evidence of fraud,
malice or bad faith, said damages cannot be awarded.

4 MAERSK LINE vs. CA  Petitioner Maersk Line is engaged in the transportation of
G.R. No. 94761, May 17,
1993
 Private respondent Efren Castillo, on the other hand, is the
 On Nov. 12, 1976, Castillo ordered from Eli Lilly, Inc. of Puerto
 Shipper Eli Lilly,Inc. advised Castillo through a Memorandum
goods by sea, doing business in the Philippines through its
general agent, Compania de Tabacos de Filipinas, while
private respondent Efren Castillo is the proprietor of Ethegal
Laboratories, a firm engaged in the manufacture of
pharmaceutical products.
proprietor of Ethegal Laboratories, a firm engaged in the
manutacture of pharmaceutical products.
Rico 600,000 empty gelatin capsules for the manufacture of his
pharmaceutical products. The capsules were placed in 6
drums of 100,000 capsules each valued at US$1,668.71.
of Shipment that the products were already shipped on board
 Neither can, there be an award of exemplary damages nor of
attorney’s fees as an item of damages in the absence of proof that
defendant acted with malice, fraud or bad faith.
Censurable conduct of TWA employees do not approximate
dimensions of fraud, malice or good faith
 The censurable conduct of TWA’s employees cannot, however, be
said to have approximated the dimensions of fraud, malice or bad
faith.
 It can be said to be more of a lethargic reaction produced and
engrained in some people by the mechanically routine nature of
their work and a racial or societal culture which stultifies what would
have been their accustomed human response to a human need
under a former and different ambience.
Award of nominal damages warranted; Articles 2221 and 2222 NCC
The facts show that the Saludos’ right to be treated with due courtesy in
accordance with the degree of diligence required by law to be exercised
by every common carrier was violated by TWA and this entitles them, at
least, to nominal damages from TWA alone.
 Articles 2221 and 2222 of the Civil Code make it clear that nominal
damages are not intended for indemnification of loss suffered but
for the vindication or recognition of a right violated or invaded.
 They are recoverable where some injury has been done but the
amount of which the evidence fails to show, the assessment of
damages being left to the discretion of the court according to the
circumstances of the case.
In the exercise of the Court’s discretion, the Court finds an
award of P40,000.00 as nominal damages in favor of the Saludos to be
a reasonable amount under the circumstances of the present case.
Issue: WON Maersk Line is liable for damages resulting from delay in
the delivery of the shipment in the absence in the bill of lading
of a stipulation on the period of delivery. YES
Held:
Content of bills of lading
The bill of lading covering the subject shipment among others, reads
“(6) GENERAL – (1) The Carrier does not undertake that the Goods
shall arrive at the port of discharge or the place of delivery at any
particular time or to meet any particular market or use and save as is
provided in clause 4 the Carrier shall in no circumstances be liable for
any direct, indirect or consequential loss or damage caused by delay. If
the Carrier should nevertheless be held legally liable for any such direct
 MV “Anders Maerskline” for shipment to the Philippines via
Oakland, California. In said Memorandum, shipper Eli Lilly, Inc.
specified the date of arrival to be April 3, 1977.
 However, for unknown reasons, said cargoes of capsules were
mis-shipped and diverted to Richmond, Virginia, USA and then
transported back to Oakland, California, USA and with the
goods finally arriving in the Philippines on June 10, 1977 or
after two (2) months from the date specified in the
memorandum.
 Consignee Castillo refused to take delivery of the goods on
account of its failure to arrive on time, and filed an action for
rescission of contract with damages against Maersk Line and
Eli Lilly alleging gross negligence and undue delay.
 Denying that it committed breach of contract, petitioner alleged
in its answer that the subject shipment was transported in
accordance with the provisions of the NCC covering bill of
lading and that its liability under the law on transportation of
good attaches only in case of loss, destruction or deterioration
of the goods as provided for in Article 1734 of Civil Code.
 For its part, Eli Lilly in its cross claim argued that the delay was
due solely to the negligence of Maersk Line.
 The Trial Court dismissed the complaint against Eli Lilly and
the latter withdrew cross claim but TC still held Maersk liable
and CA affirmed with modifications.
 It is a long standing jurisprudential rule that a bill of lading operates
or indirect or consequential loss or damage caused by delay, such
liability shall in no event exceed the freight paid for the transport covered
by this Bill of Lading.”
This provision in the bill of lading has the effect of practically leaving the
date of arrival of the subject shipment on the sole determination and will
of the carrier.
Contract of adhesion generally void, but not entirely prohibited
The provision at the back of the bill of lading, in fine print, is a contract
of adhesion. Generally, contracts of adhesion are considered void
since almost all the provisions of these types of contracts are prepared
and drafted only by one party, usually the carrier. The only participation
left of the other party in such a contract is the affixing of his signature
thereto, hence the term “adhesion”. Nonetheless, settled is the rule that
bills of lading are contracts not entirely prohibited. One who adheres to
the contract is in reality free to reject it in its entirety; if he adheres, he
gives his consent.
Nature of bill of lading; Magellan Manufacturing Marketing Corp.v.
CA
both as a receipt and as a contract. It is a receipt for the goods
shipped and a contract to transport and deliver the same as therein
stipulated. As a contract, it names the parties, which includes the
consignee, fixes the route, destination, and freight rates or charges, and
stipulates the rights and obligations assumed by the parties. Being a
contract, it is the law between the parties who are bound by its terms
and conditions provided that these are not contrary to law, morals,
good customs, public order and public policy. A bill of lading usually
becomes effective upon its delivery to and acceptance by the shipper.
It is presumed that the stipulations of the bill were, in the absence of
fraud, concealment or improper conduct, known to the shipper, and he
is generally bound by his acceptance whether he reads the bill or not.
Delivery of shipment or cargo must be made within a reasonable
time
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.
Carrier generally not an insurer of delay in transportation of goods;
Saludo vs. CA

