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JETHRO

Eastern Shipping v. Court of Appeals

G.R. No. 94151 April 30, 1991


EASTERN SHIPPING LINES, INC., petitioner,
vs.
THE COURT OF APPEALS and THE FIRST NATIONWIDE ASSURANCE
CORPORATION, respondents.

FACTS:
 Carrier – Eastern Shipping Lines Inc
 Shipper/Consignee – Stresstek Post Tensioning Philippines Inc
 Insurer - First Nationwide Assurance Corporation
 Arrastre Operator – E. Razon Inc. (not significant)
 Eastern Shipping Lines Inc shipped uncoated 7-wire stress relieved wire strand for prestressed
concrete were shipped on board the vessel "Japri Venture,". Upon arrival at the port of Manila, it
discharged the cargo to the custody of the defendant E. Razon, Inc. from whom the consignee's
customs broker received it for delivery to the consignee's warehouse. First Nationwide Assurance,
indemnified the consignee in the amount of P171,923.00 for damage and loss to the insured cargo,
whereupon the former was subrogated for the latter. The insurer now seeks to recover from the
defendants what it has indemnified the consignee. The petitioner protested alleging that it should not
be hel liable to answer for damages for the event that caused the rusting of the goods was due to the
“encountered very rough seas and stormy weather” classified as force majeure, hence relieving them of
any liability. Aggrieved, respondent filed a case against petitioner.
 RTC – dismissed the case
 CA – set aside RTC’s decision and ordered petitioner to pay respondent

ISSUE:
W/N petitioner was negligent and should be held liable for the payment of damages.

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 the Jupri 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 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.

Philippine Charter Insurance Corp. v. Unknown Owner of Vessel M/V “National Honor”, National
Shipping Corp. and International Container Services, Inc.

[G.R. No. 161833. July 8, 2005]

PHILIPPINE CHARTER INSURANCE CORPORATION, petitioner,


vs
UNKNOWN OWNER OF THE VESSEL M/V “NATIONAL HONOR,”
NATIONAL SHIPPING CORPORATION OF THE PHILIPPINES and
INTERNATIONAL CONTAINER SERVICES, INC., respondents.

FACTS:
 Carrier - National Shipping Corporation of the Philippines (NSCP)
 Consignee - Blue Mono International Company, Incorporated (BMICI)
 Insurer - Philippine Charter Insurance Corporation (PCIC)
 Arrastre Operator - International Container Terminal Services, Incorporated (ICTSI)
 On November 5, 1995, J. Trading Co. Ltd. of Seoul, Korea, loaded a shipment of four units of parts
and accessories in the port of Pusan, Korea, on board the vessel M/V “National Honor,” represented in
the Philippines by its agent, National Shipping Corporation of the Philippines (NSCP). The goods
were to be delivered to the ultimate consignee Blue Mono International Company, Incorporated
(BMICI). The shipment was contained in two wooden crates, namely, Crate No. 1 and Crate No. 2,
complete and in good order condition. There were no markings on the outer portion of the crates
except the name of the consignee.[7]
 Crate No. 1 measured 24 cubic meters and weighed 3,620 kgs. On the flooring of the wooden
crates were three wooden battens placed side by side to support the weight of the cargo.
 Crate No. 2, on the other hand, measured 10 cubic meters and weighed 2,060 kgs.
 It was insured for P2,547,270.00 with the Philippine Charter Insurance Corporation (PCIC). Upon
arrival, the International Container Terminal Services, Incorporated (ICTSI) was furnished with
a copy of the crate cargo list and bill of lading, and it knew the contents of the crate.[11] The following
day, the vessel started discharging its cargoes using its winch crane. Claudio Cansino, the stevedore of
the ICTSI, placed two sling cables on each end of Crate No. 1.[15] No sling cable was fastened on the mid-portion
of the crate. In Dauz’s experience, this was a normal procedure.[16] As the crate was being hoisted from the
vessel’s hatch, the mid-portion of the wooden flooring suddenly snapped in the air, about five feet high from the
vessel’s twin deck, sending all its contents crashing down hard,[17]resulting in extensive damage to the shipment.
BMICI’s customs broker, JRM Incorporated, took delivery of the cargo in such damaged
condition.[18] Upon receipt of the damaged shipment, BMICI found that the same could no longer be
used for the intended purpose. ]BMICI subsequently filed separate claims against the NSCP,[20] the
ICTSI,[21] and its insurer, the PCIC,[22] for US$61,500.00. When the other companies denied liability,
PCIC paid the claim and was issued a Subrogation Receipt[23] for P1,740,634.50. On March 22, 1995,
PCIC, as subrogee, filed with the RTC of Manila, Branch 35, a Complaint for Damages[24] against the
“Unknown owner of the vessel M/V National Honor,” NSCP and ICTSI, as defendants. PCIC alleged
that the loss was due to the fault and negligence of the defendants.
 RTC - rendered judgment for PCIC and ordered the complaint dismissed.
 The loss was due to the internal defect and weakness of the materials used in the fabrication
of the crates. The middle wooden batten had a hole (bukong-bukong).
 CA – affirmed in toto the RTC’s decision
 The loss of the shipment was due to an excepted cause – “[t]he character of the goods or
defects in the packing or in the containers” and the failure of the shipper to indicate signs to
notify the stevedores that extra care should be employed in handling the shipment.

ISSUE:
W/N respondents should be held liable for the damage of the goods.

HELD:
NO. Common carriers, from the nature of their business and for reasons of public policy, are mandated
to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case.The extraordinary diligence in the
vigilance over the goods tendered for shipment requires the common carrier to know and to follow the
required precaution for avoiding damage to, or destruction of the goods entrusted to it for sale, carriage and
delivery. It requires common carriers to render service with the greatest skill and foresight and “to use all
reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to exercise
due care in the handling and stowage, including such methods as their nature requires.”[42]
The common carrier’s duty to observe the requisite diligence in the shipment of goods lasts from the time
the articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier for
transportation until delivered to, or until the lapse of a reasonable time for their acceptance, by the person
entitled to receive them.[43] When the goods shipped are either 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.[44] To overcome the presumption of negligence in the case of loss,
destruction or deterioration of the goods, the common carrier must prove that it exercised extraordinary
diligence.[45]
However, under Article 1734 of the New Civil Code, the presumption of negligence does not apply 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;
3. Act or omission of the shipper or owner of the goods;
4. The character of the goods or defects in the packing or in the containers;
5. Order or act of competent public authority.
“Defect” is the want or absence of something necessary for completeness or perfection; a lack or absence
of something essential to completeness; a deficiency in something essential to the proper use for the purpose
for which a thing is to be used.[48] On the other hand, inferior means of poor quality, mediocre, or second
rate.[49] A thing may be of inferior quality but not necessarily defective. In other words, “defectiveness” is not
synonymous with “inferiority.”
In the present case, the trial court declared that based on the record, the loss of the shipment was caused
by the negligence of the petitioner as the shipper:
The case at bar falls under one of the exceptions mentioned in Article 1734 of the Civil Code, particularly
number (4) thereof, i.e., the character of the goods or defects in the packing or in the containers. The trial
court found that the breakage of the crate was not due to the fault or negligence of ICTSI, but to the inherent
defect and weakness of the materials used in the fabrication of the said crate.
It appears that the wooden batten used as support for the flooring was not made of good materials, which
caused the middle portion thereof to give way when it was lifted. The shipper also failed to indicate signs to
notify the stevedores that extra care should be employed in handling the shipment.
The petitioner failed to rebut the evidence of respondent, that the crates were sealed and that the contents
thereof could not be seen from the outside.[52] While it is true that the crate contained machineries and spare
parts, it cannot thereby be concluded that the respondents knew or should have known that the middle
wooden batten had a hole, or that it was not strong enough to bear the weight of the shipment.

Lorenzo Shipping v. BJ Marthel


(ewan ko bakit to sinali ni sir eh mas marunong pa si ate Jackie, yung binigay niyang Lorenzo case, pang-transpo talaga,
ito pang-oblicon!!! Wag niyo to masyadong damdamin na case )

G.R. No. 145483 November 19, 2004


LORENZO SHIPPING CORP., petitioner,
vs.
BJ MARTHEL INTERNATIONAL, INC., respondent.
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, respondent’s 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.
 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.
 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 contract of sale when it returned the postdated checks issued by petitioner.
 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

HELD:
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 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 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.
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.

Saludo v. Court of Appeals

G.R. No. 95536 March 23, 1992


ANICETO G. SALUDO, JR., MARIA SALVACION SALUDO, LEOPOLDO G. SALUDO and
SATURNINO G. SALUDO, petitioners,
vs.
HON. COURT OF APPEALS, TRANS WORLD AIRLINES, INC., and PHILIPPINE AIRLINES,
INC., respondents.

FACTS:
 Shipper - Pomierski and Son Funeral Home
 Consignee – Maria Saludo
 Carrier - Transworld Airlines (TWA) Chicago – San Francisco, and Philippine Airlines (PAL)- San
Francisco – Manila
 After the death of petitioner's mother, Crispina Galdo Saludo, in Chicago Illinois, Pomierski and Son
Funeral Home of Chicago, made the necessary preparations and arrangements for the shipment, of the
remains from Chicago to the Philippines. Philippine Vice Consul in Chicago, Illinois, Bienvenido M.
Llaneta, at the Pomierski & Son Funeral Home, sealed the shipping case containing a hermetically
sealed casket that is airtight and waterproof wherein was contained the remains of Crispina Saludo
Galdo). On the same date, October 26, 1976, Pomierski brought the remains to C.M.A.S. (Continental
Mortuary Air Services) at the airport (Chicago) which made the necessary arrangements such as
flights, transfers, etc.; C.M.A.S. is a national service used by undertakers to throughout the nation
(U.S.A.). C.M.A.S. booked the shipment with PAL thru the carrier's agent Air Care International,
with Pomierski F.H. as the shipper and Mario (Maria) Saludo as the consignee. The requested routing
was from Chicago to San Francisco on board TWA Flight 131 of October 27, 1976 and from San
Francisco to Manila on board PAL Flight No. 107 of the same date, and from Manila to Cebu on
board PAL Flight 149 of October 29, 1976. Maria Saludo upon arriving at San Francisco Airport, she
then called Pomierski that her mother's remains were not at the West Coast terminal, and Pomierski
immediately called C.M.A.S., which in a matter of 10 minutes informed him that the remains were on
a plane to Mexico City, that there were two bodies at the terminal, and somehow they were switched.
The following day October 28, 1976, the shipment or remains of Crispina Saludo arrived (in) San
Francisco from Mexico on board American Airlines. This shipment was transferred to or received by
PAL at 1945H or 7:45 p.m. (Exh. 2-PAL, Exh. 2-a-PAL). This casket bearing the remains of Crispina
Saludo, which was mistakenly sent to Mexico and was opened (there), was resealed by Crispin F.
Patagas for shipment to the Philippines (See Exh. B-1). The shipment was immediately loaded on
PAL flight for Manila that same evening and arrived (in) Manila on October 30, 1976, a day after its
expected arrival on October 29, 1976. Aggrieved by the incident, the petitioners instituted an action
against respondents and were asked to pay for damages.
 Petitioner allege that private respondents received the casketed remains of petitioners' mother on
October 26, 1976, as evidenced by the issuance of PAL Air Waybill No. 079-01180454 18 by Air Care
International as carrier's agent; and from said date, private respondents were charged with the
responsibility to exercise extraordinary diligence so much so that for the alleged switching of the
caskets on October 27, 1976, or one day after private respondents received the cargo, the latter must
necessarily be liable.
 RTC - absolved the two respondent airlines companies of liability.
 CA - affirmed the decision of the lower court in toto, and in a subsequent resolution, 7 denied herein
petitioners' motion for reconsideration for lack of merit.

ISSUE
W/N the delay in the delivery of the casketed remains of petitioners' mother was due to the fault of
respondent airline companies,

HELD:
NO. A bill of lading is a written acknowledgment of the receipt of the goods and an agreement to
transport and deliver them at a specified place to a person named or on his order. According to foreign
and local jurisprudence, "the issuance of a bill of lading carries the presumption that the goods were delivered
to the carrier issuing the bill, for immediate shipment, and it is nowhere questioned that a bill of lading
is prima facie evidence of the receipt of the goods by the carrier. . . . In the absence of convincing testimony
establishing mistake, recitals in the bill of lading showing that the carrier received the goods for shipment on
a specified date controls.
However, except as may be prohibited by law, there is nothing to prevent an inverse order of events,
that is, the execution of the bill of lading even prior to actual possession and control by the carrier of the cargo
to be transported. There is no law which requires that the delivery of the goods for carriage and the issuance
of the covering bill of lading must coincide in point of time or, for that matter, that the former should precede
the latter.
As between the shipper and the carrier, when no goods have been delivered for shipment no recitals in the bill
can estop the carrier from showing the true facts . . . Between the consignor of goods and receiving carrier, recitals in a
bill of lading as to the goods shipped raise only a rebuttable presumption that such goods were delivered for shipment. As
between the consignor and a receiving carrier, the fact must outweigh the recital."
In the case at bar, it was on October 26, 1976 the cargo containing the casketed remains of Crispina
Saludo was booked for PAL Flight Number PR-107 leaving San Francisco for Manila on October 27, 1976,
PAL Airway Bill No. 079-01180454 was issued, not as evidence of receipt of delivery of the cargo on October
26, 1976, but merely as a confirmation of the booking thus made for the San Francisco-Manila flight
scheduled on October 27, 1976. Actually, it was not until October 28, 1976 that PAL received physical
delivery of the body at San Francisco.
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 stoppagein transitu, 29 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. 30 And, there is
delivery to the carrier when the goods are ready for and have been placed in the exclusive possession, custody
and control of the carrier for the purpose of their immediate transportation and the carrier has accepted
them. 31 Where such a delivery has thus been accepted by the carrier, the liability of the common carrier
commences eo instanti.
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.

Sealoader Shipping Corporation vs Grand Cement Manufacturing Corp.

G.R. No. 167363 December 15, 2010


SEALOADER SHIPPING CORPORATION, Petitioner,
vs.
GRAND CEMENT MANUFACTURING CORPORATION, JOYCE LAUNCH & TUG CO., INC.,
ROMULO DIANTAN & JOHNNY PONCE, Respondents.
G.R. No. 177466
TAIHEIYO CEMENT PHILIPPINES, INC. (Formerly Grand Cement Manufacturing
Corporation), Petitioner,
vs.
SEALOADER SHIPPING CORPORATION, JOYCE LAUNCH & TUG CO., INC., ROMULO
DIANTAN & JOHNNY PONCE, Respondents.

