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TRANSPORTATION OF GOODS

a. Governing Lawi. NCC, Article 1733 to 1753.

b. Extraordinary Diligence (NCC Art. 1733)i. Eastern Shipping v. Court of Appeals, 196 SCRA 570, G.R. No. 94151

April 30, 1991.

FACTS: On September 4, 1978, 13 coils of uncoated 7-wire stress relieved wire strand were

shipped on board "Japri Venture," owned and operated by the defendant Eastern Shipping

Lines, Inc., at Kobe, Japan, for delivery to Stresstek Post-Tensioning Phils., Inc. in Manila, which

were insured by the plaintiff First Nationwide Assurance Corporation for P171,923.

While enroute from Kobe to Manila, the carrying vessel "encountered very rough seas and

stormy weather" for three days, more or less.

On September 16, 1978, Japri arrived in Manila and discharged the cargo to the custody

of E. Razon, Inc. When inspected, all the cargoes were wet and that all 13 coils were extremely

rusty and totally unsuitable for the intended purpose.

First Nationwide indemnified the consignee for damage and loss to the insured cargo. First

Nationwide filed a complaint against Eastern and E.Razon in RTC for the recovery of the amount

it paid due to the consignee.

RTC:dismissed the complaint CA: liable:Razon-8/13 and Eastern-5/13

ISSUE: WON P IS LIABLE EVEN THOUGH THE SHIPMENT WAS ALREADY IN CUSTODY OF THEARRASTRE OPERATOR

HELD: YES

Plainly, the heavy seas and rains referred to in the master's report were not caso

fortuito, but normal occurrences that an ocean-going vessel, particularly in the month of

September which, in our area, is a month of rains and heavy seas would encounter as a matter

of routine. They are not unforeseen nor unforeseeable. These are conditions that ocean-going

vessels would encounter and provide for, in the ordinary course of a voyage. That rain water

(not sea water) found its way into the holds of theJupri Venture is a clear indication that care

and foresight did not attend the closing of the ship's hatches so that rain water would not find

its way into the cargo holds of the ship.

Moreover, under Article 1733 of the Civil Code, common carriers are bound to observe "extra-

ordinary vigilance over goods . . . .according to all circumstances of each case," and Article 1735

of the same Code states, to wit:

Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding

article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have

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been at fault or to have acted negligently, unless they prove that they observed extraordinary

diligence as required in article 1733.

Since the carrier has failed to establish any caso fortuito, the presumption by law of fault or

negligence on the part of the carrier applies; and the carrier must present evidence that it has

observed the extraordinary diligence required by Article 1733 of the Civil Code in order to

escape liability for damage or destruction to the goods that it had admittedly carried in this

case. No such evidence exists of record. Thus, the carrier cannot escape liability.

The presumption, therefore, that the cargo was in apparent good condition when it was

delivered by the vessel to the arrastre operator by the clean tally sheets has been overturned

and traversed. The evidence is clear to the effect that the damage to the cargo was suffered

while aboard petitioner's vessel.

ii. Delsan Transport v. Court of Appeals, 369 SCRA 24, G.R. No. 127897,November 15, 2001.

DELSAN TRANSPORT vs. CA

FACTS

Caltex engaged into a contract of affreightment with the petitioner, Delsan Transport Lines,

Inc.(Delsan), for a period of one year whereby the said common carrier agreed to transport

Caltexs industrial fuel oil from the Batangas-Bataan Refinery to different parts of the country.

Under the contract, petitioner took on board its vessel, MT Maysun, 2,277.314 kiloliters of

industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City. The

shipment was insured with private respondent, American Home Assurance Corporation

(American Home)

The vessel sank in the early morning of August 15, 1986 near Panay Gulf in the Visayas taking

with it the entire cargo of fuel oil.

Subsequently, American Home paid Caltex the sum of Php 5,096,635.57 representing the

insured value of the cargo. Exercising its right to subrogation under Article 2207 of the New Civil

Code, the American Home demanded the Delsan the same amount it paid to Caltex.

Due to its failure to collect from Delsan despite prior demand, American Home filed a complaint

with the RTC of Makati for collection of a sum of money.

The trial court dismissed the complaint against Delsan. It ruled that the vessel, MT Maysun, was

seaworthy and that the incident was caused by unexpected inclement weather condition or

force majeure, thus exempting the common carrier from liability for the loss of its cargo.

The CA reversed. It gave credence to the weather report issued by PAGASA which stated that

the waves were only .7 to 2 meters in height in the vicinity of the Panay Gulf at the day the ship

sank, in contrast to the claim of the crew of the ship that the waves were 20 feet high.

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Delsan contends the following

1. Delsan theorized that when the American Home paid Caltex the value of its lostcargo, the act of American Home is equivalent to a tacit recognition that the ill-fated

vessel was seaworthy; otherwise, American Home was not legally liable to Caltex

due to the latters breach of implied warranty under the marine insurance policy

that the vessel was seaworthy.

2. Delsan avers that although chief officer had merely a 2nd officers license, he wasqualified to act as the vessels chief officer. In fact, all the crew and officers of MTT

Maysun were exonerated in the administrative investigation.

ISSUES

1. W/N the payment made by American Home to Caltex for the insured value of the lostcargo amounted to an admission that the vessel was seaworthy, thus precluding any

action for recovery against the petitioner. NO

2. W/N the non-presentation of the marine insurance policy bars the complaint forrecovery of sum of money for lack of cause of action. NO

RULING

First Issue:

The payment made by American Home for the insured value of the lost cargo operates as waiver

of its right to enforce the term of the implied warranty against Caltex under the marine

insurance policy. However, the same cannot be validly interpreted as an automatic admission of

the vessels seaworthiness by American Home as to foreclose recourse against Delsan for any

liability under its contractual obligation as a common carrier. The fact of payment grants

American Home subrogatory right which enables it to exercise legal remedies that would

otherwise be available to Caltex as owner of the lost cargo against Delsan, the common carrier.

From the nature of their business and for reasons of public policy, common carriers are bound

to observe extraordinary diligence in the vigilance over the goods and for the safety of

passengers transported by them, according to all the circumstances of each case. In the event of

loss, destruction or deterioration of the insured goods, common carriers shall be responsible

unless the same is brought about, among others, by flood, storm, earthquake, lightning or other

natural disaster or calamity. In all other cases, if the goods are lost, destroyed or deteriorated,

common carriers are presumed to have been at fault or to have acted negligently, unless they

prove they observed extraordinary diligence.

In order to escape liability for the loss of its cargo of industrial fuel oil belonging to Caltex,

Delsan attributes the sinking of MT Maysun to fortuitous event or force majeure. Although the

testimony of the captain and chief mate that there were strong winds and waves 20 feet high

was effectively rebutted and belied by the weather report of PAGASA. Thus, as the CA correctly

ruled, Delsans vessel, MT Maysun, sank with its entire cargo for the reason that it was not

seaworthy. There was no squall or bad weather or extremely poor sea condition in the vicinity

where the said vessel sank.

