Transportation Law

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- versus -


G.R. No. 166250


ABAD, and


July 26, 2010




For review is the Court of Appeals (CA) Decision
dated April 29, 2004 and
dated November 26, 2004. The assailed Decision affirmed the Regional Trial Court
(RTC) decision
dated February 22, 2001; while the assailed Resolution denied petitioner
Unsworth Transport International (Philippines), Inc., American President Lines, Ltd. (APL), and
Unsworth Transport International, Inc.’s (UTI’s) motion for reconsideration.

The facts of the case are:

On August 31, 1992, the shipper Sylvex Purchasing Corporation delivered to UTI a
shipment of 27 drums of various raw materials for pharmaceutical manufacturing, consisting
of: “1) 3 drums (of) extracts, flavoring liquid, flammable liquid x x x banana flavoring; 2) 2
drums (of) flammable liquids x x x turpentine oil; 2 pallets. STC: 40 bags dried yeast; and 3) 20
drums (of) Vitabs: Vitamin B Complex Extract.”
UTI issued Bill of Lading No.
covering the aforesaid shipment. The subject shipment was insured with
private respondent Pioneer Insurance and Surety Corporation in favor of Unilab against all risks
in the amount of P1,779,664.77 under and by virtue of Marine Risk Note Number MC RM UL
0627 92
and Open Cargo Policy No. HO-022-RIU.

On the same day that the bill of lading was issued, the shipment was loaded in a sealed
1x40 container van, with no. APLU-982012, boarded on APL’s vessel M/V “Pres. Jackson,”
Voyage 42, and transshipped to APL’s M/V “Pres. Taft”
for delivery to petitioner in favor of
the consignee United Laboratories, Inc. (Unilab).
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On September 30, 1992, the shipment arrived at the port of Manila. On October 6, 1992,
petitioner received the said shipment in its warehouse after it stamped the Permit to Deliver
Imported Goods
procured by the Champs Customs Brokerage.
Three days thereafter, or on
October 9, 1992, Oceanica Cargo Marine Surveyors Corporation (OCMSC) conducted a
stripping survey of the shipment located in petitioner’s warehouse. The survey results stated:

2-pallets STC 40 bags Dried Yeast, both in good order condition and
properly sealed

19- steel drums STC Vitamin B Complex Extract, all in good order
condition and properly sealed

1-steel drum STC Vitamin B Complex Extra[ct] with cut/hole on side,
with approx. spilling of 1%

On October 15, 1992, the arrastre Jardine Davies Transport Services, Inc. (Jardine) issued
Gate Pass No. 7614
which stated that “22 drums
Raw Materials for Pharmaceutical Mfg.”
were loaded on a truck with Plate No. PCK-434 facilitated by Champs for delivery to Unilab’s
warehouse. The materials were noted to be complete and in good order in the gate pass.
the same day, the shipment arrived in Unilab’s warehouse and was immediately surveyed by an
independent surveyor, J.G. Bernas Adjusters & Surveyors, Inc. (J.G. Bernas). The Report stated:

1-p/bag torn on side contents partly spilled
1-s/drum #7 punctured and retaped on bottom side content lacking
5-drums shortship/short delivery

On October 23 and 28, 1992, the same independent surveyor conducted final inspection surveys
which yielded the same results. Consequently, Unilab’s quality control representative rejected
one paper bag containing dried yeast and one steel drum containing Vitamin B Complex as unfit
for the intended purpose.

On November 7, 1992, Unilab filed a formal claim
for the damage against private
respondent and UTI. On November 20, 1992, UTI denied liability on the basis of the gate pass
issued by Jardine that the goods were in complete and good condition; while private respondent
paid the claimed amount on March 23, 1993. By virtue of the Loss and Subrogation
issued by Unilab in favor of private respondent, the latter filed a complaint
for Damages against APL, UTI and petitioner with the RTC of Makati.
The case was
docketed as Civil Case No. 93-3473 and was raffled to Branch 134.