In Saludo, Jr. v. Court of Appeals (207 SCRA 498 [1992]) the Court held
that “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 is to be
determined from the circumstances surrounding the case and by
application of the ordinary rules for the interpretation of contracts.”

Awareness of shipment’s arrival makes execution of another

contract to indicate date of arrival of shipment a superfluity

An examination of the subject bill of lading shows that the subject

shipment was estimated to arrive in Manila on 3 April 1977. While
there was no special contract entered into by the parties indicating the
date of arrival of the subject shipment, Maersk Line 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.

Delay in present case beyond reasonableness

Herein, a delay in the delivery of the goods spanning a period of 2

months and 7 days falls way 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 Maersk Line for transport to Manila via Oakland, California;
but through Maersk Line’s negligence was misshipped to Richmond,
Virginia. Maersk Lines’ insistence that it cannot be held liable for
the delay finds no merit.

Award of actual and compensatory damages proper

 It is settled that actual and compensatory damages require substantial
proof. Herein, Castillo was able to sufficiently prove through an invoice,
certification from the issuer of the letter of credit and the Memorandum
of Shipment, the amount he paid as costs of the credit line for the subject
goods. Therefore, appellate court acted correctly in affirming the award
of P11,680.97 as costs of said credit line.

Award of moral damages proper

As to the propriety of the award of moral damages, Article 2220 of the

Civil Code provides that moral damages may be awarded in “breaches
of contract where the defendant acted fraudulently or in bad faith.”
Herein, Maersk Line never even bothered to explain the cause for the
delay, i.e. more than 2 months, in the delivery of the subject shipment.
Under the circumstances of the case, Maersk Line is liable for breach of
contract of carriage through gross negligence amounting to bad faith.
Thus, the award of moral damages is therefore proper in the case.

Award of exemplary damages proper

Exemplary damages may be awarded to Castillo. In contracts,

exemplary damages may be awarded if the defendant acted in a
wanton, fraudulent, reckless, oppressive or malevolent manner. There
was gross negligence on the part of the petitioner mishipping the subject
goods destined for Manila but was inexplicably shipped to Richmond,
Virginia, U.S.A. Gross carelessness or negligence constitutes wanton
misconduct, hence, exemplary damages may be awarded to the
aggrieved party.

Award of attorney’s fees proper; Award of 30% of total damages

unconscionable

Although attorney’s fees are generally not recoverable, a party can be

held liable for such if exemplary damages are awarded (Article 2208,
New Civil Code). Herein, Castillo is entitled to reasonable attorney’s
fees since Maersk Line acted with gross negligence amounting to bad
faith. However, the award of 30% of the total damages awarded, except
those pertaining to attorney’s fees and litigation expenses in favor of
Castillo, are unconscionable. The same should then be deleted.