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Additionally, the exoneration of MT Maysuns officers and crew merely concern their respective

administrative liabilities. It does not in any way operate to absolve Delsan the common carrier

from its civil liability arising from its failure to observe extraordinary diligence in the vigilance

over the goods it was transporting and for the negligent acts or omissions of its employees, the

determination of which properly belongs to the courts. In the case at bar, Delsan is liable for the

insured value of the lost cargo of industrial fuel oil belonging to Caltex for its failure to rebut the

presumption of fault or negligence as common carrier occasioned by the unexplained sinking of

its vessel, MT Maysun, while in transit.

Second Issue:

It is the view of the SC that the presentation in evidence of the marine insurance policy is not

indispensable in this case before the insurer may recover from the common carrier the insured

value of the lost cargo in the exercise of its subrogatory right. The subrogation receipt, by itself,

is sufficient to establish not only the relationship of American Home as insurer and Caltex, as the

assured shipper of the lost cargo of industrial fuel oil, but also the amount paid to settle the

insurance claim. The right of subrogation accrues simply upon payment by the insurance

company of the insurance claim.

iii. Philippine Charter v. Chemoil, 463 SCRA 202, G.R. No. 161833, July 08,2005.

iv. Saludo v. Court of Appeals, 207 SCRA 498, G.R. No. 95536, March 23,1992.

Facts:

Plaintiff herein together with Pomierski and Son Funeral Home of Chicago brought the

remains of plaintiffs mother to Continental Mortuary Air Services which booked the shipmentof the remains from Chicago to San Francisco by Trans World Airways (TWA) and from San

Francisco to Mania with Philippine Airlines (PAL). The remains were taken to the Chicago

Airport, but it turned out that there were 2 bodies in the said airport. Somehow the 2 bodies

were switched, and the remains of plaintiffs mother was shipped to Mexico instead. The

shipment was immediately loaded on another PAL flight and it arrived the day after the

expected arrival. Plaintiff filed a claim for damages in court. The lower court absolved both

airlines and upon appeal it was affirmed by the court.

Issue:

Whether or not the 2 airlines should be held liable for damages.

Held:

Explicit is the rule under Article 1736 of the Civil Code that the extraordinary

responsibility of the common carrier begins from the time the goods are delivered to the carrier.

This responsibility remains in full force and effect even when they are temporarily unloaded or

stored in transit, unless the shipper or owner exercises the right of stoppage in transitu, and

terminates only after the lapse of a reasonable time for the acceptance, of the goods by the

consignee or such other person entitled to receive them. And, there is delivery to the carrier

when the goods are ready for and have been placed in the exclusive possession, custody and

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control of the carrier for the purpose of their immediate transportation and the carrier has

accepted them. Where such a delivery has thus been accepted by the carrier, the liability of the

common carrier commences eo instanti. Hence, while we agree with petitioners that the

extraordinary diligence statutorily required to be observed by the carrier instantaneously

commences upon delivery of the goods thereto, for such duty to commence there must in fact

have been delivery of the cargo subject of the contract of carriage. Only when such fact of

delivery has been unequivocally established can the liability for loss, destruction or

deterioration of goods in the custody of the carrier, absent the excepting causes under Article

1734, attach and the presumption of fault of the carrier under Article 1735 be invoked.

As already demonstrated, the facts in the case at bar belie the averment that there was

delivery of the cargo to the carrier on October 26, 1976. Rather, as earlier explained, the body

intended to be shipped as agreed upon was really placed in the possession and control of PAL on

October 28, 1976 and it was from that date that private respondents became responsible for the

agreed cargo under their undertakings in PAL Airway Bill No. 079-01180454. Consequently, for

the switching of caskets prior thereto which was not caused by them, and subsequent events

caused thereby, private respondents cannot be held liable

v. Lorenzo Shipping v. BJ Marthel, 443 SCRA 163, G.R. No. 145483,November 19, 2004.

FACTS

Petitioner Lorenzo Shipping Corporation is a domestic corporation engaged in coastwise

shipping. Respondent BJ Marthel International, Inc. is an importer and distributor of different

brands of engines and spare parts.

Respondent supplied petitioner with spare parts for the latter's marine engines. According to

the quotation it sent, deliveries of such items are within 2 months after receipt of firm order.

Petitioner thereafter issued to respondent Purchase Order No. 13839 for the procurement ofone set of cylinder liner, valued at P477,000, to be used for M/V Dadiangas Express. The

purchase order was co-signed by Jose Go, Jr., petitioner's vice-president, and Henry Pajarillo,

respondents sales manager.

Instead of paying the 25% down payment (indicated in the purchase order) for the first cylinder

liner, petitioner issued in favor of respondent ten postdated checks. The checks were supposed

to represent the full payment of the aforementioned cylinder liner.

Subsequently, petitioner issued Purchase Order No. 14011, for another unit of cylinder liner.

This purchase order stated the term of payment to be "25% upon delivery, balance payable in 5

bi-monthly equal installments." Like the first purchase order, the second purchase order did not

state the date of the cylinder liner's delivery.

On 26 January 1990, respondent deposited petitioner's check that was postdated 18 January

1990, however, the same was dishonored by the drawee bank due to insufficiency of funds. The

remaining nine postdated checks were eventually returned by respondent to petitioner.

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Petitioner claimed that it replaced said check with a good one, the proceeds of which were

applied to its other obligation to respondent. For its part, respondent insisted that it returned

said postdated check to petitioner.

On 20 April 1990, Pajarillo delivered the two cylinder liners at petitioner's warehouse in Manila.

The sales invoices evidencing the delivery of the cylinder liners both contain the notation

"subject to verification" under which the signature of petitioner's warehouseman, appeared.

Respondent sent a Statement of Account and respondent's vice-president sent a demand letter

dated to petitioner requiring the latter to pay. Petitioner sent the former a letter offering to pay

only P150,000 for the cylinder liners. In said letter, petitioner claimed that as the cylinder liners

were delivered late and due to the scrapping of the M/V Dadiangas Express, it (petitioner) would

have to sell the cylinder liners in Singapore and pay the balance from the proceeds of said sale.

Respondent filed an action for sum of money and damages before the RTC. Prior to the filing of

a responsive pleading, respondent filed an amended complaint with preliminary attachment.

The amendments also pertained to the issuance by petitioner of the postdated checks and the

amounts of damages claimed.

The RTC granted respondent's prayer for the issuance of a preliminary attachment. Petitioner

filed an Urgent Ex-Parte Motion to Discharge Writ of Attachment attaching thereto a counter-

bond which the RTC allowed.

Petitioner afterwards filed its Answer alleging therein that time was of the essence in the

delivery of the cylinder liners and that the delivery on 20 April 1990 of said items was late as

respondent committed to deliver said items "within two (2) months after receipt of firm order."

Respondent filed a Second Amended Complaint with Preliminary Attachment which dealt solely

with the number of postdated checks issued by petitioner as full payment for the first cylinderliner it ordered from respondent. (In the first amended complaint, only nine postdated checks

were involved, in its second amended complaint, there were ten postdated checks).

Petitioner filed a Motion alleging therein that the cylinder liners run the risk of obsolescence

and deterioration to the prejudice of the parties to this case. Thus, petitioner prayed that it be

allowed to sell the cylinder liners at the best possible price and to place the proceeds of said sale

in escrow. This motion was granted.

The RTC dismissed the complaint which ordered the plaintiff to pay P50,000.00 to the

defendant. It held respondent bound to the quotation it submitted to petitioner particularly

with respect to the terms of payment and delivery of the cylinder liners. It also declared that

respondent had agreed to the cancellation of the contract of sale when it returned the

postdated checks issued by petitioner.

