TRANSPORTATION AND PUBLICUTILITIES LAW

CASE DIGEST

Submitted byLLB4302

Table of ContentsOBLIGATIONS OF THE PARTIES IN CONTRACT OF CARRIAGE

Transportation of Goods

Saludo, Jr. vs. Court of Appeals.........................................................................................1

Ganzon vs. Court of Appeals..............................................................................................3

Eastern Shipping Lines, Inc vs. BPI/MS Insurance Corp...............................................5

Westwind Shipping Corp. vs. UCPB General Insurance Co., Inc.................................7

Republic of the Philippines vs. Lorenzo Shipping Corp..................................................9

Benito Macam vs. Court of Appeals.................................................................................11

The Philippine American General Insurance Co. Inc....................................................13

Central Shipping Co., Inc. vs Insurance Co. of North America....................................14

Nocum vs Laguna Tayabas Bus Company.....................................................................15

Belgian Overseas Chartering and Shipping N.V............................................................17

Shipper’s Right To Abandon

Magellan Marketing Mfg. Corp vs Court of Appeals......................................................20

Transportation of Passengers

Trans-Asia Shipping Lines, Inc vs Court of Appeals.....................................................22

La Mallorca vs Court of Appeals.......................................................................................25

Aboitiz Shipping Corp. vs Court of Appeals....................................................................27

Presumption of Negligence

Regional Container Lines of Singapore vs The Netherlands Insurance Co..............29

Aboitiz Shipping Co. vs New India Assurance Co. Ltd.................................................31

Mariano, Jr. vs Callejas......................................................................................................32

Heirs of Jose Marcial K. Ochoa vs G &S Transport Corp............................................33

Ong Yiu vs. Court of Appeals............................................................................................35

Belgian Overseas Chartering and Shipping N.V............................................................37

DEFENSES

Sealoader Shippine Corporation vs. Granc Cement Manufacturing...........................41

Philippine Charter Insurance Corp. vs Unknown Owner of the Vessel M/V Honor . 43

Belgian Chartering and Shipping, N.V. vs. Phil. First Insurance Co., Inc. ............... 47

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Delsan Transport Lines vs. CA ............................................................................... 51

Phil American General Insurance Company vs PKS Shipping Company ............... 53

Edgar Cokaliong Shipping Lines, Inc. vs UCPB General Insurance Company ....... 54

Central Shipping Co. Inc. vs Insurance Co. of N.A ................................................. 57

Bascos vs Court of Appeals .................................................................................... 59

Pilapil vs. Court of Appeals ..................................................................................... 61

Fortune Expree, Inc. vs Court of Appeals ............................................................... 62

Gacal, et al. vs Philippine Airlines, Inc. ................................................................... 65

Southern Lines, Inc. vs Court of Appeals

............................................................................................................................... 68

Ganzon vs. Court of Appeals .................................................................................. 70

Bachelor Express, Inc. and Cresencio Rivera ........................................................ 72

Isaac vs. A.L. Ammen Transportation Co. Inc. ....................................................... 74

Philippine National Railways vs. Court of Appeals ................................................. 76

Compania Maritima vs. Court of Appeals ............................................................... 77

Bill of Lading

Magellan Mfg. Marketing Corporation vs. Court of Appeals) .................................. 80

Lorenzo Shipping Corp. vs Chubb and Sons, Inc. .................................................. 84

MOF Company, Inc. vs Shin Yang Brokerage Corp. .............................................. 86

Ong Yiu vs. Court of Appeals ................................................................................. 88

Wallem Philippines Shipping Inc, et al vs Prudential Guarantee & Assurance, Inc 90

Ace Navigation Co., Inc vs FGU Insurance Corp. ................................................... 92

Asian Terminals, Inc. vs. Simon Enterprises, Inc. ................................................... 94

Notice of Claim and Prescription

UCPB General Insurance Co., Inc. vs Aboitiz Shipping Corp. ................................ 97

Philippine Charter Insurance Corp. vs. Chemoil Lighterage Corporation ............. 101

LORENZO SHIPPING CORP., vs. CHUBB and SONS, Inc 103Philippine American General Insurance Co., Inc. vs Sweetlines, Inc .................... 105

Belgian Overseas Chartering and Shipping N.V. vs Philippine First insurance Co.107

Loadstar Shipping vs. Court of Appeals ............................................................... 109

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Benjamins Cua vs. Wallem Philippine Shippine, Inc...................................................111

Insurance Company of North America vs. Asian Terminals......................................113

Vector Shipping Corp. vs American Home Assurance Co.........................................114

Registered Owner Rule

Teja Marketing vs. Intermediate Appellate Court........................................................117

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OBLIGATIONS OF THE PARTIES IN CONTRACT OFCARRIAGE

A. TRANSPORTATION OF GOODS

10. Saludo, Jr. vs. Hon. Court of Appeals, G.R. No. 95536, March 23, 1992

11. Ganzon vs. Court of Appeals, G.R. No. L-48757, May 30, 1988

12. Eastern Shipping Lines, Inc vs. BPI/MS Insurance Corp., G.R. No. 193986, January 15, 2014

13. Westwind Shipping Corp. vs. UCPB General Insurance Co., Inc. G.R. No. 200289 and 200314, November 25, 2013

14. Republic of the Philippines vs. Lorenzo Shipping Corp, 450 SCRA 551, February 7, 2005

15. Benito Macam vs. Court of Appeals, et al. G.R. No. 125524, August 25, 1999

16. The Philippine American General Insurance Co. Inc. vs Court of Appeals, G.R. No. 116940, June 11, 1997

17. Central Shipping Co., Inc. vs Insurance Co. of North America, 438 SCRA 511, September 20, 2004

18. Nocum vs Laguna Tayabas Bus Company, G.R. No. L-23733, October 31, 1969

55.2. Belgian Overseas Chartering and Shipping N.V. vs. Philippine First Insurance Co., Inc. G.R. No. 143133, June 5, 2002

B. SHIPPER’S RIGHT TO ABANDON

19. Magellan Marketing Mfg. Corp vs Court of Appeals G.R. No. 95529, August 22, 1991

C. TRANSPORTATION OF PASSENGERS

20. Trans-Asia Shipping Lines, Inc vs Court of Appeals, G.R. No. 118126, March 4, 1996

21. La Mallorca vs Court of Appeals, G.R. No. L-20761, July 27, 1966

22. Aboitiz Shipping Corp. vs Court of Appeals, G.R. No. 84458, November 6, 1989

D. PRESUMPTION OF NEGLIGENCE

23. Regional Container Lines of Singapore vs The Netherlands Insurance Co. (Philippines), Inc. G.R. No. 168151, September 4, 2009

22. Aboitiz Shipping Co. vs New India Assurance Co. Ltd. G.R. No. 156978, May 2, 2006

25. Mariano, Jr. vs Callejas, G.R. No. 166640, July 31, 2009

26. Heirs of Jose Marcial K. Ochoa vs G &S Transport Corp., G.R. No. 170071 & 170125, March 9, 2011

47.2 Ong Yiu vs. Court of Appeals, et 191 SCRA 223

55.1 Belgian Overseas Chartering and Shipping N.V. vs Philippine First Insurance Co., Inc., G. R. No. 143133, June 5, 2002

DE GUZMAN, Jiana Joselle SC.

Saludo Jr. v. Hon. Court of AppealsCase No. 10

FACTS:

The petitioners in this case, together with Pomierski and Son Funeral Home of Chicago brought the remains of petioners’ mother to Continental Mortuary Air Services which booked the shipment of the remains from Chicago to San Francisco by Trans World Airways (TWA) and from San Francisco to Mania with Philippine Airlines (PAL). The remains were taken to the Chicago Airport, but it turned out that there were two bodies in the said airport. Somehow the two bodies were switched, and the remains of plaintiff’s mother was shipped to Mexico instead.The shipment was immediately loaded on another PAL flight and it arrived the day after the expected arrival. Plaintiff filed a claim for damages in court. The lower court absolved both airlines and upon appeal it was affirmed by the court.

ISSUES:1. Whether or not the delay in the delivery of the casketed remains of petitioners’ mother

was due to the fault of respondent airline companies. 2. Whether or not the one-day delay in the delivery of the same constitutes contractual

breach as would entitle petitioners to damages.

HELD:1. 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 transit, and terminates only after the lapse of a reasonable time for the acceptance, of the goods by the consignee or such other person entitled to receive them. And, there is delivery to the carrier when the goods are ready for and have been placed in the exclusive possession, custody and control of the carrier for the purpose of their immediate transportation and the carrier has accepted them. Where such a delivery has thus been accepted by the carrier, the liability of the common carrier commences eo instanti.

Hence, while we agree with petitioners that the extraordinary diligence statutorily required to be observed by the carrier instantaneously commences upon delivery of the goods thereto, for such duty to commence there must in fact have been delivery of the cargo subject of the contract of carriage. Only when such fact of delivery has been unequivocally established can the liability for loss, destruction or deterioration of goods in the custody of the carrier, absent the excepting causes under Article 1734, attach and the presumption of fault of the carrier under Article 1735 be invoked.

2. The contention that there was contractual breach on the part of private respondents is founded on the postulation that there was ambiguity in the terms of the airway bill, hence petitioners' insistence on the application of the rules on interpretation of contracts and documents. We find no such ambiguity. The terms are clear enough as to preclude the necessity to probe beyond the apparent intendment of the contractual provisions.

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In any event, the contract has provided for such a situation by explicitly stating that the above condition remains effective "notwithstanding that the same (fixed time for completion of carriage, specified aircraft, or any particular route or schedule) may be stated on the face hereof." While petitioners hinge private respondents' culpability on the fact that the carrier "certifies goods described below were received for carriage," they may have overlooked that 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. (Emphasis ours.)

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DE GUZMAN, Jiana Joselle SC.

Ganzon v. Court of AppealsCase No. 11

FACTS:

Ganzon, the petitioner in this case, was hired by Tumambing to haul 305 tons of scrap iron. The contract was for the petitioner to transport the scrap iron to Manila from Bataan.

Tumambing delivered the scrap iron to Niza, captain of the lighter LCT “Batman”, to board it on the same. The crew of the Batman started to load the iron, and when they were about halfway through, Mayor Advincula arrived and demanded P5,000 from Tumambing. The latter resisted and a heated argument started. Mayor Advincula drew his gun and fired at Tumambing. He was brought to the hospital for treatment, lucky for him the wound was not fatal.

A few days after this incident, the loading of the scrap metal was resumed. However, the acting Mayor this time went to the port where the Batman was docked. He was accompanied by 3 policemen and he ordered Captain Niza to dump the scrap iron where the lighter was docked. What was left on the iron was confiscated by the Acting Mayor and brought to NASSCO. A receipt was issued showing that the municipality had taken custody of the scraps or iron.

Tumambing filed a case in order to recover damages for the loss that he sustained. The lower court rendered a decision in favor of Ganzon. However, on appeal the Court of Appeals reversed the decision ordering Ganzon to pay Tumambing P5,895 as actual damages, P5,000 for exemplary damages and attorney’s fees as well. Hence this petition by Ganzon.

ISSUES:1. Whether or not the petitioner is guilty of breach of the contract of transportation. 2. Whether or not the petitioner is liable for dumping the scrap into the sea despite that it

was ordered by the local government officials. 3. Whether or not the loss of the scrap was due to a fortuitous event and the petitioner is

therefore not liable for any losses as a consequence thereof.

HELD:1. Yes.

By the said act of delivery, the scraps were unconditionally placed in the possession and control of the common carrier, and upon their receipt by the carrier for transportation, the contract of carriage was deemed perfected. Consequently, the petitioner-carrier's extraordinary responsibility for the loss, destruction or deterioration of the goods commenced. Pursuant to Art. 1736, such extraordinary responsibility would cease only upon the delivery, actual or constructive, by the carrier to the consignee, or to the person who has a right to receive them. The fact that part of the shipment had not been loaded on board the lighter did not impair the said contract of transportation as the goods remained in the custody and control of the carrier, albeit still unloaded.

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The petitioner has failed to show that the loss of the scraps was due to any of the following causes enumerated in Article 1734 of the Civil Code, namely:(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; (5) Order or act of competent public authority. Hence, the petitioner is presumed to have been at fault or to have acted negligently.

2. Yes. In any case, the intervention of the municipal officials was not of a character that would render impossible the fulfilment by the carrier of its obligation. The petitioner was not duty bound to obey the illegal order to dump into the sea the scrap iron. Moreover, there is absence of sufficient proof that the issuance of the same order was attended with such force or intimidation as to completely overpower the will of the petitioner’s employees.

3. No. The petitioner could have been exempted from any liability had he been able to prove that he observed extraordinary diligence in the vigilance over the goods in his custody, according to all the circumstances of the case, or that the loss was due to an unforeseen event or to force majeure. As it was, there was hardly any attempt on the part of the petitioner to prove that he exercised such extraordinary diligence. For Article 1735 of the Civil Code, conversely stated, means that the shipper will suffer the losses and deterioration arising from the causes enumerated in Art. 1734; and in these instances, the burden of proving that damages were caused by the fault or negligence of the carrier rests upon him. However, the carrier must first establish that the loss or deterioration was occasioned by one of the excepted causes or was due to an unforeseen event or to force majeure.

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Diego, Jasmine A.

EASTERN SHIPPING LINES INC. vs.BPI/MS INSURANCE CORP. and MITSUI SUM TOMOINSURANCE CO. LTD

Case No. 12

Facts:

On August 29, 2003, Sumitomo Corporation shipped through MV Eastern Challenger V-9-S, a vessel owned by petitioner Eastern Shipping Lines, Inc., 31 various steel sheets in coil weighing 271,828 kilograms valued at US$125,417.26 from Yokohama, Japan for delivery in favor of the consignee Calamba Steel Center Inc. This cargo was insured against all risk with respondent Mitsui Sumitomo Insurance Co., Ltd. On or about September 6 2003, the shipment arrived at the port of Manila. Upon unloading from the vessel, nine coils were observed to be in bad condition as evidenced by the Turn Over Survey of Bad Order Cargo No. 67327. The cargo was then turned over to Asian Terminals, Inc. (ATI) for stevedoring, storage and safekeeping pending Calamba Steel’s withdrawal of the goods. When ATI delivered the cargo to Calamba Steel, the latter rejected its damaged portion, valued at US$7,751.15, for being unfit for its intended purpose. A second shipment was made for the 28 steel sheets in coil, weighing 215,817 kilograms, through petitioner’s MV Eastern Challenger V-10-S. It had a declared value of US$121,362.59. However, upon unloading of the cargo from the said vessel, 11 coils were found damaged as evidenced by the Turn Over Survey of Bad Order Cargo No. 67393. For the third time, Sumitomo again shipped 117 various steel sheets in coil weighing 930,718 kilograms which had a declared value of US$476,416.90 through petitioner’s vessel, MV Eastern VenusV-17-S. Upon its discharge, six coils were observed to be in bad condition. The cargoes of these two subsequent shipments in favour of Calamba Steel were then transferred to ATI. When ATI delivered the goods, Calamba Steel rejected the damaged portion thereof for the same reason of being unfit for its intended purpose. The value of the damaged portion of the cargo for the second shipment amounted to US$7,677.12 and the value of US$14,782.05 for the damaged cargo in the third shipment.

Calamba Steel filed an insurance claim with Mitsui through the latter’s settling agent, respondent BPI/MS Insurance Corporation (BPI/MS) and was paid the total amount of US$30,210.32. As insurer and subrogee of Calamba Steel, Mitsui and BPI/MS filed in the Regional Trial Court (RTC), of Makati City, Branch 138 a Complaint for Damages against petitioner and ATI. It rendered decision in favor of the plaintiff, ordering the defendants to pay plaintiffs actual damages amounting to US$30,210.32 plus 6% legal interest thereon commencing from the filing of this complaint, until the same is fully paid, attorney’s fees in a sum equivalent to 25% of the amount claimed, and costs of suit.

Aggrieved, petitioner and ATI appealed to the CA. On July 9, 2010, the CA in its assailedDecision affirmed with modification the RTC’s findings holding that both petitioner and ATI were very negligent in the handling of the subject cargoes. Both petitioner and ATI filed their separate petitions for review on certiorari before this Court. It gave due course to this present petition. In its Memorandum, petitioner contends that the survey reports submitted by respondents clearly show that the cause of the damage was the rough handling of the goods by ATI during the

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discharging operations which it had no participation whatsoever in the discharging operations and that petitioner did not have a choice in selecting the stevedore since ATI is the only arrastre operator mandated to conduct discharging operations in the South Harbor. Petitioner prays that it be absolved from any liability relative to the damage incurred by the goods. While respondents counter that as found by both the RTC and CA, the goods suffered damage while still in the possession of petitioner as evidenced by various Turn Over Surveys of Bad Order Cargoes which were unqualifiedly executed by petitioner’s own surveyor, Rodrigo Victoria, together with the representative of ATI.

Issue:

Whether the Court of Appeals committed any reversible error in finding that petitioner is solidarily liable with ATI on account of the damage incurred by the goods.

Held:

No. The RTC judiciously found that prior to the turnover of the cargoes for the three shipments to the custody of ATI, many coils were already found in bad order condition as evidenced by Turn Over Survey of Bad Order Cargoes (TOSBOC, for brevity) and Request for Bad Order Survey. Some are "partly dented/crumpled, have scratches on inner hole, and cover detach ". These documents were issued by ATI. These documents were corroborated by the Damage Reports. Also, a TOSBOC, usually issued by the arrastre contractor (ATI in this case), is a form of certification that states therein the bad order condition of a particular cargo, as found prior to its turn over to the custody or possession of the said arrastre contractor. The said Damage Reports, Turn Over Survey Reports and Requests for Bad Order Survey led the Court to conclude that before the subject shipments were turned over to ATI, the said cargo were already in bad order condition due to damage sustained during the sea voyage.

In ascertaining the cause of the damage to the subject shipments, Mario Manuel stated that the "coils were roughly handled during their discharging from the vessel to the pier of ASIAN TERMINALS, INC. and even during the loading operations of these coils from the pier to the trucks that will transport the coils to the consignee’s warehouse. During the aforesaid operations, the employees and forklift operators of EASTERN SHIPPING LINES and ASIAN TERMINALS, INC. were very negligent in the handling of the subject cargoes. Specifically, "during unloading, the steel coils were lifted from the vessel and not carefully laid on the ground, sometimes were even ‘dropped’ while still several inches from the ground.

It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under the custody of the carrier. Based on the evidence presented, the goods were damaged even before they were turned over to ATI. Such damage was even compounded by the negligent acts of petitioner and ATI which both mishandled the goods during the discharging operations. Thus, it bears stressing unto petitioner that common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods transported by them. Owing to this high degree of diligence required of them, common carriers, as a general rule, are presumed to have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed. The exception 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 high level of diligence. In this case, petitioner failed to hurdle such burden.

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Diego, Jasmine A.

WESTWIND SHIPPING CORPORATION vs.UCPB GENERAL INSURANCE CO., INC. andASIAN TERMINALS INC

x - - - - - - - - - - - - - - - - - - - - - - - x

ORIENT FREIGHT INTERNATIONAL INC., vs.UCPB GENERAL INSURANCE CO., INC. andASIAN TERMINALS INC.,

Case No. 13

Facts:

On August 23, 1993, Kinsho-Mataichi Corporation shipped from the port of Kobe, Japan, 197 metal containers/skids of tin-free steel for delivery to the consignee, San Miguel Corporation (SMC). The shipment, covered by Bill of Lading No.KBMA-1074, was loaded and received clean on board M/V Golden Harvest Voyage No. 66, a vessel owned and operated by Westwind Shipping Corporation (Westwind). SMC insured the cargoes against all risks with UCPB General Insurance Co., Inc. (UCPB) for $184,798.97 which, at the time, was equivalent to P6,209,245.28. The shipment arrived in Manila on August 31, 1993 and was discharged in the custody of the arrastre operator, Asian Terminals, Inc. (ATI). During the unloading operation, however, six containers/skids worth P117,093.12 sustained dents and punctures from the forklift used by the stevedores of Ocean Terminal Services, Inc. (OTSI) in centering and shuttling the containers/skids. As a result of it, two Bad Order Cargo Receipts were issued by the local ship agent of the vessel, Baliwag Shipping Agency, Inc.

On September 7, 1993, Orient Freight International, Inc. (OFII), the customs broker of SMC, withdrew from ATI the 197 containers/skids, including the six in damaged condition, and delivered the same at SMC’s warehouse in Calamba, Laguna through J.B. Limcaoco Trucking (JBL). It was discovered upon discharge that additional nine containers/skids valued P175,639.68 were also damaged due to the forklift operations; thus, making the total number of 15 containers/skids in bad order. SMC filed a claim against UCPB, Westwind, ATI, and OFII to recover the amount corresponding to the damaged 15 containers/skids on August 15, 1994. UCPB paid the total sum of P292,732.80. UCPB, in the exercise of its right of subrogation, commenced in the Manila City Regional Trial Court Branch 30 a complaint for damages againstWestwind, ATI, and OFII. RTC dismissed UCPB’s complaint and the counterclaims ofWestwind, ATI, and OFII. It ruled that the right, if any, against ATI already prescribed based on the stipulation in the 16 Cargo Gate Passes issued, a claim for reimbursement for damaged goods must be filed within 15 days from the date of consignee’s knowledge. With respect toWestwind, conformably with Section 3 (6) of the Carriage of Goods by Sea Act (COGSA), Westwind is not liable, since the discharging of the cargoes were done by ATI personnel using forklifts. It likewise absolved OFII from any liability, reasoning that it never undertook the operation of the forklifts which caused the dents and puncture.

On appeal by UCPB, the CA reversed and set aside the trial court’s decision. AppelleeWestwind Shipping Corporation is ordered to pay to UCPB General Insurance Co., Inc., Php117,093.12, while Orient Freight International, Inc. the amount of Php175,639.68 which shall bear interest at the rate of six (6%) percent per annum, from the filing of the complaint on

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August 30, 1994 until the judgment becomes final and executory. CA sustained the RTC judgment that the claim against ATI already prescribed.

When their motions for reconsideration were denied, they elevated the case before the Supreme Court via petitions for certiorari. Westwind argues that it no longer had actual or constructive custody of the containers/skids at the time they were damaged by ATI’s forklift operator during the unloading operations. As for OFII, it maintains that it is not a common carrier, but only a customs broker whose participation is limited to facilitating withdrawal of the shipment in the custody of ATI by overseeing and documenting the turnover and counterchecking if the quantity of the shipments were in tally with the shipping documents at hand.

Issue: Whether petitioners Westwind and OFII are common carriers and therefore liable to respondent UCPB General Insurance Corporation.

Held: Yes. Petitioner Westwind, a common carrier, from the nature of their business and for reasons of public policy, is bound to observe extraordinary diligence in the vigilance over the goods transported by them. Section 3 (2) of the COGSA then states that among the carriers’ responsibilities are to properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried. The functions of an arrastre operator as the case of herein petitioner OFII involve the handling of cargo deposited on the wharf or between the establishment of the consignee or shipper and the ship's tackle. Being the custodian of the goods discharged from a vessel, an arrastre operator's duty is to take good care of the goods and to turn them over to the party entitled to their possession. Both the ARRASTRE and the CARRIER are therefore charged with and obligated to deliver the goods in good condition to the consignee.

In Regional Container Lines (RCL) of Singapore v. The Netherlands Insurance Co. (Philippines), Inc., the Court echoed the doctrine that cargoes, while being unloaded, generally remain under the custody of the carrier. There is actual delivery in contracts for the transport of goods when possession has been turned over to the consignee or to his duly authorized agent and a reasonable time is given him to remove the goods. In this case, since the discharging of the containers/skids, which were covered by only one bill of lading, had not yet been completed at the time the damage occurred, there is no reason to imply that there was already delivery, actual or constructive, of the cargoes to ATI.

The contention of OFII is also untenable. A customs broker has been regarded as a common carrier because transportation of goods is an integral part of its business. The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier, as defined under Article 1732 of the Civil Code. It does not distinguish between one whose principal business activity is the carrying of goods and one who does such carrying only as an ancillary activity. Thus, for undertaking the transport of cargoes from ATI to SMC’s warehouse inCalamba, Laguna, OFII is considered a common carrier. As long as a person or corporation holds itself to the public for the purpose of transporting goods as a business, it is already considered a common carrier regardless of whether it owns the vehicle to be used or has to actually hire one.

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Doran, Mark Anthony A.

NATIONAL TRUCKING AND FORWARDING CORPORATION vs.LORENZO SHIPPING CORPORATION

Case No. 14

FACTS

On June 5, 1987, the Republic of the Philippines, through the DOH, and the Cooperative for American Relief Everywhere, Inc. (CARE) signed an agreement wherein CARE would acquire from the United States government donations of non-fat dried milk and other food products. In turn, the Philippines would transport and distribute the donated commodities to the intended beneficiaries in the country.

The government entered into a contract of carriage of goods with herein petitioner National Trucking and Forwarding Corporation (NTFC). Thus, the latter shipped 4,868 bags of non-fat dried milk through herein respondent Lorenzo Shipping Corporation. The consignee named in the bills of lading issued by the respondent was Abdurahman Jama, petitioner’s branch supervisor in Zamboanga City.

On reaching the port of Zamboanga City, respondent’s agent, Efren Ruste Shipping Agency, unloaded the 4,868 bags of non-fat dried milk and delivered the goods to petitioner’s warehouse. Before each delivery, Rogelio Rizada and Ismael Zamora, both delivery checkers of Efren Ruste Shipping Agency, requested Abdurahman to surrender the original bills of lading, but the latter merely presented certified true copies thereof. Upon completion of each delivery, Rogelio and Ismael asked Abdurahman to sign the delivery receipts. However, at times when Abdurahman had to attend to other business before a delivery was completed, he instructed his subordinates to sign the delivery receipts for him.

Notwithstanding the precautions taken, the petitioner allegedly did not receive the subject goods. Thus, in a letter, petitioner NTFC filed a formal claim for non-delivery of the goods shipped through respondent.

In its letter, the respondent explained that the cargo had already been delivered to Abdurahman Jama. The petitioner then decided to investigate the loss of the goods. But before the investigation was over, Abdurahman Jama resigned as branch supervisor of petitioner.

Noting but disbelieving respondent’s insistence that the goods were delivered, the government through the DOH, CARE, and NTFC as plaintiffs filed an action for breach of contract of carriage, against respondent as defendant, with the RTC of Manila.

After trial, the RTC resolved in favor of the defendant and against the plaintiffs.

