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TRANSPORTATION OF GOODS
a. Governing Lawi. NCC, Article 1733 to 1753.
b. Extraordinary Diligence (NCC Art. 1733)i. Eastern Shipping v. Court of Appeals, 196 SCRA 570, G.R. No. 94151
April 30, 1991.
FACTS: On September 4, 1978, 13 coils of uncoated 7-wire stress relieved wire strand were
shipped on board "Japri Venture," owned and operated by the defendant Eastern Shipping
Lines, Inc., at Kobe, Japan, for delivery to Stresstek Post-Tensioning Phils., Inc. in Manila, which
were insured by the plaintiff First Nationwide Assurance Corporation for P171,923.
While enroute from Kobe to Manila, the carrying vessel "encountered very rough seas and
stormy weather" for three days, more or less.
On September 16, 1978, Japri arrived in Manila and discharged the cargo to the custody
of E. Razon, Inc. When inspected, all the cargoes were wet and that all 13 coils were extremely
rusty and totally unsuitable for the intended purpose.
First Nationwide indemnified the consignee for damage and loss to the insured cargo. First
Nationwide filed a complaint against Eastern and E.Razon in RTC for the recovery of the amount
it paid due to the consignee.
RTC:dismissed the complaint CA: liable:Razon-8/13 and Eastern-5/13
ISSUE: WON P IS LIABLE EVEN THOUGH THE SHIPMENT WAS ALREADY IN CUSTODY OF THEARRASTRE OPERATOR
HELD: YES
Plainly, the heavy seas and rains referred to in the master's report were not caso
fortuito, but normal occurrences that an ocean-going vessel, particularly in the month of
September which, in our area, is a month of rains and heavy seas would encounter as a matter
of routine. They are not unforeseen nor unforeseeable. These are conditions that ocean-going
vessels would encounter and provide for, in the ordinary course of a voyage. That rain water
(not sea water) found its way into the holds of theJupri Venture is a clear indication that care
and foresight did not attend the closing of the ship's hatches so that rain water would not find
its way into the cargo holds of the ship.
Moreover, under Article 1733 of the Civil Code, common carriers are bound to observe "extra-
ordinary vigilance over goods . . . .according to all circumstances of each case," and Article 1735
of the same Code states, to wit:
Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding
article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have
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been at fault or to have acted negligently, unless they prove that they observed extraordinary
diligence as required in article 1733.
Since the carrier has failed to establish any caso fortuito, the presumption by law of fault or
negligence on the part of the carrier applies; and the carrier must present evidence that it has
observed the extraordinary diligence required by Article 1733 of the Civil Code in order to
escape liability for damage or destruction to the goods that it had admittedly carried in this
case. No such evidence exists of record. Thus, the carrier cannot escape liability.
The presumption, therefore, that the cargo was in apparent good condition when it was
delivered by the vessel to the arrastre operator by the clean tally sheets has been overturned
and traversed. The evidence is clear to the effect that the damage to the cargo was suffered
while aboard petitioner's vessel.
ii. Delsan Transport v. Court of Appeals, 369 SCRA 24, G.R. No. 127897,November 15, 2001.
DELSAN TRANSPORT vs. CA
FACTS
Caltex engaged into a contract of affreightment with the petitioner, Delsan Transport Lines,
Inc.(Delsan), for a period of one year whereby the said common carrier agreed to transport
Caltexs industrial fuel oil from the Batangas-Bataan Refinery to different parts of the country.
Under the contract, petitioner 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 private respondent, American Home Assurance Corporation
(American Home)
The vessel sank in the early morning of August 15, 1986 near Panay Gulf in the Visayas taking
with it the entire cargo of fuel oil.
Subsequently, American Home paid Caltex the sum of Php 5,096,635.57 representing the
insured value of the cargo. Exercising its right to subrogation under Article 2207 of the New Civil
Code, the American Home demanded the Delsan the same amount it paid to Caltex.
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.
The CA reversed. It 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.
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Delsan contends the following
1. Delsan theorized that when the American Home paid Caltex the value of its lostcargo, the act of American Home is equivalent to a tacit recognition that the ill-fated
vessel was seaworthy; otherwise, American Home was not legally liable to Caltex
due to the latters breach of implied warranty under the marine insurance policy
that the vessel was seaworthy.
2. Delsan avers that although chief officer had merely a 2nd officers license, he wasqualified to act as the vessels chief officer. In fact, all the crew and officers of MTT
Maysun were exonerated in the administrative investigation.
ISSUES
1. W/N the payment made by American Home to Caltex for the insured value of the lostcargo amounted to an admission that the vessel was seaworthy, thus precluding any
action for recovery against the petitioner. NO
2. W/N the non-presentation of the marine insurance policy bars the complaint forrecovery of sum of money for lack of cause of action. NO
RULING
First Issue:
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 vessels 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
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, Delsans 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.
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Additionally, the exoneration of MT Maysuns officers and crew merely concern their respective
administrative liabilities. It does not in any way operate to absolve Delsan the common carrier
from its civil liability arising from its failure to observe extraordinary diligence in the vigilance
over the goods it was transporting and for the negligent acts or omissions of its employees, the
determination of which properly belongs to the courts. In the case at bar, Delsan is liable for the
insured value of the lost cargo of industrial fuel oil belonging to Caltex for its failure to rebut the
presumption of fault or negligence as common carrier occasioned by the unexplained sinking of
its vessel, MT Maysun, while in transit.
Second Issue:
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.
iii. Philippine Charter v. Chemoil, 463 SCRA 202, G.R. No. 161833, July 08,2005.
iv. Saludo v. Court of Appeals, 207 SCRA 498, G.R. No. 95536, March 23,1992.
Facts:
Plaintiff herein together with Pomierski and Son Funeral Home of Chicago brought the
remains of plaintiffs mother to Continental Mortuary Air Services which booked the shipmentof 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 2 bodies in the said airport. Somehow the 2 bodies
were switched, and the remains of plaintiffs 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.
Issue:
Whether or not the 2 airlines should be held liable for damages.
Held:
Explicit is the rule under Article 1736 of the Civil Code that the extraordinary
responsibility of the common carrier begins from the time the goods are delivered to the carrier.