The CA reversed the decision of the RTC.

ISSUES

1. Whether or not respondent incurred delay in performing its obligation under thecontract of sale - NO

2. Whether or not said contract was validly rescinded by petitioner. -NO

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RULING

Petitioner maintains that its obligation to pay fully the purchase price was extinguished because

the adverted contract was validly terminated due to respondent's failure to deliver within the

two-month period. The threshold question, then, is: Was there late delivery of the subjects of

the contract of sale to justify petitioner to disregard the terms of the contract considering that

time was of the essence thereof?

In determining whether time is of the essence in a contract, the ultimate criterion is the actual

or apparent intention of the parties and before time may be so regarded by a court, there must

be a sufficient manifestation, either in the contract itself or the surrounding circumstances of

that intention. Petitioner insists that although its purchase orders did not specify the dates

when the cylinder liners were supposed to be delivered, nevertheless, respondent should abide

by the term of delivery appearing on the quotation it submitted to petitioner. Petitioner

theorizes that the quotation embodied the offer from respondent while the purchase order

represented its (petitioner's) acceptance of the proposed terms of the contract of sale. Thus,

petitioner is of the view that these two documents "cannot be taken separately as if there were

two distinct contracts." We do not agree.

While this Court recognizes the principle that contracts are respected as the law between the

contracting parties, this principle is tempered by the rule that the intention of the parties is

primordial and "once the intention of the parties has been ascertained, that element is deemed

as an integral part of the contract as though it has been originally expressed in unequivocal

terms."

In the present case, we cannot subscribe to the position of petitioner that the documents, by

themselves, embody the terms of the sale of the cylinder liners. One can easily glean the

significant differences in the terms as stated in the formal quotation and Purchase Order No.

13839 with regard to the due date of the down payment for the first cylinder liner and the dateof its delivery as well as Purchase Order No. 14011 with respect to the date of delivery of the

second cylinder liner. While the quotation provided by respondent evidently stated that the

cylinder liners were supposed to be delivered within two months from receipt of the firm order

of petitioner and that the 25% down payment was due upon the cylinder liners' delivery, the

purchase orders prepared by petitioner clearly omitted these significant items. The petitioner's

Purchase Order No. 13839 made no mention at all of the due dates of delivery of the first

cylinder liner and of the payment of 25% down payment. Its Purchase Order No. 14011 likewise

did not indicate the due date of delivery of the second cylinder liner.

In the instant case, the formal quotation provided by respondent represented the negotiation

phase of the subject contract of sale between the parties. As of that time, the parties had not

yet reached an agreement as regards the terms and conditions of the contract of sale of the

cylinder liners. Petitioner could very well have ignored the offer or tendered a counter-offer to

respondent while the latter could have, withdrawn or modified the same. The parties were at

liberty to discuss the provisions of the contract of sale prior to its perfection. In this connection,

we turn to the testimonies of Pajarillo and Kanaan, Jr., that the terms of the offer were, indeed,

renegotiated prior to the issuance of Purchase Order No. 13839.

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The law implies, however, that if no time is fixed, delivery shall be made within a reasonable

time, in the absence of anything to show that an immediate delivery intended.

We also find significant the fact that while petitioner alleges that the cylinder liners were to be

used for dry dock repair and maintenance of its M/V Dadiangas Express between the later part

of December 1989 to early January 1990, the record is bereft of any indication that respondent

was aware of such fact. The failure of petitioner to notify respondent of said date is fatal to its

claim that time was of the essence in the subject contracts of sale.

Finally, the ten postdated checks issued in November 1989 by petitioner and received by the

respondent as full payment of the purchase price of the first cylinder liner supposed to be

delivered on 02 January 1990 fail to impress. It is not an indication of failure to honor a

commitment on the part of the respondent. The earliest maturity date of the checks was 18

January 1990. As delivery of said checks could produce the effect of payment only when they

have been cashed, respondent's obligation to deliver the first cylinder liner could not have

arisen as early as 02 January 1990 as claimed by petitioner since by that time, petitioner had yet

to fulfill its undertaking to fully pay for the value of the first cylinder liner. As explained by

respondent, it proceeded with the placement of the order for the cylinder liners with itsprincipal in Japan solely on the basis of its previously harmonious business relationship with

petitioner.

As an aside, let it be underscored that "[e]ven where time is of the essence, a breach of the

contract in that respect by one of the parties may be waived by the other party's subsequently

treating the contract as still in force." Petitioner's receipt of the cylinder liners when they were

delivered to its warehouse on 20 April 1990 clearly indicates that it considered the contract of

sale to be still subsisting up to that time. Indeed, had the contract of sale been cancelled already

as claimed by petitioner, it no longer had any business receiving the cylinder liners even if said

receipt was "subject to verification." By accepting the cylinder liners when these were delivered

to its warehouse, petitioner indisputably waived the claimed delay in the delivery of said items.

We, therefore, hold that in the subject contracts, time was not of the essence. The delivery of

the cylinder liners on 20 April 1990 was made within a reasonable period of time considering

that respondent had to place the order for the cylinder liners with its principal in Japan and that

the latter was, at that time, beset by heavy volume of work.

There having been no failure on the part of the respondent to perform its obligation, the power

to rescind the contract is unavailing to the petitioner.

Here, there is no showing that petitioner notified respondent of its intention to rescind the

contract of sale between them. Quite the contrary, respondent's act of proceeding with the

opening of an irrevocable letter of credit on 23 February 1990 belies petitioner's claim that it

notified respondent of the cancellation of the contract of sale. Truly, no prudent businessman

would pursue such action knowing that the contract of sale, for which the letter of credit was

opened, was already rescinded by the other party.

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vi. Sealoader Shipping v. Grand Cement Manufacturing, 638 SCRA 488,G.R. Nos. 167363 & 177466, December 15, 2010.

Doctrine:

Contributory Negligence is conduct on the part of the injured party, contributing as a

legal cause to the harm he has suffered, which falls below the standard to which he is

required to conform for his own protection

Facts:

Sealoader executed a Time Charter Party Aggrement with Joyce Launch for the

chartering of MT Viper in order to tow its unpropelled barges for a minimum of 15 days.

Sealoder entered into a contract with Grand Cement for the loading of cement clinkers

and the delivery thereof to Manila. On March 31, 1994, Sealoders barge arrived at the

wharf of Grand Cement tugged by MT Viper. It was not immediately loaded as the

employees of Grand Cement were loaded another vessel.

On April 4, typhoon Bising struck Cebu area. The barge was still docked at the wharf ofGrand Cement. As it became stronger, MT Viper tried to tow the barge away but it was

unsuccessful because the towing line connecting the vessels snapped since the mooring

lines were not cast off, which is the ultimate cause. Hence, the barge rammed the wharf

causing significant damage.

Grand Cement filed a complaint for damages (P2.4M) since Sealoader ignored its

demands. They allege that Sealoader was negligent when it ignored its employees

advice to move the vessels after it had received weather updates. Sealoader filed a

motion to dismiss on the ground that Joyce Launch is the one liable since it was the

owner of MT Viper, whos employees were manning the vessel. Sealoader filed a cross-

claim against Joyce Launch. Joyce maintains that the damages were due to forcemajeure and faulted Grand Cements employees for abandoning the wharf leaving them

helpless and for not warning them early on.