FACTS:
 Carrier - Sealoader Shipping Corporation
 Shipper - Grand Cement Manufacturing Corp.
 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, Sealoder’s 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 of Grand 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 was 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 employee’s 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, who’s employees were manning the vessel. Sealoader filed a cross-claim
against Joyce Launch. Joyce maintains that the damages were due to force majeure and faulted Grand
Cement’s employees for abandoning the wharf leaving them helpless and for not warning them early
on.
 Sealoader contends that Grand Cement had the last clear chance to prevent the damage to the latter’s
wharf. Had Grand Cement cast off the mooring lines attached to the D/B Toploader early on, the
barge could have been towed away from the wharf and the damage thereto could have been avoided.
 RTC – 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.
 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 Sealoder’svessel did not move. Damages were reduced to 50%.
Hence, petition for review to SC.
ISSUE
W/N Sealoader should be held liable for the damages incurred by Grand Cement.

HELD;
YES. The doctrine of last clear chance states that where both parties are negligent but the negligent
act of one is appreciably later than that of the other, or where it is impossible to determine whose fault or
negligence caused the loss, the one who had the last clear opportunity to avoid the loss but failed to do so, is
chargeable with the loss. Stated differently, the antecedent negligence of plaintiff does not preclude him from
recovering damages caused by the supervening negligence of defendant, who had the last fair chance to
prevent the impending harm by the exercise of due diligence.
Negligence on the part of Sealoader – PROVEN. After a thorough review of the records of this case,
the Court finds that Sealoader was indeed guilty of negligence in the conduct of its affairs during the incident
in question on the following grounds:
 Lack of a radio or any navigational communication facility aboard the D/B Toploader.
 manifest laxity of the crew of the D/B Toploader in monitoring the weather. Despite the apparent
difficulty in receiving weather bulletins from the head office of Sealoader, the evidence on record
suggests that the crew of the D/B Toploader failed to keep a watchful eye on the prevailing weather
conditions.
Unmistakably, the crew of the D/B Toploader and the M/T Viper were caught unawares and unprepared
when Typhoon Bising struck their vicinity. Sealoader cannot pass to Grand Cement the responsibility of
casting off the mooring lines connecting the D/B Toploader to the wharf. The people at the wharf could not
just cast off the mooring lines without any instructions from the crew of the D/B Toploader and the M/T
Viper. As the D/B Toploader was without an engine, casting off the mooring lines prematurely might send
the barge adrift or even run the risk of the barge hitting the wharf sure enough. Thus, Sealoader should have
taken the initiative to cast off the mooring lines early on or, at the very least, requested the crew at the wharf
to undertake the same. In failing to do so, Sealoader was manifestly negligent.
Article 2179 of the Civil Code defines the concept of contributory negligence as follows:
Art. 2179. When the plaintiff’s own negligence was the immediate and proximate cause of his
injury, he cannot recover damages. But if his negligence was only contributory, the immediate and
proximate cause of the injury being the defendant’s lack of due care, the plaintiff may recover damages,
but the courts shall mitigate the damages to be awarded.
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.76
Negligence on the part of Grand Cement – NOT PROVEN. Grand Cement was not guilty of
negligent acts, which contributed to the damage that was incurred on its wharf. The Court holds that
Sealoader had the responsibility to inform itself of the prevailing weather conditions in the areas where its
vessel was set to sail. Sealoader cannot merely rely on other vessels for weather updates and warnings on
approaching storms, as what apparently happened in this case. Common sense and reason dictates this. 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 risk of causing damage to the property of third parties for which it would necessarily be
liable.Be that as it may, the records of the instant case reveal that Grand Cement timely informed the D/B
Toploader of the impending typhoon.
Therefore the doctrine of Last Clear Chance clearly does not apply in the instant case and it is but
right and proper to hold sealoader liable for the damages incurred by Grand Cement.

Delsan Transport v. American Home

G.R. No. 149019, 15 August 2006


DELSAN TRANSPORT LINES INC. petitioner
AMERICAN HOME ASSURANCE CORPORATION, respondent
FACTS:
 Carrier – Delsan Transport Lines Inc.
 Shipper – Caltex Philippines
 Insurer – American Home Assurance Corporation
 Delsan Transport was hired by Caltex to transport its cargo of diesel oil from Bataan Refinery
Corporation to the bulk depot in Bacolod City through a Contract of Affreightment. Upon the arrival
of MT Larusan which carried the cargo in its destination, unloading operations commenced.
Thereafter the discharging had to be stopped on account of the discovery that the port bow mooring of
the vessel was intentionally cut or stolen by unknown persons. Because there was nothing holding it,
the vessel drifted westward, dragged and stretched the flexible rubber hose attached to the riser, broke
the elbow into pieces, severed completely the rubber hose connected to the tanker from the main
delivery line at sea bed level and ultimately caused the diesel oil to spill into the sea. Unaware of what
happened, the shore tender, thinking that the vessel would, at any time, resume pumping, did not shut
the storage tank gate valve. As all the gate valves remained open, the diesel oil that was earlier
discharged from the vessel into the shore tank backflowed. In short, there was spillage and backflow
of the diesel cargo. As a result of spillage and backflow of diesel oil, Caltex sought recovery of the loss
from Delsan, but the latter refused to pay. As insurer, AHAC paid Caltex the sum of P479,262.57 for
spillage, pursuant to Marine Risk Note No. 34-5093-6, and P1,939,575.37 for backflow of the diesel oil
pursuant to Inland Floater Policy No. AH-1F64-1011549P. AHiAC as subrogee asked Delsan to
compensate it for the amount paid, but to no avail, AHAc instituted an action against Delsan.
 RTC – ruled in favor of AHAC nad held Delsan liable for the loss of the cargo due to its negligence as
a common carrier
 CA – affirmed RTC - Delsan failed to exercise the extraordinary diligence of a good father of a family
in the handling of its cargo. Applying Article 1736[4] of the Civil Code, the CA ruled that since the
discharging of the diesel oil into Caltex bulk depot had not been completed at the time the losses
occurred, there was no reason to imply that there was actual delivery of the cargo to Caltex, the
consignee

ISSUE:
W/N petitioner should be held liable for both spillage and backflow that caused the loss of the cargo.

HELD:
YES. Common carriers are bound to observe extraordinary diligence in the vigilance over the goods
transported by them. They are presumed to have been at fault or to have acted negligently if the goods are
lost, destroyed or deteriorated.[6] To overcome the presumption of negligence in case of loss, destruction or
deterioration of the goods, the common carrier must prove that it exercised extraordinary diligence. There are,
however, exceptions to this rule found in Article 1734 of the NCC.
In the case at bar, it had been established that the proximate cause of the spillage and backflow of the
diesel oil was due to the severance of the port bow mooring line of the vessel and the failure of the shore
tender to close the storage tank gate valve even as a check on the drain cock showed that there was still a
product on the pipeline. The crew of the vessel should have promptly informed the shore tender that the port
mooring line was cut off. However, Delsan did not do so on the lame excuse that there was no available banca.
The crew of the vessel should have exerted utmost effort to immediately inform the shore tender that the port
bow mooring line was severed.
To be sure, Delsan, as the owner of the vessel, was obliged to prove that the loss was caused by one of
the excepted causes if it were to seek exemption from responsibility.[7] Unfortunately, it miserably failed to
discharge this burden by the required quantum of proof.
Delsan’s argument that it should not be held liable for the loss
of diesel oil due to backflow because the same had already been actually and legally delivered to Caltex
at the time it entered the shore tank holds no water. It had been settled that the subject cargo was still in the
custody of Delsan because the discharging thereof has not yet been finished when the backflow
occurred. Since the discharging of the cargo into the depot has not yet been completed at the time of the
spillage when the backflow occurred, there is no reason to imply that there was actual delivery of the
cargo to the consignee. Delsan is straining the issue by insisting that when the diesel oil entered into the tank
of Caltex on shore, there was legally, at that moment, a complete delivery thereof to Caltex. To be sure, the
extraordinary responsibility of common carrier lasts from the time the goods are unconditionally placed in the
possession of, and received by, the carrier for transportation until the same are
delivered, actually or constructively, by the carrier to the consignee, or to a person who has the right to
receive them.[8] The discharging of oil products to Caltex Bulk Depot has not yet been finished, Delsan
still has the duty to guard and to preserve the cargo. The carrier still has in it the responsibility to guard and
preserve the goods, a duty incident to its having the goods transported.
Hence, having not overturned the presumption of negligence, it is but right and proper to held
petitioner liable for the loss of the cargo.

Delsan Transport Lines v. CA

G.R. No. 127897 November 15, 2001


DELSAN TRANSPORT LINES, INC., petitioner,
vs.
THE HON. COURT OF APPEALS and AMERICAN HOME ASSURANCE
CORPORATION, respondents.

FACTS;
 Carrier – Delsan Transport Lines Inc.
 Shipper – Caltex Philippines
 Insurer – American Home Assurance Corporation
 Caltex entered into a contract with Delsan Transport Lines to transport ots petroleum goods from its
Batangas – Bataan Refinery to Zamboanga City. The shipment was insured by private respondent
American Home Assurance Corp. MT Maysum set sail from Batangas for Zamboanga City.
Unfortunately, the vessel sank in the early morning of August 16, 1986 near Panay Gulf in the Visayas
taking with it the entire cargo of fuel oil. Subsequently, private respondent paid Caltex the sum of
(P5,096,635.67) representing the insured value of the lost cargo. Exercising its right of subrogation,
the private respondent demanded of the petitioner the same amount it paid to Caltex. Delsan failed to
pay its obligation the American Home Assurance Corp. Hence, the latter institutes an action to recover
the amount paid.
 RTC - ruled in favor of petitioner with the following reasons:
 MT Maysum, was seaworthy as certified by Philippine Coastguard
 the incident was caused by unexpected inclement weather condition or force majeure.
 CS – reversed trial court’s decision on the following reasons:
 gave credence to the weather report issued by the PAG-ASA that the sea was calm during the
voyage

ISSUE:
W/N petitioner should be held liable for damages.

HELD;
YES. 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 circumstance of each case.11 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. 12 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 that they observed extraordinary diligence.
The tale of strong winds and big waves by the said officers of the petitioner however, was effectively
rebutted and belied by the weather report15 from the PAGASA, showing that from 2:00 o’clock to 8:00 o’clock
in the morning on August 16, 1986, the wind speed remained at ten (10) to twenty (20) knots per hour while
the height of the waves ranged from .7 to two (2) meters in the vicinity of Cuyo East Pass and Panay Gulf
where the subject vessel sank. Thus, as the appellate court correctly ruled, petitioner’s 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 when the said vessel sank.
Thus not having overturned the evidence presented, (that it observed extraordinary diligence) the
presumption of negligence stands, and therefore it is but right and proper to rule that petitioner should be
held liable for damages.

Maersk Lines v. Court of Appeals

G.R. No. 94761 May 17, 1993


MAERSK LINE, petitioner,
vs.
COURT OF APPEALS AND EFREN V. CASTILLO, doing business under the name and style of
Ethegal Laboratories, respondents.

FACTS:
 Maersk Lines – Carrier; petitioner
 Eli Lilly Inc. – Shipper
 Efren Castillo – consignee; proprietor of Ethegal Laboratories; private respondent
 Private respondent ordered from Eli Lilly. Inc. of Puerto Rico through its (Eli Lilly, Inc.'s) agent in the
Philippines, Elanco Products, 600,000 empty gelatin capsules for the manufacture of his
pharmaceutical products. The goods were shipped via MV Anders Maerskline with a specified date
of arrival to be April 3, 1977. For reasons unknown, said cargo of capsules were mishipped and
diverted to Richmond, Virginia, USA and then transported back Oakland, Califorilia. The
goods finally arrived in the Philippines on June 10, 1977 or after two (2) months from the date
specified in the memorandum. As a consequence, private respondent as consignee refused to
take delivery of the goods on account of its failure to arrive on time. Private respondent alleging
gross negligence and undue delay in the delivery of the goods, filed an action before the court a quo for
rescission of contract with damages against petitioner and Eli Lilly, Inc. The issues having been joined,
private respondent moved for the dismissal of the complaint against Eli Lilly, Inc.on the ground that
the evidence on record shows that the delay in the delivery of the shipment was attributable solely to
petitioner. The lower court ruled in favor of private respondent which was affirmed with some
modification by the CA.

ISSUE:
W/N petitioner was negligent and should be held liable for damages.

HELD:
YES. While it is true that common carriers are not obligated by law to carry and to deliver
merchandise, and persons are not vested with the right to prompt delivery, unless such common carriers
previously assume the obligation to deliver at a given date or time, delivery of shipment or cargo should at
least be made within a reasonable time.
An examination of the subject bill of lading shows that the subject shipment was estimated to arrive in
Manila on April 3, 1977. While there was no special contract entered into by the parties indicating the date of
arrival of the subject shipment, petitioner nevertheless, was very well aware of the specific date when the
goods were expected to arrive as indicated in the bill of lading itself. In this regard, there arises no need to
execute another contract for the purpose as it would be a mere superfluity.
In the case before us, we find that a delay in the delivery of the goods spanning a period of two (2)
months and seven (7) days falls was beyond the realm of reasonableness. Described as gelatin capsules for use
in pharmaceutical products, subject shipment was delivered to, and left in, the possession and custody of
petitioner-carrier for transport to Manila via Oakland, California. But through petitioner's negligence was
mishipped to Richmond, Virginia. Petitioner's insitence that it cannot be held liable for the delay finds no
merit.

GRACE

FGU INSURANCE CORPORATION, Petitioners, vs.


THE COURT OF APPEALS, SAN MIGUEL CORPORATION, and ESTATE OF ANG GUI, represented
by LUCIO, JULIAN, and JAIME, all surnamed ANG, and CO TO, Respondents.

CHICO-NAZARIO, J.:

FACTS:
Carrier: ANCO (Anco Enterprises Company) Owned M/T ANCO tugboat and D/B Lucio barge (had no
engine of its own)
Shipper: San Miguel Corporation. Cases are to be delivered in Iloilo and Antique.

Upon arrival at San Jose, Antique, M/T ANCO tugboat left D/B Lucio barge. Moreover, the clouds were
dark and the waves are big. SMC’s District Sales Supervisor requested ANCO’s representative to transfer the
barge to a safer place because the vessel might not be able to withstand the big waves. ANCO’s representative
did not heed because he was confident that the barge could withstand the waves. All other vessels left the
wharf to seek shelter. Due to the waves not all the cases of beer were discharged into the custody of the
arrastre operator.

The crew of D/B Lucio abandoned the vessel because the barge’s rope attached to the wharf was cut off by the
big waves. The barge run aground and was broken and the cargoes of beer were swept away.

SMC filed a complaint for Breach of Contract of Carriage and Damages against ANCO.
(Important facts ung blue)

OPTIONAL!!! Di namannatouchsa ruling ng Court. Pero for more kabidahanala Ms. Andres, GO! 
///Claim of ANCO: There is an agreement with SMC that ANCO would not be liable for any loses or
damages by reason of fortuitous event. The cases were lost by reason of a storm, a fortuitous event. Moreover,
an agreement that SMC shall insure the cargoes in order to recover indemnity in case of loss. Cases were
insured with FGU Insurance Corporation. Subsequently, ANCO filed a Third-Party Complaint against FGU.

Claim of FGU: The alleged loss of the cargoes covered by the said insurance policy cannot be attributed
directly or indirectly to any risks insured. ANCO and SMC failed to exercise ordinary diligence or the
diligence of a good father of the family in the care and supervision of the cargoes insured to prevent its loss
and/ or destruction.