After the termination of the pre-trial conference, trial on the merits ensued. On February
22, 2001, the RTC decided in favor of private respondent and against APL, UTI and petitioner,
the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of plaintif PIONEER
INSURANCE & SURETY CORPORATION and against the defendants
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INT’L., PHILS.), ordering the latter to pay, jointly and severally, the former the
following amounts:

ONE and 27/100 (Php76,231.27) with interest at the legal rate of 6% per annum
to be computed starting from September 30, 1993 until fully paid, for and as
actual damages;

2. The amount equivalent to 25% of the total sum as attorney’s fees;

3. Cost of this litigation.


On appeal, the CA affirmed the RTC decision on April 29, 2004. The CA rejected UTI’s
defense that it was merely a forwarder, declaring instead that it was a common carrier. The
appellate court added that by issuing the Bill of Lading, UTI acknowledged receipt of the goods
and agreed to transport and deliver them at a specific place to a person named or his order. The
court further concluded that upon the delivery of the subject shipment to petitioner’s warehouse,
its liability became similar to that of a depositary. As such, it ought to have exercised ordinary
diligence in the care of the goods. And as found by the RTC, the CA agreed that petitioner failed
to exercise the required diligence. The CA also rejected petitioner’s claim that its liability should
be limited to $500 per package pursuant to the Carriage of Goods by Sea Act (COGSA)
considering that the value of the shipment was declared pursuant to the letter of credit and the
pro forma invoice. As to APL, the court considered it as a common carrier notwithstanding the
non-issuance of a bill of lading inasmuch as a bill of lading is not indispensable for the execution
of a contract of carriage.

Unsatisfied, petitioner comes to us in this petition for review on certiorari, raising the
following issues:




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Petitioner admits that it is a forwarder but disagrees with the CA’s conclusion that it is a
common carrier. It also questions the appellate court’s findings that it failed to establish that it
exercised extraordinary or ordinary diligence in the vigilance over the subject shipment. As to
the damages allegedly suffered by private respondent, petitioner counters that they were not
sufficiently proven. Lastly, it insists that its liability, in any event, should be limited to $500
pursuant to the package limitation rule. Indeed, petitioner wants us to review the factual findings
of the RTC and the CA and to evaluate anew the evidence presented by the parties.

The petition is partly meritorious.

Well established is the rule that factual questions may not be raised in a petition for
review on certiorari as clearly stated in Section 1, Rule 45 of the Rules of Court, viz.:

Section 1. Filing of petition with Supreme Court. – A party desiring to
appeal by certiorari from a judgment or final order or resolution of the Court of
Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever
authorized by law, may file with the Supreme Court a verified petition for review
on certiorari. The petition shall raise only questions of law which must be
distinctly set forth.

Admittedly, petitioner is a freight forwarder. The term “freight forwarder" refers to a firm
holding itself out to the general public (other than as a pipeline, rail, motor, or water carrier) to
provide transportation of property for compensation and, in the ordinary course of its business,
(1) to
assemble and consolidate, or to provide for assembling and consolidating, shipments, and to
perform or provide for break-bulk and distribution operations of the shipments; (2) to assume
responsibility for the transportation of goods from the place of receipt to the place of destination;
and (3) to use for any part of the transportation a carrier subject to the federal law pertaining to
common carriers.

A freight forwarder’s liability is limited to damages arising from its own negligence,
including negligence in choosing the carrier; however, where the forwarder contracts to deliver
goods to their destination instead of merely arranging for their transportation, it becomes liable
as a common carrier for loss or damage to goods. A freight forwarder assumes the responsibility
of a carrier, which actually executes the transport, even though the forwarder does not carry the
merchandise itself.

It is undisputed that UTI issued a bill of lading in favor of Unilab. Pursuant thereto,
petitioner undertook to transport, ship, and deliver the 27 drums of raw materials for
pharmaceutical manufacturing to the consignee.

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A bill of lading is a written acknowledgement of the receipt of goods and an agreement to
transport and to deliver them at a specified place to a person named or on his or her order.
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, condition, quality,
and value. As a contract, it names the contracting parties, which include the consignee; fixes the
route, destination, and freight rate or charges; and stipulates the rights and obligations assumed
by the parties.

Undoubtedly, UTI is liable as a common carrier. Common carriers, as a general rule, are
presumed to have been at fault or negligent if the goods they transported deteriorated or got lost
or destroyed. That is, unless they prove that they exercised extraordinary diligence in
transporting the goods. In order to avoid responsibility for any loss or damage, therefore, they
have the burden of proving that they observed such diligence.
Mere proof of delivery of the
goods in good order to a common carrier and of their arrival in bad order at their destination
constitutes a prima facie case of fault or negligence against the carrier. If no adequate
explanation is given as to how the deterioration, loss, or destruction of the goods happened, the
transporter shall be held responsible.