Upon testimonies, the RTC rendered judgment in favor of Grand Cement holding the

two companies liable since there was complete disregard of the storm signal, the

captain of the vessel was not present and the vessel was not equipped with a radio or

any navigational facility, which is mandatory. Joyce launch did not appeal.

On appeal, the CA affirmed the decision but on MR, it partly reversed its decision finding

Grand Cement to be guilty of contributory negligence since it was found that it was still

loading the other vessel at the last minute just before the storm hit, hence

Sealodersvessel did not move. Damages were reduced to 50%. Hence, petition for

review to SC.

Issue:

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

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Ruling:

Sealoader is liable for its negligence. First because it was not equipped with a radio or a

navigational facility and it failed to monitor the prevailing weather conditions. Second, it

cannot pass the responsibility of casting off the mooring lines because the people at the

wharf could not just cast off the mooring lines without any instructions from the crew of

the vessel. It should have taken the initiative to cast off the mooring lines early on.

With regard to Grand Cements contributory negligence, the court found that it was not

guilty thereof. It had timely informed the barge of the impending typhoon and directed

the vessels to move to a safer place. Sealoader had the responsibility to inform itself of

the prevailing weather conditions in the areas where its vessel was to sail. It cannot

merely rely on other vessels for weather updates and warnings on approaching storms.

For to do so would be to gamble with the safety of its own vessel, putting the lives of its

crew under the mercy of the sea, as well as running the rick of causing damage to

property of third parties for which it would necessarily be liable.

c. Duration of Responsibility (NCC Art. 1736-38)i. Mitsui Lines v. Court of Appeals, 287 SCRA 366, G.R. No. 119571,

March 11, 1998.

ii. Sulpicio v. First Lepanto, 462 SCRA 125, G.R. No. 140349, June 29,2005.

iii. Coastwise Lighterage v. Court of Appeals, 245 SCRA 796, G.R. No.114167 July 12, 1995

Facts:

Pag-asa Sales Inc. entered into a contract to transport molasses from the province of Negros

to Manila with Coastwise Lighterage Corporation (Coastwise for brevity), using the latter's

dumb barges. The barges were towed in tandem by the tugboat MT Marica, which is

likewise owned by Coastwise. Upon reaching Manila Bay, one of the barges, "Coastwise 9",

struck an unknown sunken object. The forward buoyancy compartment was damaged, and

water gushed in through a hole "two inches wide and twenty-two inches long". As a

consequence, the molasses at the cargo tanks were contaminated. Pag-asa filed a claim

against Philippine General Insurance Company, the insurer of its cargo. Philgen paid

P700,000 for the value of the molasses lost.

Philgen then filed an action against Coastwise to recover the money it paid, claiming to be

subrogated to the claims which the consignee may have against the carrier. Both the trial

court and the Court of Appeals ruled against Coastwise.

Issues:

(1) Whether Coastwise was transformed into a private carrier by virtue of the contract it

entered into with Pag-asa, and whether it exercised the required degree of diligence

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(2) Whether Philgen was subrogated into the rights of the consignee against the carrier

Held:

(1) Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order to carry cargo from

one point to another, but the possession, command mid navigation of the vessels remained

with petitioner Coastwise Lighterage. Coastwise Lighterage, by the contract of

affreightment, was not converted into a private carrier, but remained a common carrier and

was still liable as such. The law and jurisprudence on common carriers both hold that the

mere proof of delivery of goods in good order to a carrier and the subsequent arrival of the

same goods at the place of destination in bad order makes for a prima facie case against the

carrier. It follows then that the presumption of negligence that attaches to common

carriers, once the goods it is sports are lost, destroyed or deteriorated, applies to the

petitioner. This presumption, which is overcome only by proof of the exercise of

extraordinary diligence, remained unrebutted in this case. Jesus R. Constantino, the patron

of the vessel "Coastwise 9" admitted that he was not licensed. Coastwise Lighterage cannot

safely claim to have exercised extraordinary diligence, by placing a person whose

navigational skills are questionable, at the helm of the vessel which eventually met thefateful accident. It may also logically, follow that a person without license to navigate, lacks

not just the skill to do so, but also the utmost familiarity with the usual and safe routes

taken by seasoned and legally authorized ones. Had the patron been licensed he could be

presumed to have both the skill and the knowledge that would have prevented the vessel's

hitting the sunken derelict ship that lay on their way to Pier 18. As a common carrier,

petitioner is liable for breach of the contract of carriage, having failed to overcome the

presumption of negligence with the loss and destruction of goods it transported, by proof of

its exercise of extraordinary diligence.

(2) Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If

the insured property is destroyed or damaged through the fault or negligence of a partyother than the assured, then the insurer, upon payment to the assured will be subrogated to

the rights of the assured to recover from the wrongdoer to the extent that the insurer has

been obligated to pay. Payment by the insurer to the assured operated as an equitable

assignment to the former of all remedies which the latter may have against the third party

whose negligence or wrongful act caused the loss. The right of subrogation is not dependent

upon, nor does it grow out of, any private of contract or upon written assignment of, claim.

It accrues simply upon payment of the insurance claim by the insurer.

iv. Philippine First Insurance v. Wallem First Shipping, 582 SCRA 457, G.R.No. 165647, March 26, 2009.

d. Presumption of Negligence (NCC Art. 1735)i. Delsan Transport v. American Home, G.R. No. 149019, August 15,

2006.

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DELSAN TRANSPORT vs. CA

FACTS

Caltex engaged into a contract of affreightment with the petitioner, Delsan Transport Lines,

Inc.(Delsan), for a period of one year whereby the said common carrier agreed to transport

Caltexs industrial fuel oil from the Batangas-Bataan Refinery to different parts of the country.

Under the contract, petitioner took on board its vessel, MT Maysun, 2,277.314 kiloliters of

industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City. The

shipment was insured with private respondent, American Home Assurance Corporation

(American Home)

The vessel sank in the early morning of August 15, 1986 near Panay Gulf in the Visayas taking

with it the entire cargo of fuel oil.

Subsequently, American Home paid Caltex the sum of Php 5,096,635.57 representing the

insured value of the cargo. Exercising its right to subrogation under Article 2207 of the New Civil

Code, the American Home demanded the Delsan the same amount it paid to Caltex.

Due to its failure to collect from Delsan despite prior demand, American Home filed a complaint

with the RTC of Makati for collection of a sum of money.

The trial court dismissed the complaint against Delsan. It ruled that the vessel, MT Maysun, was

seaworthy and that the incident was caused by unexpected inclement weather condition or

force majeure, thus exempting the common carrier from liability for the loss of its cargo.

The CA reversed. It gave credence to the weather report issued by PAGASA which stated that

the waves were only .7 to 2 meters in height in the vicinity of the Panay Gulf at the day the ship

sank, in contrast to the claim of the crew of the ship that the waves were 20 feet high.

Delsan contends the following

1. Delsan theorized that when the American Home paid Caltex the value of its lostcargo, the act of American Home is equivalent to a tacit recognition that the ill-fated

vessel was seaworthy; otherwise, American Home was not legally liable to Caltex

due to the latters breach of implied warranty under the marine insurance policy

that the vessel was seaworthy.