RTC: Indeed lost to fortuitous event, there was failure on ANCO’s part, through their representatives, to
observe the degree of diligence required that would exonerate them from liability. Moreover, it is the sense of
this Court that the risk insured against was the cause of the loss. FGU shall bear 53% of the loss.

CA affirmed in toto.///

ISSUES:
1. W/N ANCO should be liable and the negligence of the crewmembers was the proximate cause
2. W/N FGU is liable
RULING:
1. Question of fact. Findings of fact by the trial court are entitled to great weight on appeal and should
not be disturbed unless for strong and cogent reasons.
But the Court finds that since it is the duty of the defendant to exercise and observe extraordinary
diligence in the vigilance over the cargo of the plaintiff, the patron or captain of M/T ANCO,
representing the defendant could have placed D/B Lucio in a very safe location before they left
knowing or sensing at that time the coming of a typhoon. The presence of big waves and dark clouds
could have warned the patron or captain of M/T ANCO to insure the safety of D/B Lucio including its
cargo. D/B Lucio being a barge, without its engine, as the patron or captain of M/T ANCO knew,
could not possibly maneuver by itself. Had the patron or captain of M/T ANCO, the representative of
the defendants observed extraordinary diligence in placing the D/B Lucio in a safe place, the loss to
the cargo of the plaintiff could not have occurred. In short, therefore, defendants through their
representatives, failed to observe the degree of diligence required of them under the provision of Art.
1733 of the Civil Code of the Philippines.

The Civil Code provides:

Art. 1733. Common carriers, from the nature of their business and for reasons of public policy are bound to
observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case.

Such extraordinary diligence in vigilance over the goods is further expressed in Articles 1734, 1735, and 1745
Nos. 5, 6, and 7 . . .

Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the
same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity.

Art. 1739. In order that the common carrier may be exempted from responsibility, the natural disaster
must have been the proximate and only cause of the loss.

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. there was blatant
negligence on the part of M/T ANCO’s 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 SMC’s 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.

2. One of the purposes for taking out insurance is to protect the insured against the consequences of his
own negligence and that of his agents. But loss has occurred due to causes which could not have been
prevented by the insured, despite the exercise of due diligence. When evidence show that the insured’s
negligence or recklessness is so gross as to be sufficient to constitute a willful act, the insurer must be
exonerated. The blatant negligence of ANCO’s employees is of such gross character that it amounts to
a wrongful act which must exonerate FGU from liability under the insurance contract.

SUPER SHORT VERSION. 2 boats owned by ANCO. Boat 1- no engine. Hired by SMC. Upon arrival boat 2
left. Storm. Boat 1 damaged including cargoes. W/N liable although storm is fortuitous. Yes. There is
negligence when boat 2 left knowing there is a storm and when refused to heed to the request to move on a
safer place. Additional langung liability ni FGU. Actually may res judicata pa pero wag na un haha.
DSR-SENATOR LINES AND C.F. SHARP AND COMPANY, INC., petitioners, vs.
FEDERAL PHOENIX ASSURANCE CO., INC., respondent.

SANDOVAL-GUTIERREZ, J.:

FACTS:
Shipper: Berde Plants, Inc.
Subject: 632 units of artificial trees
Carrier: C.F. Sharp and Company, Inc.- General Ship Agent of DSR-Senator Lines
Consignee: Al-Mohr International Group in Riyadh, Saudi Arabia
Insurer: Federal Phoenix Assurance

Vessel from Manila arrived in KhorFakkan Port and was reloaded on board DSR-Senator Lines’ feeder vessel
bound for Port Dammam, Saudia Arabia. While in transit, the vessel and its cargo caught fire. Federal paid
Berde. Federal demanded payment from CF Sharp but denied liability due to the fire.

Federal Phoenix filed a complaint in RTC. RTC rendered decision in favor of Federal. CA affirmed.

ISSUE: W/N CF Sharp is liable despite the fire

RULING: Fire is not one of those enumerated under Article 1734 which exempts a carrier from liability for
loss or destruction of the cargo. 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. Petitioners
failed to overcome it by sufficient proof of extraordinary diligence.

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

SHORTER VERSION: YAN NA UN! Basta may fire! And fire is not included in the enumeration.

PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC., petitioner, vs.


COURT OF APPEALS and TRANSPACIFIC TOWAGE, INC., respondents.

PADILLA, J.:

FACTS:
Shipper: Davao Union Marketing Corporation
Subject: 9,750 sheets of union brand GI sheets andunion Pozzolan and union Portland Cement Carrier:
Transpacific Towage, Inc.- M/V Crazy Horse
Insurer: Philippine American General Insurance Co., Inc.

M/V Crazy Horse arrived on September 7, 1985 as scheduled in the port of Camarines Sur. The shipmaster
notified the consignee's "Notify-Party" that the vessel was already (sic) to discharge the cargo. The
discharging could not be affected immediately and continuously because of certain reasons.
(Pasadahanniyolang to, bakabiglatanunginni Sir kasi covered to sa ruling) First, the buoys were installed only
on 11 September 1985; second, the consignee secured the discharge permit only on 13 September 1985; third, a
wooden catwalk had to be installed and the extension of the wharf had to be made, which was completed only
on 16 September 1985; fourth, there were intermittent rains and the stevedores supplied by the consignee did
not work during the town fiesta of the Virgin of Penafrancia, hence, the unloading was not continuous.
On October 16, 1985, a super typhoon came. The discharging of the cargo had to be suspended due to the
heavy downpour, strong winds, and turbulent sea. Not all cargoes was discharged.

Important facts that would determine the presence of negligence later:

(1) at 5:20 a.m. of 18 October 1985, as typhoon "Saling" continued to batter the Pasacao area, the shipmaster
tried to maneuver the vessel amidst strong winds and rough seas;

(2) when water started to enter the engine room and later the engine broke down, the shipmaster ordered the
ship to be abandoned, but he sought police assistance to prevent pilferage of the vessel and its cargo;

(3) after the vessel broke into two (2) parts and sank partially, the shipmaster reported the incident to the
Philippine Coast Guard, but unfortunately, despite the presence of three (3) coast guards, nothing could be
done to stop the pilferage as almost the entire barrio folk came to loot the vessel and its cargo, including the
G.I. sheets.

Philippine American General Insurance Co., Inc. paid the shipper. But carrier refused to pay insurer upon
demand. Insurer filed a complaint. (The usual) The lower court found that although the immediate cause of
the loss may have been due to an act of God, the defendant carrier had exposed the property to the accident.

CA reversed. It was solely a fortuitous event.

ISSUE: Whether the delay involved in the unloading of the goods is deemed negligently incurred in, so as
not to free private respondent from liability

RULING: NO. There was indeed delay. 40 days had lapsed. (More than enough time to unload the cargoes)
However, neither parties could be faulted for such delay. Delay was not due to negligence but to several
factors.

The cargo having been lost due to typhoon "Saling", and the delay incurred in its unloading not being due to
negligence, private respondent is exempt from liability for the loss of the cargo, pursuant to Article 1740 of
the Civil Code.

Moreover, the records also show that before, during and after the occurrence of typhoon "Saling", private
respondent through its shipmaster exercised due negligence to prevent or minimize the loss of the cargo.
(Refer to the facts) The diligence exercised by the shipmaster further supports the exemption of private
respondent from liability for the loss of the cargo, in accordance with Article 1739 of the Civil Code.

SHORTER VERSION: Arrived. Delay in unloading. Typhoon. Shipmaster prepared. Vessel broke. Cargoes
lost. Delay not negligence of parties. Shipmaster exercised diligence to prevent or minimize loss.

BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES TRANSPORT
SERVICES, INC., petitioners,
vs.
PHILIPPINE FIRST INSURANCE CO., INC., respondents.

PANGANIBAN, J.:
DOCTRINE: Proof of the delivery of goods in good order to a common carrier and of their arrival in bad
order at their destination constitutes prima facie fault or negligence on the part of the carrier. If no adequate
explanation is given as to how the loss, the destruction or the deterioration of the goods happened, the carrier
shall be held liable therefor.

FACTS:
Shipper: CMC Trading A.G.
Carrier: BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V.
Subject: coils of various Prime Cold Rolled Steel sheets
Consignee: Philippine Steel Trading Corporation
Insurer: PHILIPPINE FIRST INSURANCE CO., INC.

Goods found to be in bad order. Belgian refused to pay. Thus, Phil First did. Impugning the propriety of the
suit against them, defendants-appellees imputed that the damage and/or loss was due to pre-shipment
damage, to the inherent nature, vice or defect of the goods, or to perils, danger and accidents of the sea, or to
insufficiency of packing thereof, or to the act or omission of the shipper of the goods or their representatives.

RTC dismissed. CA ruled that Belgian liable. Failed to overcome presumption of negligence. Belgian
inadequately proven petitioners' claim that the loss or the deterioration of the goods was due to pre-shipment
damage.

ISSUES: Whether petitioners have overcome the presumption of negligence of a common carrier

RULING:

No. A review of the records and more so by the evidence shows

First, as stated in the Bill of Lading, petitioners received the subject shipment in good order and condition in
Hamburg, Germany.

Second, prior to the unloading of the cargo, an Inspection Report prepared and signed by representatives of
both parties showed the steel bands broken, the metal envelopes rust-stained and heavily buckled, and the
contents thereof exposed and rusty.

Third, Bad Order Tally Sheet No. 154979 issued by Jardine Davies Transport Services, Inc., stated that the
four coils were in bad order and condition. Normally, a request for a bad order survey is made in case there is
an apparent or a presumed loss or damage.

Fourth, the Certificate of Analysis stated that, based on the sample submitted and tested, the steel sheets found
in bad order were wet with fresh water.

Fifth, petitioners -- in a letter addressed to the Philippine Steel Coating Corporation and dated October 12,
1990 -- admitted that they were aware of the condition of the four coils found in bad order and condition.

Further, petitioners failed to prove that they observed the extraordinary diligence and precaution which the
law requires a common carrier to know and to follow to avoid damage to or destruction of the goods entrusted
to it for safe carriage and delivery.

True, the words "metal envelopes rust stained and slightly dented" were noted on the Bill of Lading; however,
there is no showing that petitioners exercised due diligence to forestall or lessen the loss. The master of the
vessel should have known at the outset that metal envelopes in the said state would eventually deteriorate
when not properly stored while in transit.The master of the vessel and his crew should have undertaken
precautionary measures to avoid possible deterioration of the cargo. But none of these measures was taken.

In their attempt to escape liability, petitioners further contend that they are exempted from liability under
Article 1734(4) of the Civil Code. They cite the notation "metal envelopes rust stained and slightly dented"
printed on the Bill of Lading as evidence that the character of the goods or defect in the packing or the
containers was the proximate cause of the damage

From the evidence on record, it cannot be reasonably concluded that the damage to the four coils was due to
the condition noted on the Bill of Lading.Theaforecitedexception refers to cases when goods are lost or
damaged while in transit as a result of the natural decay of perishable goods or the fermentation or
evaporation of substances liable therefor, the necessary and natural wear of goods in transport, defects in
packages in which they are shipped, or the natural propensities of animals. None of these is present in the
instant case.

Further, even if the fact of improper packing was known to the carrier or its crew or was apparent upon
ordinary observation, it is not relieved of liability for loss or injury resulting therefrom, once it accepts the
goods notwithstanding such condition.

May 2nd at 3rd issue pa pero di konasinama. Notice of loss. Dapat within 3 days dawsiyanagfile, 1 yr
prescription if there was an inspection. Limited liability. No stipulation in the bill of lading, Letter of credit
attached to the bill of lading does not count.

EDGAR COKALIONG SHIPPING LINES, INC., petitioner, vs.


UCPB GENERAL INSURANCE COMPANY, INC., respondent.

PANGANIBAN, J.:

DOCTRINE: The liability of a common carrier for the loss of goods may, by stipulation in the bill of lading,
be limited to the value declared by the shipper. On the other hand, the liability of the insurer is determined by
the actual value covered by the insurance policy and the insurance premiums paid therefor, and not necessarily
by the value declared in the bill of lading.

FACTS:

Shipper: ZosimaMercardo, Nestor Amelia


Carrier: EDGAR COKALIONG SHIPPING LINES, INC.
Vessel: M/V Tandag
Insurer: UCPB General Insurance Co. Inc. (Feliciana Legaspi insured the cargoes)
Event: FIRE

Edgar did not pay UCPB. UCPB filed a complaint. RTC absolved Edgar of any liability. CA affirmed.

ISSUE: 1. W/N Edgar is liable


2. What is the basis of liability? Amount in the bill of lading or actual amount?

RULING:

1. Yes. The uncontroverted findings of the Philippine Coast Guard show that the M/V Tandag sank due to a
fire, which resulted from a crack in the auxiliary engine fuel oil service tank. Fuel spurted out of the crack and
dripped to the heating exhaust manifold, causing the ship to burst into flames. The crack was located on the
side of the fuel oil tank, which had a mere two-inch gap from the engine room walling, thus precluding
constant inspection and care by the crew.

Having originated from an unchecked crack in the fuel oil service tank, the fire could not have been caused by
force majeure. May refer to Eastern Shipping Lines, Inc. v. Intermediate Appellate Court.

A stipulation that limits liability is valid as long as it is not against public policy.

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

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

2. Bill of lading. The bill of lading subject of the present controversy specifically provides, among others:

’18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the shipper’s net
invoice cost plus freight and insurance premiums, if paid, and in no event shall the carrier be liable for any loss
of possible profits or any consequential loss.

‘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 (¥100,000.00) 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.’

In the present case, the stipulation limiting petitioner’s liability is not contrary to public policy. In fact, its just
and reasonable character is evident. The shippers/consignees may recover the full value of the goods by the
simple expedient of declaring the true value of the shipment in the Bill of Lading. Other than the payment of a
higher freight, there was nothing to stop them from placing the actual value of the goods therein. In fact, they
committed fraud against the common carrier by deliberately undervaluing the goods in their Bill of Lading,
thus depriving the carrier of its proper and just transport fare.