Though it is not our function to evaluate anew the evidence presented, we refer to the
records of the case to show that, as correctly found by the RTC and the CA, petitioner failed to
rebut the prima facie presumption of negligence in the carriage of the subject shipment.

First, as stated in the bill of lading, the subject shipment was received by UTI in apparent
good order and condition in New York, United States of America. Second, the OCMSC Survey
Report stated that one steel drum STC Vitamin B Complex Extract was discovered to be with a
cut/hole on the side, with approximate spilling of 1%. Third, though Gate Pass No. 7614, issued
by Jardine, noted that the subject shipment was in good order and condition, it was specifically
stated that there were 22 (should be 27 drums per Bill of Lading No. C320/C15991-2) drums of
raw materials for pharmaceutical manufacturing. Last, J.G. Bernas’ Survey Report stated that “1-
s/drum was punctured and retaped on the bottom side and the content was lacking, and there was
a short delivery of 5-drums.”

All these conclusively prove the fact of shipment in good order and condition, and the
consequent damage to one steel drum of Vitamin B Complex Extract while in the possession of
petitioner which failed to explain the reason for the damage. Further, petitioner failed to prove
that it observed the extraordinary diligence and precaution which the law requires a common
carrier to exercise and to follow in order to avoid damage to or destruction of the goods entrusted
to it for safe carriage and delivery.

However, we affirm the applicability of the Package Limitation Rule under the COGSA,
contrary to the RTC and the CA’s findings.

It is to be noted that the Civil Code does not limit the liability of the common carrier to a
fixed amount per package. In all matters not regulated by the Civil Code, the rights and
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obligations of common carriers are governed by the Code of Commerce and special laws. Thus,
the COGSA supplements the Civil Code by establishing a provision limiting the carrier’s
liability in the absence of a shipper’s declaration of a higher value in the bill of lading.
4(5) of the COGSA provides:

(5) Neither the carrier nor the ship shall in any event be or become liable
for any loss or damage to or in connection with the transportation of goods in an
amount exceeding $500 per package of lawful money of the United States, or in
case of goods not shipped in packages, per customary freight unit, or the
equivalent of that sum in other currency, unless the nature and value of such
goods have been declared by the shipper before shipment and inserted in the bill
of lading. This declaration, if embodied in the bill of lading, shall be prima
facie evidence, but shall not be conclusive on the carrier.

In the present case, the shipper did not declare a higher valuation of the goods to be
shipped. Contrary to the CA’s conclusion, the insertion of the words “L/C No. LC No. 1-187-
008394/ NY 69867 covering shipment of raw materials for pharmaceutical Mfg. x x x” cannot be
the basis of petitioner’s liability.
Furthermore, the insertion of an invoice number does not in
itself sufficiently and convincingly show that petitioner had knowledge of the value of the

In light of the foregoing, petitioner’s liability should be limited to $500 per steel drum. In
this case, as there was only one drum lost, private respondent is entitled to receive only $500 as
damages for the loss. In addition to said amount, as aptly held by the trial court, an interest rate
of 6% per annum should also be imposed, plus 25% of the total sum as attorney’s fees.

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED.
The Court of Appeals Decision dated April 29, 2004 and Resolution dated November 26, 2004
are AFFIRMED withMODIFICATION by reducing the principal amount due private
respondent Pioneer Insurance and Surety Corporation from P76,231.27 to $500, with interest of
6% per annum from date of demand, and 25% of the amount due as attorney’s fees.

The other aspects of the assailed Decision and Resolution STAND.


