TRANSPORTATION DIGEST TRANSPORTATION OF GOODS

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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

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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 lost cargo, the act of American
Home is equivalent to a tacit recognition that the illfated 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 2 nd
officers license, he was qualified 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 lost cargo 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 for recovery 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

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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.

or negligence as common carrier occasioned by the unexplained

sinking of its vessel, MT Maysun, while in transit.

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.

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.

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

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Second Issue:

LORENZO SHIPPING vs. BJ MATHEL

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 of one 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.

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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 bimonthly 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.
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 vicepresident 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

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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 cylinder liner 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

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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 the contract of sale - NO
2. Whether or not said contract was validly rescinded by
petitioner. -NO
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 twomonth 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.

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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 date of 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

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were, indeed, renegotiated prior to the issuance of Purchase Order

No. 13839.
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 its principal 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

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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.
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.

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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.

A.M.+D.G.

TRANSPORTATION

The complaint was filed originally against Eli Lilly, Inc. as shippersupplier 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 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.

ISSUES
1. W/N a cause of action exists against Maersk Line given that
there was a dismissal of the complaint 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 shipment in the absence in the bill of
lading of a stipulation on the delivery of goods? Yes.
RULING

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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

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common carriers. Since the D/B Lucio had no engine of its own, it
could not maneuver 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 to withstand the big waves.

A.M.+D.G.

TRANSPORTATION

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).
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

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.

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).

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.

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.

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).

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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

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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
had any 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 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.

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DSR-SENATOR vs. FEDERAL

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, AlMohr 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 DSRSenator 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

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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

A.M.+D.G.

TRANSPORTATION

observe that diligence, and there need not be an express finding of

negligence to hold it liable.
Common carriers are obliged to observe extraordinary diligence in
the vigilance over the goods transported by them. Accordingly,
they are presumed to have been at fault or to have acted
negligently if the goods are lost, destroyed or deteriorated.
Respondent Federal Phoenix Assurance raised the presumption of
negligence against petitioners. However, they failed to overcome it
by sufficient proof of extraordinary diligence.

W/N DSR-Senator is liable YES

RULING

CENTRAL SHIPPIN vs. INS

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.

TO FOLLOW. SORRY OF THE INCONVENIENCE.

EVERETT STEAMSHIP vs. CA
FACTS
Hernandez trading company imported three crates of bus spare
parts marked as Marco 12, Marco 13, Marco 14 from its supplier
Maruman trading company.

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.

Said crates were shipped from Japan to Manila on noard the vessel
owned by Everette Orient Lines. Upon arrival in Manila, it was
discovered that Marco 14 was missing.

When the goods shipped either are lost or arrive in damaged

condition, a presumption arises against the carrier of its failure to

Hernandez makes a formal claim to Everette in an amount of 1 mill

++ Yen, which is the amount of the cargo lost.

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However, Everett offers an amount of 100k because it is the

amount that was stipulated in its Bill of Lading.

1. Controlling provisions for this issue would be 1749 and 1750

of the Civil Code. 2

Hernandez files a case at the RTC of Caloocan, RTC rules 1 in favor of

Hernandez holding Everett liable for the amount of !mill ++ Yen.
THE CA affirmed the RTCs ruling and made an additional
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
1mill ++ Yen.

In Sea Land Service, Inc. vs Intermediate Appellate Court

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
Art. 1750. A contract fixing the sum that may be
recovered by the owner or shipper for the loss,
destruction or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has
been fairly and freely agreed upon.
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 are printed at the back of the bill of
lading in letters so small that they are hard to read would not warrant the
presumption that the plaintiff or its supplier was aware of these conditions
such that he had fairly and freely agreed to these conditions. 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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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 this the 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 the carrier and inserted in the Bill of Lading
and extra freight is paid as required. (Emphasis supplied)

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

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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 readymade form of
contract on the other, as the plane ticket in the case at bar,
are contracts
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.
2. Even if the consignee was not a signatory to the contract of
carriage between the shipper and the carrier.

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The consignee can still be bound by the contract. private

respondent (Hernandez) formally claimed 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. Thus, 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.
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.
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

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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 in toto 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
In Alitalia 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:

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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.
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 loss of 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.