2. Delsan avers that although chief officer had merely a 2nd officers license, he wasqualified to act as the vessels chief officer. In fact, all the crew and officers of MTT

Maysun were exonerated in the administrative investigation.

ISSUES

1. W/N the payment made by American Home to Caltex for the insured value of the lostcargo amounted to an admission that the vessel was seaworthy, thus precluding any

action for recovery against the petitioner. NO

2. W/N the non-presentation of the marine insurance policy bars the complaint forrecovery of sum of money for lack of cause of action. NO

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RULING

First Issue:

The payment made by American Home for the insured value of the lost cargo operates as waiver

of its right to enforce the term of the implied warranty against Caltex under the marine

insurance policy. However, the same cannot be validly interpreted as an automatic admission of

the vessels seaworthiness by American Home as to foreclose recourse against Delsan for any

liability under its contractual obligation as a common carrier. The fact of payment grants

American Home subrogatory right which enables it to exercise legal remedies that would

otherwise be available to Caltex as owner of the lost cargo against Delsan, the common carrier.

From the nature of their business and for reasons of public policy, common carriers are bound

to observe extraordinary diligence in the vigilance over the goods and for the safety of

passengers transported by them, according to all the circumstances of each case. In the event of

loss, destruction or deterioration of the insured goods, common carriers shall be responsible

unless the same is brought about, among others, by flood, storm, earthquake, lightning or other

natural disaster or calamity. In all other cases, if the goods are lost, destroyed or deteriorated,common carriers are presumed to have been at fault or to have acted negligently, unless they

prove they observed extraordinary diligence.

In order to escape liability for the loss of its cargo of industrial fuel oil belonging to Caltex,

Delsan attributes the sinking of MT Maysun to fortuitous event or force majeure. Although the

testimony of the captain and chief mate that there were strong winds and waves 20 feet high

was effectively rebutted and belied by the weather report of PAGASA. Thus, as the CA correctly

ruled, Delsans vessel, MT Maysun, sank with its entire cargo for the reason that it was not

seaworthy. There was no squall or bad weather or extremely poor sea condition in the vicinity

where the said vessel sank.

Additionally, the exoneration of MT Maysuns officers and crew merely concern their respective

administrative liabilities. It does not in any way operate to absolve Delsan the common carrier

from its civil liability arising from its failure to observe extraordinary diligence in the vigilance

over the goods it was transporting and for the negligent acts or omissions of its employees, the

determination of which properly belongs to the courts. In the case at bar, Delsan is liable for the

insured value of the lost cargo of industrial fuel oil belonging to Caltex for its failure to rebut the

presumption of fault or negligence as common carrier occasioned by the unexplained sinking of

its vessel, MT Maysun, while in transit.

Second Issue:

It is the view of the SC that the presentation in evidence of the marine insurance policy is not

indispensable in this case before the insurer may recover from the common carrier the insured

value of the lost cargo in the exercise of its subrogatory right. The subrogation receipt, by itself,

is sufficient to establish not only the relationship of American Home as insurer and Caltex, as the

assured shipper of the lost cargo of industrial fuel oil, but also the amount paid to settle the

insurance claim. The right of subrogation accrues simply upon payment by the insurance

company of the insurance claim.

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ii. Maersk Lines v. Court of Appeals, 222 SCRA 108, G.R. 94761, May 17,1993.

MAERSK LINES vs. CA

FACTS

Petitioner Maersk Line is engaged in the transportation of goods by sea, doing business in the

Philippines through its general agent Compania de Tabacos de Filipinas, while private

respondent Efren Castillo is the proprietor of Ethegal Laboratories, a firm engaged in the

manufacture of pharmaceutical products.

On Nov. 12, 1976, Castillo ordered from Eli Lilly, Inc. of Puerto Rico 600,000 empty gelatin

capsules for the manufacture of his pharmaceutical products. The capsules were placed in 6

drums of 100,000 capsules each valued at US$1,668.71. Shipper Eli Liily,Inc. advised Castillo

through a Memorandum of Shipment that the products were already shipped on board MV

Anders Maesrkline and date of arrival to be April 3, 1977.

However, for unknown reasons, said cargoes of capsules were diverted to Richmond, VA and

then transported back to Oakland, CA and with the goods finally arriving in the PI on June 10,

1977. Consignee Castillo refused to take delivery of the goods on account of its failure to arrive

on time, and filed an action for rescission of contract with damages against Maersk and Eli Lilly

alleging gross negligence and undue delay.

Maersk contends that it is liable only in case of loss, destruction or deterioration of goods under

Art 1734 NCC while Eli Lilly in its cross claim argued that the delay was due solely to the

negligence of Maersk Line. Trial Court dismissed the complaint against Eli Lilly and the latter

withdrew cross claim but TC still held Maersk liable and CA affirmed with modifications.

ISSUES

1. W/N a cause of action exists against Maersk Line given that there was a dismissal of thecomplaint against Eli Lilly? Yes, but not under the cross claim rather because Maersk

was an original party.

2. W/N Castillo is entitled to damages resulting from delay in the delivery of the shipmentin the absence in the bill of lading of a stipulation on the delivery of goods? Yes.

RULING

The complaint was filed originally against Eli Lilly, Inc. as shipper-supplier and petitioner as

carrier. Petitioner Maersk Line being an original party defendant upon whom the delayed

shipment is imputed cannot claim that the dismissal of the complaint against Eli Liily inured to

its benefit.

Petitioner contends as well that it cannot be held liable because there was no special contract

under which the carrier undertook to deliver the shipment on or before a specific date and that

the Bill of Lading provides that The Carrier does not undertake that the Goods shall arrive at

port of discharge or the place of delivery at any particular time. However, although the SC

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stated that a bill of lading being a contract of adhesion will not be voided on that basis alone, it

did declare that the questioned provision to be void because it has the effect of practically

leaving the date of arrival of the subject shipment on the sole determination and will of the

carrier. It is established that without any stipulated date, the delivery of shipment or cargo

should be made within a reasonable time. In the case at hand, the SC declared that a delay in

the delivery of the goods spanning a period of 2 months and 7 days falls way beyond the realm

of reasonableness.

iii. FGU Insurance v. Court of Appeals, 454 SCRA 337, G.R. No. 137775,March 31, 2005.

FGU INSURANCE vs. CA

FACTS

Anco Enterprises Company (ANCO), a partnership between Ang Gui and Co To, was engaged in

the shipping business. It owned the M/T ANCO tugboat and the D/B Lucio barge which were

operated as common carriers. Since the D/B Lucio had no engine of its own, it could notmaneuver by itself and had to be towed by a tugboat for it to move from one place to another.

The D/B Lucio was towed by the M/T ANCO all the way from Mandaue City to San Jose, Antique.

The vessels arrived at San Jose, Antique, at about one oclock in the afternoon of 30 September

1979. The tugboat M/T ANCO left the barge immediately after reaching San Jose, Antique.

When the barge and tugboat arrived at San Jose, Antique, in the afternoon of 30 September

1979, the clouds over the area were dark and the waves were already big. The arrastre workers

unloading the cargoes of SMC on board the D/B Lucio began to complain about their difficulty in

unloading the cargoes. SMCs District Sales Supervisor, Fernando Macabuag, requested ANCOs

representative to transfer the barge to a safer place because the vessel might not be able towithstand the big waves.