This responsibility remains in full force and effect even when they are temporarily unloaded or
stored in transit, unless the shipper or owner exercises the right of stoppage in transitu, and
terminates only after the lapse of a reasonable time for the acceptance, of the goods by the
consignee or such other person entitled to receive them. And, there is delivery to the carrier
when the goods are ready for and have been placed in the exclusive possession, custody and
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control of the carrier for the purpose of their immediate transportation and the carrier has
accepted them. Where such a delivery has thus been accepted by the carrier, the liability of the
common carrier commences eo instanti. Hence, while we agree with petitioners that the
extraordinary diligence statutorily required to be observed by the carrier instantaneously
commences upon delivery of the goods thereto, for such duty to commence there must in fact
have been delivery of the cargo subject of the contract of carriage. Only when such fact of
delivery has been unequivocally established can the liability for loss, destruction or
deterioration of goods in the custody of the carrier, absent the excepting causes under Article
1734, attach and the presumption of fault of the carrier under Article 1735 be invoked.
As already demonstrated, the facts in the case at bar belie the averment that there was
delivery of the cargo to the carrier on October 26, 1976. Rather, as earlier explained, the body
intended to be shipped as agreed upon was really placed in the possession and control of PAL on
October 28, 1976 and it was from that date that private respondents became responsible for the
agreed cargo under their undertakings in PAL Airway Bill No. 079-01180454. Consequently, for
the switching of caskets prior thereto which was not caused by them, and subsequent events
caused thereby, private respondents cannot be held liable
v. Lorenzo Shipping v. BJ Marthel, 443 SCRA 163, G.R. No. 145483,November 19, 2004.
FACTS
Petitioner Lorenzo Shipping Corporation is a domestic corporation engaged in coastwise
shipping. Respondent BJ Marthel International, Inc. is an importer and distributor of different
brands of engines and spare parts.
Respondent supplied petitioner with spare parts for the latter's marine engines. According to
the quotation it sent, deliveries of such items are within 2 months after receipt of firm order.
Petitioner thereafter issued to respondent Purchase Order No. 13839 for the procurement ofone set of cylinder liner, valued at P477,000, to be used for M/V Dadiangas Express. The
purchase order was co-signed by Jose Go, Jr., petitioner's vice-president, and Henry Pajarillo,
respondents sales manager.
Instead of paying the 25% down payment (indicated in the purchase order) for the first cylinder
liner, petitioner issued in favor of respondent ten postdated checks. The checks were supposed
to represent the full payment of the aforementioned cylinder liner.
Subsequently, petitioner issued Purchase Order No. 14011, for another unit of cylinder liner.
This purchase order stated the term of payment to be "25% upon delivery, balance payable in 5
bi-monthly equal installments." Like the first purchase order, the second purchase order did not
state the date of the cylinder liner's delivery.
On 26 January 1990, respondent deposited petitioner's check that was postdated 18 January
1990, however, the same was dishonored by the drawee bank due to insufficiency of funds. The
remaining nine postdated checks were eventually returned by respondent to petitioner.
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Petitioner claimed that it replaced said check with a good one, the proceeds of which were
applied to its other obligation to respondent. For its part, respondent insisted that it returned
said postdated check to petitioner.
On 20 April 1990, Pajarillo delivered the two cylinder liners at petitioner's warehouse in Manila.
The sales invoices evidencing the delivery of the cylinder liners both contain the notation
"subject to verification" under which the signature of petitioner's warehouseman, appeared.
Respondent sent a Statement of Account and respondent's vice-president sent a demand letter
dated to petitioner requiring the latter to pay. Petitioner sent the former a letter offering to pay
only P150,000 for the cylinder liners. In said letter, petitioner claimed that as the cylinder liners
were delivered late and due to the scrapping of the M/V Dadiangas Express, it (petitioner) would
have to sell the cylinder liners in Singapore and pay the balance from the proceeds of said sale.
Respondent filed an action for sum of money and damages before the RTC. Prior to the filing of
a responsive pleading, respondent filed an amended complaint with preliminary attachment.
The amendments also pertained to the issuance by petitioner of the postdated checks and the
amounts of damages claimed.
The RTC granted respondent's prayer for the issuance of a preliminary attachment. Petitioner
filed an Urgent Ex-Parte Motion to Discharge Writ of Attachment attaching thereto a counter-
bond which the RTC allowed.
Petitioner afterwards filed its Answer alleging therein that time was of the essence in the
delivery of the cylinder liners and that the delivery on 20 April 1990 of said items was late as
respondent committed to deliver said items "within two (2) months after receipt of firm order."
Respondent filed a Second Amended Complaint with Preliminary Attachment which dealt solely
with the number of postdated checks issued by petitioner as full payment for the first cylinderliner it ordered from respondent. (In the first amended complaint, only nine postdated checks
were involved, in its second amended complaint, there were ten postdated checks).
Petitioner filed a Motion alleging therein that the cylinder liners run the risk of obsolescence
and deterioration to the prejudice of the parties to this case. Thus, petitioner prayed that it be
allowed to sell the cylinder liners at the best possible price and to place the proceeds of said sale
in escrow. This motion was granted.
The RTC dismissed the complaint which ordered the plaintiff to pay P50,000.00 to the
defendant. It held respondent bound to the quotation it submitted to petitioner particularly
with respect to the terms of payment and delivery of the cylinder liners. It also declared that
respondent had agreed to the cancellation of the contract of sale when it returned the
postdated checks issued by petitioner.
The CA reversed the decision of the RTC.
ISSUES
1. Whether or not respondent incurred delay in performing its obligation under thecontract of sale - NO
2. Whether or not said contract was validly rescinded by petitioner. -NO
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RULING
Petitioner maintains that its obligation to pay fully the purchase price was extinguished because
the adverted contract was validly terminated due to respondent's failure to deliver within the
two-month period. The threshold question, then, is: Was there late delivery of the subjects of
the contract of sale to justify petitioner to disregard the terms of the contract considering that
time was of the essence thereof?