It is well to point out that, for assuming a higher risk (the alleged actual value of the goods) the insurance
company was paid the correct higher premium by Feliciana Legaspi; while petitioner was paid a fee lower than
what it was entitled to for transporting the goods that had been deliberately undervalued by the shippers in
the Bill of Lading. Between the two of them, the insurer should bear the loss in excess of the value declared in
the Bills of Lading.
CASE TITLE: Sarkies Tours Phils. V. IAC
KEYWORD: DAMAGES
PONENTE: ROMERO, J
DOCTRINE: Kinds of damages to be awarded

Facts:
On August 31, 1984, Fatima boarded petitioner’s bus from Manila to Legazpi. Her belongings consisting of 3
bags were kept at the baggage compartment of the bus, but during the stopover in Daet, it was discovered
that only one remained. The others might have dropped along the way. Other passengers suggested having
the route traced, but the driver ignored it. Fatima immediately told the incident to her mother, who went to
petitioner’s office in Legazpi and later in Manila. Petitioner offered P1,000 for each bag, but she turned it
down. Disapointed, she sought help from Philtranco bus drivers and radio stations. One of the bags was
recovered. She was told by petitioner that a team is looking for the lost luggage. After nine months of fruitless
waiting, respondents filed a case to recover the lost items, as well as moral and exemplary damages, attorney’s
fees and expenses of litigation. The trial court ruled in favor of respondents, which decision was affirmed with
modification by the Court of Appeals awarding P30,000.00 for the lost items and P30,000.00 for the
transportation expenses, moral and exemplary damages in the amount of P20,000.00 and P5,000.00,
respectively.
PETITIONERS CONTENTIONS:
1) Fatima did not bring any piece of luggage with her, and even if she did, none was declared at the start
of the trip.
2) petitioner questions the award of actual damages to respondent
RESPONDENT’S CONTENTION: Extraordinary diligence on the part of petitioner;
Issues:
(1) Whether petitioner is liable for the loss of the luggage
(2) Whether the damages sought should be recovered
RULING:
(1) The cause of the loss in the case at bar was petitioner's negligence in not ensuring that the doors of the
baggage compartment of its bus were securely fastened. As a result of this lack of care, almost all of the
luggage was lost, to the prejudice of the paying passengers.

(2) There is no dispute that of the three pieces of luggage of Fatima, only one was recovered. Respondents had
to shuttle between Bicol and Manila in their efforts to be compensated for the loss. During the trial, Fatima
and Marisol had to travel from the United States just to be able to testify. Expenses were also incurred in
reconstituting their lost documents. Under these circumstances, the Court agrees with the Court of Appeals in
awarding P30,000.00 for the lost items and P30,000.00 for the transportation expenses, but disagrees with the
deletion of the award of moral and exemplary damages which, in view of the foregoing proven facts, with
negligence and bad faith on the fault of petitioner having been duly established, should be granted to
respondents in the amount of P20,000.00 and P5,000.00, respectively.

Valenzuela Hardwood and Industrial Supply vs. CA

FACTS: On January 16, 1984 plaintiff Valenzuela Hardwood and Industrial Supply Inc. entered into an
agreement with the defendant Seven Brothers whereby the latter undertook to load on board its vessel the
formers lavan round logs. On January 20, 1984 plaintiff insured the loss and/or damages with defendant
South Sea Surety and insured company for 2 million pesos on January 24, 1984, plaintiff gave the check in
payment of the premium on the insurance policy. In the meantime, the said vessel sank on January 25, 1984
resulting in the loss of the plaintiff’s insured logs. Plaintiff demanded payment of the proceeds and lost claim
for the value of the lost logs to insurance company and Seven Brothers Shipping Corporation respectively to
which both of them denied liability.
After due hearing, the RTC rendered judgment in favor of plaintiff. Both defendants appealed. The CA
affirmed in part the RTC judgment by sustaining liability of South Sea Surety but modified it by holding that
the Seven Brothers was not liable for the lost of the cargo. The CA held that the stipulation in the character
party that the ship owner would be exempted from liability in case of loss or even for negligence of its agent is
valid.

ISSUE: Whether or not patrimonial rights may be waived.

HELD: As a general rule, patrimonial rights may be waived. In the case at bar, the waiver of petitioner per
contractual stipulation and that it is solely responsible for any damage to the cargo, thereby exempting the
private carrier from any responsibility for loss or damage thereto. The Supreme Court cited Article 6 of the
Civil Code which states that rights may be waived unless the waiver is contrary to law, public order, public
policy, morals or good customs or prejudicial to a person of a right recognized by law.
YOBIDO vs. CA and TUMBOY
G.R. No. 113003 October 17, 1997

Facts:

Spouses Tito and LenyTumboy and their minor children boarded at Mangagoy, Surigaodel Sur a Yobido
Liner bus bound for Davao City. Along Picop Road in, the left front tire of the bus exploded. The bus fell into
a ravine and struck a tree. The incident resulted in the death of Tito Tumboy and physical injuries to other
passengers.

The winding road was not cemented and was wet due to the rain; it was rough with crushed rocks. The bus
which was full of passengers had cargoes on top. Leny testified that it was running fast and she cautioned the
driver to slow down but he merely stared at her through the mirror.

However, Salce, the bus conductor, testified that the bus was running speed for only 50-60 kmh. The left front
tire that exploded was a brand new Goodyear tire that he mounted on the bus only 5 days before the incident.
She stated that all driver applicants in Yobido Liner underwent actual driving tests before they were
employed.

The defendant is invoking that the tire blowout was a casofortuito.

Issues:
1. WON the tire blowout was purely casofotuito? NO
2. WON the defendant bus liner is liable for damages resulting from the death of Tito? YES
Held:

1.

The explosion of the tire is not in itself a fortuitous event. The cause of the blow-out, if due to a factory defect,
improper mounting, excessive tire pressure, is not an unavoidable event. On the other hand, there may have
been adverse conditions on the road that were unforeseeable and/or inevitable, which could make the blow-
out a casofortuito. The fact that the cause of the blow-out was not known does not relieve the carrier of
liability.

There are human factors involved in the situation. The fact that the tire was new did not imply that it was
entirely free from manufacturing defects or that it was properly mounted on the vehicle. Neither may the fact
that the tire bought and used in the vehicle is of a brand name noted for quality, resulting in the conclusion
that it could not explode within five days’ use. Be that as it may, it is settled that an accident caused either by
defects in the automobile or through the negligence of its driver is not a casofortuito that would exempt the
carrier from liability for damages.

2.

A common carrier may not be absolved from liability in case of force majeure or fortuitous event alone. The
common carrier must still prove that it was not negligent in causing the death or injury resulting from an
accident. Having failed to discharge its duty to overthrow the presumption of negligence with clear and
convincing evidence, petitioners are hereby held liable for damages.

Moral damages are generally not recoverable in culpa contractual except when bad faith had been proven.
However, the same damages may be recovered when breach of contract of carriage results in the death of a
passenger. Because petitioners failed to exercise the extraordinary diligence required of a common carrier,
which resulted in the death of Tito Tumboy, it is deemed to have acted recklessly (Article 1756).
CENTRAL SHIPPING COMPANY, INC., petitioner, vs. INSURANCE COMPANY OF NORTH
AMERICA, respondent.

DOCTRINE: A common carrier is presumed to be at fault or negligent. It shall be liable for the loss,
destruction or deterioration of its cargo, unless it can prove that the sole and proximate cause of such event is
one of the causes enumerated in Article 1734 of the Civil Code, or that it exercised extraordinary diligence to
prevent or minimize the loss. In the present case, the weather condition encountered by petitioner’s vessel
was not a “storm” or a natural disaster comprehended in the law. Given the known weather condition
prevailing during the voyage, the manner of stowage employed by the carrier was insufficient to secure the
cargo from the rolling action of the sea. The carrier took a calculated risk in improperly securing the
cargo. Having lost that risk, it cannot now disclaim any liability for the loss.

FACTS:
Carrier: CENTRAL SHIPPING COMPANY, INC
Vessel: M/V Central Bohol
Subject: 376 pieces of Philippine Apitong Round Logs
Consignee: Alaska Lumber Co. Inc.

The vessel listed up to 15 degrees. (Tumagilidata) The ship captain ordered his men to abandon ship and the
vessel completely sank.

Petitioner raised as its main defense that the proximate and only cause of the sinking of its vessel and the loss
of its cargo was a natural disaster, a tropical storm which neither [petitioner] nor the captain of its vessel
could have foreseen. RTC ruled in favor of respondent. CA affirmed. It found that the southwestern monsoon
encountered by the vessel was not unforeseeable. Given the season of rains and monsoons, the ship captain
and his crew should have anticipated the perils of the sea. The appellate court further held that the weather
disturbance was not the sole and proximate cause of the sinking of the vessel, which was also due to the
concurrent shifting of the logs in the hold that could have resulted only from improper stowage.
ISSUE: W/N petitioner is liable
RULING: Even if the weather encountered by the ship is to be deemed a natural disaster under Article 1739
of the Civil Code, 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.
According to the boatswain’s testimony, the logs were piled properly, and the entire shipment was lashed to
the vessel by cable wire. The ship captain testified that out of the 376 pieces of round logs, around 360 had
been loaded in the lower hold of the vessel and 16 on deck. The logs stored in the lower hold were not secured
by cable wire, because they fitted exactly from floor to ceiling. However, while they were placed side by side,
there were unavoidable clearances between them owing to their round shape. Those loaded on deck were
lashed together several times across by cable wire, which had a diameter of 60 millimeters, and were secured
from starboard to port.
It is obvious, as a matter of common sense, that the manner of stowage in the lower hold was not sufficient to
secure the logs in the event the ship should roll in heavy weather. Notably, they were of different lengths
ranging from 3.7 to 12.7 meters. Being clearly prone to shifting, the round logs should not have been stowed
with nothing to hold them securely in place. Each pile of logs should have been lashed together by cable wire,
and the wire fastened to the side of the hold. Considering the strong force of the wind and the roll of the
waves, the loose arrangement of the logs did not rule out the possibility of their shifting. By force of gravity,
those on top of the pile would naturally roll towards the bottom of the ship.
The evidence indicated that strong southwest monsoons were common occurrences during the month of
July. Thus, the officers and crew of M/V Central Bohol should have reasonably anticipated heavy rains, strong
winds and rough seas. They should then have taken extra precaution in stowing the logs in the hold, in
consonance with their duty of observing extraordinary diligence in safeguarding the goods. But the carrier
took a calculated risk in improperly securing the cargo. Having lost that risk, it cannot now escape
responsibility for the loss.
The doctrine of limited liability under Article 587 of the Code of Commerce is not applicable to the present
case. This rule does not apply to situations in which the loss or the injury is due to the concurrent negligence
of the shipowner and the captain.

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.

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.

Hernandez makes a formal claim to Everette 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 rules1 in favor of Hernandez holding Everett liable for
the amount of !mill ++ Yen.
THE CA affirmed the RTC’s 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.

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. 2

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 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

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 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.”
2 “ART. 1749. A stipulation that the common carrier’s liability is limited to the value of the goods appearing in the bill of lading,
unless the shipper or owner declares a greater value, is binding.”
“ART. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of
the goods is valid, if it is reasonable and just under the circumstances, and has been freely and fairly agreed upon.”
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)

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 court’s 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
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 petitioner’s vessel.

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

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 carrier’s 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.

TAMMY

SWEET LINES, INC. V. HON. BERNARDO TEVES

G.R. No. L-37750, May 19, 1978


FACTS:
 Private respondents Atty. Leovigildo Tandog and Rogelio Tiro bought tickets for Voyage 90 on Dec.
31, 1971 at the CDO branch office of petitioner, a shipping company transporting inter-island
passengers and cargoes.
 Respondents were to board petitioner’s vessel M/S Sweet Hope bound for Tagbilaran City via the port
of Cebu.
 Upon learning that the vessel was not proceeding to Bohol, private respondents, per advice, went to
the branch office for proper relocation to M/S Sweet Town.
 Since the said vessel was already filled to capacity, they were forced to agree to hide at the cargo
section to avoid inspection of the officers of the Phil. Coastguard.
 Private respondents alleged that they were exposed to scorching heat and dust coming from the cargo,
and the tickets they bought at CDO for Tagbilaran were not honored and they were constrained to pay
for other tickets.
 Private respondents sued petitioner for damages and for breach of contract of carriage before CFI
Misamis Oriental.
 Petitioner moved to dismiss the complaint on the ground of improper venue.
 Condition No. 14 (printed at the back of the tickets): It is hereby agreed and understood that any and
all actions arising out of the conditions and provisions of this ticket, irrespective of where it is issued,
shall be filed in the competent courts in Cebu City.
 Trial court denied the motion.
Petitioner contends that Condition No. 14 is valid and enforceable since private respondents acceded to it
when they purchased passage tickets; venue may be validly waived since it is printed in bold and capital letters
and not in fine print; Condition No. 14 is unequivocal and mandatory; and the respondent judge acted with or
in excess of his jurisdiction.
Private respondents claim that Condition No. 14 is not valid, that the same is not an essential element of the
contract of carriage, being in itself a different agreement which requires the mutual consent of the parties.
ISSUE: Is Condition No. 14 printed at the back of the petitioner’s passage tickets purchased by private
respondents, which limits the venue of actions arising from the contract of carriage to the CFI Cebu, valid and
enforceable?
HELD:No. Condition No. 14 is a contract of adhesion (drafted only by one party (corporation), and is sought
to be accepted or adhered by the other party who cannot change the same and who are thus made to adhere
thereto on the take it or leave it basis). The validity and enforceability of a contract of adhesion will have to be
determined by the peculiar circumstances and the nature of the conditions or terms sought to be enforced.
Condition No. 14 is void and unenforceable: 1. It is not just and fair to bind passengers to the terms of
conditions printed at the back of the tickets; 2. It subverts the public policy on transfer of venue of
proceedings, since it will prejudice rights and interests of innumerable passengers located in different places of
the country who will have to file suits against petitioner only in Cebu City. The philosophy underlying the
provisions on transfer of venue of actions is the convenience of the plaintiffs as well as his witnesses and to
promote the ends of justice.

JUAN YSMAEL & CO, INC. V. GABINO BARRETTO & CO., LTD., ET. AL

G.R. No. L-28028, Nov. 25, 1927


FACTS:
 Plaintiff seeks to recover from the defendants P 9,940.95, the alleged value of 4 cases of merchandise
which it delivered to the steamship Andres on October 25, 1922, at Manila to be shipped to Surigao,
but which were never delivered to Salomon Sharuff, the consignee, or returned to the plaintiff.
 The defendants denied all the material allegations of the complaint and as special defense, alleged that
the 4 cases of merchandise were never delivered to them, and that under paragraph 7 of the printed
conditions appearing at the back of the bill of lading, plaintiff’s right of action is barred because it was
not brought within 60 days from the time the cause of action accrued.
 Defendants further alleged that under the provision 12 of the bill of lading, the defendants are not
liable in excess of P300 for any package of silk unless the value and contents of such packages are
correctly declared in the bill of lading at the time of shipment.
 The lower court rendered judgment for the plaintiff for the full amount of its claim. Defendants
appealed.
ISSUES:
1. Whether or not the plaintiff’s right of action is barred because it was not brought within 60 days from the
time the cause of action accrued. (paragraph 7)
2. Whether or not the carrier shall not be liable for the loss or damage from any cause or for any reason to an
amount of P300 for any single package of silk or other valuable cargo.
HELD:
1. No. The goods in question were shipped from Manila on October 25, 1922, to be delivered to Salomon
Sharuff in Surigao, plaintiff’s original complaint was filed on April 17, 1923, or a little less than 6
months after the shipment was made.The action was brought with a “reasonable time.” It is true that
both the plaintiff and the defendants are residents of Manila, but it is also true that Surigao where the
goods in question were to be delivered is one of the most distant places from Manila. In the very
nature of the things, plaintiff would not want to commence its action until such time as it had made a
full and careful investigation of all of the material facts and even the law of the case, so as to determine
whether or not defendants were liable for its loss.
2. No. The validity of the stipulations limiting carrier’s liability is to be determined by their
reasonableness and their conformity to the sound public policy. It cannot lawfully stipulate for
exemption from liability, unless such exemption is just and reasonable, and unless the contract is freely
and fairly made.
The evidence shows that 164 cases were shipped, and that the value of each case was very near P2,500.
In this situation, the limit of defendants’ liability for each case of silk for loss or damage from any cause
or for any reason would put it in the power of the defendants to have taken the whole cargo of 164
cases of silk at a valuation of P300 for each case, or less that 1/8 of its actual value. If that rule should
be sustained, no silk would ever be shipped from one island to another in the Philippines. Such
limitation of value is unconscionable and void as against public policy.