5 MOF Co. v. Shin Yang Facts: Issue:

Brokerage
Halla Trading Co., a company based in Korea, shipped to Manila Whether or not whether a consignee, who is not a signatory to the bill of
second-hand cars and other articles on board the vessel Hanjin lading, is bound by the stipulations thereof
Busan. The bill of lading covering the shipment, i.e., Bill of Lading
No. HJSCPUSI14168303, prepared by the carrier Hanjin Shipping
Co., Ltd. (Hanjin),
 1. named respondent Shin Yang Brokerage Corp. (Shin
Yang) as the consignee
2. indicated that payment was on a Freight Collect basis, i.e.,
that the consignee/receiver of the goods would be the one
to pay for the freight and other charges in the total amount
of P57,646.00.
The shipment arrived in Manila on October 29, 2001. Thereafter,
petitioner MOF Company, Inc. (MOF), Hanjins exclusive general
agent in the Philippines, repeatedly demanded the payment of
ocean freight, documentation fee and terminal handling charges
from Shin Yang.
Shin Yang failed and refused to pay contending:
1. that it did not cause the importation of the goods,
2. that it is only the Consolidator of the said shipment,
3. that the ultimate consignee did not endorse in its favor the
original bill of lading and
4. that the bill of lading was prepared without its consent
Thus, MOF filed a case for sum of money before MeTC Pasay.
MOF alleged that Shin Yang, a regular client, caused the
importation and shipment of the goods and assured it that ocean
freight and other charges would be paid upon arrival of the goods
in Manila. Yet, after Hanjin's compliance, Shin Yang unjustly
breached its obligation to pay. MOF argued that Shin Yang, as
the named consignee in the bill of lading, entered itself as a
party to the contract and bound itself to the Freight Collect
arrangement. MOF thus prayed for the payment of P57,646.00
representing ocean freight, documentation fee and terminal
handling charges as well as damages and attorneys fees.
Shin Yang insists that MOF has no evidence to prove that it
consented to take part in the contract of affreightment. Shin Yang
argues that MOF miserably failed to present any evidence to prove
that it was the one that made preparations for the subject shipment,
or that it is an actual shipping practice that forwarders/consolidators
as consignees are the ones that provide carriers details and
information on the bills of lading.
MeTC: in favor of MOF
RTC: in favor of MOF
CA: reversed
MR denied Certiorari
Echoing CA decision, Shin Yang contends that a bill of lading is
essentially a contract between the shipper and the carrier and
ordinarily, the shipper is the one liable for the freight charges. A
Held:
Yes, but Shin Yang cannot be held liable in this case.
In sum, a consignee, although not a signatory to the contract of carriage
between the shipper and the carrier, becomes a party to the contract by
reason of either
a) the relationship of agency between the consignee and the shipper/
consignor;
b) the unequivocal acceptance of the bill of lading delivered to the
consignee, with full knowledge of its contents or
c) availment of the stipulation pour autrui, i.e., when the consignee, a
third person, demands before the carrier the fulfillment of the stipulation
made by the consignor/shipper in the consignees favor, specifically the
delivery of the goods/cargoes shipped.
In the instant case, Shin Yang consistently denied in all of its pleadings
that it authorized Halla Trading, Co. to ship the goods on its behalf; or
that it got hold of the bill of lading covering the shipment or that it
demanded the release of the cargo. Basic is the rule in evidence that
the burden of proof lies upon him who asserts it, not upon him who
denies, since, by the nature of things, he who denies a fact cannot
produce any proof of it. Thus, MOF has the burden to controvert all
these denials, it being insistent that Shin Yang asserted itself as the
consignee and the one that caused the shipment of the goods to the
Philippines.
In civil cases, the party having the burden of proof must establish his
case by preponderance of evidence, which means evidence which is of
greater weight, or more convincing than that which is offered in
opposition to it. Here, MOF failed to meet the required quantum of proof.
Other than presenting the bill of lading, which, at most, proves that the
carrier acknowledged receipt of the subject cargo from the shipper and
that the consignee named is to shoulder the freightage, MOF has not
adduced any other credible evidence to strengthen its cause of action.
It did not even present any witness in support of its allegation that it was
Shin Yang which furnished all the details indicated in the bill of lading
and that Shin Yang consented to shoulder the shipment costs. There is
also nothing in the records which would indicate that Shin Yang was an
agent of Halla Trading Co. or that it exercised any act that would bind it
as a named consignee. Thus, the CA correctly dismissed the suit for
failure of petitioner to establish its cause against respondent.
 consignee, on the other hand, is initially a stranger to the bill of
lading and can be liable only when the bill of lading specifies that
the charges are to be paid by the consignee. This liability arises
from either a) the contract of agency between the shipper/consignor
and the consignee; or b) the consignees availment of the stipulation
pour autrui drawn up by and between the shipper/ consignor and
carrier upon the consignees demand that the goods be delivered to
it. Shin Yang contends that the fact that its name was mentioned as
the consignee of the cargoes did not make it automatically liable for
the freightage because it never benefited from the shipment. It
never claimed or accepted the goods, it was not the shippers agent,
it was not aware of its designation as consignee and the original bill
of lading was never endorsed to it.

6 Macam vs. Court of Appeals
FACTS:
The petitioner, 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
valued at US$5,950.00 covered by Bill of Lading No. HKG 99012
and 1,611 boxes of fresh mangoes with a value of US$14,273.46
covered by Bill of Lading No. HKG 99013. The Bills of Lading
contained the following pertinent provision: “One of the Bills of
Lading must be surrendered duly endorsed in exchange for the
goods or delivery order”. The shipment was bound for Hongkong
with PAKISTAN BANK as consignee and Great Prospect Company
of Rowloon (GPC) as notify party.
On 5 April 1989, WALLEM submitted in evidence a telex dated 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 shipper’s
request since “for prepaid shipt ofrt charges already fully paid.”
Petitioner was named therein as the shipper and GPC as consignee
with respect to Bill of Lading Nos. HKG 99012 and HKG 99013.
ISSUE: Whether or not the respondents are liable to petitioner for
releasing the goods to GPC without the bill of lading or bank guarantee.
RULING:
No. 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. With the telex
instructing delivery of various shipments to GPC as consignee, not to
PAKISTAN BANK since the bank has the original copy of the Bill of
Lading.
The petition is DENIED. The decision of respondent Court of Appeals of
13 March 1996 dismissing the complaint of petitioner Benito Macam and
the counterclaims of respondents China Ocean Shipping Co. and/or
Wallem Philippines Shipping, Inc., as well as its resolution of 5 July 1996
denying reconsideration, is AFFIRMED.