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Dissatisfied with the foregoing ruling, herein petitioner appealed to the Court of Appeals. It faulted the lower court for not holding that respondent failed to deliver the cargo, and that respondent failed to exercise the extraordinary diligence required of common carriers.

The Court of Appeals found that the trial court did not commit any reversible error. It dismissed the appeal, and affirmed the assailed decision in toto.

ISSUE: WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED TO APPRECIATE AND APPLY THE LEGAL STANDARD OF EXTRAORDINARY DILIGENCE IN THE SHIPMENT AND DELIVERY OF GOODS TO THE RESPONDENT AS A COMMON CARRIER.

RULING

Article 1733 of the Civil Code demands that a common carrier observe extraordinary diligence over the goods transported by it. Extraordinary diligence is that extreme measure of care and caution which persons of unusual prudence and circumspection use for securing and preserving their own property or rights. This exacting standard imposed on common carriers in a contract of carriage of goods is intended to tilt the scales in favor of the shipper who is at the mercy of the common carrier once the goods have been lodged for shipment. Hence, in case of loss of goods in transit, the common carrier is presumed under the law to have been at fault or negligent. However, the presumption of fault or negligence, may be overturned by competent evidence showing that the common carrier has observed extraordinary diligence over the goods.

In the instant case, the Supreme Court agrees with the court a quo that the respondent adequately proved that it exercised extraordinary diligence. Although the original bills of lading remained with petitioner, respondent’s agents demanded from Abdurahman the certified true copies of the bills of lading. They also asked the latter and in his absence, his designated subordinates, to sign the cargo delivery receipts.

Also noted is that some delivery receipts were signed by Abdurahman’s subordinates and not by Abdurahman himself as consignee. Further, delivery checkers Rogelio and Ismael testified that Abdurahman was always present at the initial phase of each delivery, although on the few occasions when Abdurahman could not stay to witness the complete delivery of the shipment, he authorized his subordinates to sign the delivery receipts for him. This, to the mind of the Court, is sufficient and substantial compliance with the requirements.

WHEREFORE, the petition is GRANTED.

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Doran, Mark Anthony A.

BENITO MACAM doing business under the name and style BEN-MAC ENTERPRISES vs.COURT OF APPEALS, CHINA OCEAN SHIPPING CO., and/or WALLEM

PHILIPPINES SHIPPING, INC.,Case No. 15

FACTS

Petitioner Benito Macam, doing business under the name and style Ben-Mac Enterprises, shipped on board the vessel Nen Jiang, owned and operated by respondent China Ocean Shipping Co., through local agent respondent Wallem Philippines Shipping, Inc. (hereinafter WALLEM), 3,500 boxes of watermelons covered by Bill of Lading No. HKG 99012 and exported through a Letter of Credit issued by National Bank of Pakistan, Hongkong (hereinafter PAKISTAN BANK) and 1,611 boxes of fresh mangoes covered by Bill of Lading No. HKG 99013 and exported through a Letter of Credit also issued by PAKISTAN BANK. The Bills of Lading contained the following pertinent provision: "One of the Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery order. The shipment was bound for Hongkong with PAKISTAN BANK as consignee and Great Prospect Company of Kowloon, Hongkong (hereinafter GPC) as notify party.

On 6 April 1989, per letter of credit requirement, copies of the bills of lading and commercial invoices were submitted to petitioner's depository bank, Consolidated Banking Corporation (hereinafter SOLIDBANK), which paid petitioner in advance the total value of the goods.

Upon arrival in Hongkong, the shipment was delivered by respondent WALLEM directly to GPC, not to PAKISTAN BANK, and without the required bill of lading having been surrendered. Subsequently, GPC failed to pay PAKISTAN BANK such that the latter, still in possession of the original bills of lading, refused to pay petitioner through SOLIDBANK. Since SOLIDBANK already pre-paid petitioner the value of the shipment, it demanded payment from respondent WALLEM through five (5) letters but was refused. Petitioner was thus allegedly constrained to return the amount involved to SOLIDBANK, then demanded payment from respondent WALLEM in writing but to no avail.

Petitioner sought collection of the value of the shipment from respondents before the Regional Trial Court of Manila, based on delivery of the shipment to GPC without presentation of the bills of lading and bank guarantee.

Respondents contended that the shipment was delivered to GPC without presentation of the bills of lading and bank guarantee per request of petitioner himself because the shipment consisted of perishable goods.

The trial court opined that respondents breached the provision in the bill of lading requiring that "one of the Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery order," when they released the shipment to GPC without presentation of the bills of lading and the bank guarantee that should have been issued by PAKISTAN BANK in lieu of the bills of lading. The trial court added that the shipment should not have been released to

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GPC at all since the instruction contained in the telex was to arrange delivery to the respective consignees and not to any party.

Respondent Court of Appeals appreciated the evidence in a different manner. According to it, as established by previous similar transactions between the parties, shipped cargoes were sometimes actually delivered not to the consignee but to notify party GPC without need of the bills of lading or bank guarantee. Moreover, the bills of lading were viewed by respondent court to have been properly superseded by the telex instruction and to implement the instruction, the delivery of the shipment must be to GPC, the real importer/buyer of the goods as shown by the export invoices, and not to PAKISTAN BANK since the latter could very well present the bills of lading in its possession;

ISSUE: Whether or not respondents are liable to petitioner for releasing the goods to GPC without the bills of lading or bank guarantee.

RULING

The instruction in the telex of 5 April 1989 was "to deliver the shipment to respective consignees." There is no mistake that the originals of the two (2) subject Bills of Lading are still in the possession of the Pakistani Bank. The appealed decision affirms this fact. Conformably, to implement the said telex instruction, the delivery of the shipment must be to GPC, the notify party or real importer/buyer of the goods and not the Pakistani Bank since the latter can very well present the original Bills of Lading in its possession. Likewise, if it were the Pakistani Bank to whom the cargoes were to be strictly delivered, it will no longer be proper to require a bank guarantee as a substitute for the Bill of Lading. To construe otherwise will render meaningless the telex instruction.

WHEREFORE, the petition is DENIED.

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Escobar, Rosaline O.

The Philippine American General Insurance Co., Inc. v. Court of AppealsCase No. 16

Facts:

On July 6, 1983 Coca-Cola Bottlers Philippines, Inc., loaded on board "MV Asilda," a vessel owned and operated by respondent Felman Shipping Lines, 7,500 cases of 1-liter Coca-Cola softdrink bottles to be transported from Zamboanga City to Cebu City. The shipment was insured with petitioner Philippine American General Insurance Co., Inc., under Marine Open. On July 7, 1983, the vessel sank in the waters of Zamboanga del Norte bringing down her entire cargo with her including the subject 7,500 cases of 1-liter Coca-Cola softdrink bottles. On November 29, 1983 PHILAMGEN sued the shipowner for sum of money and damages. On February 15, 1985 FELMAN filed a motion to dismiss based on the affirmative defense that FELMAN had abandoned all its rights, interests and ownership over "MV Asilda" together with her freight and appurtenances for the purpose of limiting and extinguishing its liability under Art. 587 of the Code of Commerce.

Issue:Whether the Doctrine of Limited Liability applies.

Ruling:

The Court ruled that Art. 587 of the Code of Commerce is not applicable. The ship agent is liable for the negligent acts of the captain in the care of goods loaded on the vessel. This liability however can be limited through abandonment of the vessel, its equipment and freightage as provided in Art. 587. Nonetheless, there are exceptional circumstances wherein the ship agent could still be held answerable despite the abandonment, as where the loss or injury was due to the fault of the shipowner and the captain. The international rule is to the effect that the right of abandonment of vessels, as a legal limitation of a shipowner's liability, does not apply to cases where the injury or average was occasioned by the shipowner's own fault. It must be stressed at this point that Art. 587 speaks only of situations where the fault or negligence is committed solely by the captain. Where the shipowner is likewise to be blamed, Art. 587 will not apply. It was already established at the outset that the sinking of "MV Asilda" was due to its unseaworthiness even at the time of its departure from the port of Zamboanga. Closer supervision on the part of the shipowner could have prevented this fatal miscalculation. As such, FELMAN was equally negligent. It cannot therefore escape liability by filing a notice of abandonment of the vessel by virtue of Art. 587 of the Code of Commerce.

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Escobar, Rosaline O.

Central Shipping Company, Inc. v. Insurance Company of North AmericaCase No. 17

Facts:

On July 25, 1990 at Puerto Princesa, Palawan, the petitioner received on board its vessel, the M/V Central Bohol, 376 pieces of Philippine Apitong Round Logs and undertook to transport said shipment to Manila for delivery to Alaska Lumber Co., Inc. During the voyage the degree of the position of the ship changed due to the shifting of the logs inside, eventually at about 15 degrees, the captain ordered everyone to abandon the ship. Respondent alleged that the total loss of the shipment was caused by the fault and negligence of the petitioner and its captain. Petitioner interposed the defense that the vessel was fully manned, fully equipped and in all respects seaworthy, and that all the logs were properly loaded and secured, and that the vessel’s master exercised due diligence to prevent or minimize the loss before, during and after the occurrence of the storm. It raised as its main defense that the proximate and only cause of the sinking of its vessel and the loss of its cargo was a natural disaster, a tropical storm which neither the petitioner nor the captain of its vessel could have foreseen. The RTC was unconvinced that the sinking of M/V Central Bohol had been caused by the weather or any other caso fortuito. It noted that monsoons, which were common occurrences during the months of July to December, could have been foreseen and provided for by an ocean-going vessel. Applying the rule of presumptive fault or negligence against the carrier, the trial court held petitioner liable for the loss of the cargo. The CA affirmed the trial court’s finding that the southwestern monsoon encountered by the vessel was not unforeseeable. Given the season of rains and monsoons, the ship captain and his crew should have anticipated the perils of the sea.

Issue: Whether the Doctrine of Limited Liability applies.

Ruling:

The court ruled that the doctrine of limited liability under Article 587 of the Code of Commerce is not applicable to the present case. This rule does not apply to situations in which the loss or the injury is due to the concurrent negligence of the ship-owner and the captain. It has already been established that the sinking of M/V Central Bohol had been caused by the fault or negligence of the ship captain and the crew, as shown by the improper stowage of the cargo of logs. “Closer supervision on the part of the shipowner could have prevented this fatal miscalculation.” As such, the shipowner was equally negligent. It cannot escape liability by virtue of the limited liability rule.

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Juan, Ma. Barbara Raizza J.

HERMINIO L. NOCUM vs. LAGUNA TAYABAS BUS COMPANYCase No. 18

Facts:

Herminio L. Nocum, was a passenger of Laguna Tayabas Bus No. 120 then making a trip within the barrio of Dita, Municipality of Bay, Laguna. Nocum was injured as a consequence of the explosion of firecrackers, contained in a box, loaded in said bus and declared to its conductor as containing clothes and miscellaneous items by a co-passenger. The injuries suffered by Nocum were not due to mechanical defects but to the explosion of firecrackers.

The lower court ruled in favor of Nocum on the basis that appellant bus company did not observe the extraordinary or utmost diligence of a very cautious person required. According to the lower court the service manual prohibits the employees to allow explosives, such as dynamite and firecrackers to be transported on its buses. To implement this particular rule for 'the safety of passengers, it was therefore incumbent upon the employees of the company to make the proper inspection of all the baggages which are carried by the passengers

Issue: WON the bus company was negligent, hence liable for the injuries suffered by Nocum.

Held:

No. The Bus Company has succeeded in rebutting the presumption of negligence by showing that it has exercised extraordinary diligence for the safety of its passengers, “according to the circumstances of the (each) case.”

It is undisputed that before the box containing the firecrackers were allowed to be loaded in the bus by the conductor, inquiry was made with the passenger carrying the same as to what was in it, since its "opening was folded and tied with abaca”. According to the lower court, "if proper and rigid inspection were observed by the defendant, the contents of the box could have been discovered and the accident avoided. Refusal by the passenger to have the package opened was no excuse because, as stated by Dispatcher Cornista, employees should call the police if there were packages containing articles against company regulations. However, according to the Supreme Court the law does not require as much. Article 1733 is not as unbending for it reasonably qualifies the extraordinary diligence required of common carriers for the safety of the passengers transported by them to be "according to all the circumstances of each case." In fact, Article 1755 repeats this same qualification: "A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances."

Although it must be considered that while it is true the passengers of appellant's bus should not be made to suffer for something over which they had no control, fairness demands that in measuring a common carrier's duty towards its passengers, allowance must be given to the reliance that should be reposed on the sense of responsibility of all the passengers in regard to their common safety. It is to be presumed that a passenger will not take with him anything

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dangerous to the lives and limbs of his co-passengers, not to speak of his own. Not to be lightly considered must be the right to privacy to which each passenger is entitled. He cannot be subjected to any unusual search, when he protests the innocuousness of his baggage and nothing appears to indicate the contrary, as in the case at bar. In other words, inquiry may be verbally made as to the nature of a passenger's baggage when such is not outwardly perceptible, but beyond this, constitutional boundaries are already in danger of being transgressed. Calling a policeman to his aid, as suggested by the service manual invoked by the trial judge, in compelling the passenger to submit to more rigid inspection, after the passenger had already declared that the box contained mere clothes and other miscellaneous, could not have justified invasion of a constitutionally protected domain. Police officers acting without judicial authority secured in the manner provided by law are not beyond the pale of constitutional inhibitions designed to protect individual human rights and liberties. Withal, what must be importantly considered here is not so much the infringement of the fundamental sacred rights of the particular passenger herein involved, but the constant threat any contrary ruling would pose on the right of privacy of all passengers of all common carriers, considering how easily the duty to inspect can be made an excuse for mischief and abuse. Of course, when there are sufficient indications that the representations of the passenger regarding the nature of his baggage may not be true, in the interest of the common safety of all, the assistance of the police authorities may be solicited, not necessarily to force the passenger to open his baggage, but to conduct the needed investigation consistent with the rules of propriety and, above all, the constitutional rights of the passenger. It is in this sense that the mentioned service manual issued by appellant to its conductors must be understood.

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Chan, Richard P.

BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES TRANSPORT SERVICES, INC. vs. PHILIPPINE FIRST INSURANCE CO., INC.

Case No. 55.2

FACTS:

On June 13, 1990, CMC Trading A.G. shipped on board the M/V 'Anangel Sky' at Hamburg, Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine Steel Trading Corporation. On July 28, 1990, M/V Anangel Sky arrived at the port of Manila and, within the subsequent days, discharged the subject cargo. 4 coils were found to be in bad order. Finding the 4 coils in their damaged state to be unfit for the intended purpose, the consignee Philippine Steel Trading Corporation declared the same as total loss.

Plaintiff-appellant paid the consignee P506,086.50, and was subrogated to the latter's rights and causes of action against defendants-appellees. Subsequently, plaintiff-appellant instituted this complaint for recovery of the amount paid by them, to the consignee as insured.

Defendants-appellees argued that their liability, if there be any, should not exceed the limitations of liability provided for in the bill of lading and other pertinent laws.

The RTC dismissed the Complaint.

In reversing the trial court, the CA held that the package limitation under COGSA was not applicable, because the words "L/C No. 90/02447" indicated that a higher valuation of the cargo had been declared by the shipper.

ISSUE: Whether the package limitation of liability is applicable.

HELD:

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

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

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

In the case before us, there was no stipulation in the Bill of Lading limiting the carrier's liability. Neither did the shipper declare a higher valuation of the goods to be shipped. This fact notwithstanding, the insertion of the words "L/C No. 90/02447 cannot be the basis for petitioners' liability.

First, a notation in the Bill of Lading which indicated the amount of the Letter of Credit obtained by the shipper for the importation of steel sheets did not effect a declaration of the value of the goods as required by the bill. That notation was made only for the convenience of the shipper and the bank processing the Letter of Credit.

Second, in Keng Hua Paper Products v. Court of Appeals, we held that a bill of lading was separate from the Other Letter of Credit arrangements. We ruled thus:

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

In the light of the foregoing, petitioners' liability should be computed based on US$500 per package and not on the per metric ton price declared in the Letter of Credit. In Eastern Shipping Lines, Inc. v. Intermediate Appellate Court, we explained the meaning of packages:

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

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

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

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

SO ORDERED.

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Juan, Ma. Barbara Raizza J.

MAGELLAN MANUFACTURING MARKETING CORPORATION vs.COURT OF APPEALS, ORIENT OVERSEAS CONTAINER LINES and F.E. ZUELLIG, INC.

Case No. 19

Facts:

On May 20, 1980, plaintiff-appellant Magellan Manufacturers Marketing Corp. (MMMC) entered into a contract with Choju Co. of Yokohama, Japan to export 136,000 anahaw fans for and in consideration of $23,220.00. As payment thereof, a letter of credit was issued to plaintiff MMMC by the buyer. Through its president, James Cu, MMMC then contracted F.E. Zuellig, a shipping agent, through its solicitor, one Mr. King, to ship the anahaw fans through the other appellee, Orient Overseas Container Lines, Inc., (OOCL) specifying that he needed an on-board bill of lading and that transhipment is not allowed under the letter of credit.

On June 30, 1980, appellant MMMC paid F.E. Zuellig the freight charges and secured a copy of the bill of lading which was presented to Allied Bank. The bank then credited the amount of US$23,220.00 covered by the letter of credit to appellant's account. However, when appellant's president James Cu, went back to the bank later, he was informed that the payment was refused by the buyer allegedly because there was no on-board bill of lading, and there was a transhipment of goods. As a result of the refusal of the buyer to accept, upon appellant's request, the anahaw fans were shipped back to Manila by appellees, for which the latter demanded from appellant payment of P246,043.43. Appellant abandoned the whole cargo and asked appellees for damages.

Issues: On May 20, 1980, plaintiff-appellant Magellan Manufacturers Marketing Corp. (MMMC) entered into a contract with Choju Co. of Yokohama, Japan to export 136,000 anahaw fans for and in consideration of $23,220.00. As payment thereof, a letter of credit was issued to plaintiff MMMC by the buyer. Through its president, James Cu, MMMC then contracted F.E. Zuellig, a shipping agent, through its solicitor, one Mr. King, to ship the anahaw fans through the other appellee, Orient Overseas Container Lines, Inc., (OOCL) specifying that he needed an on-board bill of lading and that transhipment is not allowed under the letter of credit.

On June 30, 1980, appellant MMMC paid F.E. Zuellig the freight charges and secured a copy of the bill of lading which was presented to Allied Bank. The bank then credited the amount of US$23,220.00 covered by the letter of credit to appellant's account. However, when appellant's president James Cu, went back to the bank later, he was informed that the payment was refused by the buyer allegedly because there was no on-board bill of lading, and there was a transhipment of goods. As a result of the refusal of the buyer to accept, upon appellant's request, the anahaw fans were shipped back to Manila by appellees, for which the latter demanded from appellant payment of P246,043.43. Appellant abandoned the whole cargo and asked appellees for damages.

Held

Ordinarily, the shipper is liable for freightage due to the fact that the shipment was made for its benefit or under its direction and, correspondingly, the carrier is entitled to collect charges for its shipping services. This is particularly true in this case where the reshipment of the goods was made at the instance of petitioner in its letter of August 29, 1980

However, in a letter dated March 20, 1981, private respondents belatedly informed petitioner of

the arrival of its goods from Japan and that if it wished to take delivery of the cargo it would have to pay P51,271.02, but with the last paragraph thereof stating as follows:

Please can you advise within 15 days of receipt of this letter whether you intend to take delivery of this shipment, as alternatively we will have to take legal proceedings in order to have the cargo auctioned to recover the costs involved, as well as free the container which are (sic) urgently required for export cargoes.

Clearly, therefore, private respondents unequivocally offered petitioner the option of paying the shipping and demurrage charges in order to take delivery of the goods or of abandoning the same so that private respondents could sell them at public auction and thereafter apply the proceeds in payment of the shipping and other charges.

Responding thereto, in a letter dated April 3, 1981, petitioner seasonably communicated its decision to abandon to the goods in favor of private respondents with the specific instruction

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that any excess of the proceeds over the legal costs and charges be turned over to petitioner. Receipt of said letter was acknowledged by private respondents, as revealed by the testimony of Edwin Mabazza, a claim officer of F.E. Zuellig, Inc., on cross-examination.

Despite petitioner's exercise of the option to abandon the cargo, however, private respondents sent a demand letter on June 22, 1981 insisting that petitioner should pay the entire amount of P298,150.93 and, in another letter dated Apiril 30, 1981, they stated that they win not accept the abandonment of the goods and demanded that the outstanding account be settled. The testimony of said Edwin Mabazza definitely admits and bears this out.

Now, there is no dispute that private respondents expressly and on their own volition granted petitioner an option with respect to the satisfaction of freightage and demurrage charges. Having given such option, especially since it was accepted by petitioner, private respondents are estopped from reneging thereon. Petitioner, on its part, was well within its right to exercise said option. Private respondents, in giving the option, and petitioner, in exercising that option, are concluded by their respective actions. To allow either of them to unilaterally back out on the offer and on the exercise of the option would be to countenance abuse of rights as an order of the day, doing violence to the long entrenched principle of mutuality of contracts.

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GEOVANI N. LEGASPINO JR.

TRANS-ASIA SHIPPING LINES, INC. v. COURT OF APPEALSCase No. 20

Facts

1) Plaintiff Atty. Renato Arroyo bought a ticket from defendant Trans-Asia Shipping Lines, Inc., a corporation engaged inter-island shipping, for the voyage of M/V Asia Thailand vessel to Cagayan de Oro City from Cebu City on November 12, 1991. At around 5:30 in the evening of November 12, 1991, plaintiff boarded the M/V Asia Thailand vessel. At that instance, plaintiff noticed that some repair works were being undertaken on the engine of the vessel. The vessel departed at around 11:00 in the evening with only one (1) engine running.

2) After an hour of slow voyage, the vessel stopped near Kawit Island and dropped its anchor thereat. After half an hour of stillness, some passengers demanded that they should be allowed to return to Cebu City for they were no longer willing to continue their voyage to, Cagayan de Oro City. The captain acceded to their request and thus the vessel headed back to Cebu City.

3) At Cebu City, plaintiff together with the other passengers who requested to be brought back to Cebu City, were allowed to disembark. Thereafter, the vessel proceeded to Cagayan de Oro City. Plaintiff, the next day, boarded the M/V Asia Japan for its voyage to Cagayan de Oro City, likewise a vessel of defendant.

4) On account of this failure of defendant to transport him to the place of destination on November 12, 1991, plaintiff filed before the trial court “an action for damages arising from bad faith, breach of contract and from tort,” against petitioner. The trial court ruled only for breach of contract. The Court of Appeals reversed the decision and awarded moral and exemplary damages. It did not, however, grant the actual or compensatory damages, reasoning that no delay was incurred since there was no demand, as required by Article 1169 of the Civil Code.

Issues

1) Whether the failure of a common carrier to maintain in seaworthy condition its vessel constitutes breach of its duty prescribed in Article 1755 of NCC

2) Whether Article 1169 of NCC applies in case the delay in a contract of carriage is incurred after the commencement of such voyage

3) Whether the petitioner is liable for moral and exemplary damages

4)

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Ruling

1) The failure of a common carrier to maintain in seaworthy condition its vessel involved in a contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code. Before commencing the contracted voyage, the petitioner undertook some repairs on the cylinder head of one of the vessel's engines. But even before it could finish these repairs, it allowed the vessel to leave the port of origin on only one functioning engine, instead of two. Moreover, even the lone functioning engine was not in perfect condition as sometime after it had run its course, it conked out. This caused the vessel to stop and remain a drift at sea, thus in order to prevent the ship from capsizing, it had to drop anchor. Plainly, the vessel was unseaworthy even before the voyage began. For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew.

2) Article 1169 of the Civil Code finds no application in this case because, as found by the respondent Court, there was in fact no delay in the commencement of the contracted voyage. If any delay was incurred, it was after the commencement of such voyage, more specifically, when the voyage was subsequently interrupted when the vessel had to stop near Kawit Island after the only functioning engine conked out. As to the rights and duties of the parties strictly arising out of such delay, the Civil Code is silent. However, as correctly pointed out by the petitioner, Article 698 of the Code of Commerce specifically provides for such a situation. It reads:

In case a voyage already begun should be interrupted, the passengers shall be obliged to pay the fare in proportion to the distance covered, without right to recover for losses and damages if the interruption is due to fortuitous event or force majeure, but with a right to indemnity if the interruption should have been caused by the captain exclusively. If the interruption should be caused by the disability of the vessel and a passenger should agree to await the repairs, he may not be required to pay any increased price of passage, but his living expenses during the stay shall be for his own account.

This article applies suppletorily pursuant to Article 1766 of the Civil Code. Article 698 must then be read together with Articles 2199, 2200, 2201, and 2208 in relation to Article 21 of the Civil Code. So read, it means that the petitioner is liable for any pecuniary loss or loss of profits which the private respondent may have suffered by reason thereof. For the private respondent, such would be the loss of income if unable to report to his office on the day he was supposed to arrive were it not for the delay. This, however, assumes that he stayed on the vessel and was with it when it thereafter resumed its voyage; but he did not. Any further delay then in the private respondent's arrival at the port of destination was caused by his decision to disembark. Had he remained on the first vessel, he would have reached his destination at noon of 13 November 1991, thus been able to report to his office in the afternoon. He, therefore, would have lost only the salary for half of a day. But actual or compensatory damages must be proved, which the private respondent failed to do. There is no convincing evidence that he did not receive his salary for 13 November 1991 nor that his absence was not excused.

3) The petitioner is liable for moral and exemplary damages. In allowing its unseaworthy M/V Asia Thailand to leave the port of origin and undertake the contracted voyage, with full awareness that it was exposed to perils of the sea, it deliberately disregarded its

23

solemn duty to exercise extraordinary diligence and obviously acted with bad faith and in a wanton and reckless manner.

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GEOVANI N. LEGASPINO JR.

LA MALLORCA v. COURT OF APPEALSCase No. 21

Facts

1) Spouse Beltran, together with their minor daughters, boarded the Pambusco Bus owned and operated by the defendant La Mallorca, at San Fernando, Pampanga, bound for Anao, Mexico, Pampanga. At the time, they were carrying with them four pieces of baggages containing their personal belonging.

