Transportation Law Prelims – Atty. Ralph James G.
Laman officials or employees of the airline or other special injury
1. NCC – Civil Code Art 1732 – 1766
Common Carriers Introduction – Cases:
ALITALIA, Petitioner, vs. INTERMEDIATE APPELLATE COURT
and FELIPA E. PABLO, Respondents. G.R. No. 71929
: December 4, 1990
The Convention does not thus operate as an exclusive
enumeration of the instances of an airline's liability, or as an
absolute limit of the extent of that liability. Such a
proposition is not borne out by the language of the
Convention, as this Court has now, and at an earlier time,
pointed out. 25 Moreover, slight reflection readily leads to
the conclusion that it should be deemed a limit of liability
only in those cases where the cause of the death or injury to
person, or destruction, loss or damage to property or delay
in its transport is not attributable to or attended by any wilful
misconduct, bad faith, recklessness, or otherwise improper
conduct on the part of any official or employee for which the
carrier is responsible, and there is otherwise no special or
extraordinary form of resulting injury. The Convention's
provisions, in short, do not "regulate or exclude liability for
other breaches of contract by the carrier" 26 or misconduct
of its officers and employees, or for some particular or
exceptional type of damage. Otherwise, "an air carrier would
be exempt from any liability for damages in the event of its
absolute refusal, in bad faith, to comply with a contract of
carriage, which is absurd." 27 Nor may it for a moment be
supposed that if a member of the aircraft complement
should inflict some physical injury on a passenger, or
maliciously destroy or damage the latter's property, the
Convention might successfully be pleaded as the sole gauge
to determine the carrier's liability to the passenger. Neither
may the Convention be invoked to justify the disregard of
some extraordinary sort of damage resulting to a passenger
and preclude recovery therefor beyond the limits set by said
Convention. It is in this sense that the Convention has been
applied, or ignored, depending on the peculiar facts
presented by each case.
In Pan American World Airways, Inc. v. I.A.C., 28 for example,
the Warsaw Convention was applied as regards the limitation
on the carrier's liability, there being a simple loss of baggage
without any otherwise improper conduct on the part of the
Certainly, the compensation for the injury suffered by Dr.
sustained by the passenger.
On the other hand, the Warsaw Convention has invariably
been held inapplicable, or as not restrictive of the carrier's
liability, where there was satisfactory evidence of malice or
bad faith attributable to its officers and employees. 29 Thus,
an air carrier was sentenced to pay not only compensatory
but also moral and exemplary damages, and attorney's fees,
for instance, where its employees rudely put a passenger
holding a first-class ticket in the tourist or economy
section, 30 or ousted a brown Asiatic from the plane to give
his seat to a white man, 31 or gave the seat of a passenger
with a confirmed reservation to another, 32 or subjected a
passenger to extremely rude, even barbaric treatment, as by
calling him a "monkey." 33
In the case at bar, no bad faith or otherwise improper
conduct may be ascribed to the employees of petitioner
airline; and Dr. Pablo's luggage was eventually returned to
her, belatedly, it is true, but without appreciable damage. The
fact is, nevertheless, that some special species of injury was
caused to Dr. Pablo because petitioner ALITALIA misplaced
her baggage and failed to deliver it to her at the time
appointed — a breach of its contract of carriage, to be sure
— with the result that she was unable to read the paper and
make the scientific presentation (consisting of slides,
autoradiograms or films, tables and tabulations) that she had
painstakingly labored over, at the prestigious international
conference, to attend which she had traveled hundreds of
miles, to her chagrin and embarrassment and the
disappointment and annoyance of the organizers. She felt,
not unreasonably, that the invitation for her to participate at
the conference, extended by the Joint FAO/IAEA Division of
Atomic Energy in Food and Agriculture of the United
Nations, was a singular honor not only to herself, but to the
University of the Philippines and the country as well, an
opportunity to make some sort of impression among her
colleagues in that field of scientific activity. The opportunity
to claim this honor or distinction was irretrievably lost to her
because of Alitalia's breach of its contract.