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[G.R. No. 149038. April 9, 2003]
The petition before the Court seeks a review of the decision of the Court of Appeals in C.A.
G.R. CV No. 56470, promulgated on 25 June 2001, which has affirmed in toto the judgment of
the Regional Trial Court (RTC), Branch 65, of Makati, dismissing the complaint for damages
filed by petitioner insurance corporation against respondent shipping company.
Davao Union Marketing Corporation (DUMC) contracted the services of respondent PKS
Shipping Company (PKS Shipping) for the shipment to Tacloban City of seventy-five thousand
(75,000) bags of cement worth Three Million Three Hundred Seventy-Five Thousand Pesos
(P3,375,000.00). DUMC insured the goods for its full value with petitioner Philippine American
General Insurance Company (Philamgen). The goods were loaded aboard the dumb barge Limar
I belonging to PKS Shipping. On the evening of 22 December 1988, about nine o’clock,
while Limar I was being towed by respondent’s tugboat, MT Iron Eagle, the barge sank a couple
of miles off the coast of Dumagasa Point, in Zamboanga del Sur, bringing down with it the entire
cargo of 75,000 bags of cement.
DUMC filed a formal claim with Philamgen for the full amount of the insurance. Philamgen
promptly made payment; it then sought reimbursement from PKS Shipping of the sum paid to
DUMC but the shipping company refused to pay, prompting Philamgen to file suit against PKS
Shipping with the Makati RTC.
The RTC dismissed the complaint after finding that the total loss of the cargo could have
been caused either by a fortuitous event, in which case the ship owner was not liable, or through
the negligence of the captain and crew of the vessel and that, under Article 587 of the Code of
Commerce adopting the “Limited Liability Rule,” the ship owner could free itself of liability by
abandoning, as it apparently so did, the vessel with all her equipment and earned freightage.
Philamgen interposed an appeal to the Court of Appeals which affirmed in toto the decision
of the trial court. The appellate court ruled that evidence to establish that PKS Shipping was a
common carrier at the time it undertook to transport the bags of cement was wanting because the
peculiar method of the shipping company’s carrying goods for others was not generally held out
as a business but as a casual occupation. It then concluded that PKS Shipping, not being a
common carrier, was not expected to observe the stringent extraordinary diligence required of
common carriers in the care of goods. The appellate court, moreover, found that the loss of the
goods was sufficiently established as having been due to fortuitous event, negating any liability
on the part of PKS Shipping to the shipper.
In the instant appeal, Philamgen contends that the appellate court has committed a patent
error in ruling that PKS Shipping is not a common carrier and that it is not liable for the loss of
the subject cargo. The fact that respondent has a limited clientele, petitioner argues, does not
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militate against respondent’s being a common carrier and that the only way by which such
carrier can be held exempt for the loss of the cargo would be if the loss were caused by natural
disaster or calamity. Petitioner avers that typhoon "APIANG" has not entered the Philippine
area of responsibility and that, even if it did, respondent would not be exempt from liability
because its employees, particularly the tugmaster, have failed to exercise due diligence to
prevent or minimize the loss.
PKS Shipping, in its comment, urges that the petition should be denied because what
Philamgen seeks is not a review on points or errors of law but a review of the undisputed factual
findings of the RTC and the appellate court. In any event, PKS Shipping points out, the findings
and conclusions of both courts find support from the evidence and applicable jurisprudence.
The determination of possible liability on the part of PKS Shipping boils down to the
question of whether it is a private carrier or a common carrier and, in either case, to the other
question of whether or not it has observed the proper diligence (ordinary, if a private carrier, or
extraordinary, if a common carrier) required of it given the circumstances.
The findings of fact made by the Court of Appeals, particularly when such findings are
consistent with those of the trial court, may not at liberty be reviewed by this Court in a petition
for review under Rule 45 of the Rules of Court.
The conclusions derived from those factual
findings, however, are not necessarily just matters of fact as when they are so linked to, or
inextricably intertwined with, a requisite appreciation of the applicable law. In such instances,
the conclusions made could well be raised as being appropriate issues in a petition for review
before this Court. Thus, an issue whether a carrier is private or common on the basis of the facts
found by a trial court or the appellate court can be a valid and reviewable question of law.
The Civil Code defines “common carriers” in the following terms:
“Article 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.”
Complementary to the codal definition is Section 13, paragraph (b), of the Public Service Act; it
defines “public service” to be –
“x x x every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any common carrier, railroad,
street railway, subway motor vehicle, either for freight or passenger, or both, with or without
fixed route and whatever may be its classification, freight or carrier service of any class, express
service, steamboat, or steamship, or steamship line, pontines, ferries and water craft, engaged in
the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock,
ice plant, ice refrigeration plant, canal, irrigation system, gas, electric light, heat and power,
water supply and power petroleum, sewerage system, wire or wireless communication systems,
wire or wireless broadcasting stations and other similar public services. x x x. (Underscoring
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The prevailing doctrine on the question is that enunciated in the leading case of De Guzman
vs. Court of Appeals.
Applying Article 1732 of the Code, in conjunction with Section 13(b) of
the Public Service Act, this Court has held:
“The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as
an ancillary activity (in local idiom, as `a sideline’). Article 1732 also carefully avoids making
any distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier offering its services to the
`general public,’ i.e., the general community or population, and one who offers services or
solicits business only from a narrow segment of the general population. We think that Article
1732 deliberately refrained from making such distinctions.
“So understood, the concept of `common carrier’ under Article 1732 may be seen to coincide
neatly with the notion of `public service,’ under the Public Service Act (Commonwealth Act No.
1416, as amended) which at least partially supplements the law on common carriers set forth in
the Civil Code.”
Much of the distinction between a “common or public carrier” and a ”private or special
carrier” lies in the character of the business, such that if the undertaking is an isolated
transaction, not a part of the business or occupation, and the carrier does not hold itself out to
carry the goods for the general public or to a limited clientele, although involving the carriage of
goods for a fee,
the person or corporation providing such service could very well be just a
private carrier. A typical case is that of a charter party which includes both the vessel and its
crew, such as in a bareboat or demise, where the charterer obtains the use and service of all or
some part of a ship for a period of time or a voyage or voyages
and gets the control of the
vessel and its crew.
Contrary to the conclusion made by the appellate court, its factual findings
indicate that PKS Shipping has engaged itself in the business of carrying goods for others,
although for a limited clientele, undertaking to carry such goods for a fee. The regularity of its
activities in this area indicates more than just a casual activity on its part.
Neither can the
concept of a common carrier change merely because individual contracts are executed or entered
into with patrons of the carrier. Such restrictive interpretation would make it easy for a common
carrier to escape liability by the simple expedient of entering into those distinct agreements with
Addressing now the issue of whether or not PKS Shipping has exercised the proper
diligence demanded of common carriers, Article 1733 of the Civil Code requires common
carriers to observe extraordinary diligence in the vigilance over the goods they carry. In case of
loss, destruction or deterioration of goods, common carriers are presumed to have been at fault or
to have acted negligently, and the burden of proving otherwise rests on them.
The provisions of
Article 1733, notwithstanding, common carriers are exempt from liability for loss, destruction, or
deterioration of the goods due to any of the following causes:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
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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; and
(5) Order or act of competent public authority.