On 6 April 1989, per letter of credit requirement, copies of the bills

of lading and commercial invoices were submitted to petitioner’s
depository bank, SOLIDBANK, which paid petitioner in the advance
of the total value of the shipment of US$20,223.46. i
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. Petitioner constrained to return the amount paid by
 SOLIDBANK and demanded payment from WALLEM but to no
avail.

On 25 September 1991 petitioner sought collection of the value of

the shipment of US$20,223.46 or its equivalent of P546,033.42
from respondents before the Regional Trial Court of Manila, based
on the delivery of the shipment to GPC without presentation of the
bills of lading and bank guarantee.

Respondents contented that the shipment was delivered to GPC

without presentation of the bills of lading and bank guarantee per
request of the petitioner himself because the shipment consistent
of perishable goods. The request was stated in the aforementioned
telex dated 5 April 1989 which the petitioner argued that, assuming
there was such an instruction, the consignee referred to was
PAKISTAN BANK and not GPC.


7 7. Keng Hua Paper Products SSS: Shipment to KENG HUA, SEALAND was shipping co.  Is Keng Hua liable under the bill of lading?
Co. Inc, v CA Upon arrival in Manila, KENG HUA failed to discharge the
shipment  Several demands were made by SEALAND  Case YES. Bill of lading valid and binding. The prolonged failure of
1998 was filed by SEALAND  RTC and CA decided in favor or petitioner to receive and discharge the cargo from the private
SEALAND  APPEAL to SC respondent’s vessel constitutes a violation of the terms of the bill
of lading. It should thus be liable for demurrage to the former.
Sea-land Service, Inc (SEALAND) is a foreign shipping
Bill of Lading corporation licensed to do business in the Philippines. It received KENG HUA
at its Hong Kong terminal a sealed container, Container No. SEAU In RTC, Claims that the shipment SEALAND was asking KENG HUA
A bill of lading serves two
67523, containing seventy- six bales of “unsorted waste paper” for to accept was 10 metric tons more than the remaining balance, that if
functions. First, it is a receipt
shipment to petitioner Keng Hua Paper Products Co. (KENG defendant were to accept the shipment, it would be violating Central
for the goods shipped. HUA) in Manila. A bill of lading was issued by SEALAND. Bank rules and regulations and custom and tariff laws; that plaintiff had
Second, it is a contract by no cause of action against the defendant because the latter did not
which three parties, namely, Shipment was discharged at the Manila International Container hire the former to carry the merchandise; that the cause of action
the shipper, the carrier, and Port, Notices of arrival were transmitted to KENG HUA but they should be against the shipper which contracted the plaintiff’s services
the consignee undertake failed to discharge the shipment during the free time/grace period. and not against defendant; and that the defendant duly notified the
specific responsibilities and plaintiff about the wrong shipment through a letter dated January 24,
assume stipulated Shipment remained inside SEALAND’s container from the 1983.
obligations. expiration of the free time period till the shipment was unloaded (
July 29 ‘82 – Nov 22 ‘ 83) for a total for 481 days. Demurrage In SC, It argues that is should not be bound since it never gave its
charges were incurred, demands were made but KENG HUA still consent thereto. It argues that its subsequent actions belie the finding
failed to pay. Hence, a case was filed against them for collection that it accepted the terms and conditions printed therein.
Acceptance with full and damages.
knowledge = presumption of  Petitioner points to its January 24, 1983 letter to the
perfected and binding RTC found KENG HUA liable for demurrage, attorney’s fees and private respondent, stressing “that its acceptance of the
contract expenses of litigation. bill of lading would be tantamount to an act of smuggling
as the amount it had imported (with full documentary
 the acceptance of a bill of Upon appeal, the CA affirmed the RTC decision support) was only (at that time) for 10,000 kilograms and
lading by the shipper and Hence, this petition for review. not for 20,313 kilograms as stated in the bill of lading”
the consignee, with full and “could lay them vulnerable to legal sanctions for
knowledge of its violation of customs and tariff as well as Central Bank
contents, gives rise to the laws.”
presumption that the
SUPREME COURT
 same was a perfected
and binding contract.
 A “bill of lading delivered
and accepted constitutes
the contract of carriage
even though not
signed,”10 because the
“(a)cceptance of a paper
containing the terms of a
proposed contract
generally constitutes an
acceptance of the
contract and of all of its
terms and conditions of
which the acceptor has
actual or constructive
notice.”
8 UCPB General Insurance Co.,
Inc. v. Aboitiz Shipping Corp.,
On June 1991, 3 units of waste water treatment plant with
accessories were purchased by San Miguel Corp from Super Max
1. Petitioner’s inaction for such a long period conveys the clear
inference that it accepted the terms and conditions of the bill
of lading.
Having been afforded an opportunity to examine the said document,
petitioner did not immediately object to or dissent from any term or
stipulation therein. It was only six months later, on January 24, 1983,
that petitioner sent a letter to private respondent saying that it could
not accept the shipment.
2. Bill of Lading was impliedly accepted by petitioner
Petitioner’s reliance on Notice of Refused or On Hand freight as proof
of non acceptance is not of consequence. It was not written by
petitioner; it was sent by private respondent to petitioner in November
1982, or four months after petitioner received the bill of lading. If the
notice has any legal significance at all, it is to highlight petitioner’s
prolonged failure to object to the bill of lading.
3. Bill of Lading was a valid and perfected contract between the
shipper
In the case at bar, both lower courts held that the bill of lading was a
valid and perfected contract between the shipper (Ho Kee), the
consignee (Petitioner Keng Hua), and the carrier (Private Respondent
Sea-Land). Section 17 of the bill of lading provided that the shipper
and the consignee were liable for the payment of demurrage charges
for the failure to discharge the containerized shipment beyond the