In determining whether time is of the essence in a contract, the ultimate criterion is the actual
or apparent intention of the parties and before time may be so regarded by a court, there must
be a sufficient manifestation, either in the contract itself or the surrounding circumstances of
that intention. Petitioner insists that although its purchase orders did not specify the dates
when the cylinder liners were supposed to be delivered, nevertheless, respondent should abide
by the term of delivery appearing on the quotation it submitted to petitioner. Petitioner
theorizes that the quotation embodied the offer from respondent while the purchase order
represented its (petitioner's) acceptance of the proposed terms of the contract of sale. Thus,
petitioner is of the view that these two documents "cannot be taken separately as if there were
two distinct contracts." We do not agree.
While this Court recognizes the principle that contracts are respected as the law between the
contracting parties, this principle is tempered by the rule that the intention of the parties is
primordial and "once the intention of the parties has been ascertained, that element is deemed
as an integral part of the contract as though it has been originally expressed in unequivocal
terms."
In the present case, we cannot subscribe to the position of petitioner that the documents, by
themselves, embody the terms of the sale of the cylinder liners. One can easily glean the
significant differences in the terms as stated in the formal quotation and Purchase Order No.
13839 with regard to the due date of the down payment for the first cylinder liner and the dateof its delivery as well as Purchase Order No. 14011 with respect to the date of delivery of the
second cylinder liner. While the quotation provided by respondent evidently stated that the
cylinder liners were supposed to be delivered within two months from receipt of the firm order
of petitioner and that the 25% down payment was due upon the cylinder liners' delivery, the
purchase orders prepared by petitioner clearly omitted these significant items. The petitioner's
Purchase Order No. 13839 made no mention at all of the due dates of delivery of the first
cylinder liner and of the payment of 25% down payment. Its Purchase Order No. 14011 likewise
did not indicate the due date of delivery of the second cylinder liner.
In the instant case, the formal quotation provided by respondent represented the negotiation
phase of the subject contract of sale between the parties. As of that time, the parties had not
yet reached an agreement as regards the terms and conditions of the contract of sale of the
cylinder liners. Petitioner could very well have ignored the offer or tendered a counter-offer to
respondent while the latter could have, withdrawn or modified the same. The parties were at
liberty to discuss the provisions of the contract of sale prior to its perfection. In this connection,
we turn to the testimonies of Pajarillo and Kanaan, Jr., that the terms of the offer were, indeed,
renegotiated prior to the issuance of Purchase Order No. 13839.
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The law implies, however, that if no time is fixed, delivery shall be made within a reasonable
time, in the absence of anything to show that an immediate delivery intended.
We also find significant the fact that while petitioner alleges that the cylinder liners were to be
used for dry dock repair and maintenance of its M/V Dadiangas Express between the later part
of December 1989 to early January 1990, the record is bereft of any indication that respondent
was aware of such fact. The failure of petitioner to notify respondent of said date is fatal to its
claim that time was of the essence in the subject contracts of sale.
Finally, the ten postdated checks issued in November 1989 by petitioner and received by the
respondent as full payment of the purchase price of the first cylinder liner supposed to be
delivered on 02 January 1990 fail to impress. It is not an indication of failure to honor a
commitment on the part of the respondent. The earliest maturity date of the checks was 18
January 1990. As delivery of said checks could produce the effect of payment only when they
have been cashed, respondent's obligation to deliver the first cylinder liner could not have
arisen as early as 02 January 1990 as claimed by petitioner since by that time, petitioner had yet
to fulfill its undertaking to fully pay for the value of the first cylinder liner. As explained by
respondent, it proceeded with the placement of the order for the cylinder liners with itsprincipal in Japan solely on the basis of its previously harmonious business relationship with
petitioner.
As an aside, let it be underscored that "[e]ven where time is of the essence, a breach of the
contract in that respect by one of the parties may be waived by the other party's subsequently
treating the contract as still in force." Petitioner's receipt of the cylinder liners when they were
delivered to its warehouse on 20 April 1990 clearly indicates that it considered the contract of
sale to be still subsisting up to that time. Indeed, had the contract of sale been cancelled already
as claimed by petitioner, it no longer had any business receiving the cylinder liners even if said
receipt was "subject to verification." By accepting the cylinder liners when these were delivered
to its warehouse, petitioner indisputably waived the claimed delay in the delivery of said items.
We, therefore, hold that in the subject contracts, time was not of the essence. The delivery of
the cylinder liners on 20 April 1990 was made within a reasonable period of time considering
that respondent had to place the order for the cylinder liners with its principal in Japan and that
the latter was, at that time, beset by heavy volume of work.
There having been no failure on the part of the respondent to perform its obligation, the power
to rescind the contract is unavailing to the petitioner.
Here, there is no showing that petitioner notified respondent of its intention to rescind the
contract of sale between them. Quite the contrary, respondent's act of proceeding with the
opening of an irrevocable letter of credit on 23 February 1990 belies petitioner's claim that it
notified respondent of the cancellation of the contract of sale. Truly, no prudent businessman
would pursue such action knowing that the contract of sale, for which the letter of credit was
opened, was already rescinded by the other party.
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vi. Sealoader Shipping v. Grand Cement Manufacturing, 638 SCRA 488,G.R. Nos. 167363 & 177466, December 15, 2010.
Doctrine:
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
Facts:
Sealoader executed a Time Charter Party Aggrement with Joyce Launch for the
chartering of MT Viper in order to tow its unpropelled barges for a minimum of 15 days.
Sealoder entered into a contract with Grand Cement for the loading of cement clinkers
and the delivery thereof to Manila. On March 31, 1994, Sealoders barge arrived at the
wharf of Grand Cement tugged by MT Viper. It was not immediately loaded as the
employees of Grand Cement were loaded another vessel.
On April 4, typhoon Bising struck Cebu area. The barge was still docked at the wharf ofGrand 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 employees
advice to move the vessels after it had received weather updates. Sealoader filed a
motion to dismiss on the ground that Joyce Launch is the one liable since it was the
owner of MT Viper, whos employees were manning the vessel. Sealoader filed a cross-
claim against Joyce Launch. Joyce maintains that the damages were due to forcemajeure and faulted Grand Cements 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
Sealodersvessel 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?
