Transpo 3D Batch 2 NEW

TRANSPORTATION 3-D 2011-2012

37. MARANAN V. PEREZ (SALAZAR) DOCTRINE: Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the former's employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers.

FACTSRogelio Corachea was a passenger in a taxicab owned and operated by Pascual Perez when he was stabbed and killed by the driver, Simeon Valenzuela.

Valenzuela was prosecuted for homicide and found guilty. During the pendency of the appeal for the criminal case, Antonia Maranan, Rogelio's mother, filed an action CFI of Batangas to recover damages from Perez and Valenzuela for the death of her son. Defendants asserted that the deceased was killed in self-defense, since he first assaulted the driver by stabbing him from behind. Defendant Perez further claimed that the death was a caso fortuito for which the carrier was not liable.

CA found for the plaintiff and awarded her P3,000 as damages against defendant Perez. The claim against defendant Valenzuela was dismissed. Subsequently, the conviction of Valenzuela in the criminal case was affirmed during the pendency of the civil case.

Defendant-appellant appealed the decision, relying solely on the ruling enunciated in Gillaco v. Manila Railroad Co., that the carrier is under no absolute liability for assaults of its employees upon the passengers.

ISSUEWhether defendant (employer) is liable for assaults of its employees upon the passenger – YES

RATIOThe attendant facts and controlling law of that case and the one at bar are very different however. In the Gillaco case, the passenger was killed outside the scope and the course of duty of the guilty employee. As this Court there found:

x x x when the crime took place, the guard Devesa had no duties to discharge in connection with the transportation of the deceased from Calamba to Manila. When Devesa shot and killed Gillaco, Devesa was assigned to guard the Manila-San Fernando (La Union) trains, and he was at Paco Station awaiting transportation to Tutuban, the starting point of the train that he was engaged to guard. In fact, his tour of duty was to start at 9:00 two hours after the commission of the crime. Devesa was therefore under no obligation to safeguard the passengers of the

Calamba-Manila train, where the deceased was riding; and the killing of Gillaco was not done in line of duty. The position of Devesa at the time was that of another would be passenger, a stranger also awaiting transportation, and not that of an employee assigned to discharge any of the duties that the Railroad had assumed by its contract with the deceased.

Here, the killing was perpetrated by the driver of the very cab transporting the passenger, in whose hands the carrier had entrusted the duty of executing the contract of carriage. In other words, unlike the Gillaco case, the killing of the passenger here took place in the course of duty of the guilty employee and when the employee was acting within the scope of his duties.

The Gillaco case was decided under the provisions of the Civil Code of 1889 which, unlike the present Civil Code, did not impose upon common carriers absolute liability for the safety of passengers against wilful assaults or negligent acts committed by their employees. The death of the passenger in the Gillaco case was truly a fortuitous event which exempted the carrier from liability. It is true that Art. 1105 of the old Civil Code on fortuitous events has been substantially reproduced in Art. 1174 of the Civil Code of the Philippines but both articles clearly remove from their exempting effect the case where the law expressly provides for liability in spite of the occurrence of force majeure. Unlike the old Civil Code, the new Civil Code of the Philippines expressly makes the common carrier liable for intentional assaults committed by its employees upon its passengers, by the wording of Art. 1759 which categorically states that:

“Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the former's employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers.”

The Civil Code provisions on the subject of Common Carriers are new and were taken from Anglo-American Law. There, the basis of the carrier's liability for assaults on passengers committed by its drivers rests either on (1) the doctrine of respondeat superior or (2) the principle that it is the carrier's implied duty to transport the passenger safely. Under the first, which is the minority view, the carrier is liable only when the act of the employee is within the scope of his authority and duty. It is not sufficient that the act be within the course of employment only. Under the second view, upheld by the majority and also by the later cases, it is enough that the assault happens within the course of the employee's duty. It is no defense for the carrier that the act was done in excess of authority or in disobedience of the carrier's orders.

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As can be gleaned from Art. 1759, the Civil Code of the Philippines evidently follows the rule based on the second view. At least three very cogent reasons underlie this rule: (1) the special undertaking of the carrier requires that it furnish its passenger that full measure of protection afforded by the exercise of the high degree of care prescribed by the law, inter alia from violence and insults at the hands of strangers and other passengers, but above all, from the acts of the carrier's own servants charged with the passenger's safety; (2) said liability of the carrier for the servant's violation of duty to passengers, is the result of the formers confiding in the servant's hands the performance of his contract to safely transport the passenger, delegating therewith the duty of protecting the passenger with the utmost care prescribed by law; and (3) as between the carrier and the passenger, the former must bear the risk of wrongful acts or negligence of the carrier's employees against passengers, since it, and not the passengers, has power to select and remove them rph2f.

It is the carrier's strict obligation to select its drivers and similar employees with due regard not only to their technical competence and physical ability, but also, no less important, to their total personality, including their patterns of behavior, moral fibers, and social attitude.

38. NOCUM VS. LAGUNA TAYABAS BUS CO. (TANHUECO)FACTSNocum was a passenger in appellant’s Bus No. 120 when he 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 trial court ruled in favor of Nocum reasoning that there was failure on the part of Laguna Tayabas to observe the extraordinary or utmost diligence of a very cautious person as required by the law. The trial court based its ruling in the testimonies of the following:

1. The bus conductor testified that the box belonged a passenger whose name he does not know and who told him that it contained miscellaneous items and clothes. He helped the owner in loading the baggage. From its appearance there was no indication at all that the contents were explosives or firecrackers. Neither did he open the box because he just relied on the word of the owner.

2. Dispatcher Nicolas Cornista corroborrated the testimony of Mendoza and he said that they were not authorized to open the baggages of passengers because instruction from the management was to call the police if there were packages containing articles which were against

regulations.

The trial court said that the service manual, exhibits "3" and "3-A," 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. And thus, the accident cannot be attributed to a fortuitous event because In other words, the cause of the unexpected event must be independent of the will of man or something which cannot be avoided. 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.

ISSUEWON the trial court erred in ruling that Laguna Tayabas did not observe extraordinary or utmost diligence of a very cautious person as required by the law – YES

RATIOThe Court disagrees with the reasoning of the trial court. 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."The Court is of the opinion that the law does not require the reasoning provided by the trial court. 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."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 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

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nothing appears to indicate the contrary. 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, 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.

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.

39. MANILA RAILROAD COMPANY VS BALLESTEROS, CAMAYO ET. AL (TENORIO)DOCTRINE: A common carrier is responsible for the injuries caused by its negligence in allowing strangers or passengers to take control of the vehicle

FACTSPrivate respondents were passengers on petitioner's bus, the driver of which was Jose Anastacio. In Nueva Vizcaya, Anastacio stopped the bus and got off to replace a defective spark plug. While he was thus engaged, Dionisio Abello, an auditor assigned to defendant company by the General Auditing Office, took the wheel and told the driver to sit somewhere else. With Abello driving, the bus proceeded on its way, from time to time stopping to pick up passengers. Anastacio tried twice to take the wheel back but Abello would not relinquish it. Then, in the language of the trial court, while the bus was negotiating between Km. posts 328 and 329 (in Isabela) a freight truck driven by Marcial Nocum bound for Manila, was also negotiating the same place; when these two vehicles were about to meet at the bend of the road Marcial Nocum, in trying to evade several holes on the right lane, where his truck was running, swerved his truck towards the middle part of the road and in so doing, the left front fender and left side of the freight truck smashed the left side of the bus resulting in extensive damages to the body of the bus and injuries to seventeen of its passengers,

including the private respondents.

In rejecting petitioner's contention that the negligence of Marcial Nocum could not be imputed to it and relieved it from liability, the trial court found that Dionisio Abello "was likewise reckless when he was driving the bus at the rate of from 40 to 50 kilometers per hour on a bumpy road at the moment of the collision."

ISSUE:Whether or not Manila Railroad is liable despite absence of employer-employee relationship between Abello and Manila Railroad – YES

RATIO: This defense was correctly overruled by the trial court, considering the provisions of Article 1763 of the Civil Code and section 48 (b) of the Motor Vehicle Law, which respectively provide as follows:Art. 1763. A common carrier is responsible for injuries suffered by a passenger on account of the willful 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. Sec. 48(b). No professional chauffeur shall permit any unlicensed person to drive the motor vehicle under his control, or permit a person, sitting beside him or in any other part of the car, to interfere with him in the operation of the motor vehicle, by allowing said person to take hold of the steering wheel, or in any other manner take part in the manipulation or control of the car.

40. VDA. DE BATACLAN VS. MARIANO MEDINA (TONGSON)FACTSThe deceased Juan Bataclan was among the passengers of Medina Transportation, driven by Conrado Saylon and operated by Mariano Medina. On its way from Cavite to Pasay, the front tires burst and the vehicle fell into a canal. Some passengers were able to escape by themselves or with some help, while there were 4, including Bataclan, who could not get out. Their cries were heard in the neighbourhood. Then there came about 10 men, one of them carrying a torch. As they approached the bus, it caught fire and the passengers died. The fire was due to gasoline leak and the torch. Salud Villanueva Vda. de Bataclan, in her name and on behalf of her 5 minor children, sought to claim

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damages from the bus company. The CFI favored the plaintiff, and the Court of Appeals forwarded the case to the Supreme Court due to the amount involved.

ISSUEWhether or not the Bus Company (common carrier) is liable for the death of Juan and the other passengers? YES

RATIOWe agree with the trial court that the case involves a breach of contract of transportation for hire, the Medina Transportation having undertaken to carry Bataclan safely to his destination, Pasay City. We also agree with the trial court that there was negligence on the part of the defendant, through his agent, the driver Saylon. There is evidence to show that at the time of the blow out, the bus was speeding, as testified to by one of the passengers, and as shown by the fact that according to the testimony of the witnesses, including that of the defense, from the point where one of the front tires burst up to the canal where the bus overturned after zig-zaging, there was a distance of about 150 meters. The chauffeur, after the blow-out, must have applied the brakes in order to stop the bus, but because of the velocity at which the bus must have been running, its momentum carried it over a distance of 150 meters before it fell into the canal and turned turtle.

Our new Civil Code amply provides for the responsibility of common carrier to its passengers and their goods. For purposes of reference, we are reproducing the pertinent codal provisions:

ART. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case.Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extra ordinary diligence for the safety of the passengers is further set forth in articles 1755 and 1756.

ART. 1755. 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 a due regard for all the circumstances.

ART. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755

ART. 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the former's employees, although such employees may have acted beyond the scope of their authority or in violation of the order of the common carriers.

This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees.

ART. 1763. A common carrier responsible for injuries suffered by a passenger on account of the willful 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

41. PILAPIL VS. CA (COMAFAY)DOCTRINE: 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.

FACTSJose Pilapil, a paying passenger, boarded respondent-defendant's bus bearing No. 409 at San Nicolas, Iriga City on 16 September 1971 at about 6:00 P.M. While said bus No. 409 was in due course negotiating the distance between Iriga City and Naga City, upon reaching the vicinity of the cemetery of the Municipality of Baao, Camarines Sur, on the way to Naga City, an unidentified man, a bystander along said national highway, hurled a stone at the left side of the bus, which hit petitioner above his left eye. Private respondent's personnel lost no time in bringing the petitioner to the provincial hospital in Naga City where he was confined and treated. As a result of several treatments, Jose lost partially his left eye's vision and sustained a permanent scar above the left eye. The CFI sustained the action filed by Pilapil and ordered the defendant to pay. This was reversed by the CA.

ISSUEWhether the stoning of the bus by a stranger resulting in injury to petitioner-passenger is one such risk from which the common carrier may not exempt itself from liability -- NO

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RATIOUnder Article 1733 of the Civil Code, common carriers are required to observe extraordinary diligence for the safety of the passenger transported by them, according to all the circumstances of each case. The requirement of extraordinary diligence imposed upon common carriers is restated in Article 1755. Further, in case of death of or injuries to passengers, the law presumes said common carriers to be at fault or to have acted negligently.

Article 1755 of the Civil Code qualifies the duty of extraordinary care, vigilance and precaution in the carriage of passengers by common carriers to only such as human care and foresight can provide. what constitutes compliance with said duty is adjudged with due regard to all the circumstances.

Article 1756 of the Civil Code, in creating a presumption of fault or negligence on the part of the common carrier when its passenger is injured, merely relieves the latter, for the time being, from introducing evidence to fasten the negligence on the former, because the presumption stands in the place of evidence. Being a mere presumption, however, the same is rebuttable by proof that the common carrier had exercised extraordinary diligence as required by law in the performance of its contractual obligation, or that the injury suffered by the passenger was solely due to a fortuitous event.

Thus, 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.The injury sustained by the petitioner was in no way due to any defect in the means of transport or in the method of transporting or to the negligent or willful acts of private respondent's employees, and therefore involving no issue of negligence in its duty to provide safe and suitable cars as well as competent employees, with the injury arising wholly from causes created by strangers over which the carrier had no control or even knowledge or could not have prevented, the presumption is rebutted and the carrier is not and ought not to be held liable. To rule otherwise would make the common carrier the insurer of the absolute safety of its passengers which is not the intention of the lawmakers.

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.

Finally, petitioner contends that it is to the greater interest of the State if a carrier were made liable for such stone-throwing incidents rather than have the bus riding public lose confidence in the transportation system. Sad to say, we are not in a position to so hold; such a policy would be better left to the consideration of Congress which is empowered to enact laws to protect the public from the increasing risks and dangers of lawlessness in society.

42. BACHELOR EXPRES INC, ET. AL VS. CA (ABDULWAHID) DOCTRINE: It is the prevailing rule and settled jurisprudence that transportation companies are not insurers of their passengers. The defendants' personnel have every right to accept passengers absent any manifestation of violence or drunkenness. If and when such passengers harm other passengers without the knowledge of the transportation company's personnel, the latter should not be faulted.