grace period allowed by tariff rules. Applying said stipulation, both
lower courts found petitioner liable.
SC: ** Attorneys fees deleted, Interest is 6 %, then adjusted to
12% pa computed from time said judgment became final and
executor until full satisfaction
NOTA BENE
In a letter of credit, there are three distinct and independent contracts:
(1) the contract of sale between the buyer and the seller, (2) the
contract of the buyer with the issuing bank, and (3) the letter of credit
proper in which the bank promises to pay the seller pursuant to the
terms and conditions stated therein.
A transaction involving the purchase of goods may also require,
apart from a letter of credit, a contract of transportation specially
when the seller and the buyer are not in the same locale or
country, and the goods purchased have to be transported to the
latter.
Hence, the contract of carriage, as stipulated in the bill of lading in the
present case, must be treated independently of the contract of sale
between the seller and the buyer, and the contract for the issuance of a
letter of credit between the buyer and the issuing bank.
Issue:
G.R. No. 168433, 10 February
2009
Engineering. The goods came from Charleston, USA and arrived in
port of Manila on board MV Scandutch Star. From Manila it was
transported to Cebu on board of Aboitiz Supercon II. In Cebu, with
clearance from the Bureau of Customs, the goods were delivered
and received by San Miguel at its plant site. It was then discovered
that the motor of the unit was damaged.
Pursuant to the insurance agreement, UCPB General Insurance
paid San Miguel P1,703,381.40 representing the value of the
damaged unit. In turn, San Miguel executed a subrogation form in
favor of UCPB. Then, UCPB filed a complaint on July 1992 as
subrogee of San Miguel seeking to recover from Aboitiz. Aboitiz
moved to admit East Asiatic Co. as general agent of DAMCO
Intermodal System, the ship owner. RTC held Aboitiz, Eagle
Express Lines (Eagle Express) and DAMCO solidarily liable.
CA reversed the decision of the RTC and ruled that UCPBs right of
action did not accrue because UCPB failed to file a formal notice
within 24 hours from the damaged. In a memorandum, UCPB
asserts that the claim requirement does not apply to cases
concerning damages to the merchandise had already been known
to the carrier. UCPB revealed that the damage to the cargo was
found upon discharge from the foreign carrier witnessed by the
carrier’s representative who signed the request for bad order survey
and the turnover of bad order cargoes. This knowledge, UCPB
argues, dispenses with the need to give the carrier a formal notice
of claim. Incidentally, the carrier’s representative mentioned by
UCPB as present at the time the merchandise was unloaded was
in fact a representative of respondent Eagle Express Lines (Eagle
Express). UCPB further claims that the issue of the applicability of
Art. 366 of the Code of Commerce was never raised before the trial
court and should, therefore, not have been considered by the CA.
Eagle Express asserts that it cannot be held liable for the damage
to the merchandise as it acted merely as a freight forwarders agent
in the transaction. It allegedly facilitated the transhipment of the
cargo from Manila to Cebu but represented the interest of the cargo
owner, and not the carriers.
Aboitiz, on the other hand, points out, that it obviously cannot be
held liable for the damage to the cargo which, by UCPBs admission,
was incurred not during transhipment to Cebu on board one of
Aboitizs vessels, but was already existent at the time of unloading
in Manila. Aboitiz also argues that Art. 366 of the Code of
Commerce is applicable and serves as a condition precedent to the
accrual of UCPBs cause of action against it.
Pimentel Customs Brokerage Co. (Pimentel Customs) also
reiterates the applicability of Art. 366 of the Code of Commerce.
Whether UCPBs right of action did not accrue because UCPB failed to
file a formal notice within 24 hours from the damaged.
Ruling:
YES. UCPB obviously made a gross misrepresentation to the Court
when it claimed that the issue regarding the applicability of the Code of
Commerce, particularly the 24-hour formal claim rule, was not raised as
an issue before the trial court.
Interestingly enough, UCPB itself has revealed that when the shipment
was discharged and opened at the ICTSI in Manila in the presence of
an Eagle Express representative, the cargo had already been found
damaged. In fact, a request for bad order survey was then made and a
turnover survey of bad order cargoes was issued, pursuant to the
procedure in the discharge of bad order cargo. The shipment was then
repacked and transhipped from Manila to Cebu on board MV Aboitiz
Supercon II. When the cargo was finally received by SMC at its
Mandaue City warehouse, it was found in bad order, thereby confirming
the damage already uncovered in Manila.
The law clearly requires that the claim for damage or average must be
made within 24 hours from receipt of the merchandise if, as in this
case, damage cannot be ascertained merely from the outside
packaging of the cargo.’
The requirement to give notice of loss or damage to the goods is not
an empty formalism and protects the carrier by affording it an
opportunity to make an investigation of a claim while the matter is still
fresh and easily investigated so as to safeguard itself from false and
fraudulent claims.
The Court have construed the 24-hour claim requirement as a condition
precedent to the accrual of a right of action against a carrier for loss of,
or damage to, the goods. The shipper or consignee must allege and
prove the fulfilment of the condition. Otherwise, no right of action against
the carrier can accrue in favor of the former.
The shipment in this case was received by SMC on August 2, 1991.
However, as found by the Court of Appeals, the claims were dated
October 30, 1991, more than three (3) months from receipt of the
shipment and, at that, even after the extent of the loss had already been
determined by SMCs surveyor. The claim was, therefore, clearly filed
beyond the 24-hour time frame prescribed by Art. 366 of the Code of
Commerce.
Sec. 3(6) of the COGSA provides a similar claim mechanism as the
Code of Commerce but prescribes a period of three (3) days within
which notice of claim must be given if the loss or damage is not
apparent. The last paragraph of Sec. 3(6) dispenses with the written
notice if the state of the goods has been the subject of a joint survey
which, in this case, was the opening of the shipment in the presence of