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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 Cements 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. 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.
c. Duration of Responsibility (NCC Art. 1736-38)i. Mitsui Lines v. Court of Appeals, 287 SCRA 366, G.R. No. 119571,
March 11, 1998.
ii. Sulpicio v. First Lepanto, 462 SCRA 125, G.R. No. 140349, June 29,2005.
iii. Coastwise Lighterage v. Court of Appeals, 245 SCRA 796, G.R. No.114167 July 12, 1995
Facts:
Pag-asa Sales Inc. entered into a contract to transport molasses from the province of Negros
to Manila with Coastwise Lighterage Corporation (Coastwise for brevity), using the latter's
dumb barges. The barges were towed in tandem by the tugboat MT Marica, which is
likewise owned by Coastwise. Upon reaching Manila Bay, one of the barges, "Coastwise 9",
struck an unknown sunken object. The forward buoyancy compartment was damaged, and
water gushed in through a hole "two inches wide and twenty-two inches long". As a
consequence, the molasses at the cargo tanks were contaminated. Pag-asa filed a claim
against Philippine General Insurance Company, the insurer of its cargo. Philgen paid
P700,000 for the value of the molasses lost.
Philgen then filed an action against Coastwise to recover the money it paid, claiming to be
subrogated to the claims which the consignee may have against the carrier. Both the trial
court and the Court of Appeals ruled against Coastwise.
Issues:
(1) Whether Coastwise was transformed into a private carrier by virtue of the contract it
entered into with Pag-asa, and whether it exercised the required degree of diligence
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(2) Whether Philgen was subrogated into the rights of the consignee against the carrier
Held:
(1) Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order to carry cargo from
one point to another, but the possession, command mid navigation of the vessels remained
with petitioner Coastwise Lighterage. Coastwise Lighterage, by the contract of
affreightment, was not converted into a private carrier, but remained a common carrier and
was still liable as such. The law and jurisprudence on common carriers both hold that the
mere proof of delivery of goods in good order to a carrier and the subsequent arrival of the
same goods at the place of destination in bad order makes for a prima facie case against the
carrier. It follows then that the presumption of negligence that attaches to common
carriers, once the goods it is sports are lost, destroyed or deteriorated, applies to the
petitioner. This presumption, which is overcome only by proof of the exercise of
extraordinary diligence, remained unrebutted in this case. Jesus R. Constantino, the patron
of the vessel "Coastwise 9" admitted that he was not licensed. Coastwise Lighterage cannot
safely claim to have exercised extraordinary diligence, by placing a person whose
navigational skills are questionable, at the helm of the vessel which eventually met thefateful accident. It may also logically, follow that a person without license to navigate, lacks
not just the skill to do so, but also the utmost familiarity with the usual and safe routes
taken by seasoned and legally authorized ones. Had the patron been licensed he could be
presumed to have both the skill and the knowledge that would have prevented the vessel's
hitting the sunken derelict ship that lay on their way to Pier 18. As a common carrier,
petitioner is liable for breach of the contract of carriage, having failed to overcome the
presumption of negligence with the loss and destruction of goods it transported, by proof of
its exercise of extraordinary diligence.
(2) Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If
the insured property is destroyed or damaged through the fault or negligence of a partyother than the assured, then the insurer, upon payment to the assured will be subrogated to
the rights of the assured to recover from the wrongdoer to the extent that the insurer has
been obligated to pay. Payment by the insurer to the assured operated as an equitable
assignment to the former of all remedies which the latter may have against the third party
whose negligence or wrongful act caused the loss. The right of subrogation is not dependent
upon, nor does it grow out of, any private of contract or upon written assignment of, claim.
It accrues simply upon payment of the insurance claim by the insurer.
iv. Philippine First Insurance v. Wallem First Shipping, 582 SCRA 457, G.R.No. 165647, March 26, 2009.
d. Presumption of Negligence (NCC Art. 1735)i. Delsan Transport v. American Home, G.R. No. 149019, August 15,
2006.
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DELSAN TRANSPORT vs. CA
FACTS
Caltex engaged into a contract of affreightment with the petitioner, Delsan Transport Lines,
Inc.(Delsan), for a period of one year whereby the said common carrier agreed to transport
Caltexs industrial fuel oil from the Batangas-Bataan Refinery to different parts of the country.
Under the contract, petitioner 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 private respondent, American Home Assurance Corporation
(American Home)
The vessel sank in the early morning of August 15, 1986 near Panay Gulf in the Visayas taking
with it the entire cargo of fuel oil.
Subsequently, American Home paid Caltex the sum of Php 5,096,635.57 representing the
insured value of the cargo. Exercising its right to subrogation under Article 2207 of the New Civil
Code, the American Home demanded the Delsan the same amount it paid to Caltex.
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.
The CA reversed. It 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.
Delsan contends the following
1. Delsan theorized that when the American Home paid Caltex the value of its lostcargo, the act of American Home is equivalent to a tacit recognition that the ill-fated
vessel was seaworthy; otherwise, American Home was not legally liable to Caltex
due to the latters breach of implied warranty under the marine insurance policy
that the vessel was seaworthy.
2. Delsan avers that although chief officer had merely a 2nd officers license, he wasqualified to act as the vessels chief officer. In fact, all the crew and officers of MTT
Maysun were exonerated in the administrative investigation.
ISSUES
1. W/N the payment made by American Home to Caltex for the insured value of the lostcargo amounted to an admission that the vessel was seaworthy, thus precluding any
action for recovery against the petitioner. NO
2. W/N the non-presentation of the marine insurance policy bars the complaint forrecovery of sum of money for lack of cause of action. NO
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RULING
First Issue:
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 vessels 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
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, Delsans 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.
Additionally, the exoneration of MT Maysuns officers and crew merely concern their respective
administrative liabilities. It does not in any way operate to absolve Delsan the common carrier
from its civil liability arising from its failure to observe extraordinary diligence in the vigilance
over the goods it was transporting and for the negligent acts or omissions of its employees, the
determination of which properly belongs to the courts. In the case at bar, Delsan is liable for the
insured value of the lost cargo of industrial fuel oil belonging to Caltex for its failure to rebut the
presumption of fault or negligence as common carrier occasioned by the unexplained sinking of
its vessel, MT Maysun, while in transit.
Second Issue:
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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ii. Maersk Lines v. Court of Appeals, 222 SCRA 108, G.R. 94761, May 17,1993.