Apart from this, there can be no doubt that Dr. Pablo
underwent profound distress and anxiety, which gradually
turned to panic and finally despair, from the time she learned
that her suitcases were missing up to the time when, having
gone to Rome, she finally realized that she would no longer
be able to take part in the conference. As she herself put it,
she "was really shocked and distraught and confused."
Pablo cannot under the circumstances be restricted to that
prescribed by the Warsaw Convention for delay in the
transport of baggage.
AMERICAN HOME ASSURANCE, COMPANY, petitioner,
vs.
THE COURT OF APPEALS and NATIONAL MARINE
CORPORATION and/or NATIONAL MARINE CORPORATION
(Manila), respondents. G.R. No. 94149 May 5, 1992
National Development Co. v. C.A. (164 SCRA 593 [1988];
citing Eastern Shipping Lines, Inc. v. I.A.C., 150 SCRA 469, 470
[1987] --- "the law of the country to which the goods are to
be transported persons the liability of the common carrier in
case of their loss, destruction or deterioration." (Article 1753,
Civil Code). Thus, for cargoes transported to the Philippines
as in the case at bar, the liability of the carrier is governed
primarily by the Civil Code and in all matters not regulated
by said Code, the rights and obligations of common carrier
shall be governed by the Code of Commerce and by special
laws (Article 1766, Civil Code).
Under Article 1733 of the Civil Code, 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 passengers transported
by them according to all circumstances of each case. Thus,
under Article 1735 of the same Code, in all cases other than
those mentioned in Article 1734 thereof, the common carrier
shall be presumed to have been at fault or to have acted
negligently, unless it proves that it has observed the
extraordinary diligence required by law (Ibid., p. 595).
Common carriers cannot limit their liability for injury or loss
of goods where such injury or loss was caused by its own
negligence. Otherwise stated, the law on averages under the
Code of Commerce cannot be applied in determining liability
where there is negligence (Ibid., p. 606).
Hence, it is but reasonable to conclude that the issue of
negligence must first be addressed before the proper
provisions of the Code of Commerce on the extent of liability
may be applied.
Instead of presenting proof of the exercise of extraordinary
diligence as required by law, National Marine Corporation
(NMC) filed its Motion to Dismiss dated August 7, 1989,
Page 1 of 47
hypothetically admitting the truth of the facts alleged in the
complaint to the effect that the loss or damage to the 122
bales was due to the negligence or fault of NMC. Such being
the case, it is evident that the Code of Commerce provisions
on averages cannot apply.
On the other hand, Article 1734 of the Civil Code provides
that common carriers are responsible for loss, destruction or
deterioration of the goods, unless due to any of the causes
enumerated therein. It is obvious that the case at bar does
not fall under any of the exceptions. Thus, American Home
Assurance Company is entitled to reimbursement of what it
paid to Mayleen Paper, Inc. as insurer.
UNSWORTH TRANSPORT INTERNATIONAL (PHILS.), INC.,
PETITIONER, vs. COURT OF APPEALS AND PIONEER
INSURANCE AND SURETY CORPORATION, RESPONDENTS.
G.R. No. 166250 : July 26, 2010
A freight forwarder's liability is limited to damages arising
from its own negligence, including negligence in choosing
the carrier; however, where the forwarder contracts to deliver
goods to their destination instead of merely arranging for
their transportation, it becomes liable as a common carrier
for loss or damage to goods. A freight forwarder assumes
the responsibility of a carrier, which actually executes the
transport, even though the forwarder does not carry the
merchandise itself.
Undoubtedly, UTI is liable as a common carrier. Common
carriers, as a general rule, are presumed to have been at fault
or negligent if the goods they transported deteriorated or
got lost or destroyed. That is, unless they prove that they
exercised extraordinary diligence in transporting the goods.
In order to avoid responsibility for any loss or damage,
therefore, they have the burden of proving that they
observed such diligence.27 Mere proof of delivery of the
goods in good order to a common carrier and of their arrival
in bad order at their destination constitutes a prima facie
case of fault or negligence against the carrier. If no adequate
explanation is given as to how the deterioration, loss, or
destruction of the goods happened, the transporter shall be
held responsible.
Petitioner failed to rebut the prima facie presumption of
negligence in the carriage of the subject shipment. Further,
petitioner failed to prove that it observed the extraordinary
diligence and precaution which the law requires a common
carrier to exercise and to follow in order to avoid damage to
or destruction of the goods entrusted to it for safe carriage
and delivery.