9 CUA vs WALLEM  CUA sued WALLEM and ADVANCE SHIPPING for payment
PHILIPPINES SHIPPING of P2M for
(Brazilian soyabean) o damage to 218 tons
o and for shortage of 50 tons of shipment of Brazilian
Soyabean consigned to him
 it was evidenced by a bill of lading
 ADVANCE SHIPPING (foreign corp) – owner and manager of
M/V Argo Trader that carried the cargo
 WALLEM – Advance Shipping’s local agent
 ADVANCE SHIPPING’S MTD: Cua’s claim should have first
been brought to arbitration
o CUA: he, as a consignee, was not bound by the
Charter Party Agreement which was a contract
between the ship owner (ADVANCE SHIPPING) and
the charterers
o RTC: Cua was not bound by the arbitration clause in
the Charter Party Agreement
 WALLEM’S MTD
o Prescription, based Sec 3(6) of the Carriage of
Goods by Sea Act (COGSA): “the carrier and the
ship shall be discharged from all liability in respect of
loss or damage unless suit is brought within one
year after delivery of the goods
o DELIVERED: 16 Aug 1989
o COMPLAINT: 12 Nov 1990 (thus more than one
year)
 CUA denied claim of prescription. He referred to the 10 Aug
1990 telex message sent by Mr. A.R. Filder of Thomas Miller,
manager of the UK P&I Club, which stated that ADVANCE
SHIPPING agreed to extend the commencement of suit for 90
days
o From 16 Aug 1990 to 12 Nov 1990
o The extension was made with the concurrence of the
insurer of the vessel, the UK P&I Club
o A copy of the 10 Aug 1990 telex was supposedly
attached to CUA’s opposition
 WALLEM withdrew its MTD and adopted instead the
arguments of ADVANCE SHIPPING’s MTD
an Eagle Express representative. It should be noted at this point that
the applicability of the above-quoted provision of the COGSA was not
raised as an issue by UCPB before the trial court. The inspection of
the cargo in which Eagle Express’s representative had participated did
not lead to the waiver of the written notice under the Sec. 3(6) of the
COGSA. Eagle Express, after all, had acted as the agent of the freight
consolidator, not that of the carrier to whom the notice should have
been made.
Whether Cua’s claim for payment of damages against WALLEM
and ADVANCE SHIPPING has prescribed – NO, Cua timely filed
his claim
WALLEM and ADVANCE SHIPPING admitted the agreement
extending the period to file the claim
What is the applicable law? The COGSA
 The Carriage of Goods by Sea Act (COGSA) is the applicable law
for all contracts for carriage of goods by sea to and from
Philippine ports in foreign trade.
 Sec 3(6) of the COGSA: the carrier is discharged from liability for
loss or damage to the cargo “unless the suit is brought within 1
year after delivery of the goods or the date when the goods should
have been delivered.
 Jurisprudence, however, recognized the validity of an agreement
between he carrier and the shipper/consignee extending the one-
year period to file the claim.
 TIMELINE
o MV Argo Trader arrived in Manila on 8 July 1989
o Cua’s complaint filed on 12 Nov 1990
 Although complaint filed beyond the one-year period, Cua
additionally alleged in his complaint that “the defendants x x x
agreed to extend the time for filing of the action up to 12 Nov
1990)
o Such is a material averment under Sec 11, Rule 8 of the
Rules of Court which must be specifically denied by
respondents; otherwise, the allegation is deemed
admitted.
 SPECIFIC DENIAL
o Made by specifying each material allegation of fact, the
truth of which the defendant does not admit and,
whenever practicable, setting forth the substance of the
matters upon which he relies to support his denial
o Purpose of requiring the defendant to make a specific
denial is to make him disclose the matters alleged in the
complaint which he succinctly intends to disprove at the
trial, together with the matter which he relied upon to
support the denial
 Respondents failed to specifically deny Cua’s allegation of an
agreement extending the period to file an action to 12 Nov 1990