MAERSK LINES vs. CA
FACTS
Petitioner Maersk Line is engaged in the transportation of goods by sea, doing business in the
Philippines through its general agent Compania de Tabacos de Filipinas, while private
respondent Efren Castillo is the proprietor of Ethegal Laboratories, a firm engaged in the
manufacture of pharmaceutical products.
On Nov. 12, 1976, Castillo ordered from Eli Lilly, Inc. of Puerto Rico 600,000 empty gelatin
capsules for the manufacture of his pharmaceutical products. The capsules were placed in 6
drums of 100,000 capsules each valued at US$1,668.71. Shipper Eli Liily,Inc. advised Castillo
through a Memorandum of Shipment that the products were already shipped on board MV
Anders Maesrkline and date of arrival to be April 3, 1977.
However, for unknown reasons, said cargoes of capsules were diverted to Richmond, VA and
then transported back to Oakland, CA and with the goods finally arriving in the PI on June 10,
1977. Consignee Castillo refused to take delivery of the goods on account of its failure to arrive
on time, and filed an action for rescission of contract with damages against Maersk and Eli Lilly
alleging gross negligence and undue delay.
Maersk contends that it is liable only in case of loss, destruction or deterioration of goods under
Art 1734 NCC while Eli Lilly in its cross claim argued that the delay was due solely to the
negligence of Maersk Line. Trial Court dismissed the complaint against Eli Lilly and the latter
withdrew cross claim but TC still held Maersk liable and CA affirmed with modifications.
ISSUES
1. W/N a cause of action exists against Maersk Line given that there was a dismissal of thecomplaint against Eli Lilly? Yes, but not under the cross claim rather because Maersk
was an original party.
2. W/N Castillo is entitled to damages resulting from delay in the delivery of the shipmentin the absence in the bill of lading of a stipulation on the delivery of goods? Yes.
RULING
The complaint was filed originally against Eli Lilly, Inc. as shipper-supplier and petitioner as
carrier. Petitioner Maersk Line being an original party defendant upon whom the delayed
shipment is imputed cannot claim that the dismissal of the complaint against Eli Liily inured to
its benefit.
Petitioner contends as well that it cannot be held liable because there was no special contract
under which the carrier undertook to deliver the shipment on or before a specific date and that
the Bill of Lading provides that The Carrier does not undertake that the Goods shall arrive at
port of discharge or the place of delivery at any particular time. However, although the SC
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stated that a bill of lading being a contract of adhesion will not be voided on that basis alone, it
did declare that the questioned provision to be void because it has the effect of practically
leaving the date of arrival of the subject shipment on the sole determination and will of the
carrier. It is established that without any stipulated date, the delivery of shipment or cargo
should be made within a reasonable time. In the case at hand, the SC declared that a delay in
the delivery of the goods spanning a period of 2 months and 7 days falls way beyond the realm
of reasonableness.
iii. FGU Insurance v. Court of Appeals, 454 SCRA 337, G.R. No. 137775,March 31, 2005.
FGU INSURANCE vs. CA
FACTS
Anco Enterprises Company (ANCO), a partnership between Ang Gui and Co To, was engaged in
the shipping business. It owned the M/T ANCO tugboat and the D/B Lucio barge which were
operated as common carriers. Since the D/B Lucio had no engine of its own, it could notmaneuver by itself and had to be towed by a tugboat for it to move from one place to another.
The D/B Lucio was towed by the M/T ANCO all the way from Mandaue City to San Jose, Antique.
The vessels arrived at San Jose, Antique, at about one oclock in the afternoon of 30 September
1979. The tugboat M/T ANCO left the barge immediately after reaching San Jose, Antique.
When the barge and tugboat arrived at San Jose, Antique, in the afternoon of 30 September
1979, the clouds over the area were dark and the waves were already big. The arrastre workers
unloading the cargoes of SMC on board the D/B Lucio began to complain about their difficulty in
unloading the cargoes. SMCs District Sales Supervisor, Fernando Macabuag, requested ANCOs
representative to transfer the barge to a safer place because the vessel might not be able towithstand the big waves.
ANCOs representative did not heed the request because he was confident that the barge could
withstand the waves. This, notwithstanding the fact that at that time, only the M/T ANCO was
left at the wharf of San Jose, Antique, as all other vessels already left the wharf to seek shelter.
With the waves growing bigger and bigger, only Ten Thousand Seven Hundred Ninety (10,790)
cases of beer were discharged into the custody of the arrastre operator.
At about ten to eleven oclock in the evening of 01 October 1979, the crew of D/B Lucio
abandoned the vessel because the barges rope attached to the wharf was cut off by the big
waves. At around midnight, the barge run aground and was broken and the cargoes of beer in
the barge were swept away.
As a result, ANCO failed to deliver to SMCs consignee Twenty-Nine Thousand Two Hundred Ten
(29,210) cases of Pale Pilsen and Five Hundred Fifty (550) cases of Cerveza Negra. The value per
case of Pale Pilsen was Forty-Five Pesos and Twenty Centavos (P45.20). The value of a case of
Cerveza Negra was Forty-Seven Pesos and Ten Centavos (P47.10), hence, SMCs claim against
ANCO amounted to One Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven
Pesos (P1,346,197.00).
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As a consequence of the incident, SMC filed a complaint for Breach of Contract of Carriage and
Damages against ANCO for the amount of One Million Three Hundred Forty-Six Thousand One
Hundred Ninety-Seven Pesos (P1,346,197.00) plus interest, litigation expenses and Twenty-Five
Percent (25%) of the total claim as attorneys fees.
ISSUE
ANCO raised the defense that the breach was caused by a fortuitous event, thus it is exempted
from liability. Is this contention correct?
RULING
No. In order for fortuitous event to be a valid defense for a common carrier, the event must be:
1. Unforeseeable , or if foreseeable it must be inevitable.2. It must be the proximate and the only cause of the loss.3. The common carrier must exercise due diligence to prevent or minimize the loss
(before, during after the occurrence of the event).
Caso fortuito or force majeure (which in law are identical insofar as they exempt an obligor from
liability)[19] by definition, are extraordinary events not foreseeable or avoidable, events that
could not be foreseen, or which though foreseen, were 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.