It is to be noted that the Civil Code does not limit the liability
of the common carrier to a fixed amount per package. In all
matters not regulated by the Civil Code, the rights and
obligations of common carriers are governed by the Code of
Commerce and special laws. Thus, the COGSA supplements
the Civil Code by establishing a provision limiting the
carrier's liability in the absence of a shipper's declaration of a
higher value in the bill of lading.30 Section 4(5) of the COGSA
provides:
(5) Neither the carrier nor the ship shall in any event be or
become liable for any loss or damage to or in connection
with the transportation of goods in an amount exceeding
$500 per package of lawful money of the United States, or in
case of goods not shipped in packages, per customary
freight unit, or the equivalent of that sum in other currency,
unless the nature and value of such goods have been
declared by the shipper before shipment and inserted in the
bill of lading. This declaration, if embodied in the bill of
lading, shall be prima facie evidence, but shall not be
conclusive on the carrier.
In the present case, the shipper did not declare a higher
valuation of the goods to be shipped. Contrary to the CA's
conclusion, the insertion of the words "L/C No. LC No. 1-
187-008394/ NY 69867 covering shipment of raw materials
for pharmaceutical Mfg. x x x" cannot be the basis of
petitioner's liability.31 Furthermore, the insertion of an
invoice number does not in itself sufficiently and
convincingly show that petitioner had knowledge of the
value of the cargo.
NATIONAL STEEL CORPORATION, petitioner, vs. COURT OF
APPEALS AND VLASONS SHIPPING, INC., respondents. G.R.
No. 112287 December 12, 1997
At the outset, it is essential to establish whether VSI
contracted with NSC as a common carrier or as a private
carrier. The resolution of this preliminary question
determines the law, standard of diligence and burden of
proof applicable to the present case.
Article 1732 of the Civil Code defines a common carrier as
"persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering their
services to the public." It has been held that the true test of a
common carrier is the carriage of passengers or goods,
provided it has space, for all who opt to avail themselves of
its transportation service for a fee.11 A carrier which does not
qualify under the above test is deemed a private carrier.
"Generally, private carriage is undertaken by special
agreement and the carrier does not hold himself out to carry
goods for the general public. The most typical, although not
the only form of private carriage, is the charter party, a
maritime contract by which the charterer, a party other than
the shipowner, obtains the use and service of all or some
part of a ship for a period of time or a voyage or voyages."12
In the instant case, it is undisputed that VSI did not offer its
services to the general public. As found by the Regional Trial
Court, it carried passengers or goods only for those it chose
under a "special contract of charter party." 13 As correctly
concluded by the Court of Appeals, the MV Vlasons I "was
not a common but a private carrier."14Consequently, the
rights and obligations of VSI and NSC, including their
respective liability for damage to the cargo, are determined
primarily by stipulations in their contract of private carriage
or charter party.15 Recently, in Valenzuela Hardwood and
Industrial Supply, Inc., vs. Court of Appeals and Seven
Brothers Shipping Corporation,16 the Court ruled:
. . . in a contract of private carriage, the parties may freely
stipulate their duties and obligations which perforce would
be binding on them. Unlike in a contract involving a common
carrier, private carriage does not involve the general public.
Hence, the stringent provisions of the Civil Code on common
carriers protecting the general public cannot justifiably be
applied to a ship transporting commercial goods as a private
carrier. Consequently, the public policy embodied therein is
not contravened by stipulations in a charter party that lessen
or remove the protection given by law in contracts involving
common carriers.
Because the MV Vlasons I was a private carrier, the
shipowner's obligations are governed by the foregoing
provisions of the Code of Commerce and not by the Civil
Code which, as a general rule, places the prima facie
presumption of negligence on a common carrier. It is a
hornbook doctrine that:
Page 2 of 47
In an action against a private carrier for loss of, or injury to,
cargo, the burden is on the plaintiff to prove that the carrier
was negligent or unseaworthy, and the fact that the goods
were lost or damaged while in the carrier's custody does not
put the burden of proof on the carrier.