2) After about an hour's trip, the bus reached Anao whereat it stopped to allow the passengers bound therefor, among whom were the plaintiffs and their children to get off. Mariano led his companions to a shaded spot on the left pedestrians side of the road about four or five meters away from the vehicle. Afterwards, he returned to the bus to get his other bayong, which he had left behind, but in so doing, his daughter Raquel followed him, unnoticed by her father. However, although the father was still on the running board of the bus awaiting for the conductor to hand him the bag or bayong, the bus started to run, so that even he (the father) had to jump down from the moving vehicle. It was at this instance that the child, who must be near the bus, was run over and killed.

3) The trial court ruled in favor of the plaintiffs in the suit for moral damages and actual damages. On appeal to the Court of Appeals, La Mallorca claimed that there could not be a breach of contract in the case, for the reason that when the child met her death, she was no longer a passenger of the bus involved in the incident and, therefore, the contract of carriage had already terminated. Although the CA sustained this theory, it nevertheless found the defendant-appellant guilty of quasi-delict and held the latter liable for damages, for the negligence of its driver, in accordance with Article 2180 of the Civil Code.

Issues

1) Whether as to the child, who was already led by the father to a place about 5 meters away from the bus, the liability of the carrier for her safety under the contract of carriage also persisted

2) Whether petitioner may be held liable for quasi-delict

Ruling

1) In the circumstances obtaining in this case, it cannot be claimed that the carrier's agent had exercised the "utmost diligence" of a "very cautions person" required by Article 1755 of the Civil Code to be observed by a common carrier in the discharge of its obligation to transport safely its passengers. In the first place, the driver, although stopping the bus, nevertheless did not put off the engine. Secondly, he started to run the bus even before

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the bus conductor gave him the signal to go and while the latter was still unloading part of the baggages of the passengers Mariano Beltran and family. The presence of said passengers near the bus was not unreasonable and they are, therefore, to be considered still as passengers of the carrier, entitled to the protection under their contract of carriage.

2) The complaint contained an allegation for quasi-delict. The inclusion of this averment for quasi-delict, while incompatible with the other claim under the contract of carriage, is permissible under Section 2 of Rule 8 of the New Rules of Court, which allows a plaintiff to allege causes of action in the alternative, be they compatible with each other or not, to the end that the real matter in controversy may be resolved and determined. Thus, even assuming arguendo that the contract of carriage has already terminated, herein petitioner can be held liable for the negligence of its driver pursuant to Article 2180 of the Civil Code. The presentation of proof of the negligence of its employee gave rise to the presumption that the defendant employer did not exercise the diligence of a good father of the family in the selection and supervision of its employees. Petitioner had failed to overcome. Consequently, petitioner must be adjudged peculiarily liable for the death of the child Raquel Beltran.

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Mallari, John Patrick S.

ABOITIZ SHIPPING CORPORATION VS. COURT OF APPEALSCase No. 22

FACTS:

On May 11, 1975, Anacleto Viana boarded M/V Antonio from Occidental Mindoro bound for Manila. Upon arrival on May 12, 1975, the passengers therein disembarked through a gangplank connecting the vessel to the pier. Viana, instead of disembarking through the gangplank, disembarked through the third deck, which was at the same level with the pier. An hour after the passengers disembarked, Pioneer Stevedoring Corporation, pursuant to the Memorandum of Agreement with Aboitiz Shipping Corporation, started to operate in unloading the cargo from the ship. Viana then went back, remembering some of his cargoes left at the vessel. While he was pointing at the crew of the vessel to where his cargoes were loaded, the crane hit him, pinning him between the crane and the side of the vessel. He was brought to the hospital where he died 3 days after. The parents of Anacleto filed a complaint against Aboitiz for breach of contract of carriage.

Petitioner contends that the corporation is not liable since one (1) hour had already elapsed from the time Anacleto Viana disembarked from the vessel and that he was given more than ample opportunity to unload his cargoes prior to the operation of the crane, his presence on the vessel was no longer reasonable and he consequently ceased to be a passenger.

ISSUE: Whether or not Viana is still considered a passenger at the time of the incident?

RULING:

Yes. The rule is that the relation of carrier and passenger continues until the passenger has been landed at the port of destination and has left the vessel owner’s dock or premises.

Once created, the relationship will not ordinarily terminate until the passenger has, after reaching his destination, safely alighted from the carrier’s conveyance or had a reasonable opportunity to leave the carrier’s premises. All persons who remain on the premises a reasonable time after leaving the conveyance are to be deemed passengers, and what is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances, and includes a reasonable time to see after his baggage and prepare for his departure. The carrier-passenger relationship is not terminated merely by the fact that the person transported has been carried to his destination if, for example, such person remains in the carrier’s premises to claim his baggage.

It is not definitely shown that one (1) hour prior to the incident, the victim had already disembarked from the vessel. Petitioner failed to prove this. What is clear is that at the time the

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victim was taking his cargoes, the vessel had already docked an hour earlier. In consonance with common shipping procedure as to the minimum time of one (1) hour allowed for the passengers to disembark, it may be presumed that the victim had just gotten off the vessel when he went to retrieve his baggage. Yet, even if he had already disembarked an hour earlier, his presence in petitioner's premises was not without cause. The victim had to claim his baggage which was possible only one (1) hour after the vessel arrived since it was admittedly standard procedure in the case of petitioner's vessels that the unloading operations shall start only after that time. Consequently, under the foregoing circumstances, the victim Anacleto Viana is still deemed a passenger of said carrier at the time of his tragic death.

The reasonableness of the time should be made to depend on the attending circumstances of the case, such as the kind of common carrier, the nature of its business, the customs of the place, and so forth, and therefore precludes a consideration of the time element per se without taking into account such other factors.

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Mallari, John Patrick S.

REGIONAL CONTAINER LINES OF SINGAPORE VS. THE NETHERLANDS INSURANCECO. (PHILIPPINES), INC

Case No. 23

Facts:

On October 20, 1995, 405 cartons of Epoxy Molding Compound were consigned to be shipped from Singapore to Manila for Temic Telefunken Microelectronics Philippines. U-Freight Singapore, a forwarding agent based in Singapore, contracted the services of Pacific Eagle to transport the subject cargo. The cargo was packed, stored, and sealed by Pacific Eagle in its Refrigerated Container. As the cargo was highly perishable, the inside of the container had to be kept at a temperature of 0º Celsius. Pacific Eagle then loaded the refrigerated container on board the M/V Piya Bhum, a vessel owned by RCL. To insure the cargo against loss and damage, Netherlands Insurance issued a Marine Open Policy in favor of Temic to cover all losses and damages to the shipment.

On October 25, 1995, the M/V Piya Bhum docked in Manila. After unloading the refrigerated container, it was plugged to the power terminal of the pier to keep its temperature constant. Fidel Rocha, Vice-President for Operations of Marines Adjustment Corporation, conducted a protective survey of the cargo. They found that based on the temperature chart, the temperature reading was constant from October 18, 1995 to October 25, 1995 at 0º Celsius. However, at midnight of October 25, 1995, when the cargo had already been unloaded from the ship, the temperature fluctuated with a reading of 33º Celsius. Rocha believed the fluctuation was caused by the burnt condenser fan motor of the refrigerated container.

On November 9, 1995, Temic received the shipment. It found the cargo completely damaged. Temic filed a claim for cargo loss against Netherlands Insurance, with supporting claims documents. The Netherlands Insurance paid Temic the sum of P1,036,497.00 under the terms of the Marine Open Policy. Temic then executed a loss and subrogation receipt in favor of Netherlands Insurance. Netherlands Insurance filed a complaint for subrogation of insurance settlement against RCL and its agent, EDSA Shipping.

RCL and EDSA Shipping disclaim any responsibility for the loss or damage to the goods in question. They contend that the cause of the damage to the cargo was the “fluctuation of the temperature in the reefer van,” which fluctuation occurred after the cargo had already been discharged from the vessel; no fluctuation, they point out, arose when the cargo was still on board M/V Piya Bhum. As the cause of the damage to the cargo occurred after the same was already discharged from the vessel and was under the custody of the arrastre operator (International Container Terminal Services, Inc. or ICTSI), RCL and EDSA Shipping posit that the presumption of negligence provided in Article 1735 of the Civil Code should not apply.

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ISSUE:

Whether or not RCL and EDSA Shipping are liable as common carriers under the theory of presumption of negligence.

RULING:

Yes. A common carrier is presumed to have been negligent if it fails to prove that it exercised extraordinary vigilance over the goods it transported. When the goods shipped are either lost or arrived in damaged condition, a presumption arises against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold it liable.

To overcome the presumption of negligence, the common carrier must establish by adequate proof that it exercised extraordinary diligence over the goods. It must do more than merely show that some other party could be responsible for the damage.

In the present case, RCL and EDSA Shipping failed to prove that they did exercise that degree of diligence required by law over the goods they transported. Indeed, there is sufficient evidence showing that the fluctuation of the temperature in the refrigerated container van, as recorded in the temperature chart, occurred after the cargo had been discharged from the vessel and was already under the custody of the arrastre operator, ICTSI. This evidence, however, does not disprove that the condenser fan, which caused the fluctuation of the temperature in the refrigerated container, was not damaged while the cargo was being unloaded from the ship. It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under the custody of the carrier. RCL and EDSA Shipping failed to dispute this.

RCL and EDSA Shipping could have offered evidence before the trial court to show that the damage to the condenser fan did not occur: (1) while the cargo was in transit; (2) while they were in the act of discharging it from the vessel; or (3) while they were delivering it actually or constructively to the consignee. They could have presented proof to show that they exercised extraordinary care and diligence in the handling of the goods, but they opted to file a demurrer to evidence. As the order granting their demurrer was reversed on appeal, the CA correctly ruled that they are deemed to have waived their right to present evidence, and the presumption of negligence must stand.

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Olayta, Jester Kutch A.

Aboitiz Shipping Corp vs New India Assurance Co LtdCase No. 24

Facts:

Societe Francaise Des Colloides loaded a cargo of textiles and auxiliary chemicals from France on board a vessel owned by Franco Belgian Services. The Cargo was consigned to General Textile here in the Philippines and was assured by respondent insurance company. Upon reaching Hongkong, the cargo was transferred to M/V P. Aboitiz owned by petitioner. Before its departure for Manila, the vessel was advised that it was safe to travel to its destination. However, while at the sea, it was reported that a typhoon was on its path. The vessel decided to change its path but was still at the fringe of the typhoon which caused its hull to leak and ultimately sank the ship destroying the loaded cargo. After the payment of the insurance to consignee, respondent was subrogated to its rights and then filed a complaint for damages. It contended that the cause of the loss was the unseaworthiness of petitioner’s ship.This argument was refuted by petitioner saying that the cause of the loss was caused by a fortuitous event . The board of marine inquiry sided with petitioner concluding that it was the typhoon which caused the loss. However, the RTC and later on the CA ruled against it saying that petitioner is liable for the lost cargo plus interest.

Issue: Whether or not petitioner may be held liable for the total loss of the cargo

Ruling:

The Court held in the affirmative. Common carriers, from the nature of their business, are bound to observe extraordinary diligence over the goods they transport according to all the circumstances of each case. In the case of a loss, unless they can prove that it is one of the circumstances under art 1734 of NCC, common carriers are responsible in the event of loss or deterioration of goods. In all other cases common carriers are presumed to have been at fault or acted negligently unless they observe extraordinary diligence. Thus it is upon the common carrier to prove that it acted with extraordinary diligence to exonerate itself from liability. In the case at bar, we find that petitioner failed to discharge this burden. It initially attributed the sinking to the typhoon and relied on the BMI findings that it was not at fault. However, both the trial and the appellate courts, in this case, found that the sinking was not due to the typhoon but to its unseaworthiness. Evidence on record showed that the weather was moderate when the vessel sank. Moreover, where the vessel is found unseaworthy, the ship owner is also presumed to be negligent since it is tasked with the maintenance of its vessel. This is an exception to the limited liability doctrine in which case the shipowner shall be held liable to the full extent of damages. Lastly, the findings of the BMI are not conclusive upon the courts since it merely concerns itself of the administrative liability of the crew members.

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Olayta, Jester Kutch A.

Mariano vs CallejasCase No. 25

Facts:

Petitioner Herminio Mariano is the surviving spouse of the late Dr. Frelinda Mariano. His wife died aboard a passenger bus bound for Tagaytay when it was hit by a trailer truck from the opposite direction. Respondent Callejas was the registered owner of the Celyrosa Express Bus the deceased rode while the same was driven by Edgar de Borja. Petitioner then filed a complaint against respondent for breach of contract of carriage and damages. RTC rendered a decision in favor of petitioner but CA reversed the decision holding that the presumption of fault against a carrier is only a disputable presumption and cannot be invoked if the injury sustained was not due to any defect in the means of transport or method of transporting or negligent act of the employees of the owner.

Issue: Whether or not respondent can be held liable?

Ruling:

The court held in the negative .It is clear that neither the law nor the nature of the business of a transportation company makes it an insurer of the passenger's safety, but that its liability for personal injuries sustained by its passenger rests upon its negligence, its failure to exercise the degree of diligence that the law requires. In the case at bar, petitioner cannot succeed in his contention that respondents failed to overcome the presumption of negligence against them. The totality of evidence shows that the death of petitioner's spouse was caused by the reckless negligence of the driver of the Isuzu trailer truck which lost its brakes and bumped the Celyrosa Express bus, owned and operated by respondents. The passenger bus at the time of the accident was cruising on its rightful lane at the Aguinaldo Highway when the trailer truck from the opposite direction swerved and bumped the bus on its middle portion. Respondent driver had every right to expect that the trailer truck would stay on its proper lane and was not expected to know that the truck had lost its brakes. Thus, while the law requires the highest degree of diligence from common carriers in the safe transport of their passengers and creates a presumption of negligence against them, it does not, however, make the carrier an insurer of the absolute safety of its passengers,

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Christian Raymund R. Pagador

Heirs of Jose Marcial K. Ochoa vs. G & S Transport CorporationCase No. 26

Facts

Jose Marcial K. Ochoa boarded and rode a taxicab at Manila Domestic Airport which is owned and operated by G & S Corporation under the business name "Avis Coupon Taxi" and driven by Bibiano Padilla on his way home to Teacher’s Village, Diliman, Quezon City. At about11 p.m., the taxicab was cruising along EDSA at high speed. While going up the Santolan fly-over, it overtook another cab driven by Pablo Clave and tried to pass another vehicle, a 10 wheeler cargo truck. Because of the narrow space of the fly-over and the 10 wheeler truck, the Avis cab was unable to pass and because of its speed, its driver (Padilla) was unable to control it. To avoid colliding with the truck, Padilla turned the wheel to the left causing his taxicab to ram the railing throwing itself off the fly-over. The forceful drop of the vehicle on the floor broke and split it into 2 parts. Both driver Padilla and passenger Jose Marcial K. Ochoa were rushed to the East Avenue Medical Center. However Ochoa was declared dead on arrival from the accident.So Jose Marcial’s wife demands that the latter indemnify them for Jose Marcial’s death. As G &S failed to heed the same, the heirs filed a Complaint for Damages. The heirs alleged G & S is liable for breach of contract & likewise liable for damages based on quasi-delict pursuant to Article 2180 NCC. On the other hand G & S claimed that while passing the Santolan fly-over, the taxicab was bumped by an on-rushing delivery van. In other words they posited that the proximate cause of Jose Marcial’s death is a fortuitous event which is the negligence of the driver of the delivery van that hit the taxicab. It likewise claimed that it exercised the diligence required of a good father of a family in the selection and supervision of its employees including Padilla. RTC rule in favor of Jose Marcial the vehicular mishap was NOT caused by a fortuitous event but by the negligence of Padilla. CA affirmed! Padilla failed to employ reasonable foresight, diligence and care needed to exempt G & S from liability for Jose Marcial’s death. G &S did NOT exercised due diligence in the selection and supervision of its employees.

Issue: Won G & S Transportation is liable for the death of Jose Marcial?

Ruling

YES! As a common carrier, G & S is bound to carry Jose Marcial safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances.

“In a contract of carriage, it is presumed that the common carrier is at fault or is negligent when a passenger dies or is injured. In fact, there is even no need for the court to make an express finding of fault or negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence that the carrier exercised extraordinary diligence.

Here G & S miserably failed to overcome the presumption. Since Jose Marcial was not able to reach his destination safely as he died during the course of the travel. In other words, his

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death was due to the reckless driving and gross negligence of G & S’ driver, thereby holding G& S liable for breach of contract of carriage

Also to be exempt from liability for death of Jose Marcial due to Fortuitous event, G & S must clearly show that the proximate cause of the casualty was entirely independent of human will & that it was impossible to avoid. Here, Padilla’s extreme negligence was the immediate & proximate cause of the accident hence it cannot be considered as due to fortuitous event

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Casipe, Rommel T.

Ong Yiu v. Court of AppealsCase No. 47.2

Facts:

Petitioner was a fare paying passenger of respondent Philippine Air Lines, Inc. (PAL), on board Flight No. 463-R, from Mactan Cebu, bound for Butuan City. As a passenger, he checked in one of piece of luggage, a blue “maleta.” Upon arrival, petitioner claimed his luggage but it could not be found. PAL Butuan sent a message to PAL Cebu, inquiring about the missing luggage, which message was, in turn relayed in full to the Mactan Airport teletype operator that same afternoon. It must have been transmitted immediately, for at the same afternoon, PAL Manila wired PAL Cebu advising that the luggage had been over carried to Manila aboard Flight No. 156 and that it would be forwarded to Cebu Flight No. 345 of the same day. Instructions were also given that the luggage be immediately forwarded to Butuan City on the first available flight. Of the same afternoon, PAL Cebu sent a message to PAL Butuan that the luggage would be forwarded on Flight No. 963. However, this message was not received by PAL Butuan as all the personnel had already left since there were no more incoming flights that afternoon.

Petitioner wired PAL Cebu demanding the delivery of his baggage, otherwise, he would hold PAL liable for damages, and stating that PAL’s gross negligence had caused him undue inconvenience, worry, anxiety and extreme embarrassment. Messrs. De Leon, Narvasi, and Agustin, all of PAL Cebu, went to petitioner’s office to deliver the “maleta.” Petitioner filed a complaint against PAL for damages for breach of contract of transportation with the Court of First Instance of Cebu. After the trial, the lower court found PAL to have acted in bad faith and declared petitioner entitled to moral damages in the sum of P80, 000. Both parties appealed to the Court of Appeals—petitioner in so far as he was awarded only the sum of P80, 000 as moral damages; and defendant because of the unfavorable judgment rendered against it. The Court of Appeals found that PAL was guilty of simple negligence, reversed the judgment of the trial court granting petitioner moral and exemplary damages.

Issue: Whether or not the Court of Appeals was correct when it declared that there was no gross negligence on the part of PAL and that it had not acted fraudulently or in bad faith as to entitle petitioner to an award of moral and exemplary damages.

Held: From the facts of the case, we agree with respondent Court that PAL had not acted in bad faith. Bad faith means a breach of a known duty through some motive of interest or ill will. It was the duty of PAL to look for petitioner’s luggage which had been miscarried. PAL exerted due diligence in complying with such duty. Neither was the failure of PAL Cebu to reply to petitioner’s rush telegram indicative bad faith. The telegram was dispatched by petitioner around

10:00 P.M. of August 26, 1967. The PAL supervisor at Mactan Airport was notified of it only in the morning of the following day. At that time the luggage was already to be forwarded to Butuan City. There was no bad faith, therefore, in the assumption made by said supervisor that the plane carrying the bag would arrive at the Butuan earlier than a reply telegram. Had

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petitioner waited or caused someone to wait at the Bancasi Airport for the arrival of the morning flight, he would have been able to retrieve his luggage sooner. In the absence of a wrongful act omission or fraud or bad faith, petitioner is not entitled to moral damages.

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Chan, Richard P.

BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES TRANSPORT SERVICES, INC. vs. PHILIPPINE FIRST INSURANCE CO., INC.

Case No. 55.1

FACTS:

On June 13, 1990, CMC Trading A.G. shipped on board the M/V 'Anangel Sky' at Hamburg, Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine Steel Trading Corporation. On July 28, 1990, M/V Anangel Sky arrived at the port of Manila and, within the subsequent days, discharged the subject cargo. 4 coils were found to be in bad order. Finding the 4 coils in their damaged state to be unfit for the intended purpose, the consignee Philippine Steel Trading Corporation declared the same as total loss.

Plaintiff-appellant paid the consignee P506,086.50, and was subrogated to the latter's rights and causes of action against defendants-appellees. Subsequently, plaintiff-appellant instituted this complaint for recovery of the amount paid by them, to the consignee as insured.

Impugning the propriety of the suit against them, defendants-appellees imputed that the damage and/or loss was due to pre-shipment damage, to the inherent nature, vice or defect of the goods, or to perils, danger and accidents of the sea, or to insufficiency of packing thereof, or to the act or omission of the shipper of the goods or their representatives. Defendants-appellees averred that, in any event, they exercised due diligence and foresight required by law to prevent any damage/loss to said shipment.

The RTC dismissed the Complaint.

In reversing the trial court, the CA ruled that petitioners were liable for the loss or the damage of the goods shipped, because they had failed to overcome the presumption of negligence imposed on common carriers. The CA further held as inadequately proven petitioners' claim that the loss or the deterioration of the goods was due to pre-shipment damage.

ISSUE: Whether petitioners have overcome the presumption of negligence of a common carrier.

HELD:

Well-settled is the rule that common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence and vigilance with respect to the safety of the goods and the passengers they transport. Thus, common carriers are required to render service with the greatest skill and foresight and "to use all reasonable means to ascertain the nature and characteristics of the goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires." The extraordinary responsibility lasts from the time the goods are unconditionally placed in the

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possession of and received for transportation by the carrier until they are delivered, actually or constructively, to the consignee or to the person who has a right to receive them.

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

Owing to this high degree of diligence required of them, common carriers, as a general rule, are presumed to have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed. 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.

However, the presumption of fault or negligence will not arise if the loss is due to any of the following causes: (1) flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) an act of the public enemy in war, whether international or civil; (3) an act or omission of the shipper or owner of the goods; (4) the character of the goods or defects in the packing or the container; or (5) an order or act of competent public authority. This is a closed list. If the cause of destruction, loss or deterioration is other than the enumerated circumstances, then the carrier is liable therefor.

Corollary to the foregoing, mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order at their destination constitutes a prima facie case of fault or negligence against the carrier. If no adequate explanation is given as to how the deterioration, the loss or the destruction of the goods happened, the transporter shall be held responsible.

Petitioners failed to rebut the prima facie presumption of negligence is revealed in the case at bar by a review of the records and more so by the evidence adduced by respondent. First, as stated in the Bill of Lading, petitioners received the subject shipment in good order and condition in Hamburg, Germany. Second, prior to the unloading of the cargo, an Inspection Report prepared and signed by representatives of both parties showed the steel bands broken, the metal envelopes rust-stained and heavily buckled, and the contents thereof exposed and rusty. Third, Bad Order Tally Sheet No. 15497928 issued by Jardine Davies Transport Services, Inc., stated that the four coils were in bad order and condition. Normally, a request for a bad order survey is made in case there is an apparent or a presumed loss or damage. Fourth, the Certificate of Analysis stated that, based on the sample submitted and tested, the steel sheets found in bad order were wet with fresh water. Fifth, petitioners -- in a letter addressed to the Philippine Steel Coating Corporation and dated October 12, 1990 -- admitted that they were aware of the condition of the four coils found in bad order and condition.

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

True, the words "metal envelopes rust stained and slightly dented" were noted on the Bill of Lading; however, there is no showing that petitioners exercised due diligence to forestall or lessen the loss. Having been in the service for several years, the master of the vessel should have known at the outset that metal envelopes in the said state would eventually deteriorate when not properly stored while in transit. Equipped with the proper knowledge of the nature of

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steel sheets in coils and of the proper way of transporting them, the master of the vessel and his crew should have undertaken precautionary measures to avoid possible deterioration of the cargo. But none of these measures was taken. Having failed to discharge the burden of proving that they have exercised the extraordinary diligence required by law, petitioners cannot escape liability for the damage to the four coils.

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DEFENSES

27. Sealoader Shippine Corporation vs. Granc Cement Manufacturing, G.R. Nos. 167363 and 177466, December 15, 2010

28. Philippine Charter Insurance Corp. vs Unknown Owner of the Vessel M/V Honor, G.R. No. 161833, July 8, 2005

29. Belgian Chartering and Shipping, N.V. vs. Phil. First Insurance Co., Inc., G.R. No.143133, June 5, 2002

30. Delsan Transport Lines vs. CA, G.R. No. 127897, November 15, 2001

31. Phil American General Insurance Company vs PKS Shipping Company, G.R. No. 149038, April 09, 2003

32. Edgar Cokaliong Shipping Lines, Inc. vs UCPB General Insurance Company, G.R. No. 146018, June 25, 2003

33. Central Shipping Co. Inc. vs Insurance Co. of N.A. September 20, 2004, 438 SCRA 511

34. Bascos vs Court of Appeals G.R. No. 101089, April 7, 1993

35. Pilapil vs. Court of Appeals, G.R. No.52159, December 22, 1989

36. Fortune Expree, Inc. vs Court of Appeals, G. R. No.119756, March 18, 1999

37. Gacal, et al. vs Philippine Airlines, Inc. G.R. No. 55300, March 15, 1990

38. Southern Lines, Inc. vs Court of Appeals

39. Ganzon vs. Court of Appeals, et al., G.R. No. L-48757, May 30, 1988

40. Bachelor Express, Inc. and Cresencio Rivera vs Court of Appeals, G.R.No. 85691, July 31, 1990

41. Isaac vs. A.L. Ammen Transportation Co. Inc. G.R. No. L-9671, August 23, 1957, 101 Phil 1046

42. Compania Maritima vs. Court of Appeals, G.R. No. L-31379, August 29, 1988

43. Philippine National Railways vs. Court of Appeals, G.R. No. L-55347, October 04, 1985

Christian Raymund R. Pagador

Sealoader Shipping Corporation vs. Grand Cement ManufacturingCase No. 27

Facts

Sealoader executed a Time Charter Party Agreement with Joyce Launch for the chartering of MT Viper in order to tow its unpropelled barges for a minimum of 15 days. Sealoder entered into a contract with Grand Cement for the loading of cement clinkers and the delivery thereof to Manila. On March 31, 1994, Sealoder’s barge arrived at the wharf of Grand Cement tugged by MT Viper. It was not immediately loaded as the employees of Grand Cement were loaded another vessel. On April 4, typhoon Bising struck Cebu area. The barge was still docked at the wharf of Grand Cement. As it became stronger, MT Viper tried to tow the barge away but it was unsuccessful because the towing line connecting the vessels snapped since the mooring lines were not cast off, which is the ultimate cause. Hence, the barge rammed the wharf causing significant damage. Grand Cement filed a complaint for damages (P2.4M) since Sealoader ignored its demands. They allege that Sealoader was negligent when it ignored its employee’s advice to move the vessels after it had received weather updates. Sealoader filed a motion to dismiss on the ground that Joyce Launch is the one liable since it was the owner of MT Viper, who’s employees were manning the vessel. Sealoader filed a cross-claim against Joyce Launch. Joyce maintains that the damages were due to force majeure and faultedGrand Cement’s employees for abandoning the wharf leaving them helpless and for not warning them early on. Upon testimonies, the RTC rendered judgment in favor of Grand Cement holding the two companies liable since there was complete disregard of the storm signal, the captain of the vessel was not present and the vessel was not equipped with a radio or any navigational facility, which is mandatory. Joyce launch did not appeal.On appeal, the CA affirmed the decision but on MR, it partly reversed its decision finding Grand Cement to be guilty of contributory negligence since it was found that it was still loading the other vessel at the last minute just before the storm hit, hence Sealoder’svessel did not move. Damages were reduced to 50%. Hence, petition for review to SC.