In this case, the calamity which caused the loss of the cargoes was not unforeseen nor was it
unavoidable. In fact, the other vessels in the port of San Jose, Antique, managed to transfer to
another place, a circumstance which prompted SMCs District Sales Supervisor to request that
the D/B Lucio be likewise transferred, but to no avail. The D/B Lucio had no engine and could
not maneuver by itself. Even if ANCOs representatives wanted to transfer it, they no longer hadany means to do so as the tugboat M/T ANCO had already departed, leaving the barge to its
own devices. The captain of the tugboat should have had the foresight not to leave the barge
alone considering the pending storm.
While the loss of the cargoes was admittedly caused by the typhoon Sisang, a natural disaster,
ANCO could not escape liability to respondent SMC. The records clearly show the failure of
petitioners representatives to exercise the extraordinary degree of diligence mandated by law.
To be exempted from responsibility, the natural disaster should have been the proximate and
only cause of the loss. There must have been no contributory negligence on the part of the
common carrier. As held in the case of Limpangco Sons v. Yangco Steamship Co.:
. . . To be exempt from liability because of an act of God, the tug must be free from any
previous negligence or misconduct by which that loss or damage may have been occasioned.
For, although the immediate or proximate cause of the loss in any given instance may have been
what is termed an act of God, yet, if the tug unnecessarily exposed the two to such accident by
any culpable act or omission of its own, it is not excused.
Therefore, as correctly pointed out by the appellate court, there was blatant negligence on the
part of M/T ANCOs crewmembers, first in leaving the engine-less barge D/B Lucio at the mercy
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of the storm without the assistance of the tugboat, and again in failing to heed the request of
SMCs representatives to have the barge transferred to a safer place, as was done by the other
vessels in the port; thus, making said blatant negligence the proximate cause of the loss of the
cargoes.
iv. DSR-Senator v. Federal, 413 SCRA 14, G.R. No. 135377, October 07,2003.
FACTS
Berde Plants delivered 632 units of artificial trees to C.F. Sharp, the General Ship Agent of
DSR-Senator Lines, a foreign shipping corporation, for transportation and delivery to the
consignee, Al-Mohr International Group, in Riyadh, Saudi Arabia.
C.F. Sharp issued International Bill of Lading for the cargo the port of discharge for the
cargo was at the Khor Fakkan port and the port of delivery was Riyadh, Saudi Arabia, via
Port Dammam. The cargo was loaded in M/S Arabian Senator.
Federal Phoenix Assurance insured the cargo against all risks.
On June 7, 1993, M/S Arabian Senator left the Manila South Harbor for Saudi Arabia with
the cargo on board. When the vessel arrived in Khor Fakkan Port, the cargo was reloaded
on board DSR-Senator Lines feeder vessel, M/V Kapitan Sakharov, bound for Port
Dammam, Saudi Arabia.
However, while in transit, the vessel and all its cargo caught fire.
On July 5, 1993, DSR-Senator Lines informed Berde Plants that M/V Kapitan Sakharov with
its cargo was gutted by fire and sank on or about July 4, 1993. On December 16, 1993, C.F.
Sharp issued a certification to that effect
Consequently, Federal Phoenix Assurance paid Berde Plants P941,429.61 corresponding to
the amount of insurance for the cargo. In turn Berde Plants executed in its favor a
Subrogation Receipt dated January 17, 1994.
On February 8, 1994, Federal Phoenix Assurance sent a letter to C.F. Sharp demanding
payment of P941,429.61 on the basis of the Subrogation Receipt. C.F. Sharp denied any
liability on the ground that such liability was extinguished when the vessel carrying the
cargo was gutted by fire.
On March 11, 1994, Federal Phoenix Assurance filed with the RTC, Branch 16, Manila a
complaint for damages against DSR-Senator Lines and C.F. Sharp, praying that the latter be
ordered to pay actual damages of P941,429.61, compensatory damages of P100,000.00 and
costs.
ISSUE
W/N DSR-Senator is liableYES
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RULING
Under Article 1734, Fire is not one of those enumerated under the above provision which
exempts a carrier from liability for loss or destruction of the cargo. Since the peril of fire is
not comprehended within the exceptions in Article 1734, then the common carrier shall be
presumed to have been at fault or to have acted negligently, unless it proves that it has
observed the extraordinary diligence required by law.
The natural disaster must have been the proximate and only cause of the loss, and that the
carrier has exercised due diligence to prevent or minimize the loss before, during or after
the occurrence of the disaster.
When the goods shipped either are lost or arrive in damaged condition, a presumption
arises against the carrier of its failure to observe that diligence, and there need not be an
express finding of negligence to hold it liable.
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 tohave acted negligently if the goods are lost, destroyed or deteriorated.
Respondent Federal Phoenix Assurance raised the presumption of negligence against
petitioners. However, they failed to overcome it by sufficient proof of extraordinary
diligence.
v. Philamgen v. Court of Appeals, 222 SCRA 155, G.R. No. 101426, May17, 1993.
e. Defenses and Conditions (NCC Art. 1734, 1739-1743)i. Central Shipping v. Insurance Company, 438 SCRA 511, G.R. No.
150751, September 20, 2004.
Facts: On July 25, 1990 at Puerto Princesa, Palawan, the petitioner received on board its
vessel, the M/V Central Bohol, 376 pieces of Round Logs and undertook to transport said
shipment to Manila for delivery to Alaska Lumber Co., Inc. The cargo is insured for P3, 000,
000.00 against total lost under respondents MarineCargo Policy.
After loading the logs, the vessel starts its voyage. After few hours of the trip, the ship tilts
10 degrees to its side, due to the shifting of the logs in the hold. It continues to tilt causing
the captain and the crew to abandon ship. The ship sank.
Respondent alleged that the loss is due to the negligence and fault of the captain. While
petitioner contends that the happening is due to monsoons which is unforeseen or casa
fortuito.
Issue: Whether or not petitioner is liable for the loss of cargo?