Since . . . a private carrier is not an insurer but undertakes
only to exercise due care in the protection of the goods
committed to its care, the burden of proving negligence or a
breach of that duty rests on plaintiff and proof of loss of, or
damage to, cargo while in the carrier's possession does not
cast on it the burden of proving proper care and diligence on
its part or that the loss occurred from an excepted cause in
the contract or bill of lading. However, in discharging the
burden of proof, plaintiff is entitled to the benefit of the
presumptions and inferences by which the law aids the bailor
in an action against a bailee, and since the carrier is in a
better position to know the cause of the loss and that it was
not one involving its liability, the law requires that it come
forward with the information available to it, and its failure to
do so warrants an inference or presumption of its liability.
However, such inferences and presumptions, while they may
affect the burden of coming forward with evidence, do not
alter the burden of proof which remains on plaintiff, and,
where the carrier comes forward with evidence explaining
the loss or damage, the burden of going forward with the
evidence is again on plaintiff.
Where the action is based on the shipowner's warranty of
seaworthiness, the burden of proving a breach thereof and
that such breach was the proximate cause of the damage
rests on plaintiff, and proof that the goods were lost or
damaged while in the carrier's possession does not cast on it
the burden of proving seaworthiness. . . . Where the contract
of carriage exempts the carrier from liability for
unseaworthiness not discoverable by due diligence, the
carrier has the preliminary burden of proving the exercise of
due diligence to make the vessel seaworthy.
MALAYAN INSURANCE CO., INC., Petitioner, vs. PHILIPPINES
FIRST INSURANCE CO., INC. and REPUTABLE FORWARDER
SERVICES, INC., Respondents. G.R. No. 184300 July 11, 2012
Under Article 1732 of the Civil Code, common carriers are
persons, corporations, firms, or associations engaged in the
business of carrying or transporting passenger or goods, or
both by land, water or air for compensation, offering their
services to the public. On the other hand, a private carrier is
one wherein the carriage is generally undertaken by special
agreement and it does not hold itself out to carry goods for
the general public.28 A common carrier becomes a private
carrier when it undertakes to carry a special cargo or
chartered to a special person only.29 For all intents and
purposes, therefore, Reputable operated as a private/special
carrier with regard to its contract of carriage with Wyeth.
The extent of a private carrier’s obligation is dictated by the
stipulations of a contract it entered into, provided its
stipulations, clauses, terms and conditions are not contrary to
law, morals, good customs, public order, or public policy.
"The Civil Code provisions on common carriers should not be
applied where the carrier is not acting as such but as a
private carrier. Public policy governing common carriers has
no force where the public at large is not involved."30
Thus, being a private carrier, the extent of Reputable’s
liability is fully governed by the stipulations of the contract of
carriage, one of which is that it shall be liable to Wyeth for
the loss of the goods/products due to any and all causes
whatsoever, including theft, robbery and other force majeure
while the goods/products are in transit and until actual
delivery to Wyeth’s customers, salesmen and dealers.
BRITISH AIRWAYS, petitioner, vs. COURT OF APPEALS, GOP
MAHTANI, and PHILIPPINE AIRLINES, respondents. G.R. No.
121824 January 29, 1998
The nature of an airline's contract of carriage partakes of two
types, namely: a contract to deliver a cargo or merchandise
to its destination and a contract to transport passengers to
their destination. A business intended to serve the traveling
public primarily, it is imbued with public interest, hence, the
law governing common carriers imposes an exacting
standard.14 Neglect or malfeasance by the carrier's
employees could predictably furnish bases for an action for
damages.
Admittedly, in a contract of air carriage a declaration by the
passenger of a higher value is needed to recover a greater
amount. Article 22(1) of the Warsaw Convention,19 provides
as follows: (2) In the transportation of checked baggage and
goods, the liability of the carrier shall be limited to a sum of
250 francs per kilogram, unless the consignor has made, at
time the package was handed over to the carrier, a special
declaration of the value at delivery and has paid a
supplementary sum if the case so requires. In that case the
carrier will be liable to pay a sum not exceeding the declared
sum, unless he proves that the sum is greater than the actual
value to the consignor at delivery.