FACTSA bus owned by Bachelor Express, Inc. and driven by Rivera was the cause of a stampede that resulted in the death of 2 passengers. The bus picked up a passenger; that about 15 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, the two passengers were found lying down the road and died. The passenger assailant alighted from the bus and ran toward the bushes but was killed by the police. The heirs of the two deceased victims filed a complaint for "sum of money" against Bachelor Express, Inc. its alleged owner and the bus driver. In their answer, Bachelor denied liability for the death of 2 passengers. It also asserted that it exercised extraordinary diligence. Trial Court dismissed the complaint. CA reversed the decision.

ISSUEWhether the bus company and its agents exercised extraordinary diligence? NO

HELD The circumstances show that the petitioner common carrier was negligent in the provision of safety precautions so that its passengers may be transported safely to their destinations.

Considering the factual findings of the CA- 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

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people had already fallen off the bus; and the bus was not properly equipped with doors in accordance with law-it is clear that the petitioners have failed to overcome the presumption of fault and negligence found in the law governing common carriers.

The petitioners' argument that the petitioners "are not insurers of their passengers" deserves no merit in view of the failure of the petitioners to prove that the deaths of the two passengers were exclusively due to force majeure and not to the failure of the petitioners to observe extraordinary diligence in transporting safely the passengers to their destinations as warranted by law. The negligence of the common carrier, through its employees, consisted of the lack of extraordinary diligence required of common carriers, in exercising vigilance and utmost care of the safety of its passengers, exemplified by the driver's belated stop and the reckless opening of the doors of the bus while the same was travelling at an appreciably fast speed. At the same time, the common carrier itself acknowledged, through its administrative officer, that the bus was commissioned to travel and take on passengers and the public at large, while equipped with only a solitary door for a bus its size and loading capacity, in contravention of rules and regulations provided for under the Land Transportation and Traffic Code.

43. PANTRANCO NORTH EXPRESS INC. VS. BAESA (ADVINCULA) DOCTRINE: The last clear chance doctrine applies only in a situation where the plaintiff was guilty of prior or antecedent negligence, but the defendant, who had the last clear chance to avoid the injury and failed to do so is made liable for all the consequences of the accident.

FACTS:Spouses Baesa, their 4 children, the Ico spouses and their son and 7 other people boarded a passenger jeep driven by David Ico to go to a picnic in Isabela, to celebrate the 5th wedding anniversary of the Baesa spouses. While they were proceeding towards Malalam River at a speed of about 20 kph, a speeding PANTRANCO bus from Aparri, on a route to Manila, encroached on the jeepney’s lane while negotiating a curve, and collided with it. As a result, the entire Baesa family, except for their daughter Maricar Baesa, as well as David Ico, died, and the rest suffered from injuries. Maricar Baesa, through her guardian filed separate actions for damages arising from quasi-delict against PANTRANCO.

PANTRANCO alleged David Ico's negligence as a proximate cause of the accident and invoked the defense of due diligence in the selection and supervision of its driver. CA upheld RTC, in favor of Baesa.

ISSUE

W/N the last clear chance applies thereby making David Ico who had the chance to avoid the collision negligent in failing to utilize with reasonable care and competence – NO.

RATIOGenerally, the last clear change doctrine is invoked for the purpose of making a defendant liable to a plaintiff who was guilty of prior or antecedent negligence, although it may also be raised as a defense to defeat claim for damages.

For the last clear chance doctrine to apply, it is necessary to show that the person who allegedly has the last opportunity to avert the accident was aware of the existence of the peril, or should, with exercise of due care, have been aware of it. There is nothing to show that the jeepney driver David Ico knew of the impending danger.

When he saw at a distance that the approaching bus was encroaching on his lane, he did not immediately swerve the jeepney to the dirt shoulder on his right since he must have assumed that the bus driver will return the bus to its own lane upon seeing the jeepney approaching form the opposite direction.

Even assuming that the jeepney driver perceived the danger a few seconds before the actual collision, he had no opportunity to avoid it.

The last clear chance doctrine can never apply where the party charged is required to act instantaneously, and if the injury cannot be avoided by the application of all means at hand after the peril is or should have been discovered.

44 . Philippine Rabbit Bus Lines, Inc. vs. IAC

DOCTRINE: (1) The principle of "the last clear" chance is applicable in a suit between the owners and drivers of the two colliding vehicles. It does not arise where a passenger demands responsibility from the carrier to enforce its contractual obligations. For it would be inequitable to exempt the negligent driver and its owners on the ground that the other driver was likewise guilty of negligence.

(2)In culpa contractual, the moment a passenger dies or is injured, the carrier is presumed to have been at fault or to have acted negligently, and this disputable presumption may only be overcome by evidence that he had observed extra-ordinary diligence as prescribed in Articles 1733, 1755 and 1756 of the New Civil Code or that the death or injury of the passenger was due to a fortuitous event.

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(3) The driver cannot be held jointly and severally liable with the carrier in case of breach of the contract of carriage. Firstly, the contract of carriage is between the carrier and the passenger, and in the event of contractual liability, the carrier is exclusively responsible to the passenger, even if such breach be due to the negligence of his driver. In other words, the carrier can neither shift his liability on the contract to his driver nor share it with him, for his driver's negligence is his. Secondly, that would make the carrier's liability personal instead of merely vicarious and consequently, entitled to recover only the share which corresponds to the driver contradictory to the explicit provision of Article 2181 of the New Civil Code.

FACTS: At 11am on December 24, 1966, Catalina Pascua, Caridad Pascua, Adelaida Estomo, Erlinda Meriales, Mercedes Lorenzo, Alejandro Morales and Zenaida Parejas boarded the jeepney owned by spouses Isidro Mangune and Guillerma Carreon and driven by Tranquilino Manalo at Dau, Mabalacat, Pampanga bound for Carmen, Rosales, Pangasinan to spend Christmas with their families for P 24.00. Upon reaching barrio Sinayoan, San Manuel, Tarlac, the right rear wheel of the jeepney detached causing it to run in an unbalanced position. Driver Manalo stepped on the brake, causing the jeepney to make a U-turn, invading and eventually stopping on the opposite lane of the road (the jeepney's front faced the south (from where it came) and its rear faced the north (towards where it was going)). The jeepney occupied and blocked the greater portion of the western lane, which is the right of way of vehicles coming from the north.

Petitioner Phil. Rabbit Bus Lines claims that almost immediately after the sudden U-turn the bus bumped the right rear portion of the jeep. Defendants, on the other hand, claim that the bus stopped a few minutes before hitting the jeepney. Either way, as a result of the collision, three passengers of the jeepney (Catalina Pascua, Erlinda Meriales and Adelaida Estomo) died while the other jeepney passengers sustained physical injuries.

A criminal complaint was filed against the two drivers for Multiple Homicide. The case against delos Reyes (driver of Phil. Rabbit) was dismissed for insufficieny of evidence. Manalo (jeepney driver), however, was convicted and sentenced to suffer imprisonment.

3 complaints for recovery of damages were then filed before the CFI of Pangasinan. (1) Spouses Casiano Pascua and Juana Valdez sued as heirs of Catalina Pascua while Caridad Pascua sued in her behalf Court of First Instance of Pangasinan. (2) Spouses Manuel Millares and Fidencia Arcica sued as heirs of Erlinda Meriales. And (3) spouses Mariano Estomo and Dionisia Sarmiento sued

as heirs of Adelaida Estomo. All three cases impleaded spouses Mangune and Carreon, Manalo (jeepney owners), Rabbit and delos Reyes as defendants. Plaintiffs anchored their suits against spouses Mangune and Carreon and Manalo on their contractual liability. As against Rabbit and delos Reyes, plaintiffs based their suits on their culpability for a quasi-delict. Filriters Guaranty Assurance Corporation, Inc. (jeepney’s insurer) was also impleaded as additional defendant in the first case only.

The trial court ruled in favour of then plaintiffs, finding defendants negligent and having breached the contract of carriage with their passengers and ordering them, jointly and severally, to pay the plaintiffs damages.

The IAC reversed the ruling of the trial court, applying primarily (1) the doctrine of last clear chance, (2) the presumption that drivers who bump the rear of another vehicle guilty and the cause of the accident unless contradicted by other evidence, and (3) the substantial factor test (which concluded that bus driver delos Reyes, NOT jeepney driver Manalo, was negligent).

Issue: Who are liable for the death and injuries of the passenger? - Trial court decision reinstated with modification. Only Isidro Mangune, Guillerma Carreon and Filriters Guaranty Assurance Corporation, Inc. are liable to the victims or their heirs.

RATIO: (1) The principle of "the last clear" chance is applicable in a suit between the owners and drivers of the two colliding vehicles. It does not arise where a passenger demands responsibility from the carrier to enforce its contractual obligations. For it would be inequitable to exempt the negligent driver of the jeepney and its owners on the ground that the other driver was likewise guilty of negligence.(2) The IAC erred in applying the presumption that the driver who bumps the rear of another vehicle is guilty and the cause of the accident, unless contradicted by other evidence. This presumption is based on the responsibility given to a rear vehicle of avoiding a collision with the front vehicle for it is the rear vehicle who has full control of the situation as it is in a position to observe the vehicle in front of it. Such presumption is rebutted by the evidence that shows that the jeepney, which was then traveling on the eastern shoulder, making a straight, skid mark of approximately 35 meters, crossed the eastern lane at a sharp angle, making a skid mark of approximately 15 meters from the eastern shoulder to the point of impact. (Basically, the U-turn was sudden and delos Reyes could not have reasonably anticipated it even though he was the rear vehicle)

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(3) Likewise, the bus cannot be made liable under the substantial factor test (that if the actor's conduct is a substantial factor in bringing about harm to another, the fact that the actor neither foresaw nor should have foreseen the extent of the harm or the manner in which it occurred does not prevent him from being liable). Contrary to the findings of the appellate court, the bus was travelling within the speed limit allowed in highways. He also had only a few seconds to react to the situation. To require delos Reyes to avoid the collision is to ask too much from him. Aside from the time element involved, there were no options available to him to have avoided the collision.The proximate cause of the accident was the negligence of jeepney driver Manalo and spouses Mangune and Carreon. They all failed to exercise the precautions that are needed precisely pro hac vice.In culpa contractual, the moment a passenger dies or is injured, the carrier is presumed to have been at fault or to have acted negligently, and this disputable presumption may only be overcome by evidence that he had observed extra-ordinary diligence as prescribed in Articles 1733, 1755 and 1756 of the New Civil Code or that the death or injury of the passenger was due to a fortuitous event. The negligence of Manalo was proven during the trial by the unrebutted testimonies of Caridad Pascua, the police who arrived on the scene, his (Manalo's) conviction and the application of the doctrine of res ipsa loquitur supra. Spouses Mangune and Carreon alleged that their mechanic regularly maintains the jeepney and on the day before the collision, the mechanic actually checked the vehicle and even tightened the bolts, thus the incident was caused by a caso fortuito. The SC upheld the trial court’s findings that "in an action for damages against the carrier for his failure to safely carry his passenger to his destination, an accident caused either by defects in the automobile or through the negligence of its driver, is not a caso fortuito which would avoid the carriers’ liability. The SC modified the decision holding spouses Mangune and Carreon jointly and severally liable with Manalo. The driver cannot be held jointly and severally liable with the carrier in case of breach of the contract of carriage. Firstly, the contract of carriage is between the carrier and the passenger, and in the event of contractual liability, the carrier is exclusively responsible to the passenger, even if such breach be due to the negligence of his driver. In other words, the carrier can neither shift his liability on the contract to his driver nor share it with him, for his driver's negligence is his. Secondly, that would make the carrier's liability personal instead of merely vicarious and consequently, entitled to recover only the share which corresponds to the driver contradictory to the explicit provision of Article 2181 of the New Civil Code.

45. FABRE, JR. V CA (AQUINO) – DONE BY (ALDANA)DOCTRINE: Due diligence in selection of employees is not satisfied by finding that the applicant possessed a professional driver’s license. The employer

should also examine the applicant for his qualifications, experience and record of service. Due diligence in supervision, on the other hand, requires the formulation of rules and regulations for the guidance of employees and the issuance of proper instructions as well as actual implementation and monitoring of consistent compliance with the rules.

FACTSFabre is the owner of a minibus primarily used as a school bus for students of St. Scholastica. Cabil is the driver of Fabre who, after two weeks of evaluation, was hired. Word for the World Christian Fellowship, Inc. (WWCF) arranged with Fabre the transportation of 33 of its members from Manila to La Union and back. Cabil was designated as the driver for the trip.

It was Cabil’s first time to drive from Manila to La Union. A bridge was under repair on the usual route so he was forced to take a detour. It was raining and as a consequence, the road was slippery, and it was almost midnight so it was dark. Cabil was travelling at a speed of 50km/hr when even on a good day the normal speed was only 20km/hr. As Cabil was approaching a sharp curve, he lowered his speed to 30km/hr. However, as he was traversing the sharp curve, the bus skid to the left road shoulder hitting the traffic steel brace and sign along the road. The bus then turned over and landed on its left side, coming to a full stop only after a series of impact.

One of the passengers, private respondent Antonio was thrown on the floor of the bus and pinned down by a wooden seat. As a result, the suffered paraplegia and is permanently paralyzed from waist down.

ISSUEWhether Fabre is liable for the injuries suffered by Antonio – YES. Fabre, was himself negligent in the selection and supervision of his employee

RATIOFrom the facts of the case, it was proved that the driver, Cabil was indeed grossly negligent in the performance of his duty. It now boils down to the issue whether the owner, Fabre, is liable.