10 Domingo Ang v. American
Steamship Agencies, Inc.,
G.R. No. L-22491, 27 January
1967
Yan Yue and Teves entered
into a contract of carriage
wherein the former agreed to
sell and ship certain articles
on board the carrier, Nisso
Shipping Co, Ltd. in favour of
Teves as evinced in the bill of
 RTC: WALLEM and ADVANCE SHIPPING solidarily liable to
pay damages to CUA
 CA:
o The claim of prescription was meritorious
 The telex message was neither attached to
CUA’a opposition to WALLEM’s MTD, nor
presented during trial
o No basis for the RTC to conclude that the
prescriptive period was extended by the parties’
agreement
 CUA’s contention
o Extension was a fact that was already admitted by
respondents who may no longer assert the contrary
 Unless they sufficiently show that it was
made through palpable mistake or that no
admission was made
o WALLEM’s withdrawal of its MTD amounted to an
admission of the existence of the telex
o WALLEM’s withdrawal dispensed with the need for
him to present as evidence the telex message, since
RTC ruled that there is no more need to act on the
MTD
 WALLEM and ADVANCE SHIPPING’s contention
o No admission was made with respect to the
existence of the telex
o The telex was never attached to CUA’s opposition to
WALLEM’S MTD hence there was no need for them
to deny its existence
o WALLEM’s withdrawal of its MTD does not amount
to an admission of the existence of the telex, nor
does it amount to a waiver of the defense of
prescription