PARMANAND SHEWARAM V. PAL

G.R. No. L-20099, July 7, 1966


FACTS:
 Shewaram was a paying passenger on defendant’s aircraft from Zamboanga City bound for Manila.
 He checked in 3 pieces of baggages- a suitcase and 2 other pieces. The suitcase was mistagged by
defendant’s personnel in Zamboanga as IGN (Iligan) instead of MNL (Manila).
 Plaintiff made a claim with defendant’s personnel in Manila airport and another suitcase similar to his
own which was the only baggage left for that flight was given to the plaintiff for him to take delivery
but he refused to take the delivery of the same because it was not his, alleging that all his clothes were
white and the National transistor 7 and a Rollflex camera were not found inside the suitcase, and
moreover, it contained a pistol which he did not have nor placed it inside the suitcase.
 It was found out that the suitcase shown to and given to the plaintiff belonged to a certain Del Rosario
who was bound for Iligan in the same flight with Shewaram.
 Shewaram made demand for these 2 items or for the value thereof but the same was not complied with
by defendant.
 The municipal trial court rendered decision in favor of plaintiff. The said court had found that the
suitcase of the appellee was tampered and the transistor radio and the camera contained therein were
lost, and that the loss of those articles was due to the negligence of the employees of the appellant.
ISSUE: Whether or not the limited liability rule applies.
HELD: No. Article 1750 of the NCC provides that the pecuniary liability of a common carrier may, by
contract, be limited to a fixed amount. It is required, however, that the contract must be “reasonable and just
under the circumstances and has been fairly agreed upon.” In the case at bar, the requirements have not been
met. It cannot be said that the appellee had actually entered into a contract with the appellant, embodying the
conditions as printed at the back of the ticket stub that was issued by the appellant to the appellee. The fact
that those conditions are printed at the back of the tickets stub in letters so small that they are hard to read
would not warrant the presumption that the appellee was aware of those conditions such that he had fairly and
freely agreed to those conditions.
The liability of the appellant should be governed by the provisions of Article 1734 and 1735 of the NCC. It
having been clearly found by the trial court that the transistor radio and the camera of the appellee were lost
as a result of the negligence of the appellant as a common carrier, the liability of the appellant is clear- it must
pay the appellee the value of those articles.
ONG YIU V. CA AND PAL

G.R. No. L-40597, June 29, 1979


FACTS:
 On August 26, 1967, petitioner, a practicing lawyer and businessman, was a fare paying passenger of
respondent PAL on board a flight from Cebu bound for Butuan City. He was scheduled to attend a trial
in CFI Butuan on August 28-31, 1967.He checked in a blue maleta.Upon arrival in Butuan, petitioner
claimed his luggage but it could not be found.
 PAL Butuan sent a message to PAL Cebu inquiring about the missing luggage. It was later on relayed
to PAL Manila.PAL Manila wired PAL Cebu advising that the luggage had been over carried to
Manila and it would be forwarded to Cebu. Instructions were also given that the luggage be
immediately forwarded to Butuan on the first available flight. At 5 PM, PAL Cebu sent a message to
PAL Butuan that the luggage would be forwarded the following day, August 27, 1967. However, this
message was not received by PAL Butuan as all personnel had already left since there were no more
incoming flights that afternoon.
 Petitioner was worried about the missing luggage because it contained vital documents needed for trial.
Petitioner wired PAL Cebu demanding the delivery of his baggage before noon the next day otherwise
he would hold PAL liable for damages. This telegram was received by the PAL Cebu supervisor but
the latter felt no need to wire the petitioner that his luggage had already been forwarded on the
assumption that by the time the message reached Butuan City, the luggage would have arrived.
 On August 27, 1967, petitioner went to Bancasi Airport. He did not wait for the morning flight which
arrived at 10 AM. The porter paged petitioner but the latter had already left. A certain Emilio
Dagorro, a driver who used to drive the petitioner, volunteered to take the luggage to petitioner. As
Maximo Gomez knew Dagorro to be the same driver used by petitioner whenever the latter was in
Butuan City, Gomez took that luggage and placed it on the counter. Dagorro examined the lock,
pressed it, and it opened. After calling the attention of Gomez, Gomez took a look at its contents, but
did not touch them.
 Dagorro delivered the maleta to petitioner, informing him that the lock was open. Upon inspection,
petitioner found that the folder containing documents in civil case were missing, aside from 2 gift
items for his parents-in-law. Petitioner refused to accept the luggage. Dagorro returned it to the
porter clerk who sealed it and forwarded the same to PAL Cebu.
 Petitioner asked for postponement of the hearing due to the loss of his documents, which was granted
by the court. He returned to Cebu. In a letter to PAL Cebu, he demanded that his luggage be produced
intact, and that he be compensated for damages. Petitioner sent a letter to PAL Cebu inquiring the
results of the investigation to pinpoint responsibility for the unauthorized opening of the maleta. PAL
Cebu failed to found the lost folder and failed to pinpoint the personnel who allegedly pilfered the
baggage.
 Petitioner filed a complaint against PAL for damages for breach of contract of transportation. The trial
court found PAL to have acted in bad faith and with malice and declared petitioner entitled to damages.
CA found that PAL was guilty only of simple negligence.
ISSUE: Whether or not PAL acted in bad faith.
HELD:No. Bad faith means a breach of a known duty though some motive of interest or ill will. It was the
duty of PAL to look for petitioner’s luggage which had been miscarried. PAL exerted due diligence in
complying with such duty. In the absence of a wrongful act or omission or fraud or bad faith, petitioner is not
entitled to moral damages. Petitioner is neither entitled to exemplary damages. It can be granted if the
defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner, which has not been
proven in this case.
Petitioner further contends that respondent court committed grave error when it limited PAL’s carriage
liability to the amount of P100 as stipulated at the back of the ticket; and that there is nothing in the evidence
to show that he actually entered into a contract with PAL limiting the latter’s liability for the loss or delay of
the baggage of its passengers.
While it may be true that petitioner had not signed the plane ticket, he is nevertheless bound by the
provisions thereof. Such provisions have been held to be part of the contract of carriage and valid and binding
upon the passenger regardless of the latter’s lack of knowledge or assent to the regulation. It is what is known
as contract of adhesion wherein one party imposes a readymade form of contract on the other. The one who
adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent.

SEA-LAND SERVICE, INC. V. IAC

G.R. No. 75118, August 31, 1987


FACTS:
 Sea-Land received from Seaborne Trading Company in California a shipment consigned to Sen Hiap
Hing the business name used by Paulino Cue in the wholesale and retail trade which operated out of an
establishment located in Cebu City.
 The shipper not having declared the value of the shipment, no value was indicated in the bill of lading.
The shipment was loaded on board the MS Patriot, owned and operated by Sea-Land, for discharge at
the port of Cebu.
 The shipment arrived in Manila. Sometime between February 13 and 16, 1981, while awaiting trans-
shipment to Cebu, the shipment was stolen and has never been recovered.
 Paulino Cue made a formal claim upon Sea-Land for the value of the lost shipment amounting to
P179,643.48. Sea-Land offered $4,000 or P30,600 asserting that said amount represented its maximum
liability for the loss of the shipment under the package limitation clause in the covering bill of lading.
Cue rejected the offer and filed for damages.
 Trial court rendered judgment in favor of Cue. IAC affirmed the decision of the trial court.
ISSUE: Whether or not the consignee of seaborne freight is bound by stipulations in the covering bill of
lading limiting to a fixed amount the liability of the carrier for loss or damage to the cargo where its value is
not declared in the bill.
HELD:Yes. There is no question of the right of a consignee in a bill of lading to recover from the carrier or
shipper for loss or damage of goods being transported under said bill, although that document may have been
drawn up only by the consignor and the carrier without the intervention of the consignee. The right of a party
to recover for loss of a shipment consigned to him under the bill of lading drawn up only between the shipper
and the carrier springs from either a relation of agency that may exist between him and the shipper or
consignor, or his status as a stranger in whose favor some stipulation is made in said contract, and who
becomes a party when he demands fulfilment of that stipulation. There can be no doubt about the validity and
enforceability of freely-agreed-upon stipulations in an bill of lading limiting the liability of the carrier to an
agreed valuation unless the shipper declares a higher value and inserts it into said contract or bill.
Since the liability of a common carrier for loss of damage to goods transported by it under a contract of
carriage is governed by the laws of the country in destination, the liability of Sea-Land to the consignee is
governed primarily by the Civil Code and suppletorily by the Code of Commerce and special laws such as the
Carriage of Goods by Sea Act.
The stipulation in the questioned bill of lading limiting Sea-Land’s liability for loss or damage to the shipment
covered by said bill to $500 per package is held valid and binding on private respondent.

CITADEL LINES, INC. V. CA AND MANILA WINE MERCHANTS

G.R. No. 88092, April 25, 1990


FACTS:
 Petitioner Citadel (Carrier) is the general agent of the vessel Cardigan Bay/Strait Enterprise, while
respondent Manila Wine Merchants (Consignee) is the importer of the subject shipment of Dunhill
cigarettes from England.
 180 Filbrite cartons of mixed British manufactured cigarettes were loaded on the said vessel at
England for carriage to Manila. The shipment arrived at Manila in container van, which was received
by E. Razon, Inc. (Arrastre)
 On April 30, 1979, the container van, which contained 2 shipments, was stripped. One shipment was
delivered and the other shipment consisting of the imported British manufactured cigarettes was
palletized.
 Due to lack of space at the Special Cargo Coral, the cigarettes were placed in 2 containers with 2
pallets in container No. BENU 204850-9 (original container) and 4 pallets in container No. BENU
201009-9, with both containers duly padlocked and sealed by the representative of the Carrier.
 On May 1, 1979, the Carrier’s head checker discovered that container No. BENU 201009-9 had a
different padlock and the seal was tampered with. It was found out that 90 cases of imported British
cigarettes were missing.
 According to the investigation of the Arrastre, the cargo was not formally turned over to it by the
Carrier but was kept inside the container van No. BENU 201009-9 which was padlocked and sealed by
the representatives of the Carrier without any participation of the Arrastre.
 When the Consignee learned that 90 cases were missing, it filed a formal claim with the Carrier. The
Carrier admitted the loss but alleged that the same occurred at Pier 13, an area absolutely under the
control of Arrastre. In view thereof, the Consignee filed a formal claim with the Arrastre, demanding
payment of the value of the goods but said claim was denied.
 The trial court rendered a decision exonerating the Arrastre of any liability on the ground that the
container van was not formally turned over to its custody, and adjudging the Carrier liable for the
missing cargoes. CA affirmed the decision.
ISSUE: Whether the stipulation limiting the liability of the carrier contained in the bill of lading is binding on
the consignee.
HELD:Yes. A stipulation limiting the liability of the carrier to the value of goods appearing in the bill of
lading, unless the shipper or owner declares a greater value, is binding. Further, 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. The Consignee itself
admits in its memorandum that the value of goods shipped does not appear in the bills of lading. Hence, the
stipulation on the carrier’s limited liability applies.

LOADSTAR SHIPPING CO, INC. V. CA

G.R. No. 131621, September 28, 1999


FACTS:
 Loadstar received on board M/V Cherokee goods amounting to P6,067,178. The goods were insured
for the same amount with Manila Insurance Co. (MIC) against various risks including TOTAL LOSS
BY TOTAL LOSS OF THE VESSEL.”
 The vessel was insured by Prudential Guarantee & Assurance, Inc. (PGAI) for P4M.
 On November 20, 1984, the vessel, along with its cargo, sank off Limasawa Island.
 The consignee made a claim with Loadstar which ignored the same. MIC paid to the insured the full
settlement of its claim.
 MIC filed a complaint against Loadstar and PGAI, alleging that the sinking of the vessel was due to
the fault and negligence of Loadstar and its employees; that PGAI be ordered to pay the insurance of
the vessel directly to MIC, to be deducted from MIC’s claim from Loadstar.
 Loadstar denied liability for the loss of goods and claimed that the sinking was due to force majeure.
PGAI averred that MIC had no cause of action against it, Loadstar being the party insured. PGAI was
later on dropped as defendant.
 Trial court rendered judgment in favor of MIC. CA affirmed the decision in toto.
ISSUES:
1. Is the M/V Cherokee a private or common carrier?
2. Did Loadstar observe due and/or ordinary diligence in these premises?
HELD:
1. Loadstar is a common carrier. It is not necessary that the carrier be issued a certificate of public
convenience, and this public character is not altered by the fact that the carriage of the goods in
question was periodic, occasional, episodic or unscheduled. The records do not disclose that the M/V
Cherokee undertook to carry a special cargo or was chartered to a special person only. The bill of
lading failed to show any special arrangement, but only general provision that the said vessel was a
“general cargo carrier.” At that time, the vessel was also carrying passengers.
2. No. The M/V Cherokee was not seaworthy. The vessel was not even sufficiently manned. For a vessel
to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number
of competent officers and crew.

Loadstar argued that any agreement limiting its liability is valid. Since the cargo was being shipped at
“owner’s risk,” Loadstar was not liable for any loss or damage to the same. MIC, on the other hand,
argued that the limited liability theory is not applicable because Loadstar was at fault or negligent, and
because it failed to maintain a seaworthy vessel. Authorizing the voyage notwithstanding the
knowledge of a typhoon is tantamount to negligence. SC affirmed MIC’s argument.