Art. 1759 of the Civil Code provides:Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the former’s employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers.

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This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees.

In the case at bar, Fabre, in allowing Cabil to drive the bus to La Union, apparently did not consider the fact that Cabil had been driving for school children only, from their homes to the St. Scholastica’s College in Metro Manila. They had hired him only after a two-week apprenticeship. They had tested him for certain matters, such as whether he could remember the names of the children he would be taking to school, which were irrelevant to his qualification to drive on a long distance travel, especially considering that the trip to La Union was his first. The existence of hiring procedures and supervisory policies cannot be casually invoked to overturn the presumption of negligence on the part of an employer.

46. NEGRE V CABAHUG SHIPPING (BACANI) DOCTRINE: Admiralty and maritime jurisdiction – action based upon oral contract for transportation of goods by water is within the jurisdiction of the CFI.

FACTSOn August 14, 1961, Negre (appellant) filedhis complaint against Cabahug Shipping &Co (appellee), a common carrier engaged in the business of transporting persons and goods for a price within Philippine waters, to recover the sum of P3,774.90, representing the value of a cargo of dried fish belonging to him which was loaded on the latter's vessel, and which was totally destroyed onboard thereof, before it could be transported to its place of destination, due to the gross negligence of the officers and members of the crew of said vessel

As Cabahug’s answer admitted liability for the loss of said cargo, but only up to the amount of P3,733,78, appellant moved for a judgment on the pleadings. In replying t h e r e t o , h o w e v e r , a p p e l l e e m o v e d t o dismiss the case on the ground that the amount of the claim did not fall within the jur isdict ion of the court. Resolving this motion, the

court dismissed the complaint for lack of jurisdiction, without prejudice to the right of appellant to file the same with the corresponding municipal court.

Appellant maintains in this appeal that his action is one in admiralty and marit ime j u r i s d i c t i o n , w h i c h , p u r s u a n t t o t h e provisions of Section 44 of the Judiciary Act, as amended, fal ls within the exclusive original jur isdict ion of the courts of f i rst instance, irrespective of the amount or the value of the goods involved.

ISSUE:WON the case falls within the jurisdiction of CFI (RTC) – YES

RATIOI t has been held that, to give admiralty jurisdiction over a contract, the same must relate to t h e t r a d e a n d b u s i n e s s o f t h e s e a A d m i r a l t y jurisdiction, it has also been held, extends to al maritime torts.

The action was based upon an oral contract for the transportation of goods by water.-Moreover, the allegations of the complaint clearly show: first, that the contract entered into between the parties had already been partially performed with the loading of the goods subject-matter thereof onboard appellee's vessel and the acceptance thereof by said appel lee, and second, that the marit ime contract binding the parties was breached by the carr ier because through his fault and that of his agents and representatives the cargo became a total loss.Disposition: Reversed.

47. US VS. STEAMSHIP “ISLAS FILIPINAS” (BAHJIN)DOCTRINE: The word “cargo” is defined as follows: All goods, wares, and merchandise aboard ship which do not form part of the

ship's stores. The load or lading of a vessel; goods and merchandise put on board a ship to

be carried to a certain port. The lading or freight of a ship; the goods, merchandise, or whatever is

conveyed in a ship or other merchant vessel. The loading of a ship or other vessel, the bulk of which is to be ascertained

from the capacity of the ship or vessel. The word embraces all that the vessel is capable of carrying. The term may be applied in such a sense as to include passengers, as well as freight, but in a technical sense it designates goods only.

The lading of a ship or other vessel, the bulk or dimension of which is to be ascertained from the capacity of the ship or vessel; and, where the name of

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the ship or vessel is in the contract, her capacity for carrying or the bulk of her cargo need not be stated for the word "cargo" embraces all that the vessel is capable of carrying.

The lading of the vessel, and though by bribery or craft, some articles might be introduced in the hold, without the knowledge of the owners of the captain, yet everything which is put on board the vessel is, in general, comprehended in that description.

FACTSThe steamship Islas Filipinas arrived at the port of Manila from the foreign port of Hongkong, and that she had on board 918 tins of prepared opium, the estimated value which was between P35,000 and P40,000. The steamer had on board other cargo, all of which was duly manifested as required by law, but that portion of her cargo consisting of said 918 tins of opium was not manifested and did not appear upon any written or typewritten manifest of the cargo aboard said vessel. The steamship was seized by the customs authorities for having on board unmanifested contraband cargo in violation of the Customs Administrative Act; and at the hearing, the Insular Collector of Customs imposed a fine of P1,000 upon the vessel under the provisions of section 77 of Act 355. An investigation was made by the owners and they discharged the captain and all other members of the crew whom they believed implicated. A criminal charge was also filed against Jose Artiaga, the captain of the ship, and Cecilio Jimenez, another officer of the ship, charging them with the crime of illegal importation of the opium mentioned. Said persons were duly tried, convicted and punished for said offense. The owners of the steamship Islas Filipinas (the Fernandez Hermanos) appealed from the order of the Insular of Customs imposing a fine upon them for violating Section 77 of Act 355. The CFI of Manila conformed with the decision of the Insular Collector for failure to have on board a complete manifest in the prescribed form of all the cargo.

ISSUE:Whether the lower court erred in upholding the decision of the Insular Collector because, among others, the opium in question is not “cargo” within the meaning of the custom laws.

HELD & RATIO:No, the lower court did not err in its decision. The opium in question is indeed “cargo” within the meaning of the customs law.

The term "cargo" is not specifically defined in the Customs Administrative Act, but from the language used in several of its provisions it is clear that the word "cargo" as used in the section under consideration includes all goods, wares, and merchandise aboard ship which do not form part of the ship's stores.

Black's Law Dictionary defines the term "cargo" as follows: "The load or lading of a vessel; goods and merchandise put on board a ship to be carried to a certain port.

“The lading or freight of a ship; the goods, merchandise, or whatever is conveyed in a ship or other merchant vessel. (See 1 Mason, 142; 4 Pick., 429., 9 Metc. (Mass.), 366; 103 Mass., 406.)

“A cargo is the loading of a ship or other vessel, the bulk of which is to be ascertained from the capacity of the ship or vessel. The word embraces all that the vessel is capable of carrying. (3 Rob. (N.Y.), 173.) The term may be applied in such a sense as to include passengers, as well as freight, but in a technical sense it designates goods only.”

The following definitions of the word "cargo" are found in the cases: “The word ‘cargo’ ex vi termini, means the goods on board of the vessel.” (Seamans vs. Loring (U.S.), 21 Fed. Cas., 920, 942.)

“A cargo is the lading of a ship or other vessel, the bulk or dimension of which is to be ascertained from the capacity of the ship or vessel; and, where the name of the ship or vessel is in the contract, her capacity for carrying or the bulk of her cargo need not be stated for the word "cargo" embraces all that the vessel is capable of carrying.” (Flanagan vs. Demarest, 26 N.Y. Sup. Ct. (3 Rob.), 173, 181.)

“The cargo is the lading of the vessel, and though by bribery or craft, some articles might be introduced in the hold, without the knowledge of the owners of the captain, yet everything which is put on board the vessel is, in general, comprehended in that description." (Phile vs. The Anna, 1 Dallas (U.S.), 202.)

48. ANTONIO DE LA RIVA, VS. LIZARRAGA HERMANOS, ET AL. (BALANI)FACTSTeodoro Carranza built two boats on the oral order of plaintiff Dela Riva, to be paid for through the house of Gutierrez Hermanos at Manila, with which at the time both parties had standing accounts, the exact price being left to be determined by their cost. From time to time moneys were advanced to Carranza by Gutierrez Hermanos, but without any charge on the books against Dela Riva or any adjustment of the accounts as between the parties, which was deferred until the business should be closed.

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After some months, the boats being finished, Behn, Meyer & Co., who at that time were also the plaintiff's correspondents at Manila, chartered through Gutierrez Hermanos the steamer Magallanes, which carried them to Manila under a bill of landing signed by the captain, in which Teodoro Carranza was named shipper and Behn, Meyer, and Co. consignees, delivery being directed to them, but not on their order.

After the arrival of the boats at Manila, this order was indorsed by the consignees with a direction for their delivery to the plaintiff. However, upon seeking them under this order, the plaintiff Dela Riva found them in the possession of the sheriff under an attachment in favor of the defendants.

ISSUEWhether Dela Riva could validly contest the attachment made my the sheriff

HELD:No, Dela Riva failed to establish his title as against the sheriff under the attachment and must fail in this action.

RATIO:Teodoro Carranza built these boats, not as a mandatory, of the plaintiff but on his own account, retaining the ownership of them until their legal transfer. This was not affected by reason of the payments advanced by Gutierrez Hermanos through the unjusted accounts of the parties, nor by the shipment of the boats or the remittance of the bill of lading of Behn, Meyer & Co., who were merely the consignees of the builder and represented him, nor yet by the indorsement of the consignees. Had the bill of lading run to their order, then title would have passed by the indorsement of it, or had it been payable to the bearer, then in that case by the mere delivery of it. (Code of Commerce, art. 708.) By terms, however, the freight was deliverable to the consignees by name and their interest could be transferred only by document purporting to convey the property. Therefore Dela Riva failed to establish his title as against the sheriff under the attachment and must fail in this action.

49. P.C. AILMAL V. MACONDRAY & CO. INC. (BARRIENTOS)DOCTRINE: The argument that the issuance of the bill of lading is evidence that the goods were placed on board the ship might be true in the early days when shippers dealt with ship masters directly and the bills of lading were signed and

executed by the master or the vessel. But the complex processes of modern trade have reduced the bill of lading to nothing more than the contract between the parties and prima facie evidence of the receipt of the merchandise by the carrier or his agent. Receipt of the goods by the ship agent can not be evidence of their actual placement on the vessel.

FACTSAilmail handed Macondray two cases of sweaters, stockings, and handbags for delivery. Macondray was supposed to load it to S/S Tamesis to be shipped to Hong Kong. The items were consigned to Oriental Silk Store in Hong Kong. Macondray accepted the merchandise and, the freightage having been paid, issued the corresponding bill of lading. However, the Oriental Silk Store did not receive the merchandise nor was it returned to Ailmail. Action was brought against Macondray. The ship captain said that it did not load any cargo at Manila for any other port although it is bound tor Hong Kong. Macondray argues that the issuance of the bill of lading is evidence that the goods were placed on board the ship.

ISSUEWhether the cargo was loaded and taken abroad – NO

RATIOThe vessel S/S Tamesis did not load any cargo from the Manila port for Hong Kong. Thus, the goods were not taken abroad which would mean that it was impossible that the goods were delivered to the Hong Kong consignee. The complex processes of modern trade have reduced the bill of lading to nothing more than the contract between the parties and prima facie evidence of the receipt of the merchandise by the carrier or his agent. In the instant case, it is Macondray’s own witness who proved that the goods were not taken abroad, and he must be considered concluded by his own evidence.

50. MAGELLAN MANUFACTURING MARKETING VS. CA (BRIONES) FACTSOn 20 May 1980, 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 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 Orient Overseas Container Lines, Inc., (OOCL) specifying that he needed an on-board bill of lading and that transshipment is not allowed under the letter of credit. On 30 June 1980, MMMC paid F.E. Zuellig

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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 MMMC’s president James Cu, went back to the bank ,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 transshipment of goods. As a result of the refusal of the buyer to accept, upon MMMC’s request, the anahaw fans were shipped back to Manila by OOCL and FE Zuellig, for which the latter demanded from MMMC payment of P246,043.43. MMMC abandoned the whole cargo and asked OOCL and FE Zuellig for damages. On 20 July 1981 MMMC filed the complaint in this case praying that OOCL and FE Zuellig be ordered to pay whatever MMMC was not able to earn from Choju Co., Ltd., amounting to P174,150.00 and other damages like attorney’s fees . In answer it was alleged that the bill of lading clearly shows that there will be a transshipment and that MMMC was well aware that MV (Pacific) Despatcher was only up to Hongkong where the subject cargo will be transferred to another vessel for Japan. The lower court decided the case in favor of OOCL and FE Zuellig. On appeal to the Court of Appeals, the finding of the lower court that MMMC agreed to a transshipment of the goods was affirmed but the finding that petitioner is liable for P298,150.93 was modified. It was reduced to P52,102.45 which represents the freight charges and demurrage’s incurred in Japan but not for the demurrage’s incurred in Manila. MMMC, dissatisfied with the decision moved for reconsideration. Denied, it filed a petition for review on certiorari.

ISSUE: Whether private respondents were at fault.

HELD: The Supreme Court affirmed the decision with modifications.

Transshipment, 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 to another.” Either in its ordinary or its strictly legal acceptation, there is transshipment 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 camera, but rather on the fact of actual physical transfer of cargo from one vessel to another. There was transhipment, as there unmistakably appears on the face of the bill of lading the entry “Hong Kong” in the blank space labeled “Transshipment,” which can only mean that transshipment actually took place. This fact is further bolstered by the certification issued by F.E. Zuellig, Inc. dated 19 July 1980, although it carefully

used the term “transfer” instead of transshipment. Nonetheless, no amount of semantic juggling can mask the fact that transshipment in truth occurred in this case.

A bill of lading operates both as a receipt and as a contract. It is a receipt for the goods shipped and a contract to transport and deliver the same as therein stipulated. As a contract, it names the parties, which includes the consignee, fixes the route, destination, and freight rates or charges, and stipulates the rights and obligations assumed by the parties. Being a contract, it is the law between the parties who are bound by its terms and conditions provided that these are not contrary to law, morals, good customs, public order and public policy. A bill of lading usually becomes effective upon its delivery to and acceptance by the shipper. It is presumed that the stipulations of the bill were, in the absence of fraud, concealment or improper conduct, known to the shipper, and he is generally bound by his acceptance whether he reads the bill or not. The claim that there was a mistake in documentation on the part of OOCL and FE Zuellig militates against the conclusiveness of the bill of lading insofar as it reflects the terms of the contract between the parties, as an exception to the parol evidence rule, and would therefore permit it to explain or present evidence to vary or contradict the terms of the written agreement, that is, the bill of lading involved.