American jurisprudence provides that an air carrier is not
liable for the loss of baggage in an amount in excess of the
limits specified in the tariff which was filed with the proper
authorities, such tariff being binding, on the passenger
regardless of the passenger's lack of knowledge thereof or
assent thereto.20 This doctrine is recognized in this
jurisdiction.21
Notwithstanding the foregoing, we have, nevertheless, ruled
against blind reliance on adhesion contracts where the facts
and circumstances justify that they should be disregarded.22
In addition, we have held that 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.23
Given the foregoing postulates, the inescapable conclusion is
that 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.
Undeniably, for the loss of his luggage, Mahtani is entitled to
damages from BA, in view of their contract of carriage. Yet,
BA adamantly disclaimed its liability and instead imputed it
to PAL which the latter naturally denies. In other words, BA
and PAL are blaming each other for the incident.
Since the instant petition was based on breach of contract of
carriage, Mahtani can only sue BA alone, 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 acts.
PEDRO DE GUZMAN, petitioner, vs. COURT OF APPEALS and
ERNESTO CENDANA, respondents. G.R. No. L-47822
December 22, 1988
Page 3 of 47
Article 1732. Common carriers are persons, corporations,
firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or
air for compensation, offering their services to the public.
The above article makes no distinction between one
whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as
an ancillary activity (in local Idiom as "a sideline"). Article
1732 also carefully avoids making any distinction between a
person or enterprise offering transportation service on
a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services
to the "general public," i.e., the general community or
population, and one who offers services or solicits business
only from a narrow segment of the general population. We
think that Article 1733 deliberaom making such distinctions.
So understood, the concept of "common carrier" under
Article 1732 may be seen to coincide neatly with the notion
of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least
partially supplements the law on common carriers set forth in
the Civil Code. Under Section 13, paragraph (b) of the Public
Service Act, "public service" includes: ... every person that
now or hereafter may own, operate, manage, or control in
the Philippines, for hire or compensation, with general or
limited clientele, whether permanent, occasional or
accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway,
subway motor vehicle, either for freight or passenger, or
both, with or without fixed route and whatever may be its
classification, freight or carrier service of any class, express
service, steamboat, or steamship line, pontines, ferries and
water craft, engaged in the transportation of passengers or
freight or both, shipyard, marine repair shop, wharf or dock,
ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric
light, heat and power, water supply and power petroleum,
sewerage system, wire or wireless communications systems,
wire or wireless broadcasting stations and other similar
public services. ... (Emphasis supplied)
A certificate of public convenience is not a requisite for the
incurring of liability under the Civil Code provisions
governing common carriers. That liability arises the moment
a person or firm acts as a common carrier, without regard to
whether or not such carrier has also complied with the
requirements of the applicable regulatory statute and
implementing regulations and has been granted a certificate
of public convenience or other franchise. To exempt private
respondent from the liabilities of a common carrier because
he has not secured the necessary certificate of public
convenience, would be offensive to sound public policy; that
would be to reward private respondent precisely for failing to
comply with applicable statutory requirements. The business
of a common carrier impinges directly and intimately upon
the safety and well being and property of those members of
the general community who happen to deal with such carrier.
The law imposes duties and liabilities upon common carriers
for the safety and protection of those who utilize their
services and the law cannot allow a common carrier to
render such duties and liabilities merely facultative by simply
failing to obtain the necessary permits and authorizations.
Common carriers, "by the nature of their business and for
reasons of public policy" 2 are held to a very high degree of
care and diligence ("extraordinary diligence") in the carriage
of goods as well as of passengers. The specific import of
extraordinary diligence in the care of goods transported by a
common carrier is, according to Article 1733, "further
expressed in Articles 1734,1735 and 1745, numbers 5, 6 and
7" of the Civil Code.
Specific requirements of the duty of extraordinary diligence
in the vigilance over the goods carried in the specific context
of hijacking or armed robbery: Under Article 1745 (6) above,
a common carrier is held responsible — and will not be
allowed to divest or to diminish such responsibility — even
for acts of strangers like thieves or robbers, except where
such thieves or robbers in fact acted "with grave or
irresistible threat, violence or force." We believe and so hold
that the limits of the duty of extraordinary diligence in the
vigilance over the goods carried are reached where the
goods are lost as a result of a robbery which is attended by
"grave or irresistible threat, violence or force."