QUISUMBING, SR. V. CA

G.R. No. L-50076, September 14, 1990


FACTS:
 Norberto Quisumbing, Sr. and Gunther Leoffler were among the passengers of PAL’s plane from
Mactan City to Manila.
 Florencio Villarin, a Senior NBI agent who was also a passenger of the plane, noticed a certain Zaldy, a
suspect in the killing of Judge Valdez. Soon thereafter, Zaldy announced to the passengers and the
pilots that it was a hold-up and ordered the pilot not to send any SOS. The hold-uppers divested
passengers of their belongings including Quisumbing who was divested of jewelries and cash; and
Leoffler who was divested of a wrist watch, cash and wallet. Upon landing at Manila, Zaldy and his 3
companions succeeded in escaping.
 Quisumbing and Leoffler made demands to PAL to indemnify them but PAL refused averring that it is
not liable to them.
 Plaintiffs filed a suit against PAL contending that the loss is a result of breach of PAL’s contractual
obligation to carry them and their belongings and effects to Manila without loss or damage, and
constitutes a serious dereliction of PAL’s legal duty to exercise extraordinary diligence.
 PAL denied liability alleging that the robbery constitute force majeure, and neither of the plaintiffs had
notified PAL that they were in possession of cash and valuable jewelries and watches or surrendered
said items to the crew on board the aircraft.
 Trial court dismissed plaintiffs’ complaint because they did not notify defendant that they were in
possession of the cash, jewelries and wallet they are claiming; and that the robbery is a force majeure
for which the defendant is not liable because robbers were able to gain entrance to the plane with the
guns they used already in their possession, which fact could not have been prevented nor avoided by
the defendant since it was not authorized to search its passengers for firearms and deadly weapons.
 CA affirmed the trial court’s decision. PAL could not be faulted for want of diligence for failing to take
positive measures to implement regulations prohibiting civilians from carrying firearms on board
aircrafts.
ISSUE: Whether or not there is negligence of the part of the PAL crew occurring before and exposing them
to hijacking.
HELD: No.Hijackers do not board an airplane through blatant display of firepower. Firearms and grenades
are brought to the plane surreptitiously. The use of the most sophisticated electronic detection devices may
have minimized hijacking but still ineffective against truly determined hijackers. The evidence fail to prove
any want of diligence on the part of PAL or it had failed to comply with the applicable regulations or
universally accepted and observed procedures to preclude highjacking; and the particular act singled out by
the petitioners is not negligent acts sufficient to overcome the force majeure nature of armed robbery.
PAN AMERICAN WORLD AIRWAYS, INC. V. JOSE RAPADAS

G.R. No. 60673, May 19, 1992


FACTS:
 Private respondent Rapadas held Passenger ticket and Baggage claim check for petitioner’s flight from
Guam to Manila. Rapadas was ordered by petitioner’s handcarry control agent to check in his
Samsonite attache case. Rapadas protested pointing to the fact that other passengers were permitted to
handcarry bulkier baggages. He stepped out of the line. However, the same man in charge did not fail
to notice him and ordered him again to register his attache case. For fear that he would miss his flight,
he acceded to checking in. He gave his attache case to his brother who happened to be around and who
checked in for him, but without declaring its contents or the value of its contents.
 Upon arriving in Manila, Rapadas claimed and was given all his checked-in baggages except the
attache case. Petitioner exerted efforts to locate the luggage through the Pan American World
Airways Baggage Service.
 Rapadas received a letter from petitioner’s counsel offering to settle the claim for the sum of $160
representing the petitioner’s alleged limit of liability for loss or damage to a passenger’s property
under the contract of carriage.
 Rapadas refused to accept the settlement and filed an instant action for damages alleging that PAN
AM discriminated or singled him out in ordering that his luggage to be checked in; that PAN AM
neglected its duty in the handling and safekeeping of his attache case.
 Petitioner acknowledged responsibility for the loss of the attache case but asserted that the claim was
subject to the Notice of Baggage Liability Limitations allegedly attached to and forming part of the
passenger ticket.
 The trial court ruled in favor of Rapadas after finding no stipulation giving notice to the baggage
liability limitation. The court rejected the claim of PAN AM that its liability under the terms of the
passenger ticket is only up to $160. However, it discredited insufficient evidence to show
discriminatory acts or bad faith on the part of PAN AM.
 CA affirmed the trial court decision.
ISSUE: Whether or not a passenger is bound by the terms of a passenger ticket declaring that the limitations
of liability set forth in the Warsaw Convention shall apply in case of loss, damage, or destruction to a
registered luggage of a passenger.
HELD:Yes. There is no dispute that there was such a Notice appearing on page 2 of the airline ticket stating
that the Warsaw Convention governs in case of death or injury to a passenger or of loss, damage or
destruction to a passenger’s luggage. The Convention governs the availment of the liability limitations where
the baggage check is combined with or incorporated in the passenger ticket. In the case at bar, the baggage
check is combined with the passenger ticket in one document.
The passenger, upon contracting with the airline and receiving the plane ticket, was expected to be vigilant
insofar as his luggage is concerned. If the passenger fails to adduce evidence to overcome the stipulations, he
cannot avoid the application of liability limitations. The facts show that Rapadas actually refused to register
the attache case despite having ordered by the PAN AM agent. The private respondent manifested a disregard
of the airline rules. The alleged lack of enough time for him to make a declaration of a higher value and to pay
the supplementary charges cannot justify failure to comply with the requirement that will exclude the
application of limited liability. Passengers are also allowed one handcarried bag each provided it conforms to
certain prescribed dimensions. If Rapadas was not allowed to handcarry his lost attache case, this means that
he was carrying more than the allowable weight for all his luggages or more than the allowable number of
handcarried items or more than the prescribed dimension for the bag.
We are not by any means suggesting that passengers are always bound to the stipulated amounts printed on a
ticket, found in a contract of adhesion. The reason behind stipulations on liability limitations arise from the
difficulty of establishing with clear preponderance of evidence the contents of a lost suitcase. Unless the
contents are declared, it will always be the word of the passenger against that of the airline. If the loss of life
or property is caused by the gross negligence or arbitrary acts of the airline, the Court will not hesitate to
disregard the contract of adhesion.

BRITISH AIRWAYS V. CA

G.R. No. 121824, January 29, 1998


FACTS:
 Mahtani decided to visit his relatives in Bombay, India. He obtained services of Mr. Gumar to prepare
his travel plans. The latter purchased a ticket from British Airways (BA).
 Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight to HongKong via
PAL , and upon arrival in HK he had to take a connecting flight to Bombay on board BA.
 Mahtani checked in at the PAL counter in Manila his 2 pieces of luggage containing his clothing and
personal effects, confident that upon reaching HK, the same would be transferred to the BA flight
bound for Bombay.
 When Mahtani arrived in Bombay, he discovered that his luggage was missing and that upon inquiry
from the BA representatives, he was told that the same might be diverted to London. After one week,
BA finally advised him to file a claim by accomplishing the Property Irregularity Report.
 Back in the Philippines, Mahtani filed his claim for damages against BA and Mr. Gumar. BA contended
that Mahtani did not have cause of action against it. BA also filed a third party complaint against PAL
alleging that the reason for the non-transfer of the luggage was due to the latter’s late arrival in HK,
thus leaving hardly any time for the proper transfer of Mahtani’s luggage to the BA aircraft bound for
Bombay.
 PAL disclaimed liability arguing that there was adequate time to transfer the luggage to BA facilities
in HK.
 Trial court rendered its decision in favor of Mahtani. The third party complaint against PAL was
dismissed for lack of cause of action. CA affirmed in toto.
ISSUES:
1. Whether or not BA is liable for compensatory damages and attorney’s fees.
2. Whether or not the dismissal of the third party complaint is correct.
HELD:
1. Yes. In determining compensatory damages, it is vital that the claimant satisfactorily prove during the
trial the existence of the factual basis of the damages and its causal connection to the defendant’s acts.
The benefits of limited liability are subject to waiver such as when the air carrier failed to raise timely
objections during the trial when questions and answers regarding the actual claims and damages
sustained by the passenger were asked.In the case at bar, BA had waived the defense of limited liability
when it allowed Mahtani to testify as to the actual damages he incurred due to the misplacement of his
luggage, without any objection.
2. No. The contract of air transportation was exclusive between Mahtani and BA. It is undisputed that
PAL, in transporting Mahtani from Manila to HK, acted as the agent of BA. It is a well-settled rule
that an agent is also responsible for any negligence in the performance of its function and is liable for
damages which the principal may suffer by reason of its negligent act. Since the instant petition was
based on breach of contract of carriage, Mahtani can only sue BA and not PAL, since the latter was not
a party to the contract. However, this is not to say that PAL is relieved from any liability due to any of
its negligent act.

GEM

Trans-Asia Shipping Lines vs. CA


(GR 118126, 4 March 1996)

FACTS: Respondent Atty. Renato Arroyo, a public attorney, bought a ticket from herein petitioner for the
voyage of M/V Asia Thailand vessel to Cagayan de Oro City from Cebu City on November 12, 1991. At
around 5:30 in the evening of November 12, 1991, respondent boarded the M/V Asia Thailand vessel during
which he noticed that some repairs were being undertaken on the engine of the vessel. The vessel departed at
around 11:00 in the evening with only one (1) engine running. After an hour of slow voyage, the vessel
stopped near Kawit Island and dropped its anchor thereat. After half an hour of stillness, some passengers
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. In Cebu City, plaintiff together with the other passengers who requested to be brought back to Cebu
City, were allowed to disembark. Thereafter, the vessel proceeded to Cagayan de Oro City. Petitioner, the
next day, boarded the M/V Asia Japan for its voyage to Cagayan de Oro City, likewise a vessel of defendant.
On account of this failure of defendant to transport him to the place of destination on November 12, 1991,
respondent Arroyo filed before the trial court “an action for damage arising from bad faith, breach of contract
and from tort,” against petitioner. The trial court ruled only for breach of contract. The CA reversed and set
aside said decision on appeal.
ISSUE: Whether or not the petitioner Trans-Asia was negligent?
HELD: Yes. Before commencing the contracted voyage, the petitioner undertook some repairs on the cylinder
head of one of the vessel’s engines. But even before it could finish these repairs, it allowed 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 as sometime after it had run its course, it conked out. This caused 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 began. For a vessel to be seaworthy, it must be adequately
equipped for the voyage and manned with a sufficient number of competent officers and crew.[21] The failure
of a common carrier to maintain in seaworthy condition its vessel involved in a contract of carriage is a clear
breach of is duty prescribed in Article 1755 of the Civil Code.

Ganzon v. CA

Facts: Tumambing contracted the services of Ganzon for the latter to haul 305 tons of scrap iron from
Mariveles, Bataan to the port of Manila on board the lighter LCT “Batman”. Accordingly, Ganzon sent his
lighter “Batman” to Mariveles. Tumambing then delivered the scrap iron for loading to Filomeno Niza, the
lighter’s captain. However, when about half of the scrap iron was being loaded, Mayor Advincula of Mariveles,
Bataan, demanded P5,000 from Tumambing. The latter refused, an altercation started, until Mayor Advincula
fired his gun at Tumambing, who was later brought to a hospital in Balanga, Bataan. After sometime, the
loading of the scrap iron resumed. However, Acting Mayor Basilio Rub, accompanied by 3 policemen, ordered
Captain Niza and its crew to dump the scrap iron where the lighter was docked. The remaining scrap iron was
confiscated and brought to the compound of NASSCO. A receipt was issued by the Acting Mayor stating that
he had taken custody of the scrap iron. Hence, Tumambing filed an action against Ganzon for damages based
on culpa contractual. Ganzon claims that he should not be liable because the scrap iron has not been
unconditionally placed under his custody and control.

Issue Whether or not Ganzon is liable for Tumambing’s loss.

Ruling Yes, Ganzon is liable. Ratio Decidendi There is no dispute that the scrap iron was already delivered to
Ganzon’s carrier and received by Captain Niza and the crew. By the said act of delivery, the scrap iron was
already deemed to be unconditionally placed in the possession and control of the common carrier and upon
their receipt, the contract of carriage was deemed perfected. Consequently, petitioner-carrier’s extraordinary
responsibility for the loss or deterioration of the goods commenced. According to Art 1736 of the NCC, such
responsibility will only cease upon the actual or constructive delivery to the consignee or any person who has
a right to receive the goods. However, in this case, the same is not true since the scrap iron remained in the
custody and control of the carrier, albeit still unloaded. Ganzon may be exempt from liability if the loss of the
scrap iron was due to any of the causes enumerated under Art. 1734 of the NCC. However, Ganzon was not
able to prove the same. Art 1743 provides as follows: Art. 1734. Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the same is due to any of the following causes only: (1) Flood,
storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war,
whether international or civil; (3) Act of omission of the shipper or owner of the goods; (4) The character of
the goods or defects in the packing or in the containers; (5) Order or act of competent public authority. Lastly,
the SC cannot sustain Ganzon’s claim that the cause of the loss was a caso fortuito considering that in the
courts below, his defense was that the loss of the scrap iron was due to an “order or act of a competent public
authority”. Such change in theory on appeal cannot be allowed. In any case, the intervention of the municipal
officials is not of such character as would render the fulfilment of Ganzon’s obligation impossible. According
to the SC, the scrap iron could have still been delivered in accordance with the contract of carriage after the
dispute has been settled.

8. Saludo Jr. v. CA

Facts: Crispina Galdo Saludo, mother of the petitioners, died in Chicago, Illinois. Pomierski and Son Funeral
Home of Chicago, made the necessary preparations and arrangements for the shipment of the remains from
Chicago to the Philippines. Pomierski brought the remains to Continental Mortuary Air Services (CMAS) at
the Chicago Airport which made the necessary arrangements such as flights, transfers, etc. CMAS booked the
shipment with PAL thru the carrier’s agent Air Care International. PAL Airway Bill Ordinary was issued
wherein the requested routing was from Chicago to San Francisco on board Trans World Airline (TWA) and
from San Francisco to Manila on board PAL. Salvacion (one of the petitioners), upon arrival at San Francisco,
went to the TWA to inquire about her mother’s remains. But she was told they did not know anything about
it. She then called Pomierski that her mother’s remains were not at the West Coast terminal. Pomierski
immediately called CMAS which informed that the remains were on a plane to Mexico City, that there were
two bodies at the terminal, and somehow they were switched. CMAS called and told Pomierski that they were
sending the remains back to California via Texas. Petitioners filed a complaint against TWA and PAL fir the
misshipment and delay in the delay of the cargo containing the remains of the late Crispina Saludo. Petitioners
alleged that private respondents received the casketed remains of Crispina on October 26, 1976, as evidenced
by the issuance of PAL Airway Bill by Air Care and from said date, private respondents were charged with the
responsibility to exercise extraordinary diligence so much so that the alleged switching of the caskets on
October 27, 1976, or one day after the private respondents received the cargo, the latter must necessarily be
liable.