ANCOs representative did not heed the request because he was confident that the barge could

withstand the waves. This, notwithstanding the fact that at that time, only the M/T ANCO was

left at the wharf of San Jose, Antique, as all other vessels already left the wharf to seek shelter.

With the waves growing bigger and bigger, only Ten Thousand Seven Hundred Ninety (10,790)

cases of beer were discharged into the custody of the arrastre operator.

At about ten to eleven oclock in the evening of 01 October 1979, the crew of D/B Lucio

abandoned the vessel because the barges rope attached to the wharf was cut off by the big

waves. At around midnight, the barge run aground and was broken and the cargoes of beer in

the barge were swept away.

As a result, ANCO failed to deliver to SMCs consignee Twenty-Nine Thousand Two Hundred Ten

(29,210) cases of Pale Pilsen and Five Hundred Fifty (550) cases of Cerveza Negra. The value per

case of Pale Pilsen was Forty-Five Pesos and Twenty Centavos (P45.20). The value of a case of

Cerveza Negra was Forty-Seven Pesos and Ten Centavos (P47.10), hence, SMCs claim against

ANCO amounted to One Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven

Pesos (P1,346,197.00).

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As a consequence of the incident, SMC filed a complaint for Breach of Contract of Carriage and

Damages against ANCO for the amount of One Million Three Hundred Forty-Six Thousand One

Hundred Ninety-Seven Pesos (P1,346,197.00) plus interest, litigation expenses and Twenty-Five

Percent (25%) of the total claim as attorneys fees.

ISSUE

ANCO raised the defense that the breach was caused by a fortuitous event, thus it is exempted

from liability. Is this contention correct?

RULING

No. In order for fortuitous event to be a valid defense for a common carrier, the event must be:

1. Unforeseeable , or if foreseeable it must be inevitable.2. It must be the proximate and the only cause of the loss.3. The common carrier must exercise due diligence to prevent or minimize the loss

(before, during after the occurrence of the event).

Caso fortuito or force majeure (which in law are identical insofar as they exempt an obligor from

liability)[19] by definition, are extraordinary events not foreseeable or avoidable, events that

could not be foreseen, or which though foreseen, were inevitable. It is therefore not enough

that the event should not have been foreseen or anticipated, as is commonly believed but it

must be one impossible to foresee or to avoid.

In this case, the calamity which caused the loss of the cargoes was not unforeseen nor was it

unavoidable. In fact, the other vessels in the port of San Jose, Antique, managed to transfer to

another place, a circumstance which prompted SMCs District Sales Supervisor to request that

the D/B Lucio be likewise transferred, but to no avail. The D/B Lucio had no engine and could

not maneuver by itself. Even if ANCOs representatives wanted to transfer it, they no longer hadany means to do so as the tugboat M/T ANCO had already departed, leaving the barge to its

own devices. The captain of the tugboat should have had the foresight not to leave the barge

alone considering the pending storm.

While the loss of the cargoes was admittedly caused by the typhoon Sisang, a natural disaster,

ANCO could not escape liability to respondent SMC. The records clearly show the failure of

petitioners representatives to exercise the extraordinary degree of diligence mandated by law.

To be exempted from responsibility, the natural disaster should have been the proximate and

only cause of the loss. There must have been no contributory negligence on the part of the

common carrier. As held in the case of Limpangco Sons v. Yangco Steamship Co.:

. . . To be exempt from liability because of an act of God, the tug must be free from any

previous negligence or misconduct by which that loss or damage may have been occasioned.

For, although the immediate or proximate cause of the loss in any given instance may have been

what is termed an act of God, yet, if the tug unnecessarily exposed the two to such accident by

any culpable act or omission of its own, it is not excused.

Therefore, as correctly pointed out by the appellate court, there was blatant negligence on the

part of M/T ANCOs crewmembers, first in leaving the engine-less barge D/B Lucio at the mercy

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of the storm without the assistance of the tugboat, and again in failing to heed the request of

SMCs representatives to have the barge transferred to a safer place, as was done by the other

vessels in the port; thus, making said blatant negligence the proximate cause of the loss of the

cargoes.

iv. DSR-Senator v. Federal, 413 SCRA 14, G.R. No. 135377, October 07,2003.

FACTS

Berde Plants delivered 632 units of artificial trees to C.F. Sharp, the General Ship Agent of

DSR-Senator Lines, a foreign shipping corporation, for transportation and delivery to the

consignee, Al-Mohr International Group, in Riyadh, Saudi Arabia.

C.F. Sharp issued International Bill of Lading for the cargo the port of discharge for the

cargo was at the Khor Fakkan port and the port of delivery was Riyadh, Saudi Arabia, via

Port Dammam. The cargo was loaded in M/S Arabian Senator.

Federal Phoenix Assurance insured the cargo against all risks.

On June 7, 1993, M/S Arabian Senator left the Manila South Harbor for Saudi Arabia with

the cargo on board. When the vessel arrived in Khor Fakkan Port, the cargo was reloaded

on board DSR-Senator Lines feeder vessel, M/V Kapitan Sakharov, bound for Port

Dammam, Saudi Arabia.

However, while in transit, the vessel and all its cargo caught fire.

On July 5, 1993, DSR-Senator Lines informed Berde Plants that M/V Kapitan Sakharov with

its cargo was gutted by fire and sank on or about July 4, 1993. On December 16, 1993, C.F.

Sharp issued a certification to that effect

Consequently, Federal Phoenix Assurance paid Berde Plants P941,429.61 corresponding to

the amount of insurance for the cargo. In turn Berde Plants executed in its favor a

Subrogation Receipt dated January 17, 1994.

On February 8, 1994, Federal Phoenix Assurance sent a letter to C.F. Sharp demanding

payment of P941,429.61 on the basis of the Subrogation Receipt. C.F. Sharp denied any

liability on the ground that such liability was extinguished when the vessel carrying the

cargo was gutted by fire.

On March 11, 1994, Federal Phoenix Assurance filed with the RTC, Branch 16, Manila a

complaint for damages against DSR-Senator Lines and C.F. Sharp, praying that the latter be

ordered to pay actual damages of P941,429.61, compensatory damages of P100,000.00 and

costs.

ISSUE

W/N DSR-Senator is liableYES

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RULING

Under Article 1734, Fire is not one of those enumerated under the above provision which

exempts a carrier from liability for loss or destruction of the cargo. Since the peril of fire is

not comprehended within the exceptions in Article 1734, then the common carrier shall be

presumed to have been at fault or to have acted negligently, unless it proves that it has

observed the extraordinary diligence required by law.

The natural disaster must have been the proximate and only cause of the loss, and that the

carrier has exercised due diligence to prevent or minimize the loss before, during or after

the occurrence of the disaster.

When the goods shipped either are lost or arrive in damaged condition, a presumption

arises against the carrier of its failure to observe that diligence, and there need not be an

express finding of negligence to hold it liable.

Common carriers are obliged to observe extraordinary diligence in the vigilance over the

goods transported by them. Accordingly, they are presumed to have been at fault or tohave acted negligently if the goods are lost, destroyed or deteriorated.