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Held: From the nature of their business and for reasons of public policy, common carriers
are bound to observe extraordinary diligence over the goods they transport, according to all
the circumstances of each case. In the event of loss, destruction or deterioration of the
insured goods, common carriers are responsible; that is, unless they can prove that such
loss, destruction or deterioration was brought about -- among others -- by "flood, storm,
earthquake, lightning or other natural disaster or calamity." In all other cases not specifiedunder Article 1734 of the Civil Code, common carriers are presumed to have been at fault or
to have acted negligently, unless they prove that they observed extraordinary diligence.
The contention of the petitioner that the loss is due to casa fortuito exempting them from
liability is untenable. Petitioner failed to show that such natural disaster or calamity was the
proximate and only cause of the loss. Human agency must be entirely excluded from the
cause of injury or loss. In other words, the damaging effects blamed on the event or
phenomenon must not have been caused, contributed to, or worsened by the presence of
human participation. The defense of fortuitous event or natural disaster cannot be
successfully made when the injury could have been avoided by human precaution.
The monsoon is not the proximate cause of the sinking but is due to the improper stowage
of logs. The logs were not secured by cable wires, causing the logs to shift and later on the
sinking the ship. This shows that they did not exercise extraordinary diligence, making them
liable for such loss.
ii. Everett Steamship v. Court of Appeals, 297 SCRA 496, G.R.No. 122494, October 8, 1998.
EVERETT STEAMSHIP vs. CA
FACTSHernandez trading company imported three crates of bus spare parts marked as Marco 12,
Marco 13, Marco 14 from its supplier Maruman trading company.
Said crates were shipped from Japan to Manila on board the vessel owned by Everette Orient
Lines. Upon arrival in Manila, it was discovered that Marco 14 was missing.
Hernandez makes a formal claim to Everett in an amount of 1 mill ++ Yen, which is the amount
of the cargo lost. However, Everett offers an amount of 100k because it is the amount that was
stipulated in its Bill of Lading.
Hernandez files a case at the RTC of Caloocan, RTC rules
1
in favor of Hernandez holding Everettliable for the amount of1M++ Yen. THE CA affirmed the RTCs ruling and made an additional
1Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for
the loss, destruction or deterioration of the goods is valid, if it is reasonable and just under the
circumstances, and has been fairly and freely agreed upon.
It is required, however, that the contract must be reasonable and just under the circumstances and has been fairly and
freely agreed upon.XXX
the Court is of the view that the requirements of said article have not been met. The fact that those conditions areprinted at the back of the bill of lading in letters so small that they are hard to read would not warrant the presumption
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observation that since Hernandez is not a privy to the contract in the bill of lading ( the contract
was entered by Everett and Maruman trading [shipper]), and so the 100k limit stipulated will not
bind Hernandez making Everett liable for the full amount of 1M ++ Yen.
ISSUE
1. Is Everett liable for the full amount or the amount that was stipulated in the contract?-what was stipulated in the contract
2. Is Hernandez a privy to the contract which says that Petitioner is liable only for 100k?Yes
RULING
1. Controlling provisions for this issue would be 1749 and 1750 of the Civil Code.In Sea Land Service, Inc. vs Intermediate Appellate Court
That said stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750
itself in providing.
a limit to liability only if a greater value is not declared for the shipment in the bill of lading. To
hold otherwise would amount to questioning the justness and fairness of the law itself, and thisthe private respondent does not pretend to do. But over and above that consideration, the just
and reasonable character of such stipulation is implicit in it giving the shipper or owner the
option of avoiding accrual of liability limitation by the simple and surely far from onerous
expedient of declaring the nature and value of the shipment in the bill of lading
The clause of the contract goes:
The carrier shall not be liable for any loss of or any damage to or in any
connection with, goods in an amount exceeding One Hundred Thousand Yen in
Japanese Currency (Y100,000.00) or its equivalent in any other currency per package or
customary freight unit (whichever is least) unless the value of the goods higher than
this amount is declared in writing by the shipper before receipt of the goods by thecarrier and inserted in the Bill of Lading and extra freight is paid as required.
(Emphasis supplied)
The shipper, Maruman Trading, had the option to declare a higher valuation if the value of its
cargo was higher than the limited liability of the carrier. Considering that the shipper did not
declare a higher valuation, it had itself to blame for not complying with the stipulations.
The trial courts ratiocination that private respondent could not have fairly and freely
agreed to the limited liability clause in the bill of lading because the said conditions were printed
in small letters does not make the bill of lading invalid.
In Ong Yiu VS. CA the court said that
contracts of adhesion wherein one party imposes a ready-made form of
contract on the other, as the plane ticket in the case at bar, are contracts
that the plaintiff or its supplier was aware of these conditions such that he had fairly and freely agreed to theseconditions. It can not be said that the plaintiff had actually entered into a contract with the defendant, embodying the
conditions as printed at the back of the bill of lading that was issued by the defendant to plaintiff.
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not entirely prohibited
A contract limiting liability upon an agreed valuation does not offend
against the policy of the law forbidding one from contracting against his
own negligence
The shipper, Maruman Trading, we assume, has been extensively engaged in the trading
business. It can not be said to be ignorant of the business transactions it entered into involving
the shipment of its goods to its customers. The shipper could not have known, or should know
the stipulations in the bill of lading and there it should have declared a higher valuation of the
goods shipped. Moreover, Maruman Trading has not been heard to complain that it has been
deceived or rushed into agreeing to ship the cargo in petitioners vessel. A stipulation in the bill
of lading limiting the common carrier's liability for loss or destruction of a cargo to a certain
sum, unless the shipper or owner declares a greater value, is sanctioned by law, particularly
Articles 1749 and 1750 of the Civil Code which provide:
ART. 1749. A stipulation that the common carriers liability is limited to the
value of the goods appearing in the bill of lading, unless the shipper or owner declaresa greater value, is binding.
ART. 1750. A contract fixing the sum that may be recovered by the owner or
shipper for the loss, destruction, or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has been freely and fairly agreed
upon.