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. 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. Under the parol evidence rule, the terms of a contract are rendered conclusive upon the parties, and evidence aliunde is not admissible to vary or contradict a complete and enforceable agreement embodied in a document, subject to well defined exceptions which do not obtain in this case. The parol evidence rule is based on the consideration that when the parties have reduced their agreement on a particular matter into writing, all their previous and contemporaneous agreements on the matter are merged therein. Accordingly, evidence of a prior or contemporaneous verbal agreement is generally not admissible to vary, contradict or defeat the operation of a valid instrument. The mistake contemplated as an exception to the parol evidence rule is one which is a mistake of fact mutual to the parties. Furthermore, the rules on evidence, as amended, require that in order that parol evidence may be

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admitted, said mistake must be put in issue by the pleadings, such that if not raised inceptively in the complaint or in the answer, as the case may be, a party can not later on be permitted to introduce parol evidence thereon.

The terms of the contract as embodied in the bill of lading are clear and thus obviates the need for any interpretation. The intention of the parties which is the carriage of the cargo under the terms specified thereunder and the wordings of the bill of lading do not contradict each other. The terms of the contract being conclusive upon the parties and judging from the contemporaneous and subsequent actuations of petitioner, to wit, personally receiving and signing the bill of lading and paying the freight charges, there is no doubt that petitioner must necessarily be charged with full knowledge and unqualified acceptance of the terms of the bill of lading and that it intended to be bound thereby.It is a well-known commercial usage that transshipment of freight without legal excuse, however competent and safe the vessel into which the transfer is made, is a violation of the contract and an infringement of the right of the shipper, and subjects the carrier to liability if the freight is lost even by a cause otherwise excepted. It is highly improbable to suppose that OOCL and FE Zuellig, having been engaged in the shipping business for so long, would be unaware of such a custom of the trade as to have undertaken such transshipment without petitioner’s consent and unnecessarily expose themselves to a possible liability. Verily, they could only have undertaken transshipment with the shipper’s permission, as evidenced by the signature of James CuThe refusal of acceptance of the cargo of anahaw fans by Choju Co., Ltd. was also made on the ground that the bill of lading that was issued was not an on board bill of lading, in clear violation of the terms of the letter of credit issued in favor of MMMC. MMMC knew from the onset that its buyer, Choju Co., Ltd., particularly required that there be an on board bill of lading, obviously due to the guaranty afforded by such a bill of lading over any other kind of bill of lading. The buyer could not have insisted on such a stipulation on a pure whim or caprice, but rather because of its reliance on the safeguards to the cargo that having an on board bill of lading ensured. Herein petitioner cannot feign ignorance of the distinction between an “on board” and a “received for shipment” bill of lading. It is only to be expected that those long engaged in the export industry should be familiar with business usages and customs.

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.The certification of F.E. Zuellig, Inc. cannot 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 MMMC. For one, the certification was issued only on 19 July 1980, way beyond the expiry date of 30 June 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 an on board of bill of lading, such an effect may be achieved only as of the date of its issuance, that is, on 19 July 1980 and onwards. The fact remains, though, that on the crucial date of 30 June 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.

MMMC cannot escape liability by adverting to the bill of lading as a contract of adhesion, thus warranting a more liberal consideration in its favor to the extent of interpreting ambiguities against OOCL and FE Zuellig as allegedly being the parties who gave rise thereto. The bill of lading is clear on its face. There is no occasion to speak of ambiguities or obscurities whatsoever. All of its terms and conditions are plainly worded and commonly understood by those in the business.It is conceded that bills of lading constitute a class of contracts of adhesion. However, as ruled in the earlier case of Ong Yiu us. Court of Appeals, et al. and reiterated in Servando, et al. vs. Philippine Steam Navigation Co., plane tickets as well as bills of lading are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent.

51. IRON BULK SHIPPING VS. REMINGTON INDUSTRIAL SALES (CALDERON)DOCTRINE: Article 1734 of the Civil Code states that: Common carriers are responsible for the loss, destruction or deterioration of the goods, unless the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;(2) Act of the public enemy in war, whether international or civil;

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(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.

Except in the cases mentioned under Article 1734, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required under the law.

FACTSRemington Industrial ordered from Wangs Co. hot rolled steel sheets. Wangs forwarded the order to its supplier Burwill Ltd. The steel sheets were loaded on board the vessel MV Indian Reliance at the Port in Poland, for transportation to the Philippines, under Bill of Lading No. 27. The vessels owner/charterer was represented in the Philippines by Iron Bulk Shipping.

Remington had the cargo insured under a Marine Insurance Policy issued by Pioneer Asia Insurance. Upon arrival in Manila, the hot rolled steel sheets were discharged from the vessel. The cargo was inspected twice and found to be wet (with slight trace of salt) and rusty. Remington filed formal claims for loss with Pioneer, Iron Bulk, Manila Port Services, Inc. (MPS) and ESE Brokerage Corporation (ESE). No one honored such claims. Remington filed an action for collection against Wangs, Pioneer and Iron Bulk.

The trial court ruled in favor of Remington. The Court of Appeals affirmed in toto the said decision, which stated that the direct and immediate cause of the rusting of the goods imported by the plaintiff was the water found inside the cargo hold of M/V Indian Reliance wherein those goods were stored during the voyage, particularly the water found on the surface of the merchandise and on the floor of the vessel hatch. And even at the time the cargoes were being unloaded by crane at the Pier of Manila, Iron Bulks witnesses noticed that water was dripping from the cargoes.

Wangs hired an inspection agency which found that a very slight trace of salt was present in the sample as confirmed by the test of Sodium. The results however did not necessarily indicate that the rusty condition of the material was caused by seawater. Pioneer also hired an inspector the report of which showed that the sample was wetted/contaminated by fresh water.

After considering the foregoing test results and the other evidence on record, CA found no clear and sufficient proof showing that the water which stayed in the cargo hold of the vessel and which contaminated the merchandise was seawater. CA, however, was convinced that the subject goods were exposed to salt conditions as evidenced by the presence of about 17% Sodium on the rust

sample tested by SGS. Nevertheless, since Iron Bulks own evidence shows that there was water inside the cargo hold of the vessel and that the goods stored therein were wet and full of rust, without sufficient explanation on its part as to when and how water found its way into the vessel holds, CA found and held that Iron Bulk failed to exercise the extraordinary diligence required by law in the handling and transporting of the goods.

ISSUES:(1) Whether the CA erred in relying on the pro forma Bills of Lading

to establish the condition of the cargo upon loading.(2) Whether Iron Bulk failed to exercise the extraordinary diligence

required by law in the handling and transporting of the goods.

HELD: (1) No. The Court found no error in the findings of the appellate court that

the questioned bill of lading is a clean bill of lading, i.e., it does not indicate any defect in the goods covered by it, as shown by the notation, CLEAN ON BOARD and Shipped at the Port of Loading in apparent good condition on board the vessel for carriage to Port of Discharge.

(2) Yes. Iron Bulk failed to exercise extraordinary diligence; petitioner’s arguments were not plausible.

RATIO:(1) A bill of lading operates both as a receipt and as a contract. It is a receipt

for the goods shipped and a contract to transport and deliver the same as therein stipulated. Petitioner presented evidence to prove that, contrary to the recitals contained in the subject bill of lading, the cargo therein described as clean on board is actually wet and covered with rust. Indeed, having the nature of a receipt, or an acknowledgement of the quantity and condition of the goods delivered, the bill of lading, like any other receipts, may be explained, varied or even contradicted. However, the Court agreed with the CA that far from contradicting the recitals contained in the said bill, petitioner’s own evidence showed that the cargo covered by the subject bill of lading, although it was partially wet and covered with rust was, nevertheless, found to be in a fair, usually accepted condition when it was accepted for shipment.

(2) Even granting, for the sake of argument, that the subject cargo was already in a damaged condition at the time it was accepted for transportation, the carrier is not relieved from its responsibility to exercise due care in handling the merchandise and in employing the necessary precautions to prevent the cargo from further deteriorating.

It is settled that the extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the

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required precaution for avoiding damage to, or destruction of the goods entrusted to it for safe 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.

Under Article 1742 of the Civil Code, even if the loss, destruction, or deterioration of the goods should be caused, among others, by the character of the goods, the common carrier must exercise due diligence to forestall or lessen the loss. This extraordinary responsibility lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them. In the instant case, if the carrier indeed found the steel sheets to have been covered by rust at the time that it accepted the same for transportation, such finding should have prompted it to apply additional safety measures to make sure that the cargo is protected from corrosion. This, the carrier failed to do.

52. MINDANAO BUS COMPANY VS CIR CASTANEDA) FACTSPetitioner is a common carrier engaged in transporting passengers and freight by means of auto-buses in Northern Mindanao, under certificates of public convenience issued by the Public Service Commission. An agent of the respondent Collector of Internal Revenue examined the books of accounts of the petitioner and found that the freight tickets used by it do not contain the required documentary stamp tax. Said agent took with him 500 booklets of tickets used by the petitioner and counted the freight receipts contained therein. He counted 1,305 freight tickets. Assuming that each freight ticket covers baggage valued at more than P5.00, the Collector of Internal Revenue, upon recommendation of the agent, assessed against the petitioner the sum of P15,704.16, exclusive of compromise penalty, as documentary stamp taxes.The assessment of the Collector was appealed to the CTA. In that court the respondent Collector was declared in default and the petitioner presented its evidence. The tax court, modified the decision of the Collector and ordered the petitioner to pay only P15,704.16 as DST without any compromise penalty. Upon petitioner's MR, the court resolved to reopen the case, for the sole purpose of allowing the petitioner to present as evidence the 500 booklets and 17 sackful, respectively, of passenger and freight tickets of the petitioner. During the rehearing of the case, the petitioner, however, failed to submit the said evidence; instead it presented stub tickets, possession during the first hearing.

The Court of Tax Appeals denied the motion for reconsideration. Hence, this appeal.

ISSUEWhether the tax court erred in holding that the tickets issued for excess baggage are bills of lading subject to the documentary stamp tax.

RATIOThe claim of petitioner that the freight tickets issued by it are not bills of lading subject to documentary stamp tax must also be dismissed in view of the ruling in the case of Interprovincial Autobus Co., Inc. vs. Collector, supra: .

But the claim that freight tickets of bus companies are not 'bills of lading or receipts' within the meaning of the Documentary Stamp Tax Law is without merit. Bills of Lading, in modern jurisprudence, are not those issued by masters of vessels alone; they now comprehend all forms of transportation, whether by sea or land, and includes the receipts for cargo transported.

The term 'bill of lading' is frequently defined, especially by the older authorities as a writing signed by the master of a vessel acknowledging the receipts of goods on board to be transported to a certain port and there delivered to a designated person or on his order. This definition was formulated at a time when goods were principally transported by sea and, while adequate in view of the conditions existing at that early day, is too narrow to suit present conditions. As comprehending all methods of transportation, a bill of lading may be defined as a written acknowledgment of the receipt of goods and an agreement to transport and to deliver them at a specified place to a person named or on his order. Such instruments are sometimes called 'shipping receipts,' 'forwarders' receipts,' and 'receipts for transportation." The designation, however, is not material, and neither is the form of the instrument. If it contains an acknowledgment by the carrier of the receipt of goods for transportation, it is, in legal effect, a bill of lading."

Section 227 of the National Internal Revenue Code imposes the tax on receipts for goods or effects shipped from one port or place to another port or place in the Philippines. The use of the word place after port and of the, word 'receipt' shows that the receipts for goods shipped on land are included.53. ORIENTAL COMMERCIAL CO. INC. V. LA NAVIERA FILIPINA INC. (CHAN)DOCTRINE: Carrier is not obliged to notify consignee of the arrival of the consignment. (implied form Art. 707 and 711 of the Code of Commerce) Carrier is not an insuer.

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FACTSThe municipal treasurer of Occidental Mindoro loaded on La Naviera’s steamship F. Escano a Demountable typewriter, consigned to Oriental’s branch at Cebu. The vessel arrived at the port of Cebu but no one claimed the typewriter. Consequently, La Naviera stored it. After a lapse of 2 years, a certain Velasco claimed the typewriter under the name of Oriental. He was informed to come back the next day and present the bill of lading. No one came back. After the lapse of another year, Oriental’s attorney wrote to La Naviera requesting for the delivery of the typewriter or its value. After several failed negotiations, Oriental filed a complaint alleging that La Naviera had converted to its own use the said typewriter. La Naviera admits receiving the typewriter but avers that neither the consignee nor any representative had appeared to take the delivery and as such Oriental is still liable to them for certain storage fees.

Oriental avers that the carrier was under the obligation to notify the consignee and due to its failure, it had no right to collect any storage fees. La Naviera contends that it was not obligated to inform Oriental and assuming that they were, they did not know its address. The CFI-Manila ruled that La Naviera deliver the typewriter upon the payment of the storage fees it owed. Hence this appeal

ISSUEWhether carrier is obliged to notify the consignee of the arrival of the consignment – NO. CFI-Manila decision affirmed with modification as to the storage charges.

RATIOCarrier is not expected to give notice of the arrival of the goods. Because requiring the shipper to send to the consignee a copy of a bill of lading implies that the notice of the shipment shall come that way to the latter; and secondly, presuming that the consignee has been so notified, tacitly imposes on him the duty to watch for the arrival of the goods and comprls him to take delivery before they are unloaded, under the penalty of having to pay storage charges.