Issues:
Whether or not there was delivery of the cargo upon mere issuance of the airway bill
Whether or not the delay in the delivery of the casketed remains of petitioners’ mother was due to the
fault of respondent airline companies

Held: NO to both, but TWA was held to pay petitioners nominal damages of P40,000 for its violation of the
degree of diligence required by law to be exercised by every common carrier Ordinarily, a receipt is not
essential to a complete delivery of goods to the carrier for transportation but, when issued, is competent and
prima facie, but not conclusive, evidence of delivery to the carrier. A bill of lading, when properly executed
and delivered to a shipper, is evidence that the carrier has received the goods described therein for shipment.
Except as modified by statute, it is a general rule as to the parties to a contract of carriage of goods in
connection with which a bill of lading is issued reciting that goods have been received for transportation, that
the recital being in essence a receipt alone, is not conclusive, but may be explained, varied or contradicted by
parol or other evidence. In other words, on October 26, 1976 the cargo containing the casketed remains of
Crispina Saludo was booked for PAL Flight Number PR-107 leaving San Francisco for Manila on October 27,
1976, PAL Airway Bill No. 079-01180454 was issued, not as evidence of receipt of delivery of the cargo on
October 26, 1976, but merely as a confirmation of the booking thus made for the San Francisco-Manila flight
scheduled on October 27, 1976. Actually, it was not until October 28, 1976 that PAL received physical
delivery of the body at San Francisco, as duly evidenced by the Interline Freight Transfer Manifest of the
American Airline Freight System and signed for by Virgilio Rosales at 1945H, or 7:45 P.M. on said date.
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 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. The oft-repeated rule regarding a carrier's liability for delay is that in the absence of a
special contract, a carrier is not an insurer against delay in transportation of goods. When a common carrier
undertakes to convey goods, the law implies a contract that they shall be delivered at destination within a
reasonable time, in the absence, of any agreement as to the time of delivery. But where a carrier has made an
express contract to transport and deliver property within a specified time, it is bound to fulfill its contract and
is liable for any delay, no matter from what cause it may have arisen. This result logically follows from the
well-settled rule that where the law creates a duty or charge, and the party is disabled from performing it
without any default in himself, and has no remedy over, then the law will excuse him, but where the party by
his own contract creates a duty or charge upon himself, he is bound to make it good notwithstanding any
accident or delay by inevitable necessity because he might have provided against it by contract. Whether or
not there has been such an undertaking on the part of the carrier to be determined from the circumstances
surrounding the case and by application of the ordinary rules for the interpretation of contracts. Echoing the
findings of the trial court, the respondent court correctly declared that — In a similar case of delayed delivery
of air cargo under a very similar stipulation contained in the airway bill which reads: "The carrier does not
obligate itself to carry the goods by any specified aircraft or on a specified time. Said carrier being hereby
authorized to deviate from the route of the shipment without any liability therefor", our Supreme Court ruled
that common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested
with the right to prompt delivery, unless such common carriers previously assume the obligation. Said rights
and obligations are created by a specific contract entered into by the parties (Mendoza vs. PAL, 90 Phil. 836).
There is no showing by plaintiffs that such a special or specific contract had been entered into between them
and the defendant airline companies. And this special contract for prompt delivery should call the attention of
the carrier to the circumstances surrounding the case and the approximate amount of damages to be suffered
in case of delay (See Mendoza vs. PAL, supra). There was no such contract entered into in the instant case.” A
common carrier undertaking to transport property has the implicit duty to carry and deliver it within
reasonable time, absent any particular stipulation regarding time of delivery, and to guard against delay. In
case of any unreasonable delay, the carrier shall be liable for damages immediately and proximately resulting
from such neglect of duty. As found by the trial court, the delay in the delivery of the remains of Crispina
Saludo, undeniable and regrettable as it was, cannot be attributed to the fault, negligence or malice of private
respondents, a conclusion concurred in by respondent court and which we are not inclined to disturb.

Macam v. CA

Facts: Benito Macam, doing business under name Ben-Mac Enterprises, shipped on board vessel Nen-Jiang,
owned and operated by respondent China Ocean Shipping Co. through local agent Wallem Philippines
Shipping Inc., 3,500 boxes of watermelon covered by Bill of Lading No. HKG 99012, and 1,611 boxes of fresh
mangoes covered by Bill of Lading No. HKG 99013. The shipment was bound for Hongkong with
PAKISTAN BANK as consignee and Great Prospect Company of Rowloon (GPC) as notify party. Upon
arrival in Hongkong, shipment was delivered by respondent WALLEM directly to GPC, not to PAKISTAN
BANK and without the required bill of lading having been surrendered. Subsequently, GPC failed to pay
PAKISTAN BANK, such that the latter, still in possession of original bill of lading, refused to pay petitioner
thru SOLIDBANK. Since SOLIDBANK already pre-paid the value of shipment, it demanded payment from
respondent WALLEM but was refused. MACAM constrained to return the amount paid by SOLIDBANK
and demanded payment from WALLEM but to no avail. WALLEM submitted in evidence a telex dated 5
April 1989 as basis for delivering the cargoes to GPC without the bills of lading and bank guarantee. The
telex instructed delivery of various shipments to the respective consignees without need of presenting the bill
of lading and bank guarantee per the respective shipper’s request since “for prepaid shipt ofrt charges already
fully paid.” MACAM, however, argued that, assuming there was such an instruction, the consignee referred to
was PAKISTAN BANK and not GPC. The RTC ruled for MACAM and ordered value of shipment. CA
reversed RTC’s decision.

Issue: Are the respondents liable to the petitioner for releasing the goods to GPC without the bills of lading or
bank guarantee?

Held: It is a standard maritime practice when immediate delivery is of the essence, for shipper to request or
instruct the carrier to deliver the goods to the buyer upon arrival at the port of destination without requiring
presentation of bill of lading as that usually takes time. Thus, taking into account that subject shipment
consisted of perishable goods and SOLIDBANK pre-paid the full amount of value thereof, it is not hard to
believe the claim of respondent WALLEM that petitioner indeed requested the release of the goods to GPC
without presentation of the bills of lading and bank guarantee. To implement the said telex instruction, the
delivery of the shipment must be to GPC, the notify party or real importer/buyer of the goods and not the
PAKISTANI BANK since the latter can very well present the original Bills of Lading in its possession.
Likewise, if it were the PAKISTANI BANK to whom the cargoes were to be strictly delivered, it will no
longer be proper to require a bank guarantee as a substitute for the Bill of Lading. To construe otherwise will
render meaningless the telex instruction. After all, the cargoes consist of perishable fresh fruits and immediate
delivery thereof the buyer/importer is essentially a factor to reckon with. We emphasize that the
extraordinary responsibility of the common carriers lasts until actual or constructive delivery of the cargoes
to the consignee or to the person who has a right to receive them. PAKISTAN BANK was indicated in the
bills of lading as consignee whereas GPC was the notify party. However, in the export invoices GPC was
clearly named as buyer/importer. Petitioner also referred to GPC as such in his demand letter to respondent
WALLEM and in his complaint before the trial court. This premise draws us to conclude that the delivery of
the cargoes to GPC as buyer/importer which, conformably with Art. 1736 had, other than the consignee, the
right to receive them was proper.

11. Cathay Pacific v. CA

FACTS: Respondent Alcantara was a first class passenger of a Cathay Pacific flight to Jakarta to attend a
business conference with the Director General of Trade of Indonesia. Upon his arrival in Jakarta, he
discovered that his luggage was missing. He was informed that his luggage was left behind in Hongkong and
was offered $20.00 as "inconvenience money" to buy his immediate personal needs. He had to seek
postponement of his pre-arranged conference. And when his luggage finally reached Jakarta after a day, it was
required to be picked up by an official of the Philippine Embassy. The trial court ordered Cathay to pay. The
CA affirmed but increased the award of damages. SC affirmed but modified the award of damages. Cathay
argues that the one-day delay was not made in bad faith because it had a mechanical trouble wherein all pieces
of luggage on board the first aircraft bound for Jakarta were unloaded and transferred to the second aircraft
which departed an hour and a half later. Cathay also argues that he was not treated rudely and arrogantly by
its employees. Also, that the CA erred in failing to apply the Warsaw Convention on the liability of a carrier
to its passengers.

ISSUE: W/N Cathay breached its contract of carriage with Alcantara and acted in bad faith?
HELD: YES. Cathay failed to deliver his luggage at the designated place and time, it being the obligation of a
common carrier to carry its passengers and their luggage safely to their destination, which includes the duty
not to delay their transportation. It was not even aware that the luggage was left behind until its attention
was called by the Hongkong Customs authorities. It also refused to deliver the luggage at his hotel and
required him to pick it up with an official of the Philippine Embassy The Cathay employees were also
discourteous, rude, and insulting. He was simply advised to buy anything he wanted with only $20.00 which
was certainly not enough to purchase comfortable clothing appropriate for an executive conference. Cathay’s
agents only replied, "What can we do, the baggage is missing. I cannot do anything . . . Anyhow, you can buy
anything you need, charged to Cathay Pacific." Moral and exemplary damages are proper where in breaching
the contract of carriage bad faith or fraud is shown. In the absence of fraud or bad faith, liability is limited to
the natural and probable consequences of the breach of obligation which the parties had foreseen or could have
reasonably foreseen. Further, Cathay contends that the extent of its liability should be limited absolutely to
that set forth in the Warsaw Convention. The said treaty does not operate as an exclusive enumeration of the
instances for declaring a carrier liable for breach of contract of carriage or as an absolute limit of the extent of
that liability. The Warsaw Convention declares the carrier liable for damages in the enumerated cases and
under certain limitations. However, it must not be construed to preclude the operation of the Civil Code and
other pertinent laws. It does not regulate, much less exempt, the carrier from liability for damages for
violating the rights of its passengers under the contract of carriage, especially if wilfull misconduct on the part
of the carrier's employees is found or established, as in this case.

9. Macam v. CA

Facts: Benito Macam, doing business under name Ben-Mac Enterprises, shipped on board vessel Nen-Jiang,
owned and operated by respondent China Ocean Shipping Co. through local agent Wallem Philippines
Shipping Inc., 3,500 boxes of watermelon covered by Bill of Lading No. HKG 99012, and 1,611 boxes of fresh
mangoes covered by Bill of Lading No. HKG 99013. The shipment was bound for Hongkong with
PAKISTAN BANK as consignee and Great Prospect Company of Rowloon (GPC) as notify party. Upon
arrival in Hongkong, shipment was delivered by respondent WALLEM directly to GPC, not to PAKISTAN
BANK and without the required bill of lading having been surrendered. Subsequently, GPC failed to pay
PAKISTAN BANK, such that the latter, still in possession of original bill of lading, refused to pay petitioner
thru SOLIDBANK. Since SOLIDBANK already pre-paid the value of shipment, it demanded payment from
respondent WALLEM but was refused. MACAM constrained to return the amount paid by SOLIDBANK
and demanded payment from WALLEM but to no avail. WALLEM submitted in evidence a telex dated 5
April 1989 as basis for delivering the cargoes to GPC without the bills of lading and bank guarantee. The
telex instructed delivery of various shipments to the respective consignees without need of presenting the bill
of lading and bank guarantee per the respective shipper’s request since “for prepaid shipt ofrt charges already
fully paid.” MACAM, however, argued that, assuming there was such an instruction, the consignee referred to
was PAKISTAN BANK and not GPC. The RTC ruled for MACAM and ordered value of shipment. CA
reversed RTC’s decision.

Issue: Are the respondents liable to the petitioner for releasing the goods to GPC without the bills of lading or
bank guarantee?

Held: It is a standard maritime practice when immediate delivery is of the essence, for shipper to request or
instruct the carrier to deliver the goods to the buyer upon arrival at the port of destination without requiring
presentation of bill of lading as that usually takes time. Thus, taking into account that subject shipment
consisted of perishable goods and SOLIDBANK pre-paid the full amount of value thereof, it is not hard to
believe the claim of respondent WALLEM that petitioner indeed requested the release of the goods to GPC
without presentation of the bills of lading and bank guarantee. To implement the said telex instruction, the
delivery of the shipment must be to GPC, the notify party or real importer/buyer of the goods and not the
PAKISTANI BANK since the latter can very well present the original Bills of Lading in its possession.
Likewise, if it were the PAKISTANI BANK to whom the cargoes were to be strictly delivered, it will no
longer be proper to require a bank guarantee as a substitute for the Bill of Lading. To construe otherwise will
render meaningless the telex instruction. After all, the cargoes consist of perishable fresh fruits and immediate
delivery thereof the buyer/importer is essentially a factor to reckon with. We emphasize that the
extraordinary responsibility of the common carriers lasts until actual or constructive delivery of the cargoes
to the consignee or to the person who has a right to receive them. PAKISTAN BANK was indicated in the
bills of lading as consignee whereas GPC was the notify party. However, in the export invoices GPC was
clearly named as buyer/importer. Petitioner also referred to GPC as such in his demand letter to respondent
WALLEM and in his complaint before the trial court. This premise draws us to conclude that the delivery of
the cargoes to GPC as buyer/importer which, conformably with Art. 1736 had, other than the consignee, the
right to receive them was proper. 10. PAL v. CA

12. Trans-Asia Shipping Lines vs. CA


(GR 118126, 4 March 1996)

FACTS: Respondent Atty. Renato Arroyo, a public attorney, bought a ticket from herein petitioner for the
voyage of M/V Asia Thailand vessel to Cagayan de Oro City from Cebu City on November 12, 1991. At
around 5:30 in the evening of November 12, 1991, respondent boarded the M/V Asia Thailand vessel during
which he noticed that some repairs were being undertaken on the engine of the vessel. The vessel departed at
around 11:00 in the evening with only one (1) engine running. After an hour of slow voyage, the vessel
stopped near Kawit Island and dropped its anchor thereat. After half an hour of stillness, some passengers
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. In Cebu City, plaintiff together with the other passengers who requested to be brought back to Cebu
City, were allowed to disembark. Thereafter, the vessel proceeded to Cagayan de Oro City. Petitioner, the
next day, boarded the M/V Asia Japan for its voyage to Cagayan de Oro City, likewise a vessel of defendant.
On account of this failure of defendant to transport him to the place of destination on November 12, 1991,
respondent Arroyo filed before the trial court “an action for damage arising from bad faith, breach of contract
and from tort,” against petitioner. The trial court ruled only for breach of contract. The CA reversed and set
aside said decision on appeal.

ISSUE: Whether or not the petitioner Trans-Asia was negligent?

HELD: Yes. Before commencing the contracted voyage, the petitioner undertook some repairs on the cylinder
head of one of the vessel’s engines. But even before it could finish these repairs, it allowed 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 as sometime after it had run its course, it conked out. This caused 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 began. For a vessel to be seaworthy, it must be adequately
equipped for the voyage and manned with a sufficient number of competent officers and crew.[21] The failure
of a common carrier to maintain in seaworthy condition its vessel involved in a contract of carriage is a clear
breach of is duty prescribed in Article 1755 of the Civil Code.