Issue: Who should be liable for damage sustained by the wharf of Grand Cement?

Ruling

Sealoader is liable for its negligence. First because it was not equipped with a radio or a navigational facility and it failed to monitor the prevailing weather conditions. Second, it cannot pass the responsibility of casting off the mooring lines because the people at the wharf could not just cast off the mooring lines without any instructions from the crew of the vessel. It should have taken the initiative to cast off the mooring lines early on.

With regard to Grand Cement’s contributory negligence, the court found that it was not guilty thereof. It had timely informed the barge of the impending typhoon and directed the vessels to move to a safer place. Contributory Negligence is conduct on the part of the injured party, contributing as a legal cause to the harm he has suffered, which falls below the standard to which he is required to conform for his own protection

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Here, Sealoader had the responsibility to inform itself of the prevailing weather conditions in the areas where its vessel was to sail. It cannot merely rely on other vessels for weather updates and warnings on approaching storms. For to do so would be to gamble with the safety of its own vessel, putting the lives of its crew under the mercy of the sea, as well as running the rick of causing damage to property of third parties for which it would necessarily be liable

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Pawid, Mivez Anne I.

PHILIPPINE CHARTER INSURANCE CORPORATION vs. UNKNOWN OWNER OF THEVESSEL M/V “NATIONAL HONOR,” NATIONAL SHIPPING CORPORATION OF THEPHILIPPINES and INTERNATIONAL CONTAINER SERVICES, INC

Case No. 28

FACTS:

On November 5, 1995, J. Trading Co. Ltd. of Seoul, Korea, loaded a shipment of four units of parts and accessories in the port of Pusan, Korea, on board the vessel M/V “National Honor,” represented in the Philippines by its agent, National Shipping Corporation of the Philippines (NSCP). The shipment was for delivery to Manila, Philippines. Freight forwarder, Samhwa Inter-Trans Co., Ltd., issued Bill of Lading No. SH9410306 in the name of the shipper consigned to the order of Metropolitan Bank and Trust Company with arrival notice in Manila to ultimate consignee Blue Mono International Company, Incorporated (BMICI), Binondo, Manila.

NSCP, for its part, issued Bill of Lading No. NSGPBSML512565[3] in the name of the freight forwarder, as shipper, consigned to the order of Stamm International Inc., Makati, Philippines. It is provided therein that:

12. This Bill of Lading shall be prima facie evidence of the receipt of the Carrier in apparent good order and condition except as, otherwise, noted of the total number of Containers or other packages or units enumerated overleaf. Proof to the contrary shall be admissible when this Bill of Lading has been transferred to a third party acting in good faith. No representation is made by the Carrier as to the weight, contents, measure, quantity, quality, description, condition, marks, numbers, or value of the Goods and the Carrier shall be under no responsibility whatsoever in respect of such description or particulars.

13. The shipper, whether principal or agent, represents and warrants that the goods are properly described, marked, secured, and packed and may be handled in ordinary course without damage to the goods, ship, or property or persons and guarantees the correctness of the particulars, weight or each piece or package and description of the goods and agrees to ascertain and to disclose in writing on shipment, any condition, nature, quality, ingredient or characteristic that may cause damage, injury or detriment to the goods, other property, the ship or to persons, and for the failure to do so the shipper agrees to be liable for and fully indemnify the carrier and hold it harmless in respect of any injury or death of any person and loss or damage to cargo or property. The carrier shall be responsible as to the correctness of any such mark, descriptions or representations.[4]

The shipment was contained in two wooden crates, namely, Crate No. 1 and Crate No. 2, complete and in good order condition, covered by Commercial Invoice No. YJ-73564 DTD[5] and a Packing List.[6] There were no markings on the outer portion of the crates except the name of the consignee.[7] Crate No. 1 measured 24 cubic meters and weighed 3,620 kgs. It contained the following articles: one (1) unit Lathe Machine complete with parts and accessories; one (1) unit Surface Grinder complete with parts and accessories; and one (1) unit Milling Machine complete with parts and accessories. On the flooring of the wooden crates were three wooden battens placed side by side to support the weight of the cargo. Crate No. 2, on the other hand, measured 10 cubic meters and weighed 2,060 kgs. The Lathe Machine was stuffed in the crate. The shipment had a total invoice value of US$90,000.00 C&F Manila.[8] It was insured

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for P2,547,270.00 with the Philippine Charter Insurance Corporation (PCIC) thru its general agent, Family Insurance and Investment Corporation,[9] under Marine Risk Note No. 68043 dated October 24, 1994.[10]

The M/V “National Honor” arrived at the Manila International Container Terminal (MICT) onNovember 14, 1995. The International Container Terminal Services, Incorporated (ICTSI) was furnished with a copy of the crate cargo list and bill of lading, and it knew the contents of the crate.[11] The following day, the vessel started discharging its cargoes using its winch crane. The crane was operated by Olegario Balsa, a winchman from the ICTSI,[12] the exclusive arrastre operator of MICT.

Denasto Dauz, Jr., the checker-inspector of the NSCP, along with the crew and the surveyor of the ICTSI, conducted an inspection of the cargo. They inspected the hatches, checked the cargo and found it in apparent good condition. Claudio Cansino, the stevedore of the ICTSI, placed two sling cables on each end of Crate No. 1.[15] No sling cable was fastened on the mid-portion of the crate. In Dauz’s experience, this was a normal procedure. [16] As the crate was being hoisted from the vessel’s hatch, the mid-portion of the wooden flooring suddenly snapped in the air, about five feet high from the vessel’s twin deck, sending all its contents crashing down hard,[17] resulting in extensive damage to the shipment.

BMICI’s customs broker, JRM Incorporated, took delivery of the cargo in such damaged condition.[18] Upon receipt of the damaged shipment, BMICI found that the same could no longer be used for the intended purpose.

BMICI subsequently filed separate claims against the NSCP,[20] the ICTSI,[21] and its insurer, the PCIC,[22] for US$61,500.00. When the other companies denied liability, PCIC paid the claim and was issued a Subrogation Receipt[23] for P1,740,634.50.

On March 22, 1995, PCIC, as subrogee, filed with the RTC of Manila, Branch 35, a Complaint for Damages[24] against the “Unknown owner of the vessel M/V National Honor,”NSCP and ICTSI, as defendants.

PCIC alleged that the loss was due to the fault and negligence of the defendants, and prayed for damages.

ICTSI, for its part, filed its Answer with Counterclaim and Cross-claim against its co-defendant NSCP, claiming that the loss/damage of the shipment was caused exclusively by the defective material of the wooden battens of the shipment, insufficient packing or acts of the shipper.

The trial court rendered judgment for PCIC and ordered the complaint dismissed.

According to the trial court, the loss of the shipment contained in Crate No. 1 was due to the internal defect and weakness of the materials used in the fabrication of the crates. The middle wooden batten had a hole (bukong-bukong). The trial court rejected the certification of the shipper, stating that the shipment was properly packed and secured, as mere hearsay and devoid of any evidentiary weight, the affiant not having testified.

The CA rendered judgment affirming in toto the appealed decision, with thisfallo –

The appellate court ratiocinated that the loss of the shipment was due to an excepted cause– “the character of the goods or defects in the packing or in the containers” and the failure of the shipper to indicate signs to notify the stevedores that extra care should be employed in handling

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the shipment. It blamed the shipper for its failure to use materials of stronger quality to support the heavy machines and to indicate an arrow in the middle portion of the cargo where additional slings should be attached. The CA concluded that common carriers are not absolute insurers against all risks in the transport of the goods.

The petitioner posits that the loss/damage was caused by the mishandling of the shipment by therein respondent ICTSI, the arrastre operator, and not by its negligence.

The petitioner insists that the respondents did not observe extraordinary diligence in the care of the goods. Respondent NSCP counters that if ever respondent ICTSI is adjudged liable, it is not solidarily liable with it. It further avers that the “carrier cannot discharge directly to the consignee because cargo discharging is the monopoly of the arrastre.” Liability, therefore, falls solely upon the shoulder of respondent ICTSI, inasmuch as the discharging of cargoes from the vessel was its exclusive responsibility.

ISSUES:

WHETHER OR NOT RESPONDENT COMMON CARRIER IS LIABLE FOR THE DAMAGE SUSTAINED BY THE SHIPMENT IN THE POSSESSION OF THE ARRASTRE OPERATOR.

WHETHER OR NOT THE STATUTORY PRESUMPTION OF FAULT AND NEGLIGENCE IS APPLICABLE IN THE CASE AT BAR.

WHETHER OR NOT THE DAMAGE SUSTAINED BY THE SHIPMENT WAS DUE TO ITS DEFECTIVE PACKING AND NOT TO THE FAULT AND NEGLIGENCE OF THE RESPONDENTS.

RULING:

The petition is denied for lack of merit. We agree with the trial and appellate courts.

We agree with the contention of the petitioner that common carriers, from the nature of their business and for reasons of public policy, are mandated to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case.

The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for sale, carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and “to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires.

The common carrier’s duty to observe the requisite diligence in the shipment of goods lasts from the time the articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier for transportation until delivered to, or until the lapse of a reasonable time for their acceptance, by the person entitled to receive them. When the goods shipped are either lost or arrive in damaged condition, a presumption arises against the carrier of its failure

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to observe that diligence, and there need not be an express finding of negligence to hold it liable. To overcome the presumption of negligence in the case of loss, destruction or deterioration of the goods, the common carrier must prove that it exercised extraordinary diligence.

However, under Article 1734 of the New Civil Code, the presumption of negligence does not apply to any of the following causes:

1. Flood, storm, earthquake, lightning or other natural disaster or calamity; 2. Act of the public enemy in war, whether international or civil; 3. Act or omission of the shipper or owner of the goods; 4. The character of the goods or defects in the packing or in the containers; 5. Order or act of competent public authority.

It bears stressing that the enumeration in Article 1734 of the New Civil Code which exempts the common carrier for the loss or damage to the cargo is a closed list. To exculpate itself from liability for the loss/damage to the cargo under any of the causes, the common carrier is burdened to prove any of the aforecited causes claimed by it by a preponderance of evidence. If the carrier succeeds, the burden of evidence is shifted to the shipper to prove that the carrier is negligent.

“Defect” is the want or absence of something necessary for completeness or perfection; a lack or absence of something essential to completeness; a deficiency in something essential to the proper use for the purpose for which a thing is to be used. On the other hand, inferior means of poor quality, mediocre, or second rate. A thing may be of inferior quality but not necessarily defective. In other words, “defectiveness” is not synonymous with “inferiority.”

The petitioner failed to adduce any evidence to counter that of respondent ICTSI. The petitioner failed to rebut the testimony of Dauz, that the crates were sealed and that the contents thereof could not be seen from the outside. While it is true that the crate contained machineries and spare parts, it cannot thereby be concluded that the respondents knew or should have known that the middle wooden batten had a hole, or that it was not strong enough to bear the weight of the shipment.

There is no showing in the Bill of Lading that the shipment was in good order or condition when the carrier received the cargo, or that the three wooden battens under the flooring of the cargo were not defective or insufficient or inadequate. On the other hand, under Bill of Lading No. NSGPBSML512565 issued by the respondent NSCP and accepted by the petitioner, the latter represented and warranted that the goods were properly packed, and disclosed in writing the “condition, nature, quality or characteristic that may cause damage, injury or detriment to the goods.” Absent any signs on the shipment requiring the placement of a sling cable in the mid-portion of the crate, the respondent ICTSI was not obliged to do so.

The statement in the Bill of Lading, that the shipment was in apparent good condition, is sufficient to sustain a finding of absence of defects in the merchandise. Case law has it that such statement will create a prima facie presumption only as to the external condition and not to that not open to inspection.

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Pawid, Mivez Anne I.

BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES TRANSPORT SERVICES, INC., vs. PHILIPPINE FIRST INSURANCE CO., INC.,

Case No. 29

FACTS:

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

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

Defendants-appellees imputed that the damage and/or loss was due to pre-shipment damage, to the inherent nature, vice or defect of the goods, or to perils, danger and accidents of the sea, or to insufficiency of packing thereof, or to the act or omission of the shipper of the goods or their representatives. In addition thereto, defendants-appellees argued that their liability, if there be any, should not exceed the limitations of liability provided for in the bill of lading and other pertinent laws. Finally, defendants-appellees averred that, in any event, they exercised due diligence and foresight required by law to prevent any damage/loss to said shipment.

The RTC dismissed the Complaint because respondent had failed to prove its claims with the quantum of proof required by law.

In reversing the trial court, the CA ruled that petitioners were liable for the loss or the damage of the goods shipped, because they had failed to overcome the presumption of negligence imposed on common carriers.

The CA further held as inadequately proven petitioners’ claim that the loss or the deterioration of the goods was due to pre-shipment damage. It likewise opined that the notation“metal envelopes rust stained and slightly dented” placed on the Bill of Lading had not been the proximate cause of the damage to the four (4) coils.

As to the extent of petitioners’ liability, the CA held that the package limitation under COGSA was not applicable, because the words “L/C No. 90/02447” indicated that a higher valuation of the cargo had been declared by the shipper. The CA, however, affirmed the award of attorney’s fees.

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ISSUES:

1. Whether petitioners have overcome the presumption of negligence of a common carrier

2. Whether the notice of loss was timely filed

3. Whether the package limitation of liability is applicable

RULING:

The Petition is partly granted and the assailed Decision MODIFIED. Petitioners’ liability is reduced to US$2,000 plus interest at the legal rate of six percent from the time of the filing of the Complaint on July 25, 1991 until the finality of this Decision, and 12 percent thereafter until fully paid. That petitioners failed to rebut the prima facie presumption of negligence is revealed in the case at bar by a review of the records and more so by the evidence adduced by respondent.

First, as stated in the Bill of Lading, petitioners received the subject shipment in good order and condition in Hamburg, Germany.

Second, prior to the unloading of the cargo, an Inspection Report prepared and signed by representatives of both parties showed the steel bands broken, the metal envelopes rust-stained and heavily buckled, and the contents thereof exposed and rusty.

Third, Bad Order Tally Sheet No. 154979 issued by Jardine Davies Transport Services, Inc., stated that the four coils were in bad order and condition. Normally, a request for a bad order survey is made in case there is an apparent or a presumed loss or damage.]

Fourth, the Certificate of Analysis stated that, based on the sample submitted and tested, the steel sheets found in bad order were wet with fresh water.

Fifth, petitioners -- in a letter addressed to the Philippine Steel Coating Corporation and dated October 12, 1990 -- admitted that they were aware of the condition of the four coils found in bad order and condition.

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

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

True, the words “metal envelopes rust stained and slightly dented” were noted on the Bill ofLading; however, there is no showing that petitioners exercised due diligence to forestall or lessen the loss.[36] Having been in the service for several years, the master of the vessel should have known at the outset that metal envelopes in the said state would eventually deteriorate when not properly stored while in transit.[37] Equipped with the proper knowledge of the nature of steel sheets in coils and of the proper way of transporting them, the master of the vessel and his crew should have undertaken precautionary measures to avoid possible deterioration of the cargo. But none of these measures was taken.[38] Having failed to discharge the burden of proving that they have exercised the extraordinary diligence required by law, petitioners cannot escape liability for the damage to the four coils.

Petitioners claim that pursuant to Section 3, paragraph 6 of the Carriage of Goods by Sea Act (COGSA), respondent should have filed its Notice of Loss within three days from

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delivery. They assert that the cargo was discharged on July 31, 1990, but that respondent filed its Notice of Claim only on September 18, 1990.

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

Second, as stated in the same provision, a failure to file a notice of claim within three days will not bar recovery if it is nonetheless filed within one year. This one-year prescriptive period also applies to the shipper, the consignee, the insurer of the goods or any legal holder of the bill of lading.

In the present case, the cargo was discharged on July 31, 1990, while the Complaint[51]

was filed by respondent on July 25, 1991, within the one-year prescriptive period.

Assuming arguendo they are liable for respondent’s claims, petitioners contend that their liability should be limited to US$500 per package as provided in the Bill of Lading and by Section 4(5)[52] of COGSA.[53]

On the other hand, respondent argues that Section 4(5) of COGSA is inapplicable, because the value of the subject shipment was declared by petitioners beforehand, as evidenced by the reference to and the insertion of the Letter of Credit or “L/C No. 90/02447” in the said Bill ofLading.

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

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

In the case before us, there was no stipulation in the Bill of Lading[66] limiting the carrier’s liability. Neither did the shipper declare a higher valuation of the goods to be shipped. This fact notwithstanding, the insertion of the words “L/C No. 90/02447 cannot be the basis for petitioners’ liability.

First, a notation in the Bill of Lading which indicated the amount of the Letter of Credit obtained by the shipper for the importation of steel sheets did not effect a declaration of the value of the goods as required by the bill.[67] That notation was made only for the convenience of the shipper and the bank processing the Letter of Credit.[68]

Second, in Keng Hua Paper Products v. Court of Appeals,[69] we held that a bill of lading was separate from the Other Letter of Credit arrangements.

In the light of the foregoing, petitioners’ liability should be computed based on US$500 per package and not on the per metric ton price declared in the Letter of Credit. [71] In Eastern Shipping Lines, Inc. v. Intermediate Appellate Court[72] we explained the meaning of package:

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

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

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Peña, Lea Kathryn D.

Delsan Transport Lines Inc vs CACase No. 30

Facts:

Caltex entered into a contract of affreightment with Delsan Transport Lines, Inc., whereby the said common carrier agreed to transport Caltex’s industrial fuel oil from Batangas-Bataan Refinery to different parts of the country. Under the contract, Delsan took on board its vessel, MT Maysun, 2,277.314 kiloliters of industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City. The shipment was insured with American Home Assurance Corporation. Unfortunately, the vessel sank in the early morning of August 16, 1986 near Panay Gulf in the Visayas taking with it the entire cargo of fuel oil.

This prompted American Home to pay Caltex the sum of Php 5,096,635.57 representing the insured value of the cargo. Exercising its right to subrogation, American Home demanded from Delsan the same amount it paid to Caltex. However, due to its failure to collect from Delsan despite prior demand, American Home filed a complaint with the RTC of Makati for collection of a sum of money. The trial court dismissed the complaint against Delsan. It ruled that the vessel, MT Maysun, was seaworthy and that the incident was caused by unexpected inclement weather condition or force majeure, thus exempting the common carrier from liability for the loss of its cargo. On appeal to CA, the decision was reversed because the court gave credence to the weather report issued by PAGASA which stated that the waves were only .7 to 2 meters in height in the vicinity of the Panay Gulf at the day the ship sank, in contrast to the claim of the crew of the ship that the waves were 20 feet high.

Hence this petition.

Issues: 1. Whether the payment made by American Home to Caltex for the insured value of the lost cargo amounted to an admission that the vessel was seaworthy, thus precluding any action for recovery against the petitioner?

2. Whether the non-presentation of the marine insurance policy bars the complaint for recovery of sum of money for lack of cause of action?

Held:

1. No. The payment made by American Home for the insured value of the lost cargo operates as waiver of its right to enforce the term of the implied warranty against Caltex under the marine insurance policy. However, the same cannot be validly interpreted as an automatic admission of the vessel’s seaworthiness by American Home as to foreclose recourse against Delsan for any liability under its contractual obligation as a common carrier. The fact of payment grants American Home subrogatory right which enables it to exercise legal remedies that would otherwise be available to Caltex as owner of the lost cargo against Delsan, the common carrier. From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of passengers transported by them, according to all the circumstances of each case. In the event of loss, destruction or deterioration of the insured goods, common carriers shall be responsible unless the same is brought about, among others, by flood, storm, earthquake, lightning or other

51

natural disaster or calamity. In all other cases, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove they observed extraordinary diligence. In order to escape liability for the loss of its cargo of industrial fuel oil belonging to Caltex, Delsan attributes the sinking of MT Maysun to fortuitous event or force majeure. Although the testimony of the captain and chief mate that there were strong winds and waves 20 feet high was effectively rebutted and belied by the weather report of PAGASA. Thus, as the CA correctly ruled, Delsan’s vessel, MT Maysun, sank with its entire cargo for the reason that it was not seaworthy. There was no squall or bad weather or extremely poor sea condition in the vicinity where the said vessel sank.

2. No. It is the view of the SC that the presentation in evidence of the marine insurance policy is not indispensable in this case before the insurer may recover from the common carrier the insured value of the lost cargo in the exercise of its subrogatory right. The subrogation receipt, by itself, is sufficient to establish not only the relationship of American Home as insurer and Caltex, as the assured shipper of the lost cargo of industrial fuel oil, but also the amount paid to settle the insurance claim. The right of subrogation accrues simply upon payment by the insurance company of the insurance claim.

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Peña, Lea Kathryn D

Phil. American Gen. Insurance v. PKS Shipping Co.Case No. 31

Facts:

Davao Union Marketing Corporation (DUMC) contracted the services of PKS Shipping Company for the shipment to Tacloban City of 75,000 bags of cement worth P3,375,000. DUMC insured the goods with Philamgen. The bags were loaded aboard the barge Limar I belonging toPKS Shipping, however, while PKS’ tugboat MT Iron Eagle was towing the barge, Limar I sank bringing down with it the entire cargo. DUMC filed a claim with Philamgen which promptly made payment and sought reimbursement from PKS Shipping. The shipping company refused to pay causing Philamgen to file a suit with the Makati RTC. The RTC ruled against Philamgen since PKS could not be liable in cases of fortuitous event or through the negligence of the captain or its crew leading to abandonment. The CA affirmed the RTC’s decision stating that there was lack of evidence to establish that PKS Shippine was a common carrier and that the peculiar method of the shipping company’s carrying of goods for others was not generally held out as a business but as a casual occupation.

Hence, this case.

Issues: 1. Whether PKS Shipping is a common carrier or a private carrier?

2. Whether PKS Shipping exercised the required diligence over the goods they carry, therefore, not liable?

Held:

1. PKS Shipping is a common carrier. PKS Shipping has engaged itself in the business of carrying goods for others, although for a limited clientele, undertaking to carry such goods for a fee. The regularity of its activities in this area indicates more than just a casual activity on its part. Neither can the concept of a common carrier change merely because individual contracts are executed or entered into with patrons of the carrier.

2. PKS Shipping is not liable. The vessel was suddenly tossed by waves of extraordinary height of six (6) to eight (8) feet and buffeted by strong winds of 1.5 knots resulting in the entry of water into the barge’s hatches. The official Certificate of Inspection of the barge issued by thePhilippine Coastguard and the Coastwise Load Line Certificate would attest to the seaworthiness of Limar I. As such, under Art. 1733, NCC, common carriers are exempt from liability for loss, destruction, or deterioration of the goods due to any of the following causes, among others: (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity

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Quintua, Angeli

EDGAR COKALIONG SHIPPING LINES, INC. vs. UCPB GENERAL INSURANCE COMPANY, INC

Case No. 32

Doctrine: The liability of a common carrier for the loss of goods may, by stipulation in the bill of lading, be limited to the value declared by the shipper. On the other hand, the liability of the insurer is determined by the actual value covered by the insurance policy and the insurance premiums paid therefor, and not necessarily by the value declared in the bill of lading.

Facts:

On December 11, 1991, Nestor Angelia delivered to the Edgar Cokaliong Shipping Lines, Inc. (now Cokaliong Shipping Lines), cargo consisting of one (1) carton of Christmas décor and two (2) sacks of plastic toys, to be transported on board the M/V Tandag on its Voyage No. T-189 scheduled to depart from Cebu City, on December 12, 1991, for Tandag, Surigao del Sur. Petitioner issued Bill of Lading No. 58. Nestor Angelia was both the shipper and consignee of the cargo valued in the amount of P6,500.00.

Zosimo Mercado likewise delivered cargo to petitioner, consisting of two (2) cartons of plastic toys and Christmas decor, one (1) roll of floor mat and one (1) bundle of various or assorted goods for transportation thereof from Cebu City to Tandag, Surigao del Sur, on board the said vessel, and said voyage. Petitioner issued Bill of Lading No. 59 covering the cargo in the amount of P14,000.00. Under the Bill of Lading, Zosimo Mercado was both the shipper and consignee of the cargo.

Feliciana Legaspi insured the cargo, covered by Bill of Lading No. 59, with respondentUCPB General Insurance Co., Inc. for the amount of P100,000.00 ‘against all risks’. She also insured the cargo covered by Bill of Lading No. 58 for the amount of P50,000.00.

The cargoes never reached its destination because after the vessel had passed by the Mandaue-Mactan Bridge, fire ensued in the engine room, and, despite earnest efforts of the officers and crew of the vessel, the fire engulfed and destroyed the entire vessel resulting in the loss of the vessel and the cargoes therein. The Captain filed the required Marine Protest.

Feliciana Legaspi filed a claim with respondent for the value of the cargo insured covered by Bill of Lading No. 59 and 58. Respondent approved the claim of Feliciana Legaspi land issued UCPB Check No. 612939 in the net amount of P99,000.00 and P49,500 respectively, in settlement of her claim after which she executed a Subrogation Receipt/Deed, for said amount, in favor of respondent.

Respondent UCPB as subrogee of Feliciana Legaspi, filed a complaint anchored on torts against petitioner, with the RTC of Makati City, for the collection of the total principal amount of P148,500.00, which it paid to Feliciana Legaspi for the loss of the cargo.