Art. 706 of the Code of Commerce does not require the address of the consignee to be set forth in the bill of lading. It would be absurd to impose the obligation to notify where the address of the person to be notified is not known. Also a bill of lading is transferable from person to person.

Though Oriental tried to prove that sea carriers are required to give notice of the arrival of the goods, a testimony to the contrary was provided by La Naviera. Thus the alleged custom or usage has not been sufficiently established.

La Naviera has not failed to comply with any condition precedent and has the right to collect storage charges. Oriental by refusing to pay the storage fees, may not demand the delivery of the typewriter.

54. ROBLES VS. SANTOS (DE LEON)DOCTRINE: Under Art. 349 of the Code of Commerce, the operator of a public utility vehicle engaged in transporting for the public, is bound and governed by the Code of Commerce in his relations and responsibility to his passengers and their baggage or goods. There is nothing in the said article which exempts a carrier from liability incurred in case of loss of goods transported due to his own negligence.

FACTSPlaintiff boarded the vehicle operated by the defendant as a common carrier. Plaintiff had with her as baggage a large buri containing 2 bales of cloth valued at P400.00 and other goods valued at P50.00, or a total of P450.00. She had the bag with her in the front seat, but the defendant placed it in the rubble-seat. The plaintiff did not want to give up her bag at first, but the defendant assured her that the rubble-seat would be locked. The defendant gave the bag to his assistant who placed the bag in the rubble-seat which was never locked. When the car reached Manila, the plaintiff found that her bag was gone.

ISSUEWhether the defendant could be held liable – YES

RATIOUnder Art. 349 of the Code of Commerce, the operator of a public utility vehicle engaged in transporting for the public, is bound and governed by the Code of Commerce in his relations and responsibility to his passengers and their baggage or goods. There is nothing in the said article which exempts a carrier from liability incurred in case of loss of goods transported due to his own negligence. The last paragraph of the article which places upon the carrier the burden of proof to show that the loss or injury was caused by a fortuitous event or the inherent nature and defect of the goods, implies that if the damage or loss was not due to any of these circumstances, but was traceable to his negligence, then he is liable.

In the case at hand, the loss of the baggage can be easily attributed to the defendant. The loss would have never happened had the defendant allowed the plaintiff to keep her bag. The baggage compartment had to be opened every time a passenger disembarked from the vehicle. It is presumably misdelivered

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or taken by a passenger by mistake. In other words, there was misdelivery on the part of the defendant. The defendant as a carrier failed to exercise the necessary supervision and care to prevent the loss. The defendant is liable to pay the contents of the bag.

55. COMPANIA MARITIMA VS LIMSON (DELA CRUZ)FACTSPlaintiff Compania Maritima is liable to defendant in the amount of P441,339.01 – the difference of unpaid passage and freight charges for shipments of hogs and cattle on maritima’s vessel. Limson denied liability claiming he was not a shipper and had never authorized the said shipments. He set up a counter claim for the rebate he was entitled to according to the agreement. The court appointed a commissioner who would do the accounting. The findings of the commissioner is that Limson’s claim amounted to a total of P676,416.05, and Compania’s claim to P545,394.24, making Limson liable for the difference. Compania’s claim was based among others on several bills signed by one “Perry” with Limson as the shipper and consignee, and some for others as shippers and consignee. CFI ruled that Perry was not the authorized representative of Limson, thus he was not liable for the bills of lading that were included in the accounting.

ISSUEWhether or not The Trial court erred in declaring appellant limson liable in the said amount – YES

RATIOA shipper may be held liable for freightage on the bills of lading signed by another person, where it appears that he is the shipper or consignee. Bills of lading where person other than the former (Limson) appear as shipper, and bills of lading not signed by the shipper are considered his if the testimonial evidence shows that the goods shipped actually belongs to him as shipper. In this case, Limson himself appeared to have introduced “Perry” as his representative along with the other individuals who were authorized to receive shipment for him.

With respect to the unsigned bills of lading, delivery receipts were issued upon delivery of the shipments. Witnesses testified that the ordinary procedure at Compania's terminal office was to require the surrender of the original bill of lading, but when the bill of lading cannot be surrendered because it had not arrived or received by the consignee or assignee, the delivery of the cargo was authorized just the same, and the delivery receipt was prepared based on the ship's cargo manifests or ship's copy of the bill of lading. This accommodation was especially given Limson, because defendant was a regular shipper and ship chandler of plaintiff, and was a compadre of Cabling.

56. UNITED STATES LINES, INC. v . COMMISSIONER OF CUSTOMS FACTSThe vessel "American Venture" arrived in Manila from Hongkong. Among the shipments on board were cargoes consigned by the same shipper and from the same loading port consisting of 2 containers which were described in the respective bills of lading BL No. 38 and BL No. 39 as follows:

"Shipper's Load and Count”1 Container (Part) Cont. 2020984 Seal 601-04725 38 cases 100% Cotton brushed denim broken twill1 Container Cont. 2101730 Seal 601-04707 40 Cases 100% Cotton Sulphur Dyed denimTotal: One Container Only "Shipper's Load and Count"

The said information as furnished by the Shipper, was copied or entered into the vessel's Inward Foreign Manifest. Upon opening of the containers by the Bureau of Customs, it was discovered that

a) Container No. USLU-2020984 contained 34 cases of cotton denim instead of 38 cases and

b) Container No. USLU-2101730 contained 44 cases of cotton denim instead of 40 cases.

The total number of cases in the two containers was the same, however, to wit, 78 cases. US Lines amended, with the consent of the customs authorities, the Manifest to reflect the actual quantity of the cases in the containers. But, the collector of customs still instituted proceedings against US Lines for alleged violation of the Tariff and Customs Code, and ordered US Lines to pay a fine. US Lines appealed to the commissioner to no avail. CTA also affirmed the decision of the commissioner.

ISSUEWhether a carrier of containerized cargo should be liable for a fine upon a clerical error imputable to the Shipper alone and not discoverable by the carrier until after examination by the Customs – NO.

RATIOSec. 1124 of Customs Administrative Order No. 8-75 reads as follows:

Shipper's 'Load and Count' a container packed with cargo by one shipper where the quantity, description and conditions of the cargo is the sole responsibility of the shipper.

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Section 1005 of the Tariff and Customs Code:SEC. 1005. Every vessel from a foreign port must have on board a complete manifest of all her cargo.

Each manifest shall include the port of departure and the port of delivery with the marks, numbers, quantity and description of the packages and the names of the consignee thereof.A cargo manifest shall in no case be changed or altered after entry of the vessel except by means of an amendment by the master, consignee or agent thereof, under oath, and attached to the original manifest: Provided, however, that after the invoice and/or entry covering an importation have been received and recorded in the office of the Appraiser, no amendment of the Manifest shall be allowed, except when it is obvious that a clerical error or any other discrepancy has been committed in the preparation of the manifest without any fraudulent intent, discovery of which could not have been made until after examination of the importation has been completed.

SEC. 2521. Failure to Supply Requisite Manifests. - If any vessel or aircraft enters or departs from a port of entry without submitting the proper manifests to the customs authorities, or shall enter or depart conveying unmanifested cargo other than as stated in the next preceding section hereof, such vessel or aircraft shall be fined in a sum not less than ten thousand pesos (P10,000.00) but not exceeding thirty thousand P30,000.00 pesos.

The same fine shall be imposed upon any arriving or departing vessel or aircraft if the master or pilot in command shall fail to deliver or mail to the Commission on Audit a true copy of the manifest of the incoming or outgoing cargo, as required by law.

The case at bar involves a situation intended precisely to be covered by Sec. 24 of CAO No. 8-75. An examination of said Customs Administrative Order (CAO) in relation to Sec. 1005 and Sec. 2521 shows that containerized cargoes on "Shipper's Load and Count" shipping arrangement are not required to be checked and inventoried by the carrier at the port of loading or before said Carrier enters the port of unloading in the Philippines since it is the shipper who has the sole responsibility for the quantity, description and condition of the cargoes shipped in container vans, each container van considered as a unit of transport.

The "American Venture" faithfully complied with the requirements of Sec. 1005 of the Tariff and Customs Code. Said vessel submitted a complete manifest of all her cargoes. However there was a slight error thru no fraudulent intent or negligence of the vessel. Said vessel relied on the information in the bill of lading submitted by the shipper in making the Manifest. There was no way for the vessel to discover until after the opening of the containers and the inventory of their contents, that the first container contained 34 cases and the second container contained 44 cases. Also noteworthy is the fact that the goods contained in the bill of lading are parts of the same importation coming from the same shipper and destined to the same consignee, and that the total number of cases in the 2 containers are really 78 cases. Therefore, it is clear that the vessel's Manifest reflects a complete and substantially accurate statement of the cargoes contained therein in accordance with the requirement of Sec. 1005 in relation to Sec. 2521 of the Tariff and Customs Code. Accordingly, therefore, the imposition by Commissioner of Customs of a fine of P10,000.00 upon US Line’s vessel allegedly for the failure of the latter to have on board a complete manifest of all her cargoes is patently baseless, unfair, inconsiderate, and illegal. Besides the clerical error cannot be attributed to the shipper.

57. PHIL CHARTER INSURANCE CORPORATION VS UNKNOWN OWNER OF THE VESSEL MV NATIONAL HONOR (DELOS REYES)DOCTRINE: Common carriers are mandated to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them. It requires the common carrier to know and to follow the required precaution for avoiding damages to or destruction of the goods entrusted to it for sale, carriage and delivery. The duty to observe such diligence 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 but the person entitled to receive them. When damage results, the carrier is presumed negligent and must prove that they exercised extraordinary diligence in order to escape liability. This is subject to certain exceptions such as:

(1) storm, flood earthquake lightning or other natural disaster, (2) act of public enemy in war whether international or civil, (3) act or omission of the shipper or owner of goods, (4) the character of the goods or defects in the packing or in the containers, (5) order or act of competent public authority.

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FACTSJ. Trading Co. Ltd of Seoul Korea loaded a shipment of four (4) units of parts and accessories in the port of Pusan, Korea. It was boarded on the vessel of MV National Honor represented by its agent National Shipping Corporation of the Philippines (NSCP). The shipment was for delivery in Manila Philippines. Freight forwarder, Samhwa Inter-Trans Co issued Bills of Lading in the name of the shipper consigned to the order of MBTC with arrival notice to ultimate consigned Blue Mono International Company Incorporated (BMICI). The Bill of Lading stated that the goods were received by the carrier in apparent good order and conditions and that the shipper warrants that the goods are properly described, marked and secured and packed and may be handled in ordinary course without damage to the goods.

The shipment contained two wooded crates namely crate 1 and crate 2. There were no marking on the outer portion except the name of the consignee. It contained one unit of Lathe Machine complete with parts and accessories and one unit milling machine complete with parts and accessories.

The MV national Honor arrived in November 14, 1995,at the Manila International Container Terminal (MICT) and the International Container Terminal Services Incorporated (ICTSI), its arrastre operator was furnished with a copy of the crate cargo. ICTS then continued in unloading the cargo the next day using a winch crane. It was operated by Olegario Balsa. Upon conducting inspection of the cargo and upon finding that such was in good condition by Dauz the checker inspector, two slings were placed to support the cargo. Based on experience of Dauz, this was the normal procedure. As the crane was being hoisted, the mid portion of the wooden flooring suddenly snapped in the air about 5 feet above the vessel’s deck sending all its contents down hard, resulting to damage. BMICI’s custom broker JRM Inc. delivered the same cargo in such damaged condition. BMICI subsequently filed separate claims against NSCP, ICTSI and PCIC. Subsequently however PCIC as subrogee sued unknown owner of the MV National honor, NSCP and ICTSI.

ISSUEIs there merit in PCIC claim? NO

RATIOAlthough the court agrees with the contention of the petitioners that common carriers are mandated to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them. It requires the common carrier to know and to follow the required precaution for avoiding damages to or destruction of the goods entrusted to it for sale, carriage and

delivery. The duty to observe such diligence 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 but the person entitled to receive them. When damage results, the carrier is presumed negligent and must prove that they exercised extraordinary diligence in order to escape liability. However, this is subject to certain exceptions such as:1.) storm, flood earthquake lightning or other natural disaster, 2) act of public enemy in war whether international or civil, 3) act or omission of the shipper or owner of goods, 4) the character of the goods or defects in the packing or in the containers, 5) order or act of competent public authority. If the defect or damage is due to these 5 causes then the common carrier is also free from liability.

In the case at bar, the damaged was cause by the defective packaging and container of the cargo. The crate should have three solid and strong wooden battens placed side by side underneath or on the flooring of the crate to support weight of its contents. However, in this case, although there were wooden battens placed side by side, the mid section, which carried substantial weight of the crate’s contents. Had a knothole or bukong bukong, which affected its strength. The petitioner also failed to rebut the testimony of Dauz that the crates were sealed and that the contents could not be seen from the outside. Thus, it cannot be concluded that the respondents 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.

58. REYMA BROKERAGE VS. PHILIPPINE HOME ASSURANCE (FRANCISCO)DOCTRINE: “A bill of lading operates both as a receipt and as a contract. It is a receipt for the goods shipped and a contract to transport and deliver the same as therein stipulated. 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”

FACTSConsignor shipped 5 sealed containers allegedly containing 2680 cartons of hard frozen boneless beef as stated in the bill of lading from Australia to Manila. Petitioner Reyma Brokerage, Inc., an arrastre operator, was hired to deliver said containers from the Port of Manila directly to the consignee. When the consignee received the containers, it was discovered that only 2477 cartons were in the

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containers, with 203 missing. Petitioner was held liable for the missing cartons of boneless beef. Petitioner argued that in the light of US Lines case, a "said-to-contain" bill of lading for sealed containers is "receipt' only of the containers but not of their contents which the carrier was not in a position to verify.