In these circumstances, we hold that the occurrence of the
loss must reasonably be regarded as quite beyond the
control of the common carrier and properly regarded as a
fortuitous event. It is necessary to recall that even common
carriers are not made absolute insurers against all risks of
travel and of transport of goods, and are not held liable for
acts or events which cannot be foreseen or are inevitable,
provided that they shall have complied with the rigorous
standard of extraordinary diligence.
We, therefore, agree with the result reached by the Court of
Appeals that private respondent Cendana is not liable for the
value of the undelivered merchandise which was lost because
of an event entirely beyond private respondent's control.
FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs.
COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN,
BATANGAS CITY and ADORACION C. ARELLANO, in her
official capacity as City Treasurer of Batangas, respondents.
G.R. No. 125948 December 29, 1998
A "common carrier" may be defined, broadly, as one who
holds himself out to the public as engaged in the business of
transporting persons or property from place to place, for
compensation, offering his services to the public generally.
***Petitioner is a grantee of a pipeline concession under
Republic Act No. 387, as amended, to contract, install and
operate oil pipelines.
Art. 1732 of the Civil Code defines a "common carrier" as
"any person, corporation, firm or association engaged in the
business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering their
services to the public."
The test for determining whether a party is a common carrier
of goods is: 1. He must be engaged in the business of
carrying goods for others as a public employment, and must
hold himself out as ready to engage in the transportation of
goods for person generally as a business and not as a casual
occupation; 2. He must undertake to carry goods of the kind
to which his business is confined; 3. He must undertake to
carry by the method by which his business is conducted and
over his established roads; and 4. The transportation must be
for hire. 15
Based on the above definitions and requirements, there is no
doubt that petitioner is a common carrier. It is engaged in
the business of transporting or carrying goods, i.e. petroleum
products, for hire as a public employment. It undertakes to
carry for all persons indifferently, that is, to all persons who
choose to employ its services, and transports the goods by
land and for compensation. The fact that petitioner has a
Page 4 of 47
limited clientele does not exclude it from the definition of a
common carrier. In De Guzman vs. Court of Appeals 16we
ruled that: The above article (Art. 1732, Civil Code) makes no
distinction between one whose principal business activity is
the carrying of persons or goods or both, and one who does
such carrying only as an ancillary activity (in local idiom, as a
"sideline"). Article 1732 . . . avoids making any distinction
between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier
offering its services to the "general public," i.e., the general
community or population, and one who offers services or
solicits business only from a narrow segment of the general
population. We think that Article 1877 deliberately refrained
from making such distinctions. So understood, the concept
of "common carrier" under Article 1732 may be seen to
coincide neatly with the notion of "public service," under the
Public Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the law on
common carriers set forth in the Civil Code. Under Section
13, paragraph (b) of the Public Service Act, "public service"
includes: every person that now or hereafter may own,
operate. manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle, either for
freight or passenger, or both, with or without fixed route and
whatever may be its classification, freight or carrier service of
any class, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard,
marine repair shop, wharf or dock, ice plant, ice-refrigeration
plant, canal, irrigation system gas, electric light heat and
power, water supply andpower petroleum, sewerage system,
wire or wireless communications systems, wire or wireless
broadcasting stations and other similar public services.
(Emphasis Supplied)
As correctly pointed out by petitioner, the definition of
"common carriers" in the Civil Code makes no distinction as
to the means of transporting, as long as it is by land, water or
air. It does not provide that the transportation of the
passengers or goods should be by motor vehicle. In fact, in
the United States, oil pipe line operators are considered
common carriers. 17
Under the Petroleum Act of the Philippines (Republic Act
387), petitioner is considered a "common carrier." Thus,
Article 86 thereof provides that: Art. 86. Pipe line
concessionaire as common carrier. — A pipe line shall have
the preferential right to utilize installations for the
transportation of petroleum owned by him, but is obligated
to utilize the remaining transportation capacity pro rata for
the transportation of such other petroleum as may be
offered by others for transport, and to charge without
discrimination such rates as may have been approved by the
Secretary of Agriculture and Natural Resources.