Contention of Respondent:- That the loss of the cargo was due to the negligence of the petitioner.

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Contention of Petitioner:

- That it was cleared by the Board of Marine Inquiry of any negligence in the burning of the vessel; - The shippers/consignee had already been paid the value of the goods as stated in the Bill of Lading and, hence, petitioner cannot be held liable for the loss of the cargo beyond the value thereof declared in the Bill of Lading.

After respondent rested its case, petitioner prayed for and was allowed, by the Court a quo, to take the depositions of Chester Cokaliong and it has been proved that that the claim of Nestor Angelia in the amount of P6,500.00 was paid but since the latter owed Chester Marketing, Inc., for some purchases, petitioner merely set off the amount due to Nestor Angelia under Bill of Lading No. 58 against his account with Chester Marketing, Inc.

Ruling of the RTC- Dismissed the case.

Ruling of the CA

It ordered petitioner to pay respondent the amount of P148,500. It held that petitioner had failed to prove that the fire which consumed the vessel and its cargo was caused by something other than its negligence in the upkeep, maintenance and operation of the vessel.

Hence, instant petition.

Issues: (1) Is petitioner liable for the loss of the goods? (2) If it is liable, what is the extent of its liability.

Held:

(1) First Issue: Liability for Loss

Yes. Broadly speaking, force majeure generally applies to a natural accident, such as that caused by a lightning, an earthquake, a tempest or a public enemy. Hence, fire is not considered a natural disaster or calamity.

The law provides that a common carrier is presumed to have been negligent if it fails to prove that it exercised extraordinary vigilance over the goods it transported. Ensuring the seaworthiness of the vessel is the first step in exercising the required vigilance. Petitioner did not present sufficient evidence showing what measures or acts it had undertaken to ensure the seaworthiness of the vessel.It failed to show when the last inspection and care of the auxiliary engine fuel oil service tank was made, what the normal practice was for its maintenance, or some other evidence to establish that it had exercised extraordinary diligence. It merely stated that constant inspection and care were not possible, and that the last time the vessel was dry-docked was in November 1990. Necessarily, in accordance with Article 1735[17] of the Civil Code, we hold petitioner responsible for the loss of the goods covered by Bills of Lading Nos. 58 and 59.

(2) Second Issue: Extent of Liability

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In the present case, the stipulation limiting petitioner’s liability is not contrary to public policy. In fact, its just and reasonable character is evident.

The purpose of the limiting stipulation in the Bill of Lading is to protect the common carrier. Such stipulation obliges the shipper/consignee to notify the common carrier of the amount that the latter may be liable for in case of loss of the goods. The common carrier can then take appropriate measures -- getting insurance, if needed, to cover or protect itself. This precaution on the part of the carrier is reasonable and prudent. Hence, a shipper/consignee that undervalues the real worth of the goods it seeks to transport does not only violate a valid contractual stipulation, but commits a fraudulent act when it seeks to make the common carrier liable for more than the amount it declared in the bill of lading.

However, respondent was, however, able to prove that it was Feliciana Legaspi who owned those goods, and who was thus entitled to payment for their loss. Hence, the claim for the goods under Bill of Lading No. 59 cannot be deemed to have been extinguished, because payment was made to a person who was not entitled thereto.

WHEREFORE, the Petition is hereby PARTIALLY GRANTED. The assailed Decision is MODIFIED in the sense that petitioner is ORDERED to pay respondent the sums of P14,000 and P6,500, which represent the value of the goods stated in Bills of Lading Nos. 59 and 58, respectively. No costs.

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Quintua, Angeli

CENTRAL SHIPPING COMPANY, INC. vs. INSURANCE COMPANY OF NORTH AMERICA,Case No. 33

Doctrine: A common carrier is presumed to be at fault or negligent. It shall be liable for the loss, destruction or deterioration of its cargo, unless it can prove that the sole and proximate cause of such event is one of the causes enumerated in Article 1734 of the Civil Code, or that it exercised extraordinary diligence to prevent or minimize the loss. In the present case, the weather condition encountered by petitioner’s vessel was not a “storm” or a natural disaster comprehended in the law. Given the known weather condition prevailing during the voyage, the manner of stowage employed by the carrier was insufficient to secure the cargo from the rolling action of the sea. The carrier took a calculated risk in improperly securing the cargo. Having lost that risk, it cannot now disclaim any liability for the loss.

Facts

On July 25, 1990 at Puerto Princesa, Palawan, the petitioner received on board its vessel, the M/V ‘Central Bohol’, 376 pieces of Philippine Apitong Round Logs and undertook to transport said shipment to Manila for delivery to Alaska Lumber Co., Inc. The cargo was insured for P3,000,000.00 against total loss under respondent’s Marine Cargo Policy No. MCPB-00170.

The cargo never reached its destination because at about 0130 hours on July 26 the vessel completely sank and the cargo was totally lost.

Insurance Company paid the claim of Alaska Lumber Co. As consignee claim and now seeks to be subrogated to all the rights and actions of the consignee as against the petitioner.

Contention of Petitioner:

It raised as its main defense that the proximate and only cause of the sinking of its vessel and the loss of its cargo was a natural disaster, a tropical storm which neither [petitioner] nor the captain of its vessel could have foreseen.

Ruling of the RTC

It applied the rule on presumptive fault or negligence against the carrier thus, liable for the loss of the cargo.

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Ruling of the Court of Appeals

The CA affirmed the trial court’s finding that the southwestern monsoon encountered by the vessel was not unforeseeable. The CA concluded that the doctrine of limited liability was not applicable, in view of petitioner’s negligence -- particularly its improper stowage of the logs.

Hence, this Petition.

Issues:(1) Whether or not the loss of the cargo was due to the occurrence of a natural disaster.

(2) Whether or not its sole and proximate cause was such natural disaster or whether petitioner was partly to blame for failing to exercise due diligence in the prevention of that loss.

Held:

(1) First Issue: Liability for Lost Cargo

The evidence indicated that strong southwest monsoons were common occurrences during the month of July. Thus, the officers and crew of M/V Central Bohol should have reasonably anticipated heavy rains, strong winds and rough seas. They should then have taken extra precaution in stowing the logs in the hold, in consonance with their duty of observing extraordinary diligence in safeguarding the goods. But the carrier took a calculated risk in improperly securing the cargo. Having lost that risk, it cannot now escape responsibility for the loss.

(2) Second Issue: Doctrine of Limited Liability

The doctrine of limited liability under Article 587 of the Code of Commerce[36] is not applicable to the present case. This rule does not apply to situations in which the loss or the injury is due to the concurrent negligence of the shipowner and the captain. It has already been established that the sinking of M/V Central Bohol had been caused by the fault or negligence of the ship captain and the crew, as shown by the improper stowage of the cargo of logs. “Closer supervision on the part of the shipowner could have prevented this fatal miscalculation.” As such, the shipowner was equally negligent. It cannot escape liability by virtue of the limited liability rule.

WHEREFORE, the Petition is DENIED, and the assailed Decision and Resolution AFFIRMED. Costs against petitioner.

SO ORDERED.

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Rivera, Hiezll Wynn R.

BASCOS vs.COURT OF APPEALS and RODOLFO A. CIPRIANOCase No. 34

FACTS

Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered into a hauling contract with Jibfair Shipping Agency Corp whereby the former bound itself to haul the latter’s 2,000 m/tons of soya bean meal to the warehouse in Calamba, Laguna. To carry out its obligation, CIPTRADE, through Cipriano, subcontracted with Bascos to transport and to deliver 400 sacks of soya bean meal from the Manila Port Area to Calamba, Laguna. Petitioner failed to deliver the said cargo. As a consequence of that failure, Cipriano paid Jibfair Shipping Agency the amount of the lost goods in accordance with their contract.

Cipriano demanded reimbursement from petitioner but the latter refused to pay. Eventually, Cipriano filed a complaint for a sum of money and damages with writ of preliminary attachment for breach of a contract of carriage. The trial court granted the writ of preliminary attachment. In her answer, petitioner interposed the defense that there was no contract of carriage since CIPTRADE leased her cargo truck to load the cargo from Manila Port Area to Laguna and that the truck carrying the cargo was hijacked and being a force majeure, exculpated petitioner from any liability.

After trial, the trial court rendered a decision in favor of Cipriano and against Bascos ordering the latter to pay the former for actual damages for attorney’s fees and cost of suit. The “Urgent Motion To Dissolve/Lift preliminary Attachment” Bascos is DENIED for being moot and academic. Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial court’s judgment.

Hence this petition for review on certiorari

ISSUE:(1) WON petitioner a common carrier and; (2) WON the hijacking referred to a force majeure

HELD:

1. YES. We agree with the respondent Court in its finding that petitioner is a common carrier. Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or association engaged in the business of carrying or transporting passengers or goods or both, by land, water or air, for compensation, offering their services to the public." The test to determine a common carrier is "whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of the business transacted." In this case, petitioner herself has made the admission that she was in the trucking business, offering her trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is required to prove the same.

(2) Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them. Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. There are very few instances

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when the presumption of negligence does not attach and these instances are enumerated in Article 1734. In those cases where the presumption is applied, the common carrier must prove that it exercised extraordinary diligence in order to overcome the presumption. The presumption of negligence was raised against petitioner. It was petitioner's burden to overcome it. Thus, contrary to her assertion, private respondent need not introduce any evidence to prove her negligence. Her own failure to adduce sufficient proof of extraordinary diligence made the presumption conclusive against her.

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RIVERA, HIEZLL WYNN R.

JOSE PILAPIL vs. COURT OF APPEALS and ALATCO TRANSPORTATION COMPANY, INC.

Case No. 35

FACTS

Petitioner Pilapil, on board respondent’s bus was hit above his eye by a stone hurled by an unidentified bystander. Respondent’s personnel lost no time in bringing him to a hospital, but eventually petitioner partially lost his left eye’s vision and sustained a permanent scar.

Thus, Petitioner lodged an action for recovery of damages before the Court of First Instance of Camarines Sur which the latter granted. On appeal, the Court of Appeals reversed said decision.

ISSUE:Whether or not common carriers assume risks to passengers such as the stoning in this case?

HELD:

In consideration of the right granted to it by the public to engage in the business of transporting passengers and goods, a common carrier does not give its consent to become an insurer of any and all risks to passengers and goods. It merely undertakes to perform certain duties to the public as the law imposes, and holds itself liable for any breach thereof.

While the law requires the highest degree of diligence from common carriers in the safe transport of their passengers and creates a presumption of negligence against them, it does not, however, make the carrier an insurer of the absolute safety of its passengers.

Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the wilful acts or negligence of other passengers or of strangers, if the common carrier's employees through the exercise of the diligence of a good father of a family could have prevented or stopped the act or omission.

Clearly under the above provision, a tort committed by a stranger which causes injury to a passenger does not accord the latter a cause of action against the carrier. The negligence for which a common carrier is held responsible is the negligent omission by the carrier's employees to prevent the tort from being committed when the same could have been foreseen and prevented by them. Further, under the same provision, it is to be noted that when the violation of the contract is due to the willful acts of strangers, as in the instant case, the degree of care essential to be exercised by the common carrier for the protection of its passenger is only that of a good father of a family.

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Jon Mari Z. Sia

FORTUNE EXPRESS, INC vs COURT OF APPEALSCase No. 36

Facts:

Petitioner is a bus company in northern Mindanao. Private respondent Paulie Caorong is the widow of Atty. Caorong, while private respondents Yasser King, Rose Heinni, and Prince Alexander are their minor children.

On November 18, 1989, a bus of petitioner figured in an accident with a jeepney in Kauswagan, Lanao del Norte, resulting in the death of several passengers of the jeepney, including two Maranaos. Crisanto Generalao, a volunteer field agent of the Constabulary Regional Security Unit No. X, conducted an investigation of the accident. He found that the owner of the jeepney was a Maranao residing in Delabayan, Lanao del Norte and that certain Maranaos were planning to take revenge on the petitioner by burning some of its buses. Generalao rendered a report on his findings to Sgt. Reynaldo Bastasa of the Philippine Constabulary Regional Headquarters at Cagayan de Oro. Upon the instruction of Sgt. Bastasa, he went to see Diosdado Bravo, operations manager of petitioner, its main office in Cagayan de Oro City. Bravo assured him that the necessary precautions to insure the safety of lives and property would be taken.

At about 6:45 P.M. on November 22, 1989, three armed Maranaos who pretended to be passengers, seized a bus of petitioner at Linamon, Lanao del Norte while on its way to Iligan City. Among the passengers of the bus was Atty. Caorong. The leader of the Maranaos, identified as one Bashier Mananggolo, ordered the driver, Godofredo Cabatuan, to stop the bus on the side of the highway. Mananggolo then shot Cabatuan on the arm, which caused him to slump on the steering wheel. The one of the companions of Mananggolo started pouring gasoline inside the bus, as the other held the passenger at bay with a handgun. Mananggolo then ordered the passenger to get off the bus. The passengers, including Atty. Caorong, stepped out of the bus and went behind the bushes in a field some distance from the highway.

However, Atty. Caorong returned to the bus to retrieve something from the overhead rack. at that time, one of the armed men was pouring gasoline on the head of the driver. Cabatuan, who had meantime regained consciousness, heard Atty. Caorong pleading with the armed men to spare the driver as he was innocent of any wrong doing and was only trying to make a living. The armed men were, however, adamant as they repeated the warning that they were going to burn the bus along with its driver. During this exchange between Atty. Caorong and the assailants, Cabatuan climbed out of the left window of the bus and crawled to the canal on the opposite side of the highway. He heard shots from inside the bus. Larry de la Cruz, one of the passengers, saw that Atty. Caorong was hit. Then the bus was set on fire. Some of the passengers were able to pull Atty. Caorong out of the burning bus and rush him to the Mercy Community Hospital in Iligan City, but he died while undergoing operation. Hence, the private respondents filed an action for damages for breach of contract of carriage against the petitioner.

The petitioner contends that the seizure of its bus by the armed assailants was a fortuitous event for which it could not be held liable, and that Atty. Caorong was guilty of contributory negligence in returning to the bus to retrieve something.

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Issues: Whether or not the petitioner is exempted from liability on the ground of fortuitous event, and whether or not Atty. Caorong is guilty of contributory negligence.

Ruling:

The seizure of petitioner's bus is not a case of force majeure and Atty. Caorong is not guilty of contributory negligence.

Art. 1763 of the Civil Code provides that a common carrier is responsible for injuries suffered by a passenger on account of wilfull acts of other passengers, if the employees of the common carrier could have prevented the act through the exercise of the diligence of a good father of a family. In the present case, it is clear that because of the negligence of petitioner's employees, the seizure of the bus by Mananggolo and his men was made possible. Despite warning by the Philippine Constabulary at Cagayan de Oro that the Maranaos were planning to take revenge on the petitioner by burning some of its buses and the assurance of petitioner's operation manager, Diosdado Bravo, that the necessary precautions would be taken, petitioner did nothing to protect the safety of its passengers. Had petitioner and its employees been vigilant they would not have failed to see that the malefactors had a large quantity of gasoline with them. Under the circumstances, simple precautionary measures to protect the safety of passengers, such as frisking passengers and inspecting their baggages, preferably with non-intrusive gadgets such as metal detectors, before allowing them on board could have been employed without violating the passenger's constitutional rights. From the foregoing, it is evident that petitioner's employees failed to prevent the attack on one of petitioner's buses because they did not exercise the diligence of a good father of a family. Hence, petitioner should be held liable for the death of Atty. Caorong.

The petitioner contends that the seizure of its bus by the armed assailants was a fortuitous event for which it could not be held liable.Art. 1174 of the Civil Code defines a fortuitous event as an occurence which could not be foreseen, is inevitable. In Yobido v. Court of Appeals, we held that to considered as force majeure, it is necessary that (1) the cause of the breach of the obligation must be independent of the human will; (2) the event must be either unforeseeable or unavoidable; (3) the occurence must be render it impossible for the debtor to fulfill the obligation in a normal manner; and (4) the obligor must be free of participation in, or aggravation of, the injury to the creditor. The absence of any of the requisites mentioned above would prevent the obligor from being excused from liability.

Art. 1755 of the Civil Code provides that "a common carrier is bound to carry the passengers as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances." Thus, we held in Pilapil and De Guzman that the respondents therein were not negligent in failing to take special precautions against threats to the safety of passengers which could not be foreseen, such as tortious or criminal acts of third persons. In the present case, this factor of unforeseeability (the second requisite for an event to be considered force majeure) is lacking. As already stated, despite the report of PC agent Generalao that the Maranaos were planning to burn some of petitioner's buses and the assurance of petitioner's operation manager (Diosdado Bravo) that the necessary precautions would be taken, nothing was really done by petitioner to protect the safety of passengers.

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The petitioner contends that Atty. Caorong was guilty of contributory negligence in returning to the bus to retrieve something. But Atty. Caorong did not act recklessly. It should be pointed out that the intended targets of the violence were petitioners and its employees, not its passengers. The assailant's motive was to retaliate for the loss of life of two Maranaos as a result of the collision between petitioner's bus and the jeepney in which the two Maranaos were riding. Mananggolo, the leader of the group which had hijacked the bus, ordered the passengers to get off the bus as they intended to burn it and its driver. The armed men actually allowed Atty. Caorong to retrieve something from the bus. What apparently angered them was his attempt to help the driver of the bus by pleading for his life. He was playing the role of the good Samaritan. Certainly, this act cannot considered an act of negligence, let alone recklessness.

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Sia, Jon Mari Z.

FRANKLIN G. GACAL and CORAZON M. GACAL vs PHILIPPINE AIR LINES, INC.Case No. 37

Facts:

Plaintiffs Franklin G. Gacal and his wife, Corazon M. Gacal, Bonifacio S. Anislag and his wife, Mansueta L. Anislag, and the late Elma de Guzman, were then passengers boarding defendant's BAC 1-11 at Davao Airport for a flight to Manila, not knowing that on the same flight, Macalinog, Taurac Pendatum known as Commander Zapata, Nasser Omar, Liling Pusuan Radia, Dimantong Dimarosing and Mike Randa, all of Marawi City and members of the Moro National Liberation Front (MNLF), were their co-passengers, three (3) armed with grenades, two(2) with .45 caliber pistols, and one with a .22 caliber pistol. Ten (10) minutes after take off at about 2:30 in the afternoon, the hijackers brandishing their respective firearms announced the hijacking of the aircraft and directed its pilot to fly to Libya. With the pilot explaining to them especially to its leader, Commander Zapata, of the inherent fuel limitations of the plane and that they are not rated for international flights, the hijackers directed the pilot to fly to Sabah. With the same explanation, they relented and directed the aircraft to land at Zamboanga Airport, Zamboanga City for refueling. The aircraft landed at 3:00 o'clock in the afternoon of May 21, 1976 at Zamboanga Airport. When the plane began to taxi at the runway, it was met by two armored cars of the military with machine guns pointed at the plane, and it stopped there. The rebels thru its commander demanded that a DC-aircraft take them to Libya with the President of the defendant company as hostage and that they be given $375,000 and six (6) armalites, otherwise they will blow up the plane if their demands will not be met by the government and Philippine Air Lines. Meanwhile, the passengers were not served any food nor water and it was only on May 23, a Sunday, at about 1:00 o'clock in the afternoon that they were served 1/4 slice of a sandwich and 1/10 cup of PAL water. After that, relatives of the hijackers were allowed to board the plane but immediately after they alighted therefrom, an armored car bumped the stairs. That commenced the battle between the military and the hijackers which led ultimately to the liberation of the surviving crew and the passengers, with the final score of ten (10) passengers and three (3) hijackers dead on the spot and three (3) hijackers captured.

City Fiscal Franklin G. Gacal was unhurt. Mrs. Corazon M. Gacal suffered injuries in the course of her jumping out of the plane when it was peppered with bullets by the army and after two (2) hand grenades exploded inside the plane. She was hospitalized at General Santos Doctors Hospital, General Santos City, for two (2) days, spending P245.60 for hospital and medical expenses, Assistant City Fiscal Bonifacio S. Anislag also escaped unhurt but Mrs. Anislag suffered a fracture at the radial bone of her left elbow for which she was hospitalized and operated on at the San Pedro Hospital, Davao City, and therefore, at Davao Regional Hospital, Davao City, spending P4,500.00. Elma de Guzman died because of that battle. Hence, the plaintiffs filed an action for damages against PAL.

Petitioners alleged that the main cause of the unfortunate incident is the gross, wanton and inexcusable negligence of respondent Airline personnel in their failure to frisk the passengers adequately in order to discover hidden weapons in the bodies of the six (6) hijackers.

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Respondent Airline averred that in the performance of its obligation to safely transport passengers as far as human care and foresight can provide, it has exercised the utmost diligence of a very cautious person with due regard to all circumstances, but the security checks and measures and surveillance precautions in all flights, including the inspection of baggages and cargo and frisking of passengers at the Davao Airport were performed and rendered solely by military personnel who under appropriate authority had assumed exclusive jurisdiction over the same in all airports in the Philippines.

The trial court, on August 26, 1980, dismissed the complaints finding that all the damages sustained in the premises were attributed to force majeure. Hence, the petitioners appealed to the Supreme Court.

Issue: Whether or not hijacking or air piracy during martial law and under the circumstances of the case, is a caso fortuito or force majeure which would exempt an aircraft from payment of damages to its passengers.

Ruling:

Yes. In order to constitute a caso fortuito or force majeure that would exempt a person from liability under Article 1174 of the Civil Code, it is necessary that the following elements must concur: (a) the cause of the breach of the obligation must be independent of the human will (the will of the debtor or the obligor); (b) the event must be either unforeseeable or unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the debtor must be free from any participation in, or aggravation of the injury to the creditor. Caso fortuito or force majeure, by definition, are extraordinary events not foreseeable or avoidable, events that could not be foreseen, or which, though foreseen, are inevitable. It is, therefore, not enough that the event should not have been foreseen or anticipated, as is commonly believed, but it must be one impossible to foresee or to avoid. The mere difficulty to foresee the happening is not impossibility to foresee the same.

Applying the above guidelines to the case at bar, the failure to transport petitioners safely from Davao to Manila was due to the skyjacking incident staged by six (6) passengers of the same plane, all members of the Moro National Liberation Front (MNLF), without any connection with private respondent, hence, independent of the will of either the PAL or of its passengers.

Under normal circumstances, PAL might have foreseen the skyjacking incident which could have been avoided had there been a more thorough frisking of passengers and inspection of baggages as authorized by R.A. No. 6235. But the incident in question occurred during Martial Law where there was a military take-over of airport security including the frisking of passengers and the inspection of their luggage preparatory to boarding domestic and international flights. In fact military take-over was specifically announced on October 20, 1973 by General Jose L. Rancudo, Commanding General of the Philippine Air Force in a letter to Brig. Gen. Jesus Singson, then Director of the Civil Aeronautics Administration later confirmed shortly before the hijacking incident of May 21, 1976 by Letter of Instruction No. 399 issued on April 28, 1976.

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Otherwise stated, these events rendered it impossible for PAL to perform its obligations in a nominal manner and obviously it cannot be faulted with negligence in the performance of duty taken over by the Armed Forces of the Philippines to the exclusion of the former.

Finally, there is no dispute that the fourth element has also been satisfied. Consequently the existence of force majeure has been established exempting respondent PAL from the payment of damages to its passengers who suffered death or injuries in their persons and for loss of their baggages.

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Cyrus D.C. Untalan

Southern Lines Inc. vs. Court of AppealsCase No. 38

Facts

Sometime in 1948, the City of Iloilo requisitioned for rice from the National Rice and Corn Corporation (hereafter referred to as NARIC) in Manila. On the same year, NARIC, pursuant to the order, shipped 1,726 sacks of rice consigned to the City of Iloilo on board the SS "General Wright" belonging to the Southern Lines, Inc. Each sack of rice weighed 75 kilos and the entire shipment as indicated in the bill of lading had a total weight of 129,450 kilos. According to the bill of lading, the cost of the shipment was P63,115.50. The City of Iloilo received the shipment and paid the amount of P63,115.50. However, it was noted that the foot of the bill of lading that the City of Iloilo 'Received the above mentioned merchandise apparently in same condition as when shipped, save as noted below: actually received 1685 sacks with a gross weight of 116,131 kilos upon actual weighing. Total shortage ascertained 13,319 kilos." The shortage was equivalent to 41 sacks of rice with a net weight of 13,319 kilos, the proportionate value of which was P6,486.35.

The City of Iloilo filed a complaint in the CFI Iloilo against NARIC and the Southern Lines, Inc. for the recovery of the amount of P6,486.35 representing the value of the shortage of the shipment of rice. After trial, the lower court absolved NARIC from the complaint, but sentenced the Southern Lines, Inc. to pay the amount of P4,931.41 which is the difference between the sum of P6,486.35 and P1,554.94 representing the latter's counterclaim for handling and freight. The Southern Lines, Inc. appealed to CA which affirmed the judgment of the trial court.

Issue: Whether or not herein petitioner, is liable for the loss or shortage of the rice shipped.

Ruling

Yes, Article 361 of the Code of Commerce provides that: The merchandise shall be transported at the risk and venture of the shipper, if the contrary has not been expressly stipulated. As a consequence, all the losses and deteriorations which the goods may suffer during the transportation by reason of fortuitous event, force majeure, or the inherent nature and defect of the goods, shall be for the account and risk of the shipper. Proof of these accidents is incumbent upon the carrier.

Article 362 of the same Code provides: Nevertheless, the carrier shall be liable for the losses and damages resulting from the causes mentioned in the preceding article if it is proved, as against him, that they arose through his negligence or by reason of his having failed to take the precautions which usage his established among careful persons, unless the shipper has committed fraud in the bill of lading, representing the goods to be of a kind or quality different from what they really were. Under the provisions of Article 361, the defendant-carrier in order to free itself from liability was only obliged to prove that the damages suffered by the goods were "by virtue of the nature or defect of the articles." Under the provisions of Article 362, the plaintiff,

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in order to hold the defendant liable, was obliged to prove that the damages to the goods by virtue of their nature occurred on account of its negligence or because the defendant did not take the precaution adopted by careful persons. (Government v. Ynchausti & Co., 40 Phil. 219, 223).