ISSUEWhether petitioner should be held liable for the missing cartons. YES

RATIO“The rule enunciated by United States Lines applies to a situation where the carrier of the containerized cargo simply admits the information furnished by the shipper with regard to the goods it shipped as reflected in the bill of lading ("said to contain") but not where the carrier of the containerized cargo makes an explicit admission as to the weight, measurement marks, numbers, quality contents, and value, and more so inscribed these admissions as stipulations in the bill of lading itself, or made them an addendum thereto, to which the carrier affixed its express acknowledgment as what happened in this case. In its stead, the dictum that the bill of lading shall be prima facie evidence of the receipt by the carrier of the goods as therein described governs”“A bill of lading operates both as a receipt and as a contract. It is a receipt for the goods shipped and a contract to transport and deliver the same as therein stipulated. 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”

59. KENG HUA PAPER PRODUCTS VS. CA (FUSTER) FACTSSea-Land Service, a shipping company, is a foreign corporation licensed to do business in the Philippines. On 29 June 1982, SeaLand received at its Hong Kong terminal a sealed container, Container SEAU 67523, containing 76 bales of “unsorted waste paper” for shipment to Keng Hua Paper Products, Co. in Manila. A bill of lading to cover the shipment was issued by Sea-Land. On 9 July 1982, the shipment was discharged at the Manila International Container Port. Notices of arrival were transmitted to Keng Hua but the latter failed to discharge the shipment from the container during the “free time” period or grace period. The said shipment remained inside the Sea-Land’s container from the moment the free time period expired on 29 July 1982 until the time when the shipment was unloaded from the container on 22 November 1983, or a total of 481 days. During the 481-day period, demurrage charges accrued. Within the same period,

letters demanding payment were sent by Sea-Land to Keng Hua who, however, refused to settle its obligation which eventually amounted to P67,340.00. Numerous demands were made on Keng Hua but the obligation remained unpaid.

Sea Land thereafter commenced the civil action for collection and damages. The RTC found Keng Hua liablefor demurrage, attorney’s fees and expenses of litigation. Keng Hua appealed to the Court of Appeals, which denied the appeal and affirmed the lower court’s decision in toto. In a subsequent resolution, it also denied Keng Hua’s motion for reconsideration. Hence, the petition for review.

ISSUEW/n the CA erred in upholding RTC’s decision making Keng hua liable. NO!

RATIOThe Supreme Court affirmed the assailed Decision with the modification that the legal interest of 6% per annum shall be computed from 28 September 1990 until its full payment before finality of judgment. The rate of interest shall be adjusted to 12% per annum, computed from the time said judgment became final and executory until full satisfaction. The award of attorney’s fees is deleted.

Keng Hua’s letter proved refusal to pick up cargo and not rejection of bill of lading; Implied acceptance Keng Hua “received the bill of lading immediately after the arrival of the shipment” on 8 July 1982.Having been afforded an opportunity to examine the said document, it did not immediately object to or dissent from any term or stipulation therein. It was only six months later, on 24 January 1983, that it sent a letter to private respondent saying that it could not accept the shipment. Its inaction for such a long period conveys the clear inference that it accepted the terms and conditions of the bill of lading. Moreover, said letter spoke only of petitioner’s inability to use the delivery permit, i.e. to pick up the cargo, due to the shipper’s failure to comply with the terms and conditions of the letter of credit, for which reason the bill of lading and other shipping documents were returned by the “banks” to the shipper. The letter merely proved its refusal to pick up the cargo, not its rejection of the bill of lading.

Apprehension of violating laws cannot defeat contractual obligation and liabilityKeng Hua’s attempt to evade its obligation to receive the shipment on the pretext that this may cause it to violate customs, tariff and central bank laws must fail. Mere apprehension of violating said laws, without a clear

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demonstration that taking delivery of the shipment has become legally impossible, cannot defeat thepetitioner’s contractual obligation and liability under the bill of lading.

Contract of carriage in bill of lading to be treated independently of contract of sale and thecontract for the issuance of creditThe contract of carriage, as stipulated in the bill of lading in the present case, must be treated independently of the contract of sale between the seller and the buyer, and the contract for the issuance of a letter of credit between the buyer and the issuing bank. Any discrepancy between the amount of the 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-a-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 Keng Hua’s obligation to private respondent arising from the contract of transportation.

Remedy of alleged overshipment lies against the shipper and not against the carrierThe contract of carriage was under the arrangement known as “Shipper’s Load And Count,” and the shipper was solely responsible for the loading of the container while the carrier was oblivious to the contents of the shipment. Keng Hua’s remedy in case of overshipment lies against the seller/shipper, not against the carrier.

60. GANZON VS. CA (GRUBA)FACTSGelacio Tumambing contracted the services of Mauro Ganzon to haul 305 tons of scrap iron, on board a lighter. Pursuant to the agreement, Ganzon sent his lighter to Mariveles, Bataan where it docked. Tumambing delivered the scrap iron to 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 of the scrap iron was already loaded, Mayor Advincula of Bataan arrived and demanded P5000 from Tumambing. The latter resisted and was shot by the mayor. Tumambing was rushed to the hospital. Loading of the scrap iron resumed.

Acting Mayor Basilio Rub, with 3 policemen, ordered the captain, Niza, and his crew to dump the scrap iron where the lighter was docked. The rest was brought to the compound. They were issued, by the acting mayor, a receipt stating that the Municipality of Mariveles had taken custody of the scrap metal. CA ordered Ganzon to pay Tumambing for damages

ISSUEWhether there was a breach of the contract of transportation – YES

RATIOBy 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. The common carrier's extraordinary responsibility for loss, destruction or deterioration of goods commenced. Such extraordinary responsibility shall cease only upon delivery, actual or constructive, by the carrier to the consignee, or to the person who has the 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.

The intervention of the municipal officials was not 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. Absence of sufficient proof that the issuance of the same order was attended with force or intimidation. The mere difficulty in the fulfillment of the obligation is not considered force majure, as to exempt the common carrier.

61. EASTERN SHIPPING LINES VS. CA (GUTIERREZ) - DONE BY (FUSTER)FACTSOn 4 December 1981, 2 fiber drums of riboflavin were shipped from Yokohama,Japan for delivery vessel “SS Eastern Comet” owned by Eastern Shipping Lines under Bill of Lading YMA-8. The shipment was insured under Mercantile Insurance Company’s Marine Insurance Policy 81/01177 for P36M.Upon arrival of the shipment in Manila on 12 December 1981, it was discharged unto the custody of Metro Port Services, Inc. The latter excepted to one drum, said to be in bad order, which damage was unknown to Mercantile Insurance. On 7 January 1982, Allied Brokerage Corporation received the shipment from Metro Port Service, one drum opened and without seal. On January 8 and 14, 1982, Allied Brokerage made deliveries of the shipment to the

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consignees’ warehouse. The latter excepted to one drum which containedspillages, while the rest of the contents was adulterated/fake. Due to the losses/damage sustained by saiddrum, the consignee suffered losses totaling P19,032.95, due to the fault and negligence of the shippingcompany, arrastre operator and broker-forwarder. Claims were presented against them who failed and refused to pay the same. As a consequence of the losses sustained, Mercantile Insurance was compelled to pay the consignee P19,032.95 under the aforestated marine insurance policy, so that it became subrogated to all therights of action of said consignee against the shipping company, etc.

After trial, the trial court rendered judgment (1) ordering the shipping company the arrastre operator and the broker-forwarder to pay Mercantile Insurance, in solidum, the amount of P19,032.95 with the present legal interest of 12% per annum from October 1, 1982, the date of filing of this complaints, until fully paid (the liability of defendant Eastern Shipping, Inc. shall not exceed US$500 per case or the CIF value of the loss, whichever is lesser, while the liability of defendant Metro Port Service, Inc. shall be to the extent of the actual invoice value of each package, crate box or container in no case to exceed P5,000.00 each, pursuant to Section 6.01 of the Management Contract); P3,000.00 as attorney’s fees, and costs; and dismissing the counterclaims and crossclaim of defendant/cross-claimant Allied Brokerage Corporation. Dissatisfied, Eastern Shipping Lines appealed to the Court of Appeals. The Court of Appeal affirmed in toto the judgment of the court a quo.The Supreme Court partly granted the petition. The Court affirmed the appealed decision with the modification that the legal interest to be paid is 6% on the amount due computed from the decision, dated 3 February 1988, of the court a quo. A 12% interest, in lieu of 6%, shall be imposed on such amount upon finality of this decision until the payment thereof.

ISSUEWhether Eastern can be held severally and jointly liable with Metro Port and Allied Brokerage. YES

RATIOThe 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 (Arts. 1736-1738, Civil Code; Ganzon vs. Court of Appeals, 161 SCRA 646; Kui Baivs. Dollar Steamship Lines, 52 Phil. 863).

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 (Art.

1735, Civil Code; Philippine National Railways vs. Court of Appeals, 139 SCRA 87; MetroPort Service vs. Court of Appeals, 131 SCRA 365). There are, of course, exceptional cases when such presumption of fault is not observed but these cases, enumerated in Article 1734 1 of the Civil Code, areexclusive, not one of which can be applied to the case at bar.

In Fireman’s Fund Insurance vs. Metro Port Services (182 SCRA 455), the Court has explained in holding the carrier and the arrastre operator liable in solidum, in the manner that “The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and warehouseman (Lua Kian v. Manila Railroad Co., 19 SCRA 5 [1967]. The relationship between the consignee and the common carrier is similar to that of the consignee and the arrastre operator (Northern Motors, Inc. v. Prince Line, et al., 107 Phil. 253 [1960]). Since it is the duty of the Arrastre to take good care of the goods that are in its custody and to deliver them in good condition to the consignee, such responsibility also devolves upon the Carrier. Both the Arrastre and the Carrier are therefore charged with the obligation to deliver the goods in goods condition to the consignee.” The pronouncement, however, does not imply that the arrastre operator and the customs broker are themselves always and necessarily liable solidarily with the carrier, or vice-versa, nor that attendant facts in a given case may not vary the rule.

62. DSR-SENATOR LINES AND C.F. SHARP COMPANY INC. V. FEDERAL PHOENIX ASSURANCE CO. INC. (IBARRA)FACTS:DSR-Senator Lines is a foreign shipping company. It has a general ship agent in the Philippines – C.F. Sharp Company Inc. Berde Plants Inc. delivered artificial trees to C.F. Sharp, which will be shipped to the Khor Fakkan Port. From there, DSR-Senator Lines will pick up the artificial trees and deliver the same to Saudi Arabia to the consignee of Berde Plants Inc., Al-Mohr International Group. Federal Phoenix Assurance Company Inc. insured the cargo against all risks for P941,000 plus.

The vessel carrying the cargo was gutted by fire and sank. All of its cargo were burned. DSR-Senator Lines informed Berde Plants Inc. The latter claimed against Federal Phoenix. Federal Phoenix paid the full amount insured while Berde Plants Inc. issued a subrogation receipt to allow Federal Phoenix Assurance Company to claim against the carrier of the cargo. C.F. Sharp denied liability. Federal PhoenixAssurance filed a complaint for damages against C.F. Sharp and DSR-Senator Lines in the RTC.

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RTC ruled in favor of Federal Phoenix Assurance Co. and held that C.F. Sharp and DSR-Senator Lines are liable jointly and severally. CA affirmed the decision of the RTC and held that the carrier was presumed to have acted negligently for the fire that gutted the feeder vessel and the consequent loss or destruction of the cargo. Hence, the appellant carrier is liable for appellee’s claim under the Civil Code.

ISSUE:Whether the carrier, C.F. Sharp and DSR-Senator Lines, are liable for the loss of the cargo due to fire, in the light of Art. 1734 of the Civil Code – YES

RATIOContrary to C.F. Sharp and Co., Inc.’s pose, its liability as ship agent continued and remained until the cargo was delivered to the consignee. The status of the appellant as ship agent subsisted and its liability as a ship agent was co-terminous with and subsisted as long as the cargo was not delivered to the consignee under the terms of the Bill of Lading. Article 1734 of the Civil Code provides:

"Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only:(1) Flood, storm, earthquake, lightning, or other natural disaster or

calamity;(2) Act of the public enemy in war, whether international or civil;(3) Act 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."

Fire is not one of those enumerated under the above provision which exempts a carrier from liability for loss or destruction of the cargo.

Even if fire were to be considered a natural disaster within the purview of Article 1734, it is required under Article 1739 of the same Code that the natural disaster must have been the proximate and only cause of the loss, and that the carrier has exercised due diligence to prevent or minimize the loss before, during or after the occurrence of the disaster.

A 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 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 to have acted negligently if the goods are lost, destroyed or deteriorated.

63. SEA LAND SERVICE, INC. VS. IAC AND CUE (INOTURAN) OR (GUTIERREZ)? – BOTH MADE

(INOTURAN)FACTS:On 8 January 1981, Sea-Land Service, Inc., a foreign shipping and forwarding company licensed to do business in the Philippines, received from Seaborne Trading Company in Oakland, California a shipment consigned to Sen Hiap Hing, the business name used by Paulino Cue in the wholesale and retail trade which he operated out of an establishment located on Borromeo and Plaridel Streets, Cebu City. The shipper not having declared the value of the shipment, no value was indicated in the bill of lading.

Based on volume measurements Sea-land charged the shipper the total amount of US$209.28 for freightage and other charges. The shipment was loaded on board the MS Patriot, a vessel owned and operated by Sea-Land, for discharge at the Port of Cebu. The shipment arrived in Manila and there discharged into the custody of the arrastre contractor and the customs and port authorities. Sometime, after the shipment had been transferred, along with other cargoes awaiting trans-shipment to Cebu, it was stolen by pilferers and has never been recovered.