Southern Lines v. CA

DOCTRINE:If the fact of improper packing is known to the carrier or his servants, or apparent upon ordinary
observation, but it accepts the goods notwithstanding such condition, it is not relieved of liability for loss or
injury resulting therefrom.
FACTS: - The City of Iloilo requisitioned for rice from the National Rice and Corn Corporation (NARIC). -
NARIC shipped 1,726 sacks of rice consigned to the City of Iloilo on board of SS General Wright belong to
Southern Lines. - The City of Iloilo received the shipment and paid the amount stated in the bill of lading
(around Php 63K). - However, at the bottom of the bill of lading, it was noted that City of Iloilo received the
merchandise in the same condition as when shipped, except that it received only 1,685 sacks. - Upon actual
weighing, it was discovered that the shortage was equal to 41 sacks of rice. - Thus, the City of Iloilo filed a
complaint against NARIC and Southern Lines for the recovery of the value of the shortage of the shipment of
rice (Php 6,486.35). - The lower court absolved NARIC but sentenced Southern Lines to pay the amount. - CA
affirmed. - Hence, this petition for review. - Southern Lines claims exemption from liability by contending that
the shortage in the shipment of rice was due to such factors as shrinkage, leakage or spillage of the rice on
account of the bad condition of the sacks at the time it received the same and negligence of the agents of City
of Iloilo in receiving the shipment.
ISSUES:
- Whether Southern Lines is liable for the loss or shortage of the rice shipped.YES
- Whether the City of Iloilo is precluded from filing an action for damages on account of its failure to
present a claim within 24 hours from receipt of the shipment as stated in the bill of lading.NO
HELD: - YES. The SC held that the contention of Southern Lines with respect to the improper packing is
untenable.Under Art. 361 of the Code of Commerce, the carrier, in order to free itself from liability, was only
obliged to prove that the damages suffered by the goods were “by virtue of the nature or defect of the articles.”
Under Art. 362, the plaintiff, in order to hold the defendant liable, was obliged to prove that the damages to
the goods is by virtue of their nature, occurred on account of its negligence or because the defendant did not
take the precaution adopted by careful persons.It held that if the fact of improper packing is known to the
carrier or his servants, or apparent upon ordinary observation, but it accepts the goods notwithstanding such
condition, it is not relieved of liability for loss or injury resulting therefrom. - NO. The SC noted that
Southern Lines failed to plead this defense in its answer to City of Iloilo’s complaint and, therefore, the same is
deemed waived and cannot be raised for the first time.The SC also cited the finding of the CA that City of
Iloilo filed the action within a reasonable time; that the action is one for the refund of the amount paid in
excess, and not for damages or the recovery of shortage; the bill of lading does not at all limit the time for the
filing of action for the refund of money paid in excess.

2. Mitsui Lines v. CA

3. Sulpicio v. First Lepanto

4. Coastwise Lighterage Corporation v. CA

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
(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 the fateful 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 party other 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.

5. First Philippine Insurance v. Wallem

6. Samar Mining Co. v. Nordeutscher Lloyd

FACTS: The case arose from an importation made by Samar Mining Co. Inc. of 1 crate Optima welded wedge
wire sieves through the M/S Schwabenstein, a vessel owned by Nordeutscher Lloyd, (represented in the
Philippines by its agent, C.F. Sharp & Co., Inc.), which shipment is covered by Bill of Lading No. 18 duly
issued to consignee Samar Mining. Upon arrival of the vessel at the port of Manila, the importation was
unloaded and delivered in good order and condition to the bonded warehouse of AMCYL. The goods were
however never delivered to, nor received by, the consignee at the port of destination — Davao. When the
letters of complaint sent to Nordeutscher Lloyd failed to elicit the desired response, Samar Mining filed a
formal claim for P1,691.93, the equivalent of $424.00 at the prevailing rate of exchange at that time, against
the former, but neither paid. Samar Mining filed a suit to enforce payment. Nordeutscher Lloyd and CF Sharp
& Co. brought in AMCYL as third party defendant. The trial court rendered judgment in favor of Samar
Mining, ordering Nordeutscher Lloyd, et. al. to pay the amount of P1,691.93 plus attorney’s fees and costs.
However, the Court stated that Nordeutscher Lloyd, et. al. may recoup whatever they may pay Samar Mining
by enforcing the judgment against third party defendant AMCYL, which had earlier been declared in default.
Nordeutscher Lloyd and C.F. Sharp & Co. appealed from said decision. Notes The following are the pertinent
ports, as provided in the bill of lading: Port of Loading: Bremen, Germany Port of discharge from ship: Manila
Port of destination/Port of discharge of the goods: Davao As plainly indicated on the face of the bill, the
vessel M/S Schwabenstein is to transport the goods only up to Manila. Thereafter, the goods are to be
transshipped by the carrier to the port of destination.
ISSUE: Whether or not a stipulation in the bill of lading exempting the carrier from liability for loss of goods
not in its actual custody (i.e., after their discharge from the ship) is valid.
HELD: It is clear that in discharging the goods from the ship at the port of Manila, and delivering the same
into the custody of AMCYL, the bonded warehouse, appellants were acting in full accord with the contractual
stipulations contained in Bill of Lading No. 18. The delivery of the goods to AMCYL was part of appellants'
duty to transship (meaning to transfer for further transportation from one ship or conveyance to another) the
goods from Manila to their port of destination-Davao. The extent of appellant carrier's responsibility and/or
liability in the transshipment of the goods in question are spelled out and delineated under Section 1,
paragraph 3 of Bill of Lading No. 18, to wit: “the carrier shall not be liable in any capacity whatsoever for any
delay, loss or damage occurring before the goods enter ship's tackle to be loaded or after the goods leave ship's
tackle to be discharged, transshipped or forwarded”. Further, in Section 11 of the same bill, it was provided
that “this carrier, in making arrangements for any transshipping or forwarding vessels or means of
transportation not operated by this carrier shall be considered solely the forwarding agent of the shipper and
without any other responsibility whatsoever even though the freight for the whole transport has been
collected by him… Pending or during forwarding or transshipping the carrier may store the goods ashore or
afloat solely as agent of the shipper…” We find merits in Nordeutscher’s contention that they are not liable
for the loss of the subject goods by claiming that they have discharged the same in full and good condition
unto the custody of AMCYL at the port of discharge from ship — Manila, and therefore, pursuant to the
aforequoted stipulation (Sec. 11) in the bill of lading, their responsibility for the cargo had ceased.The validity
of stipulations in bills of lading exempting the carrier from liability for loss or damage to the goods when the
same are not in its actual custody has been upheld by Us in PHOENIX ASSURANCE CO., LTD. vs.
UNITED STATES LINES, 22 SCRA 674 (1968), ruling that “pursuant to the terms of the Bill of Lading,
appellee's responsibility as a common carrier ceased the moment the goods were unloaded in Manila and in
the matter of transshipment, appellee acted merely as an agent of the shipper and consignee” In the present
case, by the authority of the above pronouncements, and in conformity with the pertinent provisions of the
Civil Code, Section 11 of Bill of Lading No. 18 and the third paragraph of Section 1 thereof are valid
stipulations between the parties insofar as they exempt the carrier from liability for loss or damage to the
goods while the same are not in the latter's actual custody. Acareful perusal of the provisions of the New Civil
Code on common carriers directs our attention to Article 1736, which reads: “The extraordinary responsibility
of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and
received by the carrier for transportation until the same are delivered, actually or constructively, by the
carrier to the consignee, or to the person who has a right to receive them, without prejudice to the provisions
of article 1738.” In relation to this, Article 1738 provides: “the extraordinary liability of the common carrier
continues to be operative even during the time the goods are stored in a warehouse of the carrier at the place
of destination, until the consignee has been advised of the arrival of the goods and has had reasonable
opportunity thereafter to remove them or otherwise dispose of them.” Art. 1738 finds no applicability to the
instant case. The said article contemplates a situation where the goods had already reached their place of
destination and are stored in the warehouse of the carrier. The subject goods were still awaiting
transshipment to their port of destination, and were stored in the warehouse of a third party when last seen
and/or heard of. However, Article 1736 is applicable to the instant suit. Under said article, the carrier may be
relieved of the responsibility for loss or damage to the goods upon actual or constructive delivery of the same
by the carrier to the consignee, or to the person who has a right to receive them. There is actual delivery in
contracts for the transport of goods when possession has been turned over to the consignee or to his duly
authorized agent and a reasonable time is given him to remove the goods. In the present case, there was actual
delivery to the consignee through its duly authorized agent, the carrier. Lastly, two undertakings are
embodied in the bill of lading: the transport of goods from Germany to Manila, and the transshipment of the
same goods from Manila to Davao, with Samar Mining acting as the agent of the consignee. The moment the
subject goods are discharged in Manila, Samar Mining’s personality changes from that of carrier to that of
agent of the consignee. Such being the case, there was, in effect, actual delivery of the goods from appellant as
carrier to the same appellant as agent of the consignee. Upon such delivery, the appellant, as erstwhile carrier,
ceases to be responsible for any loss or damage that may befall the goods from that point onwards. This is the
full import of Article 1736. But even as agent of the consignee, the appellant cannot be made answerable for
the value of the missing goods. It is true that the transshipment of the goods, which was the object of the
agency, was not fully performed. However, appellant had commenced said performance, the completion of
which was aborted by circumstances beyond its control. An agent who carries out the orders and instructions
of the principal without being guilty of negligence, deceit or fraud, cannot be held responsible for the failure of
the principal to accomplish the object of the agency.

3. Sulpicio v. First Lepanto


4. Coastwise Lighterage Corporation v. CA

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
(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 the fateful 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 party other 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.

5. First Philippine Insurance v. Wallem

6. Samar Mining Co. v. Nordeutscher Lloyd

FACTS: The case arose from an importation made by Samar Mining Co. Inc. of 1 crate Optima welded wedge
wire sieves through the M/S Schwabenstein, a vessel owned by Nordeutscher Lloyd, (represented in the
Philippines by its agent, C.F. Sharp & Co., Inc.), which shipment is covered by Bill of Lading No. 18 duly
issued to consignee Samar Mining. Upon arrival of the vessel at the port of Manila, the importation was
unloaded and delivered in good order and condition to the bonded warehouse of AMCYL. The goods were
however never delivered to, nor received by, the consignee at the port of destination — Davao. When the
letters of complaint sent to Nordeutscher Lloyd failed to elicit the desired response, Samar Mining filed a
formal claim for P1,691.93, the equivalent of $424.00 at the prevailing rate of exchange at that time, against
the former, but neither paid. Samar Mining filed a suit to enforce payment. Nordeutscher Lloyd and CF Sharp
& Co. brought in AMCYL as third party defendant. The trial court rendered judgment in favor of Samar
Mining, ordering Nordeutscher Lloyd, et. al. to pay the amount of P1,691.93 plus attorney’s fees and costs.
However, the Court stated that Nordeutscher Lloyd, et. al. may recoup whatever they may pay Samar Mining
by enforcing the judgment against third party defendant AMCYL, which had earlier been declared in default.
Nordeutscher Lloyd and C.F. Sharp & Co. appealed from said decision. Notes The following are the pertinent
ports, as provided in the bill of lading: Port of Loading: Bremen, Germany Port of discharge from ship: Manila
Port of destination/Port of discharge of the goods: Davao As plainly indicated on the face of the bill, the
vessel M/S Schwabenstein is to transport the goods only up to Manila. Thereafter, the goods are to be
transshipped by the carrier to the port of destination.
ISSUE: Whether or not a stipulation in the bill of lading exempting the carrier from liability for loss of goods
not in its actual custody (i.e., after their discharge from the ship) is valid.
HELD: It is clear that in discharging the goods from the ship at the port of Manila, and delivering the same
into the custody of AMCYL, the bonded warehouse, appellants were acting in full accord with the contractual
stipulations contained in Bill of Lading No. 18. The delivery of the goods to AMCYL was part of appellants'
duty to transship (meaning to transfer for further transportation from one ship or conveyance to another) the
goods from Manila to their port of destination-Davao. The extent of appellant carrier's responsibility and/or
liability in the transshipment of the goods in question are spelled out and delineated under Section 1,
paragraph 3 of Bill of Lading No. 18, to wit: “the carrier shall not be liable in any capacity whatsoever for any
delay, loss or damage occurring before the goods enter ship's tackle to be loaded or after the goods leave ship's
tackle to be discharged, transshipped or forwarded”. Further, in Section 11 of the same bill, it was provided
that “this carrier, in making arrangements for any transshipping or forwarding vessels or means of
transportation not operated by this carrier shall be considered solely the forwarding agent of the shipper and
without any other responsibility whatsoever even though the freight for the whole transport has been
collected by him… Pending or during forwarding or transshipping the carrier may store the goods ashore or
afloat solely as agent of the shipper…” We find merits in Nordeutscher’s contention that they are not liable
for the loss of the subject goods by claiming that they have discharged the same in full and good condition
unto the custody of AMCYL at the port of discharge from ship — Manila, and therefore, pursuant to the
aforequoted stipulation (Sec. 11) in the bill of lading, their responsibility for the cargo had ceased.The validity
of stipulations in bills of lading exempting the carrier from liability for loss or damage to the goods when the
same are not in its actual custody has been upheld by Us in PHOENIX ASSURANCE CO., LTD. vs.
UNITED STATES LINES, 22 SCRA 674 (1968), ruling that “pursuant to the terms of the Bill of Lading,
appellee's responsibility as a common carrier ceased the moment the goods were unloaded in Manila and in
the matter of transshipment, appellee acted merely as an agent of the shipper and consignee” In the present
case, by the authority of the above pronouncements, and in conformity with the pertinent provisions of the
Civil Code, Section 11 of Bill of Lading No. 18 and the third paragraph of Section 1 thereof are valid
stipulations between the parties insofar as they exempt the carrier from liability for loss or damage to the
goods while the same are not in the latter's actual custody. Acareful perusal of the provisions of the New Civil
Code on common carriers directs our attention to Article 1736, which reads: “The extraordinary responsibility
of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and
received by the carrier for transportation until the same are delivered, actually or constructively, by the
carrier to the consignee, or to the person who has a right to receive them, without prejudice to the provisions
of article 1738.” In relation to this, Article 1738 provides: “the extraordinary liability of the common carrier
continues to be operative even during the time the goods are stored in a warehouse of the carrier at the place
of destination, until the consignee has been advised of the arrival of the goods and has had reasonable
opportunity thereafter to remove them or otherwise dispose of them.” Art. 1738 finds no applicability to the
instant case. The said article contemplates a situation where the goods had already reached their place of
destination and are stored in the warehouse of the carrier. The subject goods were still awaiting
transshipment to their port of destination, and were stored in the warehouse of a third party when last seen
and/or heard of. However, Article 1736 is applicable to the instant suit. Under said article, the carrier may be
relieved of the responsibility for loss or damage to the goods upon actual or constructive delivery of the same
by the carrier to the consignee, or to the person who has a right to receive them. There is actual delivery in
contracts for the transport of goods when possession has been turned over to the consignee or to his duly
authorized agent and a reasonable time is given him to remove the goods. In the present case, there was actual
delivery to the consignee through its duly authorized agent, the carrier. Lastly, two undertakings are
embodied in the bill of lading: the transport of goods from Germany to Manila, and the transshipment of the
same goods from Manila to Davao, with Samar Mining acting as the agent of the consignee. The moment the
subject goods are discharged in Manila, Samar Mining’s personality changes from that of carrier to that of
agent of the consignee. Such being the case, there was, in effect, actual delivery of the goods from appellant as
carrier to the same appellant as agent of the consignee. Upon such delivery, the appellant, as erstwhile carrier,
ceases to be responsible for any loss or damage that may befall the goods from that point onwards. This is the
full import of Article 1736. But even as agent of the consignee, the appellant cannot be made answerable for
the value of the missing goods. It is true that the transshipment of the goods, which was the object of the
agency, was not fully performed. However, appellant had commenced said performance, the completion of
which was aborted by circumstances beyond its control. An agent who carries out the orders and instructions
of the principal without being guilty of negligence, deceit or fraud, cannot be held responsible for the failure of
the principal to accomplish the object of the agency.