Respondent Federal Phoenix Assurance raised the presumption of negligence against

petitioners. However, they failed to overcome it by sufficient proof of extraordinary

diligence.

v. Philamgen v. Court of Appeals, 222 SCRA 155, G.R. No. 101426, May17, 1993.

e. Defenses and Conditions (NCC Art. 1734, 1739-1743)i. Central Shipping v. Insurance Company, 438 SCRA 511, G.R. No.

150751, September 20, 2004.

Facts: On July 25, 1990 at Puerto Princesa, Palawan, the petitioner received on board its

vessel, the M/V Central Bohol, 376 pieces of Round Logs and undertook to transport said

shipment to Manila for delivery to Alaska Lumber Co., Inc. The cargo is insured for P3, 000,

000.00 against total lost under respondents MarineCargo Policy.

After loading the logs, the vessel starts its voyage. After few hours of the trip, the ship tilts

10 degrees to its side, due to the shifting of the logs in the hold. It continues to tilt causing

the captain and the crew to abandon ship. The ship sank.

Respondent alleged that the loss is due to the negligence and fault of the captain. While

petitioner contends that the happening is due to monsoons which is unforeseen or casa

fortuito.

Issue: Whether or not petitioner is liable for the loss of cargo?

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Held: From the nature of their business and for reasons of public policy, common carriers

are bound to observe extraordinary diligence over the goods they transport, according to all

the circumstances of each case. In the event of loss, destruction or deterioration of the

insured goods, common carriers are responsible; that is, unless they can prove that such

loss, destruction or deterioration was brought about -- among others -- by "flood, storm,

earthquake, lightning or other natural disaster or calamity." In all other cases not specifiedunder Article 1734 of the Civil Code, common carriers are presumed to have been at fault or

to have acted negligently, unless they prove that they observed extraordinary diligence.

The contention of the petitioner that the loss is due to casa fortuito exempting them from

liability is untenable. Petitioner failed to show that such natural disaster or calamity was the

proximate and only cause of the loss. Human agency must be entirely excluded from the

cause of injury or loss. In other words, the damaging effects blamed on the event or

phenomenon must not have been caused, contributed to, or worsened by the presence of

human participation. The defense of fortuitous event or natural disaster cannot be

successfully made when the injury could have been avoided by human precaution.

The monsoon is not the proximate cause of the sinking but is due to the improper stowage

of logs. The logs were not secured by cable wires, causing the logs to shift and later on the

sinking the ship. This shows that they did not exercise extraordinary diligence, making them

liable for such loss.

ii. Everett Steamship v. Court of Appeals, 297 SCRA 496, G.R.No. 122494, October 8, 1998.

EVERETT STEAMSHIP vs. CA

FACTSHernandez trading company imported three crates of bus spare parts marked as Marco 12,

Marco 13, Marco 14 from its supplier Maruman trading company.

Said crates were shipped from Japan to Manila on board the vessel owned by Everette Orient

Lines. Upon arrival in Manila, it was discovered that Marco 14 was missing.

Hernandez makes a formal claim to Everett in an amount of 1 mill ++ Yen, which is the amount

of the cargo lost. However, Everett offers an amount of 100k because it is the amount that was

stipulated in its Bill of Lading.

Hernandez files a case at the RTC of Caloocan, RTC rules

1

in favor of Hernandez holding Everettliable for the amount of1M++ Yen. THE CA affirmed the RTCs ruling and made an additional

1Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for

the loss, destruction or deterioration of the goods is valid, if it is reasonable and just under the

circumstances, and has been fairly and freely agreed upon.

It is required, however, that the contract must be reasonable and just under the circumstances and has been fairly and

freely agreed upon.XXX

the Court is of the view that the requirements of said article have not been met. The fact that those conditions areprinted at the back of the bill of lading in letters so small that they are hard to read would not warrant the presumption

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observation that since Hernandez is not a privy to the contract in the bill of lading ( the contract

was entered by Everett and Maruman trading [shipper]), and so the 100k limit stipulated will not

bind Hernandez making Everett liable for the full amount of 1M ++ Yen.

ISSUE

1. Is Everett liable for the full amount or the amount that was stipulated in the contract?-what was stipulated in the contract

2. Is Hernandez a privy to the contract which says that Petitioner is liable only for 100k?Yes

RULING

1. Controlling provisions for this issue would be 1749 and 1750 of the Civil Code.In Sea Land Service, Inc. vs Intermediate Appellate Court

That said stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750

itself in providing.

a limit to liability only if a greater value is not declared for the shipment in the bill of lading. To

hold otherwise would amount to questioning the justness and fairness of the law itself, and thisthe private respondent does not pretend to do. But over and above that consideration, the just

and reasonable character of such stipulation is implicit in it giving the shipper or owner the

option of avoiding accrual of liability limitation by the simple and surely far from onerous

expedient of declaring the nature and value of the shipment in the bill of lading

The clause of the contract goes:

The carrier shall not be liable for any loss of or any damage to or in any

connection with, goods in an amount exceeding One Hundred Thousand Yen in

Japanese Currency (Y100,000.00) or its equivalent in any other currency per package or

customary freight unit (whichever is least) unless the value of the goods higher than

this amount is declared in writing by the shipper before receipt of the goods by thecarrier and inserted in the Bill of Lading and extra freight is paid as required.

(Emphasis supplied)

The shipper, Maruman Trading, had the option to declare a higher valuation if the value of its

cargo was higher than the limited liability of the carrier. Considering that the shipper did not

declare a higher valuation, it had itself to blame for not complying with the stipulations.

The trial courts ratiocination that private respondent could not have fairly and freely

agreed to the limited liability clause in the bill of lading because the said conditions were printed

in small letters does not make the bill of lading invalid.

In Ong Yiu VS. CA the court said that

contracts of adhesion wherein one party imposes a ready-made form of

contract on the other, as the plane ticket in the case at bar, are contracts

that the plaintiff or its supplier was aware of these conditions such that he had fairly and freely agreed to theseconditions. It can not be said that the plaintiff had actually entered into a contract with the defendant, embodying the

conditions as printed at the back of the bill of lading that was issued by the defendant to plaintiff.

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not entirely prohibited

A contract limiting liability upon an agreed valuation does not offend

against the policy of the law forbidding one from contracting against his

own negligence

The shipper, Maruman Trading, we assume, has been extensively engaged in the trading

business. It can not be said to be ignorant of the business transactions it entered into involving

the shipment of its goods to its customers. The shipper could not have known, or should know

the stipulations in the bill of lading and there it should have declared a higher valuation of the

goods shipped. Moreover, Maruman Trading has not been heard to complain that it has been

deceived or rushed into agreeing to ship the cargo in petitioners vessel. A stipulation in the bill

of lading limiting the common carrier's liability for loss or destruction of a cargo to a certain

sum, unless the shipper or owner declares a greater value, is sanctioned by law, particularly

Articles 1749 and 1750 of the Civil Code which provide:

ART. 1749. A stipulation that the common carriers liability is limited to the

value of the goods appearing in the bill of lading, unless the shipper or owner declaresa greater value, is binding.

ART. 1750. A contract fixing the sum that may be recovered by the owner or

shipper for the loss, destruction, or deterioration of the goods is valid, if it is

reasonable and just under the circumstances, and has been freely and fairly agreed

upon.