Paulino Cue, the consignee, made formal claim upon Sea-Land for the valueof the lost shipment allegedly amounting to P179,643.48. Sea-Land offered to settle for P30,600.00 asserting that said amount represented its maximum liability for the loss of the shipment under the package limitation clause in the covering bill of lading. Cue rejected the offer and thereafter brought suit for damages against Sea-Land. Said Court, after trial, rendered judgment in favor of Cue, sentencing Sea-Land to pay h im the Ph i l ipp ine currency va lue o f the lost cargo, unrealized profit, attorney’s fees, and litigation expenses.

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Sea-Land appealed to the Intermediate Appellate Court. The IAC affirmed the decision of the Trial Court in toto. Sea-Land thereupon filed the present petition for review.

ISSUES and HELD:1. Whether the consignee has the right on the bill of lading to

recover from the carrier or shipper for the loss or damage to goods transported under said bill. – YES.

2. Whether the liability limitation clause in the bill of lading, limiting Sea-Land’s liability to $500 per package, is valid. –YES.

RATIO:There is no question of the right of a consignee in a bill of lading to recover from the carrier or shipper for loss of, or damage, to goods being transported under said bill, although that document may have been drawn up only by the consignor and the carrier without the intervention of the consignee.

Since the liability of a common carrier for loss or damage to goods transported by it under a contract of carriage is governed by the laws of the country of destination and the goods in question were shipped from the US to the Philippines, the liability of Sea-Land to Cue is governed primarily by the Civil Code, and as ordained by the said Code, suppletorily, in all matters not deterred thereby, by the Code of Commerce and special laws. One of these suppletory special laws is the Carriage of Goods by Sea Act (COGSA), made applicable to all contracts for the carriage of goods by sea to and from the Philippine Ports in Foreign Trade by Com. Act 65.

Even if Sec. 4(5) of COGSA did not exist, the validity and binding effect of the liability limitation clause in the bill of lading here are fully sustainable on the bases alone of Articles 1749 and 1750 of the Civil Code. The justness of such stipulation is implicit in its giving the owner or shipper the option of avoiding accrual of liability limitation by the simple expedient of declaring the value of the shipment in the bill of lading.

The stipulation in the bill of lading limiting Sea-Land’s liability for loss or damage to the shipment covered by said bill to $500 per package, unless the shipper declares the value of the shipment and pays additional charges, is valid and binding on Cue.

The Supreme Court reversed and set aside the Decision of the Intermediate Appellate Court complained of,holding that (1) the stipulation in the questioned bill of lading limiting Sea-Land’s liability for loss of or damage to the shipment covered by said bill to US$500.00 per package is valid

and binding on Paulino Cue;(2) Sea-Land is liable in the aggregate amount of US$4,000.00 as there was no question of the fact that the lost shipment consisted of 8 cartons or packages; (3) Sea-Land was discharged of that obligation by paying Cue the sum of P32,000.00, the equivalent in Philippine currency of US$4,000.00 at the conversion rate of P8.00 to $1.00. Costs against Cue.

(GUTIERREZ)DOCTRINE: A stipulation that the common carrier's liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding. 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

FACTSOn or about January 8, 1981, Sea-Land Service, Inc. (Sea-Land), a foreign shipping and forwarding company licensed to do business in the Philippines, received from Seaborne Trading Company in Oakland, California, a shipment consisted of eight (8) cartons or packages, which was consigned to Sen Hiap Hing (business name used by Paulino Cue in the wholesale and retail trade located in Cebu City).

Seaborne Trading Company, shipper, not declared the value of the shipment, thus, no value was indicated in the bill of lading. The bill described the shipment only as "8 CTNS on 2 SKIDS-FILES. Based on volume measurements Sea-land charged the shipper for freightage and other charges. Bill of lading limits to a fixed amount of US$500.00 per package the liability of the carrier for loss or damage to the cargo. The shipment was loaded on board the “MS Patriot”, a vessel owned and operated by Sea-Land, for discharge at the Port of Cebu.

The shipment arrived in Manila on February 12, 1981, and there discharged in Container No. 310996 into the custody of the arrastre contractor and the customs and port authorities. Sometime between February 13 and 16, 1981, after the shipment had been transferred to Container No. 40158 awaiting trans-shipment to Cebu, it was stolen by pilferers and has never been recovered.

On March 10, 1981, Paulino Cue, consignee, made formal claim upon Sea-Land for the value of the lost shipment allegedly amounting to P179,643.48. Sea-Land offered to settle for US$4,000.00, equivalent to P30,600.00, asserting that said amount represented its maximum liability for the loss of the shipment under the package limitation clause in the covering bill of lading. Cue rejected the offer and thereafter brought suit for damages against Sea-Land in the then Court of

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First Instance of Cebu. CFI rendered judgment in favor of Cue, sentencing Sea-Land to pay Cue P186,048.00 representing the Philippine currency value of the lost cargo, P55,814.00 for unrealized profit with 1% percent monthly interest from the filing of the complaint until fully paid, P25,000.00 for attorney's fees and P2,000.00 as litigation expenses.

Sea-Land appealed to the Intermediate Appellate Court (IAC). IAC however affirmed the decision of the Trial Court. Sea-Land filed petition for review poses the question of whether, upon the facts above set forth, it can be held liable for the loss of the shipment in any amount beyond the limit of US$500.00 per package stipulated in the bill of lading.

ISSUE:Whether the consignee of seaborne freight is bound by stipulations in the covering bill of lading limiting to a fixed amount of US$500.00 per package the liability of the carrier for loss or damage to the cargo where its value is not declared in the bill? YES

The stipulation in the questioned bill of lading limiting Sea-Land's liability for loss of or damage to the shipment covered by said bill to US$500.00 per package is held valid and binding on private respondent. Thus, Sea Land is liable only in the aggregate amount of US$4,000.00 (US$500.00 per package for 8 packages) equivalent to P32,000.00.

RATIO:A consignee in a bill of lading can recover from the carrier or shipper for loss of, or damage to, goods being transported under said bill ,although that document may have been — as in practice it oftentimes is — drawn up only by the consignor and the carrier without the intervention of the consignee.

Since the liability of a common carrier for loss of or damage to goods transported by it under a contract of carriage is governed by the laws of the country of destination and the goods in question were shipped from the United States to the Philippines, the liability of petitioner Sea-Land to the respondent consignee is governed primarily by the Civil Code, suppletorily, in all matters not determined thereby, by the Code of Commerce and special laws.

Not only is there nothing in the Civil Code which absolutely prohibits agreements between shipper and carrier limiting the latter's liability for loss of or damage to cargo shipped under contracts of carriage; it is also quite clear that said Code in fact has agreements of such character in contemplation in providing, in its Articles 1749 and 1750, that:

ART. 1749 A stipulation that the common carrier's liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding.

ART. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon.

There can, therefore, be no doubt or equivocation about the validity and enforceability of freely-agreed-upon stipulations in a contract of carriage or bill of lading limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and inserts it into said contract or bill

Court takes note of Sea-Land's explanation that it only directly serves the Port of Manila from abroad in the usual course of voyage of its carriers, hence its maintenance of arrangements with a local forwarder. Aboitiz and Company, for delivery of its imported cargo to the agreed final point of destination within the Philippines, such arrangements not being prohibited, but in fact recognized, by law.

The fact that respondent shipped his goods on board the ship of petitioner and paid the corresponding freight thereon shows that he impliedly accepted the bill of lading which was issued in connection with the shipment in question, and so it may be said that the same is finding upon him as if it had been actually signed by him or by any other person in his behalf.

64. MARITIME CO. OF THE PHILS. VS. CA (DE LEON)DOCTRINEThe “law of the country to which the goods are to be transported (which) shall govern the liability of the common carrier for their loss, destruction or deterioration." It is only in "matters not regulated by x x (the Civil) Code," according to Article 1766, that "the rights and obligations of common carriers shall be governed by the Code of Commerce and by special laws."FACTSRizal Surety & Insurance Co. (hereafter, simply Rizal Surety) sued the National Development Company (NDC) and Maritime Co. of the Philippines (hereafter simply Maritime Co.) for the recovery of a sum of money paid by it as insurer for the value of goods lost in transit on board vessel known as the SS Doña Nati . After due proceedings and trial, the complainant was "dismissed with costs

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against plaintiff ." The Trial Court's judgment was founded upon the following findings and conclusions, to wit:

xxx5. There is no doubt that under our Code of Commerce, it would be the vessel at fault in this collision, that would be responsible for the damage to the cargo. And the evidence of both Defendants, which has not been rebutted, is that the M/V Yasushima Maru was at fault in the collision, so that the cause of action of plaintiff should be directed to the owners of the negligent vessel. However, as Plaintiff has brought this action in good faith, attorney's fees are not recoverable." Rizal Surety elevated the case to the Court of Appeals. That Court found merit in its appeal. It thus rendered judgment, setting aside that of the Trial Court and 'ordering defendants-appellees (NDC and Maritime Co.) ISSUEWhether the carrier should be held liable.HELDYesRATIOThe rights are to be determined by the Civil Code, not the Code of Commerce. This conclusion derives from Article 1753 of the Civil Code to the effect that it is the "law of the country to which the goods are to be transported (which) shall govern the liability of the common carrier for their loss, destruction or deterioration." It is only in "matters not regulated by x x (the Civil) Code," according to Article 1766, that "the rights and obligations of common carriers shall be governed by the Code of Commerce and by special laws." Since there are indeed specific provisions regulating the matter of such liability in the Civil Code, these being embodied in Article 1734, as well as prescribing the period of prescription of actions, it follows that the Code of Commerce, or the Carriage of Goods by Sea Act, has no relevancy in the determination of the carrier's liability in the instant case. In view of said Articles 1753 and 1766, the provisions of the Carriage of Goods by Sea Act are merely suppletory to the Civil Code. Under the established facts, and in accordance with Article 1734 above mentioned, petitioner Maritime Co. and NDC, as "common carriers," are liable to Acme for "the loss, destruction or deterioration of the goods," and may be relieved of responsibility if the loss, etc., "is due to any of the following causes only: 1. Flood, storm, earthquakes, 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.' Since none of the specified absolutory causes is present, the carrier's liability is palpable. Having failed to exercise extraordinary diligence to avoid any loss of life and property, as commanded by law, not having in fact exercised "even due diligence to avoid the collision,' it must be held responsible for the loss of the goods in question. Besides, as remarked by the Court of Appeals, "the principal cause of action is not derived from a maritime collision, but rather, from a contract of carriage, as evidenced by the bill of lading."

65. REPUBLIC V. LORENZO SHIPPING CORP. (LAVADIA)FACTSThe 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 (LSC) from September to December 1988. 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, the government and petitioner sued respondent for breach of contract of carriage.

ISSUEWhether respondent is liable for breach of contract of carriage – NO.

RATIOArticle 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, we agree 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

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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.

This practice, which respondent’s agents testified to be their standard operating procedure, finds support in Article 353 of the Code of Commerce:

ART. 353. After the contract has been complied with, the bill of lading which the carrier has issued shall be returned to him, and by virtue of the exchange of this title with the thing transported, the respective obligations and actions shall be considered cancelled, ….

In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed by the carrier, because of its loss or of any other cause, he must give the latter a receipt for the goods delivered, this receipt producing the same effects as the return of the bill of lading. (Emphasis supplied)

Conformably with the aforecited provision, the surrender of the original bill of lading is not a condition precedent for a common carrier to be discharged of its contractual obligation. If surrender of the original bill of lading is not possible, acknowledgment of the delivery by signing the delivery receipt suffices. This is what respondent did.

66. COMPANIA MARITIMA VS. INSURANCE COMPANY OF NORTH AMERICA (KING)FACTSMacleod and Company of the Philippines contracted by telephone the services of the Compañia Maritima, a shipping corporation, for the shipment of 2,645 bales of hemp from the former's Sasa private pier at Davao City to Manila and for their subsequent transhipment to Boston, Massachusetts, U.S.A. on board the S.S. Steel Navigator. The loading of the hemp was completed on two lighters on October 29, 1952. These two lighters were manned each by a patron and an assistant patron. The two loaded barges left Macleod's wharf and proceeded to and moored at the government's marginal wharf in the same place to await the arrival of the S.S. Bowline Knot belonging to Compañia Maritima on which the hemp was to be loaded. All abaca shipments of Macleod, including the 1,162 bales loaded on the carrier's LCT No. 1025, were insured with the Insurance Company of North America against all losses and damages. The lighters sunk on the night of October 29, 1952.

ISSUES

1. Was there a contract of carriage between the carrier and the shipper even if the loss occurred when the hemp was loaded on a barge owned by the carrier which was loaded free of charge and was not actually loaded on the S.S. Bowline Knot which would carry the hemp to Manila and no bill of lading was issued therefore? YES

2. Was the damage caused to the cargo or the sinking of the barge where it was loaded due to a fortuitous event, storm or natural disaster that would exempt the carrier from liability? NO

RATIO1. This issue should be answered in the affirmative. As found by the Court of

Appeals, Macleod and Company contracted by telephone the services of petitioner to ship the hemp in question from the former's private pier at Sasa, Davao City, to Manila, to be subsequently transhipped to Boston, Massachusetts, U.S.A., which oral contract was later confirmed by a formal and written booking issued by the shipper's branch office, Davao City, in virtue of which the carrier sent two of its lighters to undertake the service. It also appears that the patrons of said lighters were employees of the carrier with due authority to undertake the transportation and to sign the documents that may be necessary.