2. Even if the consignee was not a signatory to the contract of carriage between theshipper and the carrier.
The consignee can still be bound by the contract. private respondent (Hernandez) formallyclaimed reimbursement for the missing goods from petitioner and subsequently filed a case
against the latter based on the very same bill of lading, it (private respondent) accepted the
provisions of the contract and thereby made itself a party thereto, or at least has come to court
to enforce it.iThus, private respondent cannot now reject or disregard the carriers limited
liability stipulation in the bill of lading. In other words, private respondent is bound by the
whole stipulations in the bill of lading and must respect the same.
iii. Cruz v. Sun Holidays, 622 SCRA 389, G.R. No. 186312, June 29, 2010.f. Limited Liability (NCC Art. 1744-1753)
i. PAL v. Court of Appeals, 207 SCRA 100, G.R. No. 92501, 6 March 1992.PAL vs. CA
FACTS
Isidro Co, accompanied by his wife and son, arrived at the Manila International Airport
aboard PAL airline's Flight from San Francisco. Soon after his embarking, Co proceeded to
the baggage retrieval area to claim his checks in his possession. He found 8 of his luggage,
but despite diligent search, he failed to locate his 9 th luggage.
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Co then immediately notified PAL through its employee, Willy Guevarra, who was then in
charge of the PAL claim counter at the airport. Willy filled up the printed form known as a
Property Irregularity Report, acknowledging the luggage to be missing, and signed it.
The incontestable evidence further shows that plaintiff lost luggage was a Samsonite
suitcase worth about US$200 and containing various personal effects purchased by plaintiff
and his wife during their stay in the US and similar other items sent by their friends abroad
to be given as presents to relatives in the Philippines worth around $1,800.
Co on several occasions unrelentingly called PALs office in order to pursue his complaint
about his missing luggage but no avail was given. Thus, Co wrote a demand letter to PAL,
through its manager of the Central Baggage Services. PAL replied acknowledging that they
have been unable to locate the baggage despite careful search and extended their sincere
apologies for the inconvenience. PAL never found the missing luggage or paid its
corresponding value. Co then filed his present complaint against PAL for damages.
The RTC found PAL liable and ordered said company to pay damages. The CA affirmed intoto the trial court's award.
PAL Contends: The Lower Courts were in error in not applying the limit of liability under the
Warsaw Convention which limits the liability of an air carrier of loss, delay or damage to
checked-in baggage to US$20.00 based on weight; and
ISSUE
W/N the Lower Courts should apply the limit of liability under the Warsaw Convention?
NO
RULING
InAlitalia vs. IAC, the Warsaw Convention limiting the carrier's liability was applied because
of a simple loss of baggage without any improper conduct on the part of the officials or
employees of the airline, or other special injury sustained by the passengers. The petitioner
therein did not declare a higher value for his luggage, much less did he pay an additional
transportation charge.
PAL contends that under the Warsaw Convention, its liability, if any, cannot exceed US
$20.00 based on weight as private respondent Co did not declare the contents of his
baggage nor pay traditional charges before the flight.
We find no merit in that contention. In Samar Mining Company, Inc. vs. Nordeutscher Lloyd,
this Court ruled:
The liability of the common carrier for the loss, destruction or deterioration of goods
transported from a foreign country to the Philippines is governed primarily by the New
Civil Code. In all matters not regulated by said Code, the rights and obligations of
common carriers shall be governed by the Code of Commerce and by Special Laws.
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The provisions of the New Civil Code on common carriers are Articles 1733, 1735 and 1753
which provide:
Art. 1733. Common carriers.. are bound to observe extraordinary diligence in the vigilance
over the goods and for the safety of the passengers transported by them...
Art. 1735. ...if the goods are lost, destroyed or deteriorated, common carriers are presumed
to have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence..
Art. 1753. The law of the country to which the goods are to be transported shall govern the
liability of the common carrier for their loss, destruction or deterioration.
Since the passenger's destination in this case was the Philippines, Philippine law governs the
liability of the carrier for the loss of the passenger's luggage.
In this case, the PAL failed to overcome, not only the presumption, but more importantly,
the Cos evidence, proving that the carrier's negligence was the proximate cause of the lossof his baggage. Furthermore, petitioner acted in bad faith in faking a retrieval receipt to bail
itself out of having to pay Co's claim. The CA therefore did not err in disregarding the limits
of liability under the Warsaw Convention and applied the Civil Code instead.
ii. Cathay Pacific v. Court of Appeals, 219 SCRA 520, G.R. No. 60501, 5March 1993.
iii. Transasia Shipping v. Court of Appeals, 254 SCRA 260, G.R. No. 118126,March 04, 1996.
Facts: Plaintiff (herein private respondent Atty. Renato Arroyo) bought a ticket from herein
petitioner for the voyage of M/V Asia Thailand Vessel to Cagayan de Oro from Cebu City.
Arroyo boarded the vessel in the evening of November 12, 1991 at around 5:30. At that
instance, plaintiff noticed that some repair works were being undertaken on the evening of
the vessel. The vessel departed at around 11:00 in the evening with only one engine
running.
After an hour of slow voyage, vessel stopped near Kawit Island and dropped its anchor
threat. After an hour of stillness, some passenger 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.
At Cebu City, the plaintiff together with the other passengers who requested to be brought
back to Cebu City was 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 the defendant.
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On account of this failure of defendant to transport him to the place pf destination on
November 12, 1991, plaintiff filed before the trial court a complaint for damages against the
defendant.
Issue: Whether or not the failure of a common carrier to maintain in seaworthy condition its
vessel involved in a contract of carriage a breach of its duty?
Held: Undoubtedly, there was, between the petitioner and private respondent a contract of
carriage. Under Article 1733 of the Civil Code, the petitioner was bound to observed
extraordinary diligence in ensuring the safety of the private respondent. That meant that
the petitioner was pursuant to the Article 1755 off the said Code, bound to carry the private
respondent safely as far as human care and foresight could provide, using the utmost
diligence of very cautious persons, with due regard for all the circumstances. In this case,
the Supreme Court is in full accord with the Court of Appeals that the petitioner failed or
discharged this obligation.
Before commencing the contact of voyage, the petitioner undertook some repairs on the
cylinder head of one of the vessels engines. But even before it could finish these repairs itallowed 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 at sometime after
it had run its course, in conked out. Which cause the vessel to stop and remain adrift at sea,
thus in order to prevent the ship from capsizing, it had to drop anchor. Plainly, the vessel
was unseaworthy even before the voyage begun. For the vessel to be seaworthy, it must be
adequately equipped for the voyage and manned with the sufficient number of competent
officers and crew. The Failure of the 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.
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