2. Even if the consignee was not a signatory to the contract of carriage between theshipper and the carrier.

The consignee can still be bound by the contract. private respondent (Hernandez) formallyclaimed reimbursement for the missing goods from petitioner and subsequently filed a case

against the latter based on the very same bill of lading, it (private respondent) accepted the

provisions of the contract and thereby made itself a party thereto, or at least has come to court

to enforce it.iThus, private respondent cannot now reject or disregard the carriers limited

liability stipulation in the bill of lading. In other words, private respondent is bound by the

whole stipulations in the bill of lading and must respect the same.

iii. Cruz v. Sun Holidays, 622 SCRA 389, G.R. No. 186312, June 29, 2010.f. Limited Liability (NCC Art. 1744-1753)

i. PAL v. Court of Appeals, 207 SCRA 100, G.R. No. 92501, 6 March 1992.PAL vs. CA

FACTS

Isidro Co, accompanied by his wife and son, arrived at the Manila International Airport

aboard PAL airline's Flight from San Francisco. Soon after his embarking, Co proceeded to

the baggage retrieval area to claim his checks in his possession. He found 8 of his luggage,

but despite diligent search, he failed to locate his 9 th luggage.

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Co then immediately notified PAL through its employee, Willy Guevarra, who was then in

charge of the PAL claim counter at the airport. Willy filled up the printed form known as a

Property Irregularity Report, acknowledging the luggage to be missing, and signed it.

The incontestable evidence further shows that plaintiff lost luggage was a Samsonite

suitcase worth about US$200 and containing various personal effects purchased by plaintiff

and his wife during their stay in the US and similar other items sent by their friends abroad

to be given as presents to relatives in the Philippines worth around $1,800.

Co on several occasions unrelentingly called PALs office in order to pursue his complaint

about his missing luggage but no avail was given. Thus, Co wrote a demand letter to PAL,

through its manager of the Central Baggage Services. PAL replied acknowledging that they

have been unable to locate the baggage despite careful search and extended their sincere

apologies for the inconvenience. PAL never found the missing luggage or paid its

corresponding value. Co then filed his present complaint against PAL for damages.

The RTC found PAL liable and ordered said company to pay damages. The CA affirmed intoto the trial court's award.

PAL Contends: The Lower Courts were in error in not applying the limit of liability under the

Warsaw Convention which limits the liability of an air carrier of loss, delay or damage to

checked-in baggage to US$20.00 based on weight; and

ISSUE

W/N the Lower Courts should apply the limit of liability under the Warsaw Convention?

NO

RULING

InAlitalia vs. IAC, the Warsaw Convention limiting the carrier's liability was applied because

of a simple loss of baggage without any improper conduct on the part of the officials or

employees of the airline, or other special injury sustained by the passengers. The petitioner

therein did not declare a higher value for his luggage, much less did he pay an additional

transportation charge.

PAL contends that under the Warsaw Convention, its liability, if any, cannot exceed US

$20.00 based on weight as private respondent Co did not declare the contents of his

baggage nor pay traditional charges before the flight.

We find no merit in that contention. In Samar Mining Company, Inc. vs. Nordeutscher Lloyd,

this Court ruled:

The liability of the common carrier for the loss, destruction or deterioration of goods

transported from a foreign country to the Philippines is governed primarily by the New

Civil Code. In all matters not regulated by said Code, the rights and obligations of

common carriers shall be governed by the Code of Commerce and by Special Laws.

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The provisions of the New Civil Code on common carriers are Articles 1733, 1735 and 1753

which provide:

Art. 1733. Common carriers.. are bound to observe extraordinary diligence in the vigilance

over the goods and for the safety of the passengers transported by them...

Art. 1735. ...if the goods are lost, destroyed or deteriorated, common carriers are presumed

to have been at fault or to have acted negligently, unless they prove that they observed

extraordinary diligence..

Art. 1753. The law of the country to which the goods are to be transported shall govern the

liability of the common carrier for their loss, destruction or deterioration.

Since the passenger's destination in this case was the Philippines, Philippine law governs the

liability of the carrier for the loss of the passenger's luggage.

In this case, the PAL failed to overcome, not only the presumption, but more importantly,

the Cos evidence, proving that the carrier's negligence was the proximate cause of the lossof his baggage. Furthermore, petitioner acted in bad faith in faking a retrieval receipt to bail

itself out of having to pay Co's claim. The CA therefore did not err in disregarding the limits

of liability under the Warsaw Convention and applied the Civil Code instead.

ii. Cathay Pacific v. Court of Appeals, 219 SCRA 520, G.R. No. 60501, 5March 1993.

iii. Transasia Shipping v. Court of Appeals, 254 SCRA 260, G.R. No. 118126,March 04, 1996.

Facts: Plaintiff (herein private respondent Atty. Renato Arroyo) bought a ticket from herein

petitioner for the voyage of M/V Asia Thailand Vessel to Cagayan de Oro from Cebu City.

Arroyo boarded the vessel in the evening of November 12, 1991 at around 5:30. At that

instance, plaintiff noticed that some repair works were being undertaken on the evening of

the vessel. The vessel departed at around 11:00 in the evening with only one engine

running.

After an hour of slow voyage, vessel stopped near Kawit Island and dropped its anchor

threat. After an hour of stillness, some passenger demanded that they should be allowed to

return to Cebu City for they were no longer willing to continue their voyage to Cagayan de

Oro City. The captain acceded to their request and thus the vessel headed back to Cebu City.

At Cebu City, the plaintiff together with the other passengers who requested to be brought

back to Cebu City was allowed to disembark. Thereafter, the vessel proceeded to Cagayan

de Oro City. Plaintiff, the next day boarded the M/V Asia Japan for its voyage to Cagayan de

Oro City, likewise a vessel of the defendant.

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On account of this failure of defendant to transport him to the place pf destination on

November 12, 1991, plaintiff filed before the trial court a complaint for damages against the

defendant.

Issue: Whether or not the failure of a common carrier to maintain in seaworthy condition its

vessel involved in a contract of carriage a breach of its duty?

Held: Undoubtedly, there was, between the petitioner and private respondent a contract of

carriage. Under Article 1733 of the Civil Code, the petitioner was bound to observed

extraordinary diligence in ensuring the safety of the private respondent. That meant that

the petitioner was pursuant to the Article 1755 off the said Code, bound to carry the private

respondent safely as far as human care and foresight could provide, using the utmost

diligence of very cautious persons, with due regard for all the circumstances. In this case,

the Supreme Court is in full accord with the Court of Appeals that the petitioner failed or

discharged this obligation.

Before commencing the contact of voyage, the petitioner undertook some repairs on the

cylinder head of one of the vessels engines. But even before it could finish these repairs itallowed the vessel to leave the port of origin on only one functioning engine, instead of two.

Moreover, even the lone functioning engine was not in perfect condition at sometime after

it had run its course, in conked out. Which cause the vessel to stop and remain adrift at sea,

thus in order to prevent the ship from capsizing, it had to drop anchor. Plainly, the vessel

was unseaworthy even before the voyage begun. For the vessel to be seaworthy, it must be

adequately equipped for the voyage and manned with the sufficient number of competent

officers and crew. The Failure of the common carrier to maintain in seaworthy condition its

vessel involved in a contract of carriage is a clear breach of its duty prescribed in Article

1755 of the Civil Code.

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