The fact that the carrier sent its lighters free of charge to take the hemp from Macleod's wharf at Sasa preparatory to its loading onto the ship Bowline Knot does not in any way impair the contract of carriage already entered into between the carrier and the shipper, for that preparatory step is but part and parcel of said contract of carriage.

The lighters were manned by its (Compania Maritima) authorized employees, under which Macleod became entitled to the privilege secured to him by law for its safe transportation and delivery, and the carrier to the full payment of its freight upon completion of the voyage.

The liability of the carrier as common carrier begins with the actual delivery of the goods for transportation, and not merely with the formal execution of a receipt or bill of lading; the issuance of a bill of lading is not necessary to complete delivery and acceptance. Even where it is provided by statute that liability commences with the issuance of the bill of lading, actual delivery and acceptance are sufficient to bind the carrier.

2. The barge had cracks on its bottom which admitted sea water in the same manner as rain entered "thru tank man-holes", according to the patron of LCT No. 102. The barge was not sea-worthy!

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67. PAL VS. CA AND GILDA MEJIA (LOVERIA)DOCTRINE: Recognition of the Warsaw Convention does not preclude the operation of the Civil Code and other pertinent laws in the determination of the extent of liability of the common carrier.

FACTSPrivate respondent Gilda Mejia shipped thru petitioner, Philippine Airlines, one (1) unit microwave oven, with a gross weight of 33 kilograms from San Francisco, U.S.A. to Manila, Philippines. Upon arrival, however, of said article in Manila, Philippines, Mejia discovered that its front glass door was broken and the damage rendered it unserviceable. Demands both oral and written were made by Mejia against the petitioner for the reimbursement of the value of the damaged microwave oven, and transportation charges paid by respondent to petitioner company. But these demands fell on deaf ears.

In San Francisco, the microwave was still in good condition upon inspection but Mejia did not declare the value of said appliance to petitioner’s personnel. In private respondent’s complaint she alleged sleepless nights over the broken microwave and a loss of income due thereto. Both the trial court and the CA ruled in favor of Mejia.

On appeal, one of petitioner’s claims is that under the Warsaw Convention, its liability if any, cannot exceed U.S. $20.00 based on weight as plaintiff did not declare the contents of her baggage nor pay additional charges before the flight.

ISSUEWhether the Warsaw Convetion’s provisions on limited liability are applicable to the instant case.

RATIOThere is no absolute obligation on the part of a carrier to accept a cargo. Where a common carrier accepts a cargo for shipment for valuable consideration, it takes the risk of delivering it in good condition as when it was loaded. And if the fact of improper packing is known to the carrier or its personnel, or apparent upon observation but it accepts the goods notwithstanding such condition, it is not relieved of liability for loss or injury resulting therefrom. The acceptance in due course by PAL of private respondent’s cargo as packed and its advice against the need for declaration of its actual value operated as an assurance to private respondent that in fact there was no need for such a declaration. Petitioner can hardly be faulted for relying on the representations of PAL’s own personnel. In other words, private respondent Mejia could and

would have complied with the conditions stated in the air waybill, i.e., declaration of a higher value and payment of supplemental transportation charges, entitling her to recovery of damages beyond the stipulated limit of US$20 per kilogram of cargo in the event of loss or damage, had she not been effectively prevented from doing so upon the advice of PAL’s personnel for reasons best known to themselves. Petitioner, therefore, is estopped from blaming private respondent for not declaring the value of the cargo shipped and which would have otherwise entitled her to recover a higher amount of damages.

We likewise uphold the lower court’s finding that private respondent complied with the requirement for the immediate filing of a formal claim for damages as required in the air waybill or, at least, we find that there was substantial compliance therewith. All told, therefore, respondent appellate court did not err in ruling that the provision on limited liability is not applicable in this case. We, however, note in passing that while the facts and circumstances of this case do not call for the direct application of the provisions of the Warsaw Convention, it should be stressed that, indeed, recognition of the Warsaw Convention does not preclude the operation of the Civil Code and other pertinent laws in the determination of the extent of liability of the common carrier.

Petitioner was not able to overcome the statutory presumption of negligence in Article 1735 which, as a common carrier, it was laboring under in case of loss, destruction or deterioration of goods, through proper showing of the exercise of extraordinary diligence. Neither did it prove that the damage to the microwave oven was because of any of the excepting causes under Article 1734, all of the same Code. Inasmuch as the subject item was received in apparent good condition, no contrary notation or exception having been made on the air waybill upon its acceptance for shipment, the fact that it was delivered with a broken glass door raises the presumption that PAL’s personnel were negligent in the carriage and handling of the cargo.

68. PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY INSURANCE CO., INC. VS. CA AND TRANSPACIFIC (MANGAHAS) FACTSDavao Union shipped on board the vessel M/V "Crazy Horse" operated by the Transpacific Towage, Inc. cargo consisting of 9,750 sheets of union brand GI sheets and 86,860 bags of cement. The cargo was consigned to the Bicol Union Center with a certain Pedro Olivan as the "Notify-Party." The cargo was insured by the Philamgen Insurance Co.

The vessel arrived as scheduled at the port of Pasacao, Camarines Sur. Upon arrival the shipmaster notified the consignee's "Notify-Party" that the vessel was

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ready to discharge the cargo. The discharging of the cargo had to be suspended due to the heavy downpour, strong winds, and turbulent sea brought by typhoon “Saling”. According to the shipmaster plotting the typhoon's path in a chart, the radius was so wide that there was no way the typhoon could be evaded. The shipmaster had no choice but to order the ship to be abandoned. The cargo-carrying vessel was wrecked and partially sank due to typhoon "Saling". A the time said vessel sank, the remaining undischarged cargo, consisting of 26,424 cement bags and 4,000 pieces of G.I. sheets, were still on board the vessel. As a result of the incident the cargo of cement was damaged while the GI sheets were looted and nothing was left of the undischarged pieces.

Insurer Philamgen paid the shipper Davao Union. Thereafter, the said insurer made demands upon the Transpacific for the payment of said amount as subrogee of the insured, claiming that the loss of the cargo was directly and exclusively brought about by the fault and negligence of the shipmaster and the crew of M/V "Crazy Horse". Because the latter refused to pay the amount demanded, the Philamgen filed a complaint against Transpacific.

The lower court against Philamgen and found that although the immediate cause of the loss may have been due to an act of God, the defendant carrier had exposed the property to the accident. CA reversed the decision of the trial court and ruled instead that private respondent, as a common carrier, is not responsible for the loss of the insured cargo involved in the case at bar, as said loss was due solely to a fortituous event.

ISSUEWhether Transpacific was negligent and liable for damages for the delay in unloading of cargo? NO

RATIOTranspacific is exempt from liability for the loss of the cargo, pursuant to Article 1740 of the Civil Code and because the shipmaster exercised diligence required pursuant to Article 1739 of the Civil Code.

It was undisputed that the carrier was a common carrier and that typhoon Saling was a fortuitous event. The Court of Appeals summarized the reasons which adversely affected the completion of the unloading of the cargo from the time the vessel arrived at the Pasacao area on 7 September 1985, namely: first, the buoys were installed only on 11 September 1985; second, the consignee secured the discharge permit only on 13 September 1985; third, a wooden catwalk had to be installed and the extension of the wharf had to be made, which was completed only on 16 September 1985; fourth, there were

intermittent rains and the stevedores supplied by the consignee did not work during the town fiesta of the Virgin of Penafrancia, hence, the unloading was not continuous.

The Court agreed with the above-mentioned factual findings of the appellate court as to the natural conditions of the port of Pasacao were the vessel was docked, and several other factors which harshly affected the completion of the discharge of the cargo, as these findings of fact are substantially supported by evidence.

While it is true that there was indeed delay in discharging the cargo from the vessel, the Court agreed with the Court of Appeals that neither of the parties herein could be faulted for such delay, for the same (delay) was due not to negligence, but to several factors earlier discussed. The cargo having been lost due to typhoon "Saling", and the delay incurred in its unloading not being due to negligence, Transpacific is exempt from liability for the loss of the cargo, pursuant to Article 1740 of the Civil Code.

The records also show that before, during and after the occurrence of typhoon "Saling", private respondent through its shipmaster exercised due negligence to prevent or minimize the loss of the cargo, as shown by the following facts: (1) at 5:20 a.m. of 18 October 1985, as typhoon "Saling" continued to batter the Pasacao area, the shipmaster tried to maneuver the vessel amidst strong winds and rough seas; (2) when water started to enter the engine room and later the engine broke down, the shipmaster ordered the ship to be abandoned, but he sought police assistance to prevent pilferage of the vessel and its cargo; (3) after the vessel broke into two (2) parts and sank partially, the shipmaster reported th eincident to the Philippine Coast Guard, but unfortunately, despite the presence of three (3) coast guards, nothing could be done to stop the pilferage as almost the entire barrio folk came to loot the vessel and its cargo, including the G.I. sheets.

The diligence exercised by the shipmaster further supports the exemption of private respondent from liability for the loss of the cargo, in accordance with Article 1739 of the Civil Code.

69. PHOENIX ASSURANCE CO., LTD VS. UNITED STATES LINES (MANLICLIC)DOCTRINE: A bill of lading operates both as a receipt and as a contract. It is a receipt for the goods shipped and a contract to transport and deliver the same as therein stipulated.

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FACTSGeneral Motors shipped and consigned on a CIF basis destined to Davao Parts and Service, Inc. at Davao City from New York aboard the United States Lines' vessel SS "Pioneer Moor" a cargo of truck spare parts in 25 cases and 4 crates (2 pieces unboxed), for which United States Lines issued a short form bill of lading and which shipment was insured against loss and damage with Phoenix Assurance Co., Ltd. The short form bill of lading indicated Manila as the port of discharge and Davao City as the place where the goods were to be transshipped, and expressly incorporated by reference the provisions contained in the carrier's regular long form bill of lading.

On July 28, 1962, the SS "Pioneer Moor" discharged the cargo at Manila to the custody of the Manila Port Service (the arrastre service at the Port of Manila). Said cargo was complete but with the exception of two crates valued at 1.4k.

In addition to the 2 missing crates, 2 crates were also lost while in the custody of the Manila Port Service. Thereafter, the cargo minus the 4 missing crates was transshipped by United States Lines to Davao through a vessel of its Davao agent, Columbian Rope Company, and duly received in good order by the Davao Parts and Service, Inc.

Davao Parts and Service, Inc. filed a formal claim with the United States Lines through the latter's agent, Columbian Rope Company, for the value of the missing 4 crates worth 2k

The United States Lines, paid Davao Parts and Service, Inc. the sum 1k representing the value of the first 2 missing crates when it was discovered that these two crates had been overlanded in Honolulu, but refused to pay for the value of second 2 missing crates for the reason that these crates had been lost while in the custody of the Manila Port Service.

The first 2 crates which were overlanded in Honolulu were later recovered and returned to Davao Parts and Service, Inc. and the latter refunded United States Lines for the sum it paid. In view of United States Lines' refusal to pay for 2 crates which were lost while in the custody of the Manila Port Service, Ker & Company, Ltd., agent of Phoenix Assurance Co., Ltd., in the Philippines, and insurer of Davao Parts and Service, Inc., paid to the latter the value of said crates in the sum of P552.

The United States Lines, through the Columbian Rope Company filed a claim for the undelivered crates with the Manila Port Service. but the latter declined to honor the same.

United States Lines, through Columbian Rope Company, informed the Davao Parts and Service, Inc. that the Manila Port Service had not yet settled its claim, and that the one-year period provided by law within which to bring action against the Manila Port Service for the 2 crates would expire on July 28, 1963.

Phoenix Assurance Co., Ltd., through Ker & Company Ltd., its agent in the Philippines, wrote to the United States Lines expressing its appreciation to the latter for taking action against the Manila Port Service. In the same letter it requested for an extension of time to file suit against the United States Lines (the prescriptive period for doing so being set to expire on July 28, 1963), explaining that it could not file suit against any entity (including the Manila Port Service) except the United States Lines with whom its subrogee the Davao Parts and Service, Inc., was in contract.

No reply having been received by it from the United States Lines, the Phoenix Assurance Co., Ltd. on July 29, 1963 filed a suit praying that judgment be rendered against US Lines for the sum of P552.

ISSUEWhether US Lines is liable for the 2 crates that was lost in the custody of the Manila Port Service? -NO

RATIOA bill of lading operates both as a receipt and as a contract. It is a receipt for the goods shipped and a contract to transport and deliver the same as therein stipulated. 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 weight rate or charges, and stipulates the rights and obligations assumed by the parties.

The crates were lost while in the possession and custody of the Manila Port Service. Since the long form of Bill of Lading provides that “The carrier shall not be liable in any capacity whatsoever for any loss or damage to the goods while the goods are NOT in its actual custody”, US Lines cannot be held responsible for the loss of said crates. It is hardly fair to make US Lines accountable for a loss not due to its acts or omissions or over which it had no control.

US Lines did not undertake to carry and deliver safely the cargo to the consignee in Davao City. The short form Bill of Lading states in no uncertain terms that the port of discharge of the cargo is Manila, but that the same was to be

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transshipped beyond the port of discharge to Davao City. Pursuant to the terms of the long form Bill of Lading, US Lines’ responsibility as a common carrier ceased the moment the goods were unloaded in Manila; and in the matter of transshipment, US Lines acted merely as an agent of the shipper and consignee. Further, the cargo was not transshipped with the use of transportation used or operated by US Lines. Although the vessel used for transshipment is owned and operated by US Lines’ Davao agent, Columbian Rope, but there is no proof that said vessel is owned or operated by US Lines.

The filing of a claim by US Lines with the Manila Port Service for the value of the losses cannot be considered as an indication that it is answerable for cargo losses up to Davao City. On the contrary, it is a convincing proof that said party was not remiss in its duties as agent of the consignee.

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