Petitioner claims exemption from liability by contending that the shortage in the shipment of rice was due to such factors as the shrinkage, leakage or spillage of the rice on account of the bad condition of the sacks at the time it received the same and the negligence of the agents of respondent City of Iloilo in receiving the shipment. The contention is untenable, for, if the fact of improper packing is known to the carrier or his servants, or apparent upon ordinary observation, but it accepts the goods notwithstanding such condition, it is not relieved of liability for loss or injury resulting therefrom. Furthermore, according to CA, appellant itself frankly admitted that the strings that tied the bags of rice were broken; some bags were with holes and plenty of rice was spilled inside the hull of the boat, and that the personnel of the boat collected no less than 26 sacks of rice which they had distributed among themselves." This finding, which is binding upon this Court, shows that the shortage resulted from the negligence of petitioner. Decision of the CA is affirmed.

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Cyrus D.C. Untalan

Ganzon vs. Court of Appeals, et al.Case No. 39

Facts

In 1956, Gelacio Tumambing contracted the services of Mauro B. Ganzon to haul 305 tons of scrap iron from Mariveles, Bataan, to the port of Manila on board the lighter LCT "Batman". Pursuant to that agreement, Mauro B. Ganzon sent his lighter "Batman" to Mariveles where it docked in three feet of water . On December 1, 1956, Gelacio Tumambing delivered the scrap iron to defendant Filomeno Niza, captain of the lighter, for loading which was actually begun on the same date by the crew of the lighter under the captain's supervision. When about half of the scrap iron was already loaded, Mayor Jose Advincula of Mariveles, Bataan, arrived and demanded P5,000.00 from Tumambing. The latter resisted the shakedown and after a heated argument between them, Mayor Jose drew his gun and fired at Tumambing. The gunshot was not fatal but he had to be taken to a hospital in Balanga, Bataan, for treatment.

After sometime, the loading of the scrap iron was resumed. But on December 4, 1956, Acting Mayor Basilio Rub, accompanied by three policemen, ordered captain Niza and his crew to dump the scrap iron where the lighter was docked. The rest was brought to the compound of NASSCO. Later on Acting Mayor Rub issued a receipt stating that the Municipality of Mariveles had taken custody of the scrap iron.

Issue: Whether or not the loss of the goods was due to causes under Art. 1734 of the NCC.

Ruling

Petitioner has failed to show that the loss of the scraps was due to any of the following causes enumerated in Article 1734 of the Civil Code, specifically : (5) Order or act of competent public authority. Hence, the petitioner is presumed to have been at fault or to have acted negligently. Ganzon could have been exempted from any liability had he been able to prove that he observed extraordinary diligence in the vigilance over the goods in his custody, according to all the circumstances of the case, or that the loss was due to an unforeseen event or to force majeure.

Petitioner maintains that he is exempt from any liability because the loss of the scraps was due mainly to the intervention of the municipal officials of Mariveles which constitutes a caso fortuito. Ganzon could be absolved from responsibility on the ground that he was ordered by competent public authority to unload the scrap iron; it must be shown that Acting Mayor Basilio Rub had the power to issue the disputed order, or that it was lawful, or that it was issued under legal process of authority but he failed to established this. Indeed, no authority or power of the acting mayor to issue such an order was given in evidence. Neither has it been shown that the cargo of scrap iron belonged to the Municipality of Mariveles. The fact remains that the order given by the acting mayor to dump the scrap iron into the sea was part of the pressure

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applied by Mayor Jose to shakedown the appellant for P5,000.00. The order of the acting mayor did not constitute valid authority for Ganzon and his representatives to carry out.

In any case, the intervention of the municipal officials was not in any case, of a character that would render impossible the fulfillment by the carrier of its obligation. The petitioner was not duty bound to obey the illegal order to dump into the sea the scrap iron. Moreover, there is absence of sufficient proof that the issuance of the same order was attended with such force or intimidation as to completely overpower the will of the petitioner's employees. The mere difficulty in the fulfillment of the obligation is not considered force majeure. We agree with the private respondent that the scraps could have been properly unloaded at the shore or at the NASSCO compound, so that after the dispute with the local officials concerned was settled, the scraps could then be delivered in accordance with the contract of carriage. Decision of the Court of Appeals is affirmed.

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Villanueva, Liezl

BACHELOR EXPRESS, INCORPORATED, and CRESENCIO RIVERA vs.THE HONORABLE COURT OF APPEALS

Case No. 40

Facts:

Bus No. 800 owned by Bachelor Express, Inc. and driven by Cresencio Rivera was the situs of a stampede which resulted in the death of passengers Ornominio Beter and Narcisa Rautraut.

The evidence shows that the bus came from Davao City on its way to Cagayan de Oro City passing Butuan City; that while at Tabon-Tabon, Butuan City, the bus picked up a passenger; that about fifteen minutes later, a passenger at the rear portion suddenly stabbed a PC soldier which caused commotion and panic among the passengers that when the bus stopped, passengers Ornominio Beter and Narcisa Rautraut were found lying down the road, the former already dead as a result of head injuries and the latter also suffering from severe injuries which caused her death later. The passenger assailant alighted from the bus and ran toward the bushes but was killed by the police. The Private respondent filed a complaint for sum of money against Bachelor Express, Inc. its alleged owner Samson Yasay and the driver Rivera.

Petitioners denied liability for the death of Ornominio Beter and Narcisa Rautraut. They alleged that the driver was able to transport his passengers safely to their respective places of destination except Ornominio Beter and Narcisa Rautraut who jumped off the bus without the knowledge and consent, much less, the fault of the driver and conductor and the defendants in this case; the defendant corporation had exercised due diligence in the choice of its employees to avoid as much as possible accidents, it was an incident or event very much beyond the control of the defendants defendants were not parties to the incident complained of as it was an act of a third party who is not in any way connected with the defendants and of which the latter have no control and supervision

Issue:

Whether or not the petitioner is liable for the death of passengers Beter and Rautraut caused by force majeure or caso fortuito over which the common carrier did not have any control

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Held:

Yes. The running amuck of the passenger was the proximate cause of the incident as it triggered off a commotion and panic among the passengers such that the passengers started running to the sole exit shoving each other resulting in the falling off the bus by passengers Beter and Rautraut causing them fatal injuries. The sudden act of the passenger who stabbed another passenger in the bus is within the context of force majeure. However, in order that a common carrier may be absolved from liability in case of force majeure, it is not enough that the accident was caused by force majeure. The common carrier must still prove that it was not negligent in causing the injuries resulting from such accident. In this case, Bachelor was negligent.

Considering the factual findings of the Court of Appeals-the bus driver did not immediately stop the bus at the height of the commotion; the bus was speeding from a full stop; the victims fell from the bus door when it was opened or gave way while the bus was still running; the conductor panicked and blew his whistle after people had already fallen off the bus; and the bus was not properly equipped with doors in accordance with law.

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Villanueva, Liezl

CESAR L. ISAAC vs. A. L. AMMEN TRANSPORTATION CO., INC.,Case No. 41

Facts:

A. L. Ammen Transportation Co., Inc. is a corporation engaged in the business of transporting passengers by land for compensation in the Bicol provinces and one of the lines it operates is the one connecting Legaspi City, Albay with Naga City, Camarines Sur. One of the buses which Ammen Transportation was operating is Bus 31. On 31 May 1951, Cesar L. Isaac boarded said bus as a passenger paying the required fare from Ligao, Albay bound for Pili, Camarines Sur, but before reaching his destination, the bus collided with a motor vehicle of the pick-up type coming from the opposite direction, as a result of which Isaac’s left arm was completely severed and the severed portion fell inside the bus. Isaac was rushed to a hospital in Iriga, Camarines Sur where he was given blood transfusion to save his life. After 4 days, he was transferred to another hospital in Tabaco, Albay, where he underwent treatment for 3 months. He was moved later to the Orthopedic Hospital where he was operated on and stayed there for another 2 months. For these services, he incurred expenses amounting to P623.40, excluding medical fees which were paid by Ammen Transporation.

Plaintiff brought this action against defendants for damages alleging that the collision which resulted in the loss of his left arm was mainly due to the gross incompetence and recklessness of the driver of the bus operated by defendant.

Defendant set up as special defense that the injury suffered by plaintiff was due entirely to the fault or negligence of the driver of the pick-up car which collided with the bus driven by its driver and to the contributory negligence of plaintiff himself. Defendant further claims that the accident which resulted in the injury of plaintiff is one which defendant could not foresee or, though foreseen, was inevitable. The court dismissed the complaint.

Issue:

Whether the defendant observed extraordinary diligence or the utmost diligence of every cautious person, having due regard for all circumstances, in avoiding the collision which resulted in the injury caused to the plaintiff?

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Held:

Yes. principles governing the liability of a common carrier: 1) the liability of a carrier is contractual and arises upon breach of its obligation. There is breach if it fails to exert extraordinary diligence according to all circumstances of each case; 2) a carrier is obliged to carry its passenger with the utmost diligence of a very cautious person, having due regard for all the circumstances; 3) a carrier is presumed to be at fault or to have acted negligently in case of death of, or injury to, passengers, it being its duty to prove that it exercised extraordinary diligence; 4) the carrier is not an insurer against all risks of travel.

Where a carrier's employee is confronted with a sudden emergency, the fact that he is obliged to act quickly and without a chance for deliberation must be taken into account, and he is held to the some degree of care that he would otherwise be required to exercise in the absence of such emergency but must exercise only such care as any ordinary prudent person would exercise under like circumstances and conditions, and the failure on his part to exercise the best judgment the case renders possible does not establish lack of care and skill on his part.

Herein, when Isaac boarded the bus in question, he seated himself on the left side thereof resting his left arm on the window sill but with his left elbow outside the window, this being his position in the bus when the collision took place. It is for this reason that the collision resulted in the severance of said left arm from the body of appellant thus doing him a great damage. Had he not placed his left arm on the window sill with a portion thereof protruding outside, perhaps the injury would have been avoided as is the case with the other passengers. It is to be noted that Isaac was the only victim of the collision. It is apparent that Isaac is guilty of contributory negligence

Considering all the circumstances, we are persuaded to conclude that the driver of the bus has done what a prudent man could have done to avoid the collision

It is true that Isaac's contributory negligence cannot relieve A.L. Ammen of its liability but will only entitle it to a reduction of the amount of damage caused (Article 1762, new Civil Code), but this is a circumstance which further militates against the position taken by Isaac

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VILLARTA, Reychelle Anne B.

Philippine National Railways vs. Court of AppealsCase No. 42

Facts:

On September 10, 1972, Winifredo Tupang (Winifredo) boarded the train of appellant at Libmanan, Camarines Sur, as a paying passenger bound for Manila. Upon passing Iyam Bridge at Lucena, Quezon, Winifredo fell off the train resulting in his death. The train did not stop despite the alarm raised by the other passengers that somebody fell from the train. Instead, the train conductor called the station agent and requested for verification of the information. Police authorities were dispatched to the Iyam Bridge where they found the lifeless body of Winifredo.

Upon complaint filed by the deceased’s widow, Rosario Tupang, the then CFI of Rizal held the petitioner PNR liable for damages for breach of contract of carriage and ordered it to pay for the death and loss of earning capacity of the deceased, as well as moral damages.

On appeal, the Appellate Court sustained the holding of the trial court and further increased the amount adjudicated and added exemplary damages. Moving for reconsideration, the PNR raised for the first time, as a defense, the doctrine of state immunity from suit. The motion was denied by the Appellate Court ruling that the ground could not be raised for the first time on appeal.

Issue:

1. WON the PNR, as a government entity, may be validly sued for damages 2. WON the PNR failed to exercise extraordinary diligence 3. WON the deceased was guilty of contributory negligence

Ruling:

1. YES. The PNR has all the powers, the characteristics and attributes of a corporation under the Corporation Law. There can be no question then that the PNR may sue and be sued and may be subjected to court processes just like any other corporation. In the case of Manila Hotel Employees Association v. Manila Hotel Co., the Court laid down the rule that “when the government enters into commercial business, it abandons its sovereign capacity and is to be treated like any other corporation.” In Prisco v. CIR, the Court said that “when the government engages in business, it abdicates part of its sovereign prerogatives and descends to the level of a citizen, x x x.”

2. YES. As a rule, death or injury suffered by any of its passengers gives rise to the presumption that a common carrier is negligent in the performance of its obligation under the contract of carriage. The petitioner failed to overthrow such presumption of negligence with clear and convincing evidence.

3. YES. Since he opted to sit on the open platform between the coaches of the train, he should have held tightly and tenaciously on the upright metal bar found at the side of said platform to avoid falling off from the speeding train.

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VILLARTA, Reychelle Anne B.

Compania Maritima vs. Court of AppealsCase No. 43

Facts:

Private respondent Vicente E. Concepcion negotiated with petitioner for the shipment to Cagayan de Oro City of one (1) unit payloader, four (4) units 6x6 Reo trucks and two (2) pieces of water tanks. These equipment were loaded aboard the MV Cebu and arrived at Cagayan de Oro City. The Reo trucks and water tanks were safely unloaded within a few hours after arrival, but while the payloader was about two (2) meters above the pier in the course of unloading, the swivel pin of the heel block of the port block gave way, causing the payloader to fall. The payloader was damaged. Private respondent wrote petitioner to demand a replacement of the payloader which it was considering as a complete loss because of the extent of the damage. Petitioner denied the claim for damages contending that had private respondent declared the actual weight of the payloader, damage to their ship as well as to his payloader could have been prevented.

Private respondent filed an action for damages against petitioner with the CFI of Manila which then dismissed the complaint, stating that the proximate cause of the fall of the payloader was private respondent’s act or omission in having misrepresented the weight of the payloader.

The Court of Appeals reversed the adverse decision against private respondent.

Issue: WON the act of private respondent in furnishing petitioner with an inaccurate weight was the proximate and only cause of the damage

Ruling:

NO. The general rule under Article 1735 and 1752 of the Civil Code is that common carriers are presumed to have been at fault or to have acted negligently in case the goods transported by them are lost, destroyed or had deteriorated. To overcome the presumption of liability for the loss, destruction or deterioration of the goods under Article 1735, the common carriers must prove that they observed extraordinary diligence as required in Article 1733 of the Civil Code.

As found by the respondent Court of Appeals, the fact is that petitioner used a 5-ton capacity lifting apparatus to lift and unload a visibly heavy cargo like a payloader. Private respondent has, likewise sufficiently established the laxity and carelessness of petitioner’s crew in their methods of ascertaining the weight of heavy cargoes offered for shipment before loading and unloading them, as is customary among careful persons.

While the act of private respondent in furnishing petitioner with an inaccurate weight of the payloader cannot successfully be used as an excuse by petitioner to avoid liability to the

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damage thus caused, said act constitutes a contributory circumstance to the damage caused on the payloader, which mitigates the liability for damages of petitioner.

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BILL OF LADING

44.1 Magellan Mfg. Marketing Corporation vs. Court of Appeals, G.R. No. 95529, August 22, 1991

44.2 Magellan Mfg. Marketing Corporation vs. Court of Appeals, G.R. No. 95529, August 22, 1991

45. Lorenzo Shipping Corp. vs Chubb and Sons, Inc. G.R. No. 172822, December 18, 2009

46. MOF Company, Inc. vs Shin Yang Brokerage Corp. G.R. No. 172822, December 18, 2009

47.2 Ong Yiu vs. Court of Appeals, et al, 91 SCRA 223

48. Wallem Philippines Shipping Inc, et al vs Prudential Guarantee & Assurance, Inc et al, G.R. No. 1521158, February 7, 2003

49. Ace Navigation Co., Inc vs FGU Insurance Corp., G.R. No. 171591, June 25, 2011

50. Asian Terminals, Inc. vs. Simon Enterprises, Inc. G.R. No. 177116, February 27, 2013

Juan, Ma. Barabara Raizza J.

MAGELLAN MANUFACTURING MARKETING CORPORATION vs.COURT OF APPEALS, ORIENT OVERSEAS CONTAINER LINES and F.E. ZUELLIG, INC.

Case No. 44.1

FactsOn May 20, 1980, plaintiff-appellant Magellan Manufacturers Marketing Corp. (MMMC)

entered into a contract with Choju Co. of Yokohama, Japan to export 136,000 anahaw fans for and in consideration of $23,220.00. As payment thereof, a letter of credit was issued to plaintiff MMMC by the buyer. Through its president, James Cu, MMMC then contracted F.E. Zuellig, a shipping agent, through its solicitor, one Mr. King, to ship the anahaw fans through the other appellee, Orient Overseas Container Lines, Inc., (OOCL) specifying that he needed an on-board bill of lading and that transhipment is not allowed under the letter of credit.

On June 30, 1980, appellant MMMC paid F.E. Zuellig the freight charges and secured a copy of the bill of lading which was presented to Allied Bank. The bank then credited the amount of US$23,220.00 covered by the letter of credit to appellant's account. However, when appellant's president James Cu, went back to the bank later, he was informed that the payment was refused by the buyer allegedly because there was no on-board bill of lading, and there was a transhipment of goods. As a result of the refusal of the buyer to accept, upon appellant's request, the anahaw fans were shipped back to Manila by appellees, for which the latter demanded from appellant payment of P246,043.43. Appellant abandoned the whole cargo and asked appellees for damages.

The lower court decided the case in favor of OOCL. It dismissed the complaint on the ground that petitioner had given its consent to the contents of the bill of lading where it is clearly indicated that there will be transhipment.

On appeal to the respondent court, the finding of the lower (court) that petitioner agreed to a transhipment of the goods was affirmed but the finding that petitioner is liable for P298,150.93 was modified.

Issues: W/N the bill of lading which reflected the transhipment against the letter of credit is consented by MMMC

Held:

Transhipment, in maritime law, is defined as "the act of taking cargo out of one ship and loading it in another," or "the transfer of goods from the vessel stipulated in the contract of affreightment to another vessel before the place of destination named in the contract has been reached," or "the transfer for further transportation from one ship or conveyance toanother." Clearly, either in its ordinary or its strictly legal acceptation, there is transhipment whether or not the same person, firm or entity owns the vessels. In other words, the fact of transhipment is not dependent upon the ownership of the transporting ships or conveyances or in the change of carriers, as the petitioner seems to suggest, but rather on the fact of actual physical transfer of cargo from one vessel to another.

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According to the Supreme Court there was transhipment within this contemplation as there unmistakably appears on the face of the bill of lading the entry "Hong Kong" in the blank space labeled "Transhipment," which can only mean that transhipment actually took place. This fact is further bolstered by the certification issued by private respondent F.E. Zuellig, Inc. dated July 19, 1980, although it carefully used the term "transfer" instead of transhipment. Nonetheless, no amount of semantic juggling can mask the fact that transhipment in truth occurred in this case.

The holding in most jurisdictions has been that a shipper who receives a bill of lading without objection after an opportunity to inspect it, and permits the carrier to act on it by proceeding with the shipment is presumed to have accepted it as correctly stating the contract and to have assented to its terms. In other words, the acceptance of the bill without dissent raises the presumption that all the 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 the light of the series of events that transpired in the case at bar, there can be no logical conclusion other than that the petitioner had full knowledge of, and actually consented to, the terms and conditions of the bill of lading thereby making the same conclusive as to it, and it cannot now be heard to deny having assented thereto.

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Juan, Ma. Barabara Raizza J.

MAGELLAN MANUFACTURING MARKETING CORPORATION vs.COURT OF APPEALS, ORIENT OVERSEAS CONTAINER LINES and F.E. ZUELLIG, INC.

Case No. 44.2

Facts

On May 20, 1980, plaintiff-appellant Magellan Manufacturers Marketing Corp. (MMMC) entered into a contract with Choju Co. of Yokohama, Japan to export 136,000 anahaw fans for and in consideration of $23,220.00. As payment thereof, a letter of credit was issued to plaintiff MMMC by the buyer. Through its president, James Cu, MMMC then contracted F.E. Zuellig, a shipping agent, through its solicitor, one Mr. King, to ship the anahaw fans through the other appellee, Orient Overseas Container Lines, Inc., (OOCL) specifying that he needed an on-board bill of lading and that transhipment is not allowed under the letter of credit.

On June 30, 1980, appellant MMMC paid F.E. Zuellig the freight charges and secured a copy of the bill of lading which was presented to Allied Bank. The bank then credited the amount of US$23,220.00 covered by the letter of credit to appellant's account. However, when appellant's president James Cu, went back to the bank later, he was informed that the payment was refused by the buyer allegedly because there was no on-board bill of lading, and there was a transhipment of goods. As a result of the refusal of the buyer to accept, upon appellant's request, the anahaw fans were shipped back to Manila by appellees, for which the latter demanded from appellant payment of P246,043.43. Appellant abandoned the whole cargo and asked appellees for damages.

Issues: WON the bill of lading can be considered as on board billing of lading

Ruling:

An on board bill of lading is one in which it is stated that the goods have been received on board the vessel which is to carry the goods, whereas a received for shipment bill of lading is one in which it is stated that the goods have been received for shipment with or without specifying the vessel by which the goods are to be shipped. Received for shipment bills of lading are issued whenever conditions are not normal and there is insufficiency of shipping space. An on board bill of lading is issued when the goods have been actually placed aboard the ship with every reasonable expectation that the shipment is as good as on its way. It is, therefore, understandable that a party to a maritime contract would require an on board bill of lading because of its apparent guaranty of certainty of shipping as well as the seaworthiness of the vessel which is to carry the goods.

It cannot plausibly be said that the aforestated certification of F.E. Zuellig, Inc. can qualify the bill of lading, as originally issued, into an on board bill of lading as required by the terms of the letter of credit issued in favor of petitioner. For one, the certification was issued only on July 19, 1980, way beyond the expiry date of June 30, 1980 specified in the letter of credit for the presentation of an on board bill of lading. Thus, even assuming that by a liberal treatment of the certification it could have the effect of converting the received for shipment bill of lading into

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an on board of bill of lading, as petitioner would have us believe, such an effect may be achieved only as of the date of its issuance, that is, on July 19, 1980 and onwards

The fact remains, though, that on the crucial date of June 30, 1980 no on board bill of lading was presented by petitioner in compliance with the terms of the letter of credit and this default consequently negates its entitlement to the proceeds thereof. Said certification, if allowed to operate retroactively, would render illusory the guaranty afforded by an on board bill of lading, that is, reasonable certainty of shipping the loaded cargo aboard the vessel specified, not to mention that it would indubitably be stretching the concept of substantial compliance too far

In sum, petitioner had full knowledge that the bill issued to it contained terms and conditions clearly violative of the requirements of the letter of credit. Nonetheless, perhaps in its eagerness to conclude the transaction with its Japanese buyer and in a race to beat the expiry date of the letter of credit, petitioner took the risk of accepting the bill of lading even if it did not conform with the indicated specifications, possibly entertaining a glimmer of hope and imbued with a touch of daring that such violations may be overlooked, if not disregarded, so long as the cargo is delivered on time. Unfortunately, the risk did not pull through as hoped for. Any violation of the terms and conditions of the letter of credit as would defeat its right to collect the proceeds thereof was, therefore, entirely of the petitioner's making for which it must bear the consequences

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Mutya S. Alegre

Lorenzo Shipping Corp. vs. Chubb and Sons, Inc., Gearbulk Ltd. and Philippine Transmarine Carriers, Inc

Case No. 45

Facts

On November 21, 1987, Mayer Steel Pipe loaded 581 bundles of black steel pipes worth $137,912 on board the vessel M/V Lorcon owned by petitioner Lorenzo Shipping for shipment to Davao City. Petitioner issued a clean bill of lading for the account of the consignee, Sumitomo Corporation of San Francisco, California, USA, which in turn insured the goods with respondent Chubb and Sons.

M/V Lorcon arrived in Davao City on December 2, 1987. Respondent Transmarine Carriers received the subject shipment. It discovered seawater in the hatch of M/V Lorcon and found the steel pipes submerged in it. The consignee Sumimoto hired surveyors to inspect the shipment, and their report showed that said shipment was no longer in good condition as the pipes were found with rust formation. It was also noted that the cargo hold was flooded with seawater and the tank top was rusty, thinning, and with several holes at different places. The rust condition was noted on the mate's receipts and the checker of M/V Lorcon signed his conforme thereon.

Respondent Gearbulk then loaded the shipment on its vessel for carriage to the United States. Sumimoto rejected the damaged steel pipes and declared them unfit for the purpose they were intended. It filed a marine insurance claim with respondent Chubb and Sons. Respondent Chubb and Sons filed a complaint for collection of money against Lorenzo Shipping. Lorenzo Shipping filed its answer denying liability. The RTC ruled in favor of Chubb and Sons. The CA affirmed. Hence, this petition.

Issue: Whether petitioner Lorenzo Shipping is negligent in carrying the cargo.

Held:

We affirm the findings of the lower court that petitioner was negligent in its care and custody of the consignee's goods.

The steel pipes were in good condition when they were loaded at the port of origin (Manila) on board petitioner's M/V Lorcon en route to Davao City. Petitioner Lorenzo Shipping issued clean bills of lading covering the subject shipment. A bill of lading, aside from being a contract and a receipt, is also a symbol of the goods covered by it. A bill of lading which has no notation of any defect or damage in the goods is called a clean bill of lading. A clean bill of

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lading constitutes prima facie evidence of the receipt by the carrier of the goods as therein described.

The case law teaches us that mere proof of delivery of goods in good order to a carrier and the subsequent arrival in damaged condition at the place of destination raises a prima facie case against the carrier.

In view thereof, the petition is DENIED. The Decision of the Court of Appeals and its Resolution are hereby AFFIRMED.

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Bustamante, Joseph Sante E.

MOF Company, Inc. v. Shin Yang Brokerage Corp.Case No. 46

Facts:

Halla Trading Co., a company based in Korea, shipped to Manila secondhand cars and other articles on board the vessel Hanjin Busan and the bill of lading covering the shipment named respondent Shin Yang Brokerage Corp as the consignee and indicated that payment was on a “Freight Collect” basis. After the shipment arrived in Manila and petitioner MOF Company, Inc. (MOF), Hanjin’s exclusive general agent in the Philippines, repeatedly demanded the payment of ocean freight, documentation fee and terminal handling charges from Shin Yang. The latter, however, failed and refused to pay contending that it did not cause the importation of the goods, that it is only the Consolidator of the said shipment, that the ultimate consignee did not endorse in its favor the original bill of lading and that the bill of lading was prepared without its consent. Thus, petitioner MOF filed a case for sum of money and the MeTC decided the case in their favor. The decision was brought before the RTC but said court affirmed in toto the decision of the MeTC. However, on appeal the CA dismissed MOF’s complaint and refused to award any form of damages or attorney’s fees, on the ground of insufficiency of evidence. Accordingly, for failure (of the petitioner MOF) to substantiate its claim by preponderance of evidence, respondent has not established its case against petitioner. On appeal to SC, petitioner maintain that as against Shin Yang’s bare denials, the bill of lading is sufficient preponderance of evidence required to prove MOF’s claim and that Shin Yang was the one that supplied all the details in the bill of lading and acquiesced to be named consignee of the shipment on a ‘Freight Collect’ basis. On the other hand, Shin Yang contends that the fact that its name was mentioned as the consignee of the cargoes but did not make it automatically liable for the freightage because it never benefited from the shipment and that they were not aware of its designation as consignee and the original bill of lading was never endorsed to it..Issue:

Whether as consignee, who is not a signatory to the bill of lading, is bound by the stipulations thereof.