 Yau Yue Commercial Bank Ltd. Of Hongkong agreed to sell
140 packages of galvanized steel durzinc sheets to one
Herminio G. Teves (the date of said agreement is not shown in
the record) for $32,458.26. It is subject to the following terms
and conditions:
 (a) the purchase price should be covered by a bank draft for
the corresponding amount which should be paid by Herminio
G. Teves in exchange for the delivery to him of the
corresponding bill of lading to be deposited with a local bank,
the Hongkong & Shanghai Bank of Manila;
 (b) upon arrival of the articles in Manila, Teves would be
notified and he would have to pay the amount called for in the
 Wallem’s MTD simpy referred to the fact that the complaint was
filed beyond the one-year period but it did not contain a denial
of the extension
 Advance Shipping’s MTD focused solely on its contention that the
action was premature for failure to first undergo arbitration
 While the joint answer submitted by the respondents denied Cua’s
allegation of an extension, they made no further statement other
than a bare and unsupported contention that the complaint is
barred by prescription and/or laches.
o There was no factual basis for their belief that the
complaint had prescribed
 Since the COGSA is the applicable law, the respondents’
discussion to support their claim of prescription under Art 366 of
the Code of Commerce would not constitute a refutation of Cua’s
allegation of extension
 The presumed admission is further bolstered by the express
admission made by the respondent themselves in their
Memorandum “ This case was filed by [the] plaintiff on 11
November 1990 within the extended period agreed upon by
the parties to file suit.”
 In light of this admission, it would be unnecessary for Cua to
present a copy of the August 10, 1990 telex message to prove the
existence of the agreement. Thus, Cua timely filed a claim for the
damage to and shortage of the cargo.
CIVPRO:
 SC need not resolve the question of whether WALLEM actually
waived the defense of prescription
 An inquiry into this question is useless, as courts are empowered
to dismiss actions on the basis of prescription even if it is not
raised by the defendant so long as the facts supporting this
ground are evident from the records
 In the present case, what is decisive is whether the pleadings and
the evidence support a finding that Cua’s claim has prescribed,
and it is on this point that SC disagrees with the CA’s findings.
The CA failed to appreciate the admissions made by the
respondents in their pleadings that negate a finding of prescription
of Cua’s claim.
Has plaintiff-appellant’s cause of action prescribed under Section
3(6), paragraph 4 of the Carriage of Goods by Sea Act? (NO)/
Whether there was "loss" of the goods subject matter of the
complaint (NO)
COURT: Both parties admitted that there was no damage caused to the
goods which were delivered intact to Herminio G. Teves who did not file
any notice of damage.
A. ‘Loss’ is not defined in COGSA so recourse must be had to the
Civil Code which provides in Article 18 that, "In matters which
are governed by the Code of Commerce and special laws, their
 lading. Respondent American
Steamship Agencies is the
carrier’s agent. However,
upon the shipment’s arrival,
Teves didn’t pay the demand
draft of the ban and he
endorsed the bill of lading to
petitioner Ang. Despite his
non-payment, Teves got the
goods to the prejudice of Ang.
Thus, the latter filed a
complaint against the former
for the misdelivery of the
goods, but his action was
dismissed on the ground of
prescription, as provided in
the COGSA. The SC held in
the negative and ruled that the
one year prescriptive period
does not apply, using the Civil
Code’s definition of loss, since
there was no loss or damage
in this case. In fact, there was
misdelivery and in such case,
the prescriptive periods in the
NCC (10 years and 4 years)
are applicable.
1Section 3 (6), paragraph 4: In any event, the carrier and the ship shall be discharged from all liability in respect to loss or damage unless suit is brought within one year, after delivery of the goods
or the date when the goods should have been delivered.
corresponding demand draft, after which the bill of lading would
be delivered to him; and
 © Teves would present said bill of lading to the carrier’s agent,
American Steamship Agencies, Inc. which would then issue
the corresponding “Permit To Deliver Imported Articles” to be
presented to the Bureau of Customs to obtain the release of
the articles.
 Shipment. Under a shipping agreement (Bill of Lading), Yau
Yue through Tokyo Boeki Ltd. Of Tokyo, Japan, shipped the
articles at Yawata, Japan, on April 30, 1961 aboard the S.S.
TENSAI MARU, Manila, belonging to the Nissho Shipping Co.,
Ltd. Of Japan, of which the American Steamship Agencies, Inc.
is the agent in the Philippines.
 The bill of lading was indorsed to the order of and delivered to
Yau Yue by the shipper. Upon receipt thereof, Yau Yue drew a
demand draft together with the bill of lading against Herminio
G. Teves, through the Hongkong & Shanghai Bank.
 Arrival of the Goods. When the articles arrived in Manila on
or about May 9, 1961, Hongkong & Shanghai Bank notified
Teves, the “notify party” under the bill of lading, of the arrival of
the goods and requested payment of the demand draft
representing the purchase price of the articles.
 Non-payment. Teves did not pay the demand draft, prompting
the bank to make the corresponding protest. The bank likewise
returned the bill of lading and demand draft to Yau Yue which
indorsed the said bill of lading to Domingo Ang.
 Despite his non-payment, Teves was able to obtain a bank
guaranty in favor of the American Steamship Agencies, Inc., as
carrier’s agent, to the effect that he would surrender the original
and negotiable bill of lading duly indorsed by Yau Yue. On the
strength of this guaranty, Teves secured the “Permit To Deliver
Imported Articles” from the carrier’s agent, which he presented
to the Bureau of Customs which in turn released to him the
articles covered by the bill of lading.
 Complaint by Ang. He tried to claim the articles by presenting
the indorsed bill of lading, but was informed that it was already
delivered to Teves. Thus, on October 30, 1963, Domingo Ang
filed a complaint in the trial court against the American
Steamship Agencies, Inc., for having allegedly wrongfully
delivered and/or converted the goods covered by the bill of
lading.
 Motion to dismiss filed by American Steamship on the grounds
that his cause of action has prescribed under the Carriage of
Goods by Sea Act (Commonwealth Act No. 65).1
 Trial court dismissed the action, his MR also denied. Ang
appealed with the SC on a question of law.
deficiency shall be supplied by the provisions of this Code."
(See doctrine)
o The contract of carriage is one involving an obligation
to give or to deliver the goods "to the order of
shipper", that is, upon the presentation and surrender
of the bill of lading. Paragraph 2 of Art. 1189 provides
that, "... it is understood that a thing is lost when it
perishes, or goes out of commerce, or disappears in
such a way that its existence unknown or it cannot be
recovered."
B. The distinction between non-delivery and misdelivery has
reference to bills of lading, as explained in the case of Tan Pho
v. Hassamal Dalamal
o (In that case) Considering that the bill of lading
covering the goods in question has been made to
order, which means that said goods cannot be
delivered without previous payment of the value
thereof, it is evident that, the said goods having been
delivered to Aldeguer without paying the price of the
same, these facts constitute misdelivery. This is a
violation of the bill of lading, because his duty was not
only to transport the goods entrusted to him safely,
but to deliver them to the person indicated in the bill
of lading.
C. There being no loss or damage, the one year prescriptive
period in the Sec. 3(6), par. 4 of COGSA is inapplicable.
o Said one-year period of limitation is designed to meet
the exigencies of maritime hazards. In a case where
the goods shipped were neither last nor damaged in
transit but were, on the contrary, delivered in port to
someone who claimed to be entitled thereto, the
situation is different, and the special need for the
short period of limitation in cases of loss or damage
caused by maritime perils does not obtain.
D. For suits predicated not upon loss or damage but on alleged
misdelivery (or conversion) of the goods, the applicable rule on
prescription is that found in the Civil Code, namely, either ten
years for breach of a written contract or four years for quasi-
delict. (Arts. 1144[1], 1146, Civil Code).
o In either case, plaintiff's cause of action has not vet
prescribed, since his right of action would have
accrued at the earliest on May 9, 1961 when the ship
 arrived in Manila and he filed suit on October 30,
1963.

Dismissal order reversed; Case remanded to court for further

proceedings