The appellate court ruled, gathered from the testimonies and sworn marine protests of the
respective vessel masters of Limar I and MT Iron Eagle, that there was no way by which the
barge’s or the tugboat’s crew could have prevented the sinking of Limar I. The vessel was
suddenly tossed by waves of extraordinary height of six (6) to eight (8) feet and buffeted by
strong winds of 1.5 knots resulting in the entry of water into the barge’s hatches. The official
Certificate of Inspection of the barge issued by the Philippine Coastguard and the Coastwise
Load Line Certificate would attest to the seaworthiness of Limar I and should strengthen the
factual findings of the appellate court.
Findings of fact of the Court of Appeals generally conclude this Court; none of the
recognized exceptions from the rule - (1) when the factual findings of the Court of Appeals and
the trial court are contradictory; (2) when the conclusion is a finding grounded entirely on
speculation, surmises, or conjectures; (3) when the inference made by the Court of Appeals from
its findings of fact is manifestly mistaken, absurd, or impossible; (4) when there is a grave abuse
of discretion in the appreciation of facts; (5) when the appellate court, in making its findings,
went beyond the issues of the case and such findings are contrary to the admissions of both
appellant and appellee; (6) when the judgment of the Court of Appeals is premised on a
misapprehension of facts; (7) when the Court of Appeals failed to notice certain relevant facts
which, if properly considered, would justify a different conclusion; (8) when the findings of fact
are themselves conflicting; (9) when the findings of fact are conclusions without citation of the
specific evidence on which they are based; and (10) when the findings of fact of the Court of
Appeals are premised on the absence of evidence but such findings are contradicted by the
evidence on record – would appear to be clearly extant in this instance.
All given then, the appellate court did not err in its judgment absolving PKS Shipping from
liability for the loss of the DUMC cargo.
WHEREFORE, the petition is DENIED. No costs.

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