Whether petitioner MOF was able to meet the required quantum of proof by only presenting the bill of lading.

Held:

YES. A consignee, who is not a signatory to the bill of lading, is bound by the stipulations thereof. Accordingly, as 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

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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 consignee’s favor, specifically the delivery of the goods/cargoes shipped.

NO. 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.

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Casipe, Rommel T.

Ong Yiu v. Court of AppealsCase No. 47.1

Facts:

Petitioner was a fare paying passenger of respondent Philippine Air Lines, Inc. (PAL), on board Flight No. 463-R, from Mactan Cebu, bound for Butuan City. As a passenger, he checked in one of piece of luggage, a blue “maleta.” Upon arrival, petitioner claimed his luggage but it could not be found. PAL Butuan sent a message to PAL Cebu, inquiring about the missing luggage, which message was, in turn relayed in full to the Mactan Airport teletype operator that same afternoon. It must have been transmitted immediately, for at the same afternoon, PAL Manila wired PAL Cebu advising that the luggage had been over carried to Manila aboard Flight No. 156 and that it would be forwarded to Cebu Flight No. 345 of the same day. Instructions were also given that the luggage be immediately forwarded to Butuan City on the first available flight. Of the same afternoon, PAL Cebu sent a message to PAL Butuan that the luggage would be forwarded on Flight No. 963. However, this message was not received by PAL Butuan as all the personnel had already left since there were no more incoming flights that afternoon.

Petitioner wired PAL Cebu demanding the delivery of his baggage, otherwise, he would hold PAL liable for damages, and stating that PAL’s gross negligence had caused him undue inconvenience, worry, anxiety and extreme embarrassment. Messrs. De Leon, Narvasi, and

Agustin, all of PAL Cebu, went to petitioner’s office to deliver the “maleta.” Petitioner filed a complaint against PAL for damages for breach of contract of transportation with the Court of First Instance of Cebu. After the trial, the lower court found PAL to have acted in bad faith and declared petitioner entitled to moral damages in the sum of P80, 000. Both parties appealed to the Court of Appeals—petitioner in so far as he was awarded only the sum of P80, 000 as moral damages; and defendant because of the unfavorable judgment rendered against it. The Court of Appeals found that PAL was guilty of simple negligence, reversed the judgment of the trial court granting petitioner moral and exemplary damages, but ordered PAL to pay the petitioner the sum of P100.00, the baggage liability assumed by it under the condition carriage printed at the back of the ticket.

Issue: Whether or not the Court of Appeals misconstrued the evidence and the law when it reversed the decision of the lower court when it ordered respondent PAL to compensate plaintiff the sum of P100.00 only.

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Held:

There is no dispute that petitioner did not declare any higher value of his luggage, much less did he pay any additional transportation charge. While it may be true that petitioner had not signed the plane ticket, he is nevertheless bound by the provisions thereof. Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of the latter’s lack of knowledge or assent to the regulation. Considering, therefore, that petitioner had failed to declare a higher value for his baggage, he cannot be permitted a recovery in excess of P 100.00.

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Catli, Fely Jane

WALLEM PHILIPPINES SHIPPING INC. vs. PRUDENTIAL GUARANTEE AND ASSURANCE INC.

Case No. 48

Facts:

General Milling Corporation (GMC) contracted Wallem Philippines Shipping Inc. (WALLEM) to ship Indian Toasted Soyabean Extraction Meal to its warehouse in Pasig. During the weighing of the cargo in Batangas, and after comparing its supposed weight from that indicated in the bill of lading, it was found that there was a shortage of 295.682 M/Tons in the shipment. The said bill of lading was prepared by GMC.

Prudential Guarantee & Assurance Inc (PRUDENTIAL), being GMC’s insurer, received a claim from the latter because of the shortage in the shipment. Prudential paid GMC P995, 677.09, and the latter issued a subrogation receipt to PRUDENTIAL. PRUDENTIAL thereafter sent a demand letter to WALLEM to recover the amount paid to GMC. WALLEM denied liability for the loss in the shipment.

On April 17, 1991, PRUDENTIAL brought an action for damages against WALLEM and Seacoast Maritime Corp. with the RTC of Makati City. Prudential sought the recovery of the sum of P995,677.00, representing the amount it had paid to its insured, General Milling Corporation(GMC), for alleged shortage incurred in the shipment of “Indian Toasted Soyabean ExtractionMeal.

The trial court ruled that private respondent Prudential failed to prove by clear, convincing, and competent evidence that there was a shortage in the shipment. Since PRUDENTIAL failed to establish that the bill of lading was duly executed, the true and exact weight of the shipment when it was loaded unto the vessel cannot be determined. Hence, there was no way by which a shortage could be determined. Also, since PRUDENTIAL failed to present the contract of insurance executed between it and GMC, it had no cause of action against WALLEM.

On appeal, the CA reversed. The Court of Appeals ruled that the bill of lading was prima facie evidence of the goods therein described, both notations “said to contain” and “weight unknown” on the bill of lading being inapplicable to shipments in bulk. Contrary to the opinion of the trial court, it was ruled by the appeals court that losses were incurred during the loading operations, and that these losses were the liability of the carrier.

Issue:

Whether or not the quantity of the cargo reflected in the bill of lading is conclusive as to

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the actual cargo of the consignee notwithstanding the fact that said cargo was shipped on a“said to weigh” basis.

Wheter or not Wallem can be held liable.

Held:

Bill of Lading states that the subject shipment was carried with the qualification

“Shipper’s weight, quantity and quality unknown,” meaning that it was transported with the carrier having been oblivious of the weight, quantity, and quality of the cargo. The bill of lading shall not be deemed prima facie evidence against the carrier of the receipt of goods of the weight so inserted in the bill of lading, and the accuracy thereof at the time of shipment shall not be deemed to have been guaranteed by the shipper.

In the absence of clear, convincing, and competent evidence to prove that the shipment indeed weighed 4,415.35 metric tons at the port of origin when it was loaded on the M/V Gao Yang, it cannot be determined whether there was a shortage of the shipment upon its arrival inBatangas. Wallem’s evidence casts doubt on the veracity of the documents upon which

Prudential bases its claim. There could have been no spillage while the shipment was on board the vessel. It was shown that, after the shipment was unloaded from the vessel, it was weighed with the use of GMC’s weighing scale, which was later found to be defective.

It is likely that there was again spillage of the shipment when it was reweighed after its unloading in the same manner that there was spillage when the shipment was unloaded from the vessel. It should also be noted that the reweighing was conducted only on April 26, 1990, five days after the shipment was put in the storage of the consignee.

Indeed, as the bill of lading indicated that the contract of carriage was under a “said to weigh” clause, the shipper is solely responsible for the loading while the carrier is oblivious of the contents of the shipment.

Even if the shortage can be definitively determined, Wallem still cannot be held liable because of the failure of Prudential to present the contract of insurance or a copy thereof. Prudential claims that it is subrogated to the rights of GMC pursuant to their insurance contract.

As GMC’s subrogee, Prudential can exercise only those rights granted to GMC under the insurance contract. The contract of insurance must be presented in evidence to indicate the extent of its coverage.

Wallem cannot be held liable.

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Chan, Richard P.

ACE NAVIGATION CO., INC. vs. FGU INSURANCE CORPORATION and PIONEER INSURANCE AND SURETY CORPORATION

Case No. 49

FACTS:

On July 19, 1990, CARDIA shipped on board the vessel M/V Pakarti Tiga at Shanghai Port China, 8,260 metric tons or 165,200 bags of Grey Portland Cement to be discharged at the Port of Manila and delivered to its consignee, HEINDRICH. The subject shipment was insured with respondents, FGU and PIONEER, against all risks for the amount of P18,048,421.00.

The subject vessel is owned by PAKARTI which it chartered to SHINWA. Representing itself as owner of the vessel, SHINWA entered into a charter party contract with SKY, an agent of KEE YEH, which further chartered it to REGENCY. Thus, it was REGENCY that directly dealt with consignee HEINDRICH, and accordingly, issued Clean Bill of Lading No. SM-1.

On July 23, 1990, the vessel arrived at the Port of Manila and the shipment was discharged. However, upon inspection of HEINDRICH and petitioner ACENAV, agent of CARDIA, it was found that out of the 165,200 bags of cement, 43,905 bags were in bad order and condition. Unable to collect the sustained damages in the amount of P1,423,454.60 from the shipper, CARDIA, and the charterer, REGENCY, the respondents, as co-insurers of the cargo, each paid the consignee, HEINDRICH, the amounts of P427,036.40 and P284,690.94, respectively, and consequently became subrogated to all the rights and causes of action accruing to HEINDRICH.

On August 8, 1991, respondents filed a complaint for damages against ACENAV and other defendants.

ACENAV claimed that, not being privy to the bill of lading, it was not a real party-in-interest from whom the respondents can demand compensation. It further denied being the local ship agent of the vessel or REGENCY and claimed to be the agent of the shipper, CARDIA.

The RTC dismissed the complaint.

The CA found PAKARTI, SHINWA, KEE YEH and its agent, SKY, solidarily liable for 70% of the respondents' claim plus interest at the rate of 6% from the date of the filing of the complaint, with the remaining 30% to be shouldered solidarily by CARDIA and its agent, ACENAV plus interest at the rate of 6% from the date of the filing of the complaint.

ISSUE: Whether or not ACENAV may be held liable to the respondents for 30% of their claim.

HELD:

A bill of lading is defined as "an instrument in writing, signed by a carrier or his agent, describing the freight so as to identify it, stating the name of the consignor, the terms of the

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contract for carriage, and agreeing or directing that the freight to be delivered to the order or assigns of a specified person at a specified place."

It operates both as a receipt and as a contract. As a receipt, it recites the date and place of shipment, describes the goods as to quantity, weight, dimensions, identification marks and condition, quality, and value. As a contract, it names the contracting parties, which include the consignee, fixes the route, destination, and freight rates or charges, and stipulates the rights and obligations assumed by the parties. As such, it shall only be binding upon the parties who make them, their assigns and heirs.

In this case, the original parties to the bill of lading are: (a) the shipper CARDIA; (b) the carrier PAKARTI; and (c) the consignee HEINDRICH. However, by virtue of their relationship with PAKARTI under separate charter arrangements, SHINWA, KEE YEH and its agent SKY likewise became parties to the bill of lading. In the same vein, ACENAV, as admitted agent of CARDIA, also became a party to the said contract of carriage.

The respondents, however, maintain that ACENAV is a ship agent and not a mere agent of CARDIA, as found by both the CA and the RTC.

The Court disagrees.

Article 586 of the Code of Commerce provides:

ART. 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the obligations contracted by the latter to repair, equip, and provision the vessel, provided the creditor proves that the amount claimed was invested therein.

By ship agent is understood the person entrusted with the provisioning of a vessel, or who represents her in the port in which she may be found.

Records show that the obligation of ACENAV was limited to informing the consignee HEINDRICH of the arrival of the vessel in order for the latter to immediately take possession of the goods. No evidence was offered to establish that ACENAV had a hand in the provisioning of the vessel or that it represented the carrier, its charterers, or the vessel at any time during the unloading of the goods. Clearly, ACENAV's participation was simply to assume responsibility over the cargo when they were unloaded from the vessel. Hence, no reversible error was committed by the courts a quo in holding that ACENAV was not a ship agent within the meaning and context of Article 586 of the Code of Commerce, but a mere agent of CARDIA, the shipper.

Accordingly, the Court finds that the CA erred in ordering ACENAV jointly and severally liable with CARDIA to pay 30% of the respondents' claim.

WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are hereby REVERSED. The complaint against petitioner Ace Navigation Co., Inc. is hereby DISMISSED.

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Cheng,Renlyn B.

ASIAN TERMINALS, INC., Petitioner, vs. SIMON ENTERPRISES, INC., Respondent.Case No. 50

Facts:

Simon Enterprise Inc. entered into contract with Contiquincybunge Export Company. On October 25, 1995, Contiquincybunge Export Company loaded 6,843.700 metric tons of U.S. Soybean Meal in Bulk on board the vessel MN "Sea Dream" at the Port of Darrow, Louisiana, U.S.A., for delivery to the Port of Manila to respondent Simon Enterprises, Inc., as consignee. When the vessel arrived at the South Harbor in Manila, the shipment was discharged to the receiving barges of petitioner Asian Terminals, Inc. (ATI), the arrastre operator. Respondent later received the shipment but claimed having received only 6,825.144 metric tons of U.S. Soybean Meal, or short by 18.556 metric tons, which is estimated to be worth US$7,100.16 or P186,743.20.For the second shipment, Contiquincybunge made shipment, through M/V Tern, of 3,300.000 metric tons of U.S. Soybean Meal in Bulk for delivery to Simon at the Port of Manila. The shipment was received by ATI again for delivery to Simon. However, the shipped cargos were found lacking 199.863 metric tons. For the Third Shipment, On January 25, 1996, the carrier docked at the inner Anchorage, South Harbor, Manila. The subject shipment was discharged to the receiving barges of petitioner ATI and received by respondent which, however, reported receiving only 3,100.137 metric tons instead of the manifested 3,300.000 metric tons of shipment. Respondent filed against petitioner ATI and the carrier a claim for the shortage of 199.863 metric tons, estimated to be worth US$79,848.86 or P2,100,025.00, but its claim was denied.

Simon Enterprise filed an action for damages against the unknown owner of the vessels M/V Sea Dream and M/V Tern, its local agent Inter-Asia Marine Transport, Inc., and petitioner ATI alleging that it suffered the losses through the fault or negligence of the said defendants. The case of the unknown owner of the vessel M/V Sea Dream has been settled in release and quitclaim and therefore has been stricken out of the case, leaving M/V Tern, its local agent Inter-Asia Marine Transport, Inc., and petitioner ATI’s case remaining. The unknown owner of the vessel M/V "Tern" and its local agent Inter-Asia Marine Transport, Inc., prayed for the dismissal of the complaint essentially alleging lack of cause of action and prescription. They alleged that the cause of action had already prescribed or laches had set in;that the draft survey report indicates that the cargo discharged was more than the figures appearing in the bill of lading; that because the bill of lading states that the goods are carried on a "shipper’s weight, quantity and quality unknown" terms and on "all terms, conditions and exceptions as per charter party dated October 15, 1995," the vessel had no way of knowing the actual weight, quantity, and quality of the bulk cargo when loaded at the port of origin and the vessel had to rely on the shipper for such information; that the subject shipment was discharged in Manila in the same condition and quantity as when loaded at the port of loading.The RTC of Manila rendered a Decision holding petitioner ATI and its co-defendants solidarily liable to respondent for damages arising from the shortage. The CA affirmed the decision of the RTC.

Issues:

1.Whether or not the weight of the shipment as indicated in the bill of lading is conclusive as to the actual weight of the goods?

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2.)Wheter or not ATI should be held solidarily liable for for the losses incurred in the shipment of goods?

Ruling:

1.) No.As the bill of lading indicated that the contract of carriage was under a "said to weigh" clause, the shipper is solely responsible for the loading while the carrier is oblivious of the contents of the shipment. The recital of the bill of lading for goods thus transported ordinarily would declare "Said to Contain", "Shipper’s Load and Count", "Full Container Load", and the amount or quantity of goods in the container in a particular package is only prima facie evidence of the amount or quantity.A shipment under this arrangement is not inspected or inventoried by the carrier whose duty is only to transport and deliver the containers in the same condition as when the carrier received and accepted the containers for transport.The weight of the shipment as indicated in the bill of lading is not conclusive as to the actual weight of the goods. Consequently, the respondent must still prove the actual weight of the subject shipment at the time it was loaded at the port of origin so that a conclusion may be made as to whether there was indeed a shortage for which petitioner must be liable.

2.) No. Though it is true that common carriers are presumed to have been at fault or to have acted negligently if the goods transported by them are lost, destroyed, or deteriorated, and that the common carrier must prove that it exercised extraordinary diligence in order to overcome the presumption, the plaintiff must still, before the burden is shifted to the defendant, prove that the subject shipment suffered actual shortage. In this case, respondent failed to prove that the subject shipment suffered shortage, for it was not able to establish that the subject shipment was weighed at the port of origin at Darrow, Louisiana, U.S.A. and that the actual weight of the said shipment was 3,300 metric tons.

Second, as correctly asserted by petitioner ATI, the shortage, if any, may have been due to the inherent nature of the subject shipment or its packaging since the subject cargo was shipped in bulk and had a moisture content of 12.5%.

Third, SC agreed with the petitioner ATI that respondent has not proven any negligence on the part of the former.

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NOTICE OF CLAIM AND PRESCRIPTION

51. UCPB General Insurance Co., Inc. vs Aboitiz Shipping Corp., et al., G.R. No. 168433, February 10, 2009

52. UCPB General Insurance Co., Inc vs Aboitiz Shipping Corp. et al., G.R. No. 168433, February 10, 2009

53. Philippine Charter Insurance Corp. vs. Chemoil Lighterage Corporation, G.R. No. 136888, June 29, 2005

54. Philippine American General Insurance Co., Inc. vs Sweetlines, Inc. et al., G.R. No. 87434, August 5, 1992, 212 SCRA 194, 207

55. Belgian Overseas Chartering and Shipping N.V. vs Philippine First insurance Co., Inc. G.R. No. 143133, June 5, 2002

56. Loadstar Shipping vs. Court of Appeals, September 28, 1999, 315 SCRA 339

57. Benjamins Cua vs. Wallem Philippine Shippine, Inc., G.R. No. 171337, July 11, 2012

58. Insurance Company of North America vs. Asian Terminals, Inc. G.R. No. 180784, February 15, 2012

59. Vector Shipping Corp. vs American Home Assurance Co. G.R. No. 159213, July 3, 2013

Chu, Lea Mona P.

UCPB GENERAL INSURANCE CO., INC. vs. ABOITIZ SHIPPING CORP. et alCase No. 51

Facts

On June 18, 1991, three units of waste water treatment with accessories were purchased by San Miguel Corporation (SMC) from Super Max Engineering Enterprises, Co. Ltd. of Taipei, Taiwan. The goods came from Charleston, U.S.A and arrived at the port of Manila on board MV “SCANDUTCH STAR.” The same were then transported to Cebu on board MV “ABOITIZ SUPERCON II.” After its arrival at the port of Cebu and clearance from the Bureau of Customs, the goods were delivered to and received by SMC at its plant site on August 2, 1991. It was then discovered that one electrical motor of DBS Drive Unit Model DE-30-7 was damaged.

Plaintiff-appellee paid SMC the amount of P1,703,381.40 representing the value of the damaged unit. In turn, SMC executed a Subrogation Form dated March 31, 1992 in favor of plaintiff-appellee.

Consequently, plaintiff-appellee filed a Complaint on July 21, 1992 as subrogee of SMC seeking to recover from defendants the amount it had paid SMC.

The lower court declared DAMCO Intermodal Systems, Inc., Eagle Express Lines, Inc. and defendant Aboitiz Shipping solidarily liable to plaintiff-subrogee for the damaged shipment and orders them to pay plaintiff jointly and severally the sum of P1,703,381.40.

On appeal, the appellate court, reversed the decision of the trial court and ruled thatUCPB’s right of action against respondents did not accrue because UCPB failed to file a formal notice of claim within 24 hours from (SMC’s) receipt of the damaged merchandise as required under Art. 366 of the Code of Commerce. According to the Court of Appeals, the filing of a claim within the time limitation in Art. 366 is a condition precedent to the accrual of a right of action against the carrier for the damages caused to the merchandise.

UCPB asserts that the claim requirement under Art. 366 of the Code of Commerce does not apply to this case because the damage to the merchandise had already been known to the carrier. Interestingly, UCPB makes this revelation: "x x x damage to the cargo was found upon discharge from the foreign carrier onto the International Container Terminal Services, Inc.(ICTSI) in the presence of the carrier’s representative who signed the Request for Bad Order Survey6 and the Turn Over of Bad Order Cargoes. On transshipment, the cargo was already damaged when loaded on board the inter-island carrier." 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 claims that under the Carriage of Goods by Sea Act (COGSA), notice of loss need not be given if the condition of the cargo has been the subject of joint inspection such as, in this case, the inspection in the presence of the Eagle Express representative at the time the cargo was opened at the ICTSI.

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Eagle Express, asserts that it cannot be held liable for the damage to the merchandise as it acted merely as a freight forwarder’s agent in the transaction. It allegedly facilitated the transshipment of the cargo from Manila to Cebu but represented the interest of the cargo owner, and not the carrier’s.

Aboitiz Shipping Corporation (Aboitiz), on the other hand, points out, that it obviously cannot be held liable for the damage to the cargo which, by UCPB’s admission, was incurred not during transshipment to Cebu on board one of Aboitiz’s 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 UCPB’s cause of action against it.

The Memorandum filed by Pimentel Customs Brokerage Co. (Pimentel Customs), is also a reiteration of the applicability of Art. 366 of the Code of Commerce.

Eagle Express averred in its Answer to Amended Complaint that the amended complaint states no cause of action under the provisions of the Code of Commerce and the terms of the bill of lading; consignee made no claim against herein defendant within twenty four (24) hours following the receipt of the alleged cargo regarding the condition in which said cargo was delivered; however, assuming arguendo that the damage or loss, if any, could not be ascertained from the outside part of the shipment, consignee never made any claim against herein defendant at the time of receipt of said cargo; herein defendant learned of the alleged claim only upon receipt of the complaint.

Aboitiz also raised the defense that UCPB did not file a claim with it and that the complaint states no cause of action.

ISSUE: Whether or not UCPB can claim damages against the respondents under Article 366 of the Code of Commerce.

HELD: No. 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. The fundamental reason or purpose of such a stipulation is not to relieve the carrier from just liability, but reasonably to inform it that the shipment has been damaged and that it is charged with liability therefor, and to give it an opportunity to examine the nature and extent of the injury. This 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.

We 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 fulfillment 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

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determined by SMC’s surveyor. The claim was, therefore, clearly filed beyond the 24-hour time frame prescribed by Art. 366 of the Code of Commerce.

But what of the damage already discovered in the presence of Eagle Express’s representative at the time the shipment was discharged in Manila? The Request for Bad Order Survey and Turn Over Survey of Bad Order Cargoes, respectively dated June 17, 1999 and June 28, 1991, evince the fact that the damage to the cargo was already made known to Eagle Express and, possibly, SMC, as of those dates.

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. It states:

“Sec. 3(6). Unless notice of loss or damage and the general nature of such loss or damage be given in writing to the carrier or his agent at the port of discharge or at the time of the removal of the goods into the custody of the person entitled to delivery thereof under the contract of carriage, such removal shall be prima facie evidence of the delivery by the carrier of the goods as descibed in the bill of lading. If the loss or damage is not apparent, the notice must be given within three days of the delivery.

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

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

UCPB seizes upon the last paragraph which 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 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 and was only cited by UCPB in its Memorandum in this case.

UCPB, however, is ambivalent as to which party Eagle Express represented in the transaction. By its own manifestation, East Asiatic, and not Eagle Express, acted as the agent through which summons and court notices may be served on DAMCO. It would be unjust to hold that Eagle Express’s knowledge of the damage to the cargo is such that it served to preclude or dispense with the 24-hour notice to the carrier required by Art. 366 of the Code of Commerce. Neither did the inspection of the cargo in which Eagle Express’s representative had participated 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.

At any rate, the notion that the request for bad order survey and turn over survey of bad cargoes signed by Eagle Express’s representative is construable as compliant with the notice requirement under Art. 366 of the Code of Commerce was foreclosed by the dismissal of the complaint against DAMCO’s representative, East Asiatic.

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As regards respondent Pimentel Customs, it is sufficient to acknowledge that it had no participation in the physical handling, loading and delivery of the damaged cargo and should, therefore, be absolved of liability.

Finally, UCPB’s misrepresentation that the applicability of the Code of Commerce was not raised as an issue before the trial court warrants the assessment of double costs of suit against it.

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Cusay, Jerman F.

Philippine Charter Insurance Corporation v. Chemoil Lighterage CorporationCase No. 52

Facts

Petitioner, Philippine Charter Insurance Corporation, is a domestic corporation engaged in the business of non-life insurance while respondent, Chemoil Lighterage Corporation, is also a domestic corporation engaged in the transport of goods. Samkyung Chemical Company based in Ulsan, South Korea, shipped 62.06 metric tons of the liquid chemical Dioctyl Phthalate (DOP) on board MT TACHIBANA under Bill of Lading No. ULS/MNL-1 and another 436.70 metric tons of DOP under Bill of Lading No. ULS/MNL to the Philippines. The consignee was Plastic Group Phils., Inc. (PGP) in Manila. PGP insured the cargo with herein petitioner Philippine Charter Insurance Corporation against all risks.

The ocean tanker MT TACHIBANA unloaded the cargo to Tanker Barge LB-1011 of respondent Chemoil Lighterage Corporation, which shall transport the same to Del Pan Bridge in Pasig River. Tanker Barge LB-1011 would unload the cargo to tanker trucks, also owned by the respondent, and haul it by land to PGP’s storage tanks in Calamba, Laguna. Upon inspection by PGP, the samples taken from the shipment showed discoloration from yellowish to amber, demonstrating that it was damaged, as DOP is colorless and water clear. As a result PGP sent letter to the petitioner where it made an insurance claim for the loss it sustained due to contamination. The petitioner requested an independent insurance adjuster, the GIT Insurance Adjusters, Inc. (GIT), to conduct a Quantity and Condition Survey of the shipment. The result of the test conducted by GIT showed that the rubber gaskets of the manhole covers of the ballast tanks re-acted to the chemical causing shrinkage thus, loosening the covers and cargo ingress to the rusty ballast tanks.

The petitioner paid PGP the amount of P5,000,000.00 as full and final payment for the loss. Thereafter, PGP issued a Subrogation Receipt to the petitioner. Meanwhile PGP paid respondents PGP paid the respondent the amount of P301,909.50 as full payment for the latter’s services, as evidenced by Official Receipt. As a result of Subrogation Receipt, petitioner filed an action for damages against respondent before the Regional Trial Court (RTC) of Manila. Defendant filed counterclaim against the petitioner.

After due hearing, RTC ruled in favor of plaintiff ordering respondent to pay plaintiff’s claim of P5,000,000 with legal interest from the time of the filing of the complaint. In addition, RTC dismissed the counterclaim filed by the defendant. Aggrieved, the respondent sought relief with the Court of Appeals where it alleged in the main that PGP failed to file any notice, claim or protest within the period required by Article 366 of the Code of Commerce, which is a condition precedent to the accrual of a right of action against the carrier. A telephone call which was supposedly made by a certain Alfred Chan, an employee of PGP, to one of the Vice Presidents of the respondent, informing the latter of the discoloration, is not the notice required by Article 366 of the Code of Commerce. The Court of Appeals reversed the RTC ruling.

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Issue: (i) Whether or not the notice of claim was filed within the required period. If the answer is in the affirmative.

(ii) Whether or not the damage to the cargo was due to the fault or negligence of the respondent.

Ruling

The notice of claim was not filed within the required period.

Article 366 of the Code of Commerce is applicable to this case. As to the first issue, the petitioner contended that the notice of contamination was given by Alfredo Chan, an employee of PGP, to Ms. Encarnacion Abastillas, Vice President for Administration and Operations of the respondent, at the time of the delivery of the cargo, and therefore, within the required period. This was done by telephone.

The respondent, however, claims that the supposed notice given by PGP over the telephone was denied by Ms. Abastillas. Between the testimonies of Alfredo Chan andEncarnacion Abastillas, the latter’s testimony is purportedly more credible because it would be quite unbelievable and contrary to business practice for Alfredo Chan to merely make a verbal notice of claim that involves millions of pesos.

The court ruled that telephone call made to defendant-company could constitute substantial compliance with the requirement of notice considering that the notice was given to a responsible official, the Vice-President, who promptly replied that she will look into the matter. However, it must be pointed out that compliance with the period for filing notice is an essential part of the requirement, i.e. immediately if the damage is apparent, or otherwise within twenty-four hours from receipt of the goods, the clear import being that prompt examination of the goods must be made to ascertain damage if this is not immediately apparent. The court have examined the evidence and are unable to find any proof of compliance with the required period, which is fatal to the accrual of the right of action against the carrier.

The filing of a claim with the carrier within the time limitation therefore actually constitutes 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 fulfillment of the condition. If it fails to do so, no right of action against the carrier can accrue in favor of the former. The aforementioned requirement is a reasonable condition precedent; it does not constitute a limitation of action.

The second paragraph of Article 366 of the Code of Commerce provides that it is not only when the period to make a claim has elapsed that no claim whatsoever shall be admitted, as no claim may similarly be admitted after the transportation charges have been paid. In this case, there is no question that the transportation charges have been paid, as admitted by the petitioner, and the corresponding official receipt duly issued. To conclude, there is no evidence to confirm that the notice of claim was filed within the period provided for under Article 366 of the Code of Commerce. There is no need to discuss the second issue because the filing of claim against respondent is already prescribed.

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Chu, Lea Mona P.

LORENZO SHIPPING CORP., vs. CHUBB and SONS, IncCase No. 53

Facts

On November 21, 1987, Mayer steel Pipe Corporation of Binondo, Manila, loaded 581 bundles of ERW black steel pipes on board the vessel M/V Lorcon IV, owned by petitionr Lorenzo Shipping, for shipment to Davao City. Petitioner Lorenzo Shipping issued a clean bill of lading designated as Bill of Lading No. T-3 for the account of the consignee, Sumitomo Corporation of San Francisco, California, USA, which in turn, insured the goods with respondent Chubb and Sons, Inc.

On December 2, 1987 M/V Lorcon IV arrived at the Sasa Wharf in Davao City. Respondent Transmarine Carriers received the subject shipment which was discharged on December 4, 1987, evidenced by Delivery Cargo Receipt No. 115090. It discovered seawater in the hatch of M/V Lorcon IV, and found the steel pipes submerged in it. The consignee Sumitomo then hired the services of R.J. Del Pan Surveyors to inspect the shipment prior to and subsequent to discharge. The Survey Report dated December 4, 1987 showed that the subject shipment was no longer in good condition, as in fact, the pipes were found with rust formation on top and/or at the sides. Moreover, the surveyor noted that the cargo hold of the M/V LorconIV was flooded with seawater, and the tank top was “rusty, thinning, and with several holes at different places.” The rusty condition of the cargo was noted on the mate’s receipt and the checker of M/V Lorcon IV signed his conforme thereon.

After the survey, respondent Gearbulk loaded the shipment on board its vessel M/V San Mateo Victory, for carriage to the United States. All bills of lading issued were marked “ALL UNITS HEAVILY RUSTED.”

Sumitomo sent a letter of intent dated December 7, 1987 to petitioner Lorenzo Shipping that it will be filing a claim based on the damaged cargo once such damage had been ascertained.

On January 17, 1988, M/V San Mateo Victory arrived at Oakland, California, U.S.A., where it unloaded 364 bundles of the subject steel pipes. It then sailed to Vancouver, Washington on January 23, 1988 where it unloaded the remaining 217 bundles.

The consignee Sumitomo rejected the damaged steel pipes and declared them unfit for the purpose they were intended. It then filed a marine insurance claim with respondent Chubb and Sons, Inc. which the later settled in the amount of US$104,151.00.

On December 2, 1988, respondent Chubb and Sons, Inc. filed a complaint for collection of a sum of money against Lorenzo Shipping, Gearbulk, and Transmarine.

Petitioner Lorenzo Shipping denied liability, alleging that prescription, laches and extinguishment of obligations and actions had set in.

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ISSUE: Whether or not Sumitomo, Chubb’s predecessor-in-interest, validly made a claim for damages against Lorenzo Shipping within the period prescribed by the Code of Commerce.

HELD:

Yes, the claim for damages has not yet prescribed at the time it was made.

Article 366 of the Code of Commerce states:

Within the twenty-four-hours following the receipt of the merchandise, the claim against the carrier for damage or average, which may be found therein upon the opening of the packages, may be made, provided that the indications of the damage or average which gives rise to the claim cannot be ascertained from the outside part of such package, in which case the claim shall be admitted only at the time of the receipt.

After the periods mentioned have elapsed, or transportation charges have been paid, no claim shall be admitted against the carrier with regards to the condition in which the goods transported were delivered.

A somewhat similar provision is embodied in the Bill of Lading No. T-3 which reads:

NOTE: No claim for damage or loss shall be honored twenty-four hours after delivery.

The twenty-four-hour period prescribed by Art. 366 of the Code of Commerce within which claims must be presented does not begin to run until the consignee has received such possession of the merchandise that he may exercise over it the ordinary control pertinent to ownership. In other words, there must be delivery of the cargo by the carrier to the consignee at the place of destination.

In the case at bar, consignee Sumitomo has not received possession of the cargo, and has not physically inspected the same at the time the shipment was discharged from M/V Lorcon IV in Davao City. Petitioner Lorenzo Shipping failed to establish that an authorized agent of the consignee Sumitomo received the cargo at Sasa Wharf in Davao City. Respondent Transmarine Carriers as agent of respondent Gearbulk, Ltd., which carried the goods from Davao City to the United States, and the principal, respondent Gearbulk, Ltd. itself, are not the authorized agents as contemplated by law. What is clear from the evidence is that the consignee received and took possession of the entire shipment only when the latter reached theUnited States’ shore. Only then was delivery made and completed. And only then did the 24-hour prescriptive period start to run.

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Cheng,Renlyn B.

PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC. and TAGUM PLASTICS, INC., vs. SWEET LINES, INC.,

Case No. 54

Facts:

In or about March 1977, the vessel SS "VISHVA YASH" belonging to or operated by the foreign common carrier, took on board at Baton Rouge, LA, two (2) consignments of cargoes for shipment to Manila and later for transhipment to Davao City, consisting of 600 bags Low Density Polyethylene 631 and another 6,400 bags Low Density Polyethylene 647, both consigned to the order of Far East Bank and Trust Company of Manila, with arrival notice to Tagum Plastics, Inc., Madaum, Tagum, Davao City. In the course of time, the said vessel arrived at Manila and discharged its cargoes in the Port of Manila for transhipment to Davao City. For this purpose, the foreign carrier awaited and made use of the services of the vessel called M/V "Sweet Love" owned and operated by defendant inter island carrier.Subject cargoes were loaded in Holds Nos. 2 and 3 of the interisland carrier. These were commingled with similar cargoes belonging to Evergreen Plantation and also Standfilco. On May 15, 1977, the shipment(s) were discharged from the interisland carrier into the custody of the consignee. The survey shows shortages, damages and losses, of said shipment totalling 7,000 bags, originally contained in 175 pallets, only a total of 5,820 bags were delivered to the consignee in good order condition, leaving a balance of 1,080 bags. Some bags were either shortlanded or were missing, and some of the 1,080 bags were torn, the contents thereof partly spilled or were fully/partially emptied, but, worse, the contents thereof contaminated with foreign matters and therefore could no longer serve their intended purpose.

A maritime suit was commenced on May 12, 1978 by herein Petitioner Philippine American General Insurance Co., Inc. (Philamgen) and Tagum Plastics, Inc. (TPI) against private respondents Sweet Lines, Inc. (SLI) and Davao Veterans Arrastre and Port Services, Inc. (DVAPSI), along with S.C.I. Line (The Shipping Corporation of India Limited) and F.E. Zuellig, Inc., seeking recovery of the cost of lost or damaged shipment.

Issues:

1.) Whether or not notice of claim is neccessary to enforce the carrier's liability?

2.) Whether or not paragraph 5 of the bills of lading which unequivocally prescribes a time frame of thirty (30) days for filing a claim with the carrier in case of loss of or damage to the cargo and sixty (60) days from accrual of the right of action for instituting an action in court is valid?

Ruling:

1.) Yes. where the contract of shipment contains a reasonable requirement of giving notice of loss of or injury to the goods, the giving of such notice is a condition precedent to the action for loss or injury or the right to enforce the carrier's liability. Such requirement is not an empty formalism. The fundamental reason or purpose of such a stipulation is not to relieve the

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carrier from just liability, but reasonably to inform it that the shipment has been damaged and that it is charged with liability therefor, and to give it an opportunity to examine the nature and extent of the injury. This protects the carrier by affording it an opportunity to make an investigation of a claim while the matter is fresh and easily investigated so as to safeguard itself from false and fraudulent claims. Stipulations in bills of lading or other contracts of shipment which require notice of claim for loss of or damage to goods shipped in order to impose liability on the carrier operate to prevent the enforcement of the contract when not complied with, that is, notice is a condition precedent and the carrier is not liable if notice is not given in accordance with the stipulation, as the failure to comply with such a stipulation in a contract of carriage with respect to notice of loss or claim for damage bars recovery for the loss or damage suffered.

In the case at bar, there is neither any showing of compliance by petitioners with the requirement for the filing of a notice of claim within the prescribed period nor any allegation to that effect. It may then be said that while petitioners may possibly have a cause of action, for failure to comply with the above condition precedent they lost whatever right of action they may have in their favor or, token in another sense, that remedial right or right to relief had prescribed.

2.) Yes. The validity of a contractual limitation of time for filing the suit itself against a carrier shorter than the statutory period therefor has generally been upheld as such stipulation merely affects the shipper's remedy and does not affect the liability of the carrier. In the absence of any statutory limitation and subject only to the requirement on the reasonableness of the stipulated limitation period, the parties to a contract of carriage may fix by agreement a shorter time for the bringing of suit on a claim for the loss of or damage to the shipment than that provided by the statute of limitations. Such limitation is not contrary to public policy for it does not in any way defeat the complete vestiture of the right to recover, but merely requires the assertion of that right by action at an earlier period than would be necessary to defeat it through the operation of the ordinary statute of limitations.

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Chan, Richard P.

BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES TRANSPORT SERVICES, INC. vs. PHILIPPINE FIRST INSURANCE CO., INC.

Case No. 55

FACTS:

On June 13, 1990, CMC Trading A.G. shipped on board the M/V 'Anangel Sky' at Hamburg, Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine Steel Trading Corporation. On July 28, 1990, M/V Anangel Sky arrived at the port of Manila and, within the subsequent days, discharged the subject cargo. 4 coils were found to be in bad order. Finding the 4 coils in their damaged state to be unfit for the intended purpose, the consignee Philippine Steel Trading Corporation declared the same as total loss.

Plaintiff-appellant paid the consignee P506,086.50, and was subrogated to the latter's rights and causes of action against defendants-appellees. Subsequently, plaintiff-appellant instituted this complaint for recovery of the amount paid by them, to the consignee as insured.

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

ISSUE: Whether the notice of loss was timely filed.

HELD:

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

Second, as stated in the same provision, a failure to file a notice of claim within three days will not bar recovery if it is nonetheless filed within one year. This one-year prescriptive period also applies to the shipper, the consignee, the insurer of the goods or any legal holder of the bill of lading.

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

"Inasmuch as the neither the Civil Code nor the Code of Commerce states a specific prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA)--which provides for a one-year period of limitation on claims for loss of, or damage to, cargoes sustained during transit--may be applied suppletorily to the case at bar."

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In the present case, the cargo was discharged on July 31, 1990, while the Complaint was filed by respondent on July 25, 1991, within the one-year prescriptive period.

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Catli, Fely Jane

LOADSTAR SHIPPING CO vs. COURT OF APPEALSCase No. 56

Facts:

On November 19, 1984, loadstar received on board its M/V“Cherokee” bales of lawanit hardwood, tilewood and Apitong Bolidenized for shipment. The goods, amounting to P6, 067, 178.00 were insured for the same amount with the Manila Insurance Company against various risks including “Total Loss by Total Loss of the Vessel”.

On November 20, 1984, on its way to Manila from the port of Nasipit, Agusan Del Norte, the vessel, along with its cargo, sank off Limasawa Island. As a result of the total loss of its shipment, the consignee made a claim with Loadstar, which, however, ignored the same. As the insurer, MIC paid to the insured in full settlement of its claim, and the latter executed a subrogation receipt therefor.

MIC thereafter filed a complaint against Loadstar alleging that the sinking of the vessel was due to fault and negligence of Loadstar and its employees. In its answer, Loadstar denied any liability for the loss of the shipper’s goods and claimed that the sinking of its vessel was due to force majeure.

The court a quo rendered judgment in favor of MIC prompting Loadstar to elevate the matter to the Court of Appeals, which however, agreed with the trial court and affirmed its decision in toto. On appeal, Loadstar maintained that the vessel was a private carrier because it was not issued a Certificate of Public Convenience, it did not have a regular trip or schedule nor a fixed route, and there was only “one shipper, one consignee for a special cargo”. Loadstar argues that as a private carrier, it cannot be presumed to have been negligent, and the burden of proving otherwise devolved upon MIC. It also maintains that the vessel was seaworthy, and that the loss was due to force majeure. Finally, Loadstar avers that MIC’s claim had already prescribed, the case having been instituted beyond the period stated in the bills of lading for instituting the same — suits based upon claims arising from shortage, damage, or non-delivery of shipment shall be instituted within sixty days from the accrual of the right of action. MIC, on the other hand, claims that Loadstar was liable, notwithstanding that the loss of the cargo was due to force majeure, because the same concurred with Loadstar’s fault or negligence.

Issue:

Whether or not M/V Cherokee was a private carrier so as to exempt it from the provisions covering common carrier.

Whether or not Loadstar exercised the degree of diligence requires under the circumstances

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Whether or not the claim was barred by prescription

Held:

Loadstar is a common carrier. The Court held that Loadstar is a common carrier. It is not necessary that the carrier be issued a certificate of public convenience, and this public character is not altered by the fact that the carriage of the goods in question was periodic, occasional, episodic or unscheduled.

Further, the bare fact that the vessel was carrying a particular type of cargo for one shipper, which appears to be purely co-incidental; it is no reason enough to convert the vessel from a common to a private carrier, especially where, as in this case, it was shown that the vessel was also carrying passengers.

The Civil Code defines “common carriers” in the following terms: “Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public.”

Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population.

The doctrine of limited liability does not apply where there was negligence on the part of the vessel owner or agent. Loadstar was at fault or negligent in not maintaining a seaworthy vessel and in having allowed its vessel to sail despite knowledge of an approaching typhoon. In any event, it did not sink because of any storm that may be deemed as force majeure, inasmuch as the wind condition in the area where it sank was determined to be moderate. Since it was remiss in the performance of its duties, Loadstar cannot hide behind the "limited liability" doctrine to escape responsibility for the loss of the vessel and its cargo.

The claim in this case was not barred by prescription. MIC’s cause of action had not yet prescribed at the time it was concerned. Inasmuch as neither the Civil Code nor the Code of Commerce states a specific prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA) – which provides for a one-year period of limitation on claims for loss of, or damage to, cargoes sustained during transit – may be applied suppletorily to the case at bar. This one-year prescriptive period also applies to the insurer of the good. In this case, the period for filing the action for recovery has not yet elapsed. Moreover, a stipulation reducing the one-year period is null and void; it must, accordingly, be struck down.

The petition is denied.

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Casipe, Rommel T.

Cua v. Wallem Philippines Shipping, Inc.Case No. 57

Facts:

Cua filed a civil action for damages against Wallem and Advance Shipping before the RTC of Manila. Cua sought the payment of P2, 030, 303.52 for damage to 218 tons and for a shortage of 50 tons of shipment of Brazilian Soyabeans consigned to him. He claimed that the loss was due to the respondents’ failure to observe extraordinary diligence in carrying the cargo. Advance Shipping (a foreign corporation) was the owner and manager of M/V Argo Trader that carried the cargo, while Wallem was its local agent. Advance Shipping filed a motion to dismiss the complaint, assailing the RTC’s jurisdiction over Cua’s claim. Wallem filed its own motion to dismiss, raising the sole ground of prescription. Section 3(6) of the Carriage of Goods by Sea

Act (COGSA) provides that “the carrier and the ship shall be discharged from all liability in respect of the loss or damage unless suit is brought within one year after delivery of the goods.”

Wallem alleged that the goods were delivered to Cua on August 16, 1989, but the damages suit was instituted only on November 12, 1990-- more than one year than the period allotted under the COGSA. Since the action was filed beyond the one year prescriptive period, Wallem argued that Cua’s action has been barred.

Issue: Whether Cua’s claim for payment of damages against the respondent has prescribed.

Held:

Cua’s claim for payment of damages against respondent has not prescribed. Respondents admitted the agreement extending the period to file the claim. The COGSA is the applicable law for all the contracts for carriage of goods by sea to and from Philippine ports in foreign trade; it is thus the law that the Court shall consider in the present case since the cargo was transported from Brazil to the Philippines. Under section 3(6) of the COGSA, the carrier is discharged from liability for loss or damage to the cargo “unless the suit is brought within one year after the delivery of the goods or the date when the goods should have been delivered.”

Jurisprudence, however, recognized the validity of an agreement between the carrier and the shipper/consignee extending the one-year period to file a claim. Although the complaint was clearly filed beyond the one-year period, Cua additionally alleged in his complaint that “the defendants agreed to extend the time for filing of the action up to November 12, 1990.” The allegation of an agreement extending the period to file an action in Cua’s complaint is a material averment that, under Section 11, Rule 8 of the Rules of Court, must be specifically denied by the respondent; otherwise, the allegation is deemed admitted. A review of the pleadings

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submitted by the respondents discloses that they failed to specifically deny Cua’s llegation of an agreement extending the period to file an action to November 12, 1990.

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Joseph Sante E. Bustamante

Insurance Company of North America v. Asian Terminal, Inc.Case No. 58

Facts:

Macro-Lite Korea Corporation shipped to San Miguel Corporation, through M/V "DIMI P" vessel, of electrolytic tin free steel in complete and good order condition and was insured with petitioner against all risks. Upon arrival, after it was discharged, it was noted that 7 packages were damaged and in bad order. Then the shipment was turned over to the custody of respondent for storage and safekeeping pending its withdrawal by the consignee's authorized customs broker. However, prior to the last withdrawal of the shipment, a joint inspection of the said cargo was conducted and found that an additional 5 packages were damaged and in bad order. Hence, a claim was filed and as insurer, petitioner paid the consignee the amount for the damage caused to the shipment. Thereafter, petitioner, formally demanded reparation against respondent. As respondent failed to satisfy its demand, petitioner filed an action for damages with the RTC of Makati City. However, the trial court dismissed the complaint on the ground that the petitioner’s claim was already barred by the statute of limitations under COGSA embodied in

Commonwealth Act (CA) No. 65. Motion for reconsideration was also denied. On appeal to the SC, petitioner contends that the one-year limitation period for bringing a suit in court under the COGSA is not applicable to the case, because the prescriptive period applies only to the carrier and the ship and that they are not carrier.

Issue:

Whether the one-year prescriptive period for filing a suit under the COGSA applies to this action for damages against respondent arrastre operator.

Held:

No. Paragraph (e), Section 1, Title I of CA No. 65 provides that: (e) the term "carriage of goods" covers the period from the time when the goods are loaded to the time when they are discharged from the ship. The term “carriage of goods” covers the period from the time when the goods are loaded to the time when they are discharged from the ship; thus, it can be inferred that the period of time when the goods have been discharged from the ship and given to the custody of the arrastre operator is not covered by the COGSA. The prescriptive period for filing an action for the loss or damage of the goods under the COGSA is also found in paragraph (6), Section 3, which provide: xxx In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered xxx.

However, said COGSA provision does not mention that an arrastre operator may invoke the prescriptive period of one year; hence, it does not cover the arrastre operator.

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Alegre, Mutya S.

Vector Shipping Corporation vs. American Home Assurance CompanyCase No. 59

Facts

Vector was the operator of the motor tanker M/T Vector, while Soriano was the registered owner of the M/T Vector. Respondent is a domestic insurance corporation.

On September 30, 1987, Caltex entered into a contract of affreightment with Vector for the transport of Caltex's petroleum cargo through M/T Vector. Caltex insured the petroleum cargo with respondent. In the evening of December 20, 1987, M/T Vector and M/V Dona Paz (owned by Sulpicio Lines) collided in the open sea, resulting to the sinking of both vessels. The entire petroleum cargo perished. Respondent indemnified Caltex for the loss of the petroleum cargo in the full amount of P7,455,421.08. On March 5, 1992, respondent filed a complaint against Vector, Soriano, and Sulpicio Lines to recover the full amount it paid to Caltex.

The RTC dismissed the case holding that the action is upon a quasi-delict and as such must be commenced within four years from the day they may be brought, which is the day the quasi-delict occurred. The tort complained in the case occurred on 20 December 1987. The action arising therefrom would prescribe on 20 December 1991. When the case was filed against defendants on 5 March 1992, the action had already prescribed.

The CA reversed and held Vector and Soriano jointly and severally liable, absolving Sulpicio Lines. It said that the claim is anchored on a breach of contract of affreightment and under Article 1144 of the Civil Code, actions based on written contract must be brought within 10 years from the time the right of action accrued.

Issue: Whether the action of respondent was already barred by prescription for bringing it only on March 5, 1992

Held:

We concur with the CA's ruling that respondent's action did not yet prescribe. The legal provision governing this case is Article 1144 of the Civil Code, which states:

Article 1144. The following actions must be brought within ten years from the timethe cause of action accrues:

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(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

However, we find and hold that the present action was not upon a written contract, but upon obligation created by law. This is because the subrogation of respondent to the rights of Caltex as the insured was by virtue of the express provision of law embodied in Article 2207 of the Civil Code, to wit:

Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury.

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REGISTERED OWNER RULE

9. Teja Marketing vs. Intermediate Appellate Court, G.R. No. 65510, March 9, 1987

Cusay, Jerman F.

TEJA MARKETING AND/OR ANGEL JAUCIAN v. INTERMEDIATE APPELLATE COURTCase No. 9

Facts

The defendant, Pedro Nale, purchased from the plaintiff, Angel Jaucian, a motorcycle with complete accessories and a sidecar in the total consideration of P8,000.00. Out of the total purchase price the defendant gave a downpayment of P1,700.00 with a promise that he would pay plaintiff the balance within sixty days. Unfortunately defendant failed to comply with his promise and requested that the period of paying the balance be extended to one year in monthly installments. In spite of this extension defendant still failed to comply with his obligation. Plaintiff made demands but the same is not heeded prompting the plaintiff to file a case against defendant. Plaintiff filed an action for sum of money with damages against the defendant.

Records of the Land Transportation Commission (LTC) show that the motorcycle sold to the defendant was first mortgaged to the Teja Marketing by Angel Jaucian despite the fact that Teja Marketing and Angel Jaucian are one and the same, because it was made to appear that way only as the defendant had no franchise of his own and he attached the unit to the plaintiff’s

MCH line. Furthermore, there was an agreement between the plaintiff and defendant that it was the former who would undertake the yearly registration of the motorcycle with LTC upon payment of sum of money by the defendant to the plaintiff. However, the agreement did not prosper through alleged fault of the defendant in not complying with some requirements i.e. payment of insurance premium. On the other hand, defendant alleged that plaintiff failed to make the registration of the motorcycle in spite of the payment made by the defendant. As a result, defendant filed counterclaim against the plaintiff.

The City Court of Naga rendered judgment in favor of the plaintiff. On appeal, the decision was affirmed in toto by the Court of First Instance of Camarines Sur. However, Intermediate Appellate Court (IAC) reversed the decision and dismissed the plaintiff’s claim as well as the counterclaim of defendant on the basis of the doctrine of pari delicto.

Issue: Whether or not respondent court erred in applying the doctrine of pari delicto.

Ruling

No. Supreme Court ruled that IAC did not err in applying the doctrine of pari delicto. The parties herein operated under an arrangement, commonly known as the kabit system whereby a person who has been granted a certificate of public convenience allows another person who owns motor vehicles to operate under such franchise for a fee. A certificate of public

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convenience is a special privilege conferred by the government. Abuse of this privilege by the grantees thereof cannot be countenanced. The kabit system has been identified as one of the root causes of the prevalence of graft and corruption in the government transportation offices.

Although the motorcycle was allegedly purchased from the petitioner, the same remained to be registered in the name of the petitioner and was operated under the latter’s franchise pursuant to kabit system without prior approval of the appropriate government agency. The court ruled that it will not aid either party to enforce illegal contract. It is in consonance of the time-honored maxim that no action arises out of illicit bargain.

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