Republic Act 387 also regards petroleum operation as a
public utility. Pertinent portion of Article 7 thereof provides:
that everything relating to the exploration for and
exploitation of petroleum . . . and everything relating to the
manufacture, refining, storage, or transportation by special
methods of petroleum, is hereby declared to be a public
utility. (Emphasis Supplied)
The Bureau of Internal Revenue likewise considers the
petitioner a "common carrier." In BIR Ruling No. 069-83, it
declared: . . . since [petitioner] is a pipeline concessionaire
that is engaged only in transporting petroleum products, it is
considered a common carrier under Republic Act No. 387 . . .
. Such being the case, it is not subject to withholding tax
prescribed by Revenue Regulations No. 13-78, as amended.
From the foregoing disquisition, there is no doubt that
petitioner is a "common carrier" and, therefore, exempt from
the business tax.
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner,
vs. COURT OF APPEALS and PRUDENTIAL GUARANTEE AND
ASSURANCE, INC., respondents. G.R. No. 147246 August 19,
2003
Article 1732 of the Civil Code defines common carriers as
persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering their
services to the public.
In De Guzman vs. Court of Appeals,21 we held that the
definition of common carriers in Article 1732 of the Civil
Code makes no distinction between one whose principal
business activity is the carrying of persons or goods or both,
and one who does such carrying only as an ancillary activity.
We also did not distinguish between a person or enterprise
offering transportation service on a regular or scheduled
basis and one offering such service on an occasional,
episodic or unscheduled basis. Further, we ruled that Article
1732 does not distinguish between a carrier offering its
services to the general public, and one who offers services or
solicits business only from a narrow segment of the general
population.
In the case at bar, the principal business of the petitioner is
that of lighterage and drayage22 and it offers its barges to
the public for carrying or transporting goods by water for
compensation. Petitioner is clearly a common carrier. In De
Guzman, supra,23 we considered private respondent Ernesto
Cendaña to be a common carrier even if his principal
occupation was not the carriage of goods for others, but that
of buying used bottles and scrap metal in Pangasinan and
selling these items in Manila.
We therefore hold that petitioner is a common carrier
whether its carrying of goods is done on an irregular rather
than scheduled manner, and with an only limited clientele. A
common carrier need not have fixed and publicly known
routes. Neither does it have to maintain terminals or issue
tickets.
To be sure, petitioner fits the test of a common carrier as laid
down in Bascos vs. Court of Appeals.24 The test to determine
a common carrier is "whether the given undertaking is a part
of the business engaged in by the carrier which he has held
out to the general public as his occupation rather than the
quantity or extent of the business transacted."25 In the case
at bar, the petitioner admitted that it is engaged in the
business of shipping and lighterage,26 offering its barges to
the public, despite its limited clientele for carrying or
transporting goods by water for compensation.27
Common carriers are bound to observe extraordinary
diligence in the vigilance over the goods transported by
them.28 They are presumed to have been at fault or to have
acted negligently if the goods are lost, destroyed or
deteriorated.29 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. There are, however, exceptions to
this rule. Article 1734 of the Civil Code enumerates the
Page 5 of 47
instances when the presumption of negligence does not
attach:
Art. 1734. Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the same is
due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural
disaster or calamity;
(2) Act of the public enemy in war, whether international or
civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in
the containers;
(5) Order or act of competent public authority.
In the case at bar, the barge completely sank after its towing
bits broke, resulting in the total loss of its cargo. Petitioner
claims that this was caused by a typhoon, hence, it should
not be held liable for the loss of the cargo. However,
petitioner failed to prove that the typhoon is the proximate
and only cause of the loss of the goods, and that it has
exercised due diligence before, during and after the
occurrence of the typhoon to prevent or minimize the
loss.30 The evidence show that, even before the towing bits of
the barge broke, it had already previously sustained damage
when it hit a sunken object while docked at the Engineering
Island. It even suffered a hole. Clearly, this could not be
solely attributed to the typhoon. The partly-submerged
vessel was refloated but its hole was patched with only clay
and cement. The patch work was merely a provisional
remedy, not enough for the barge to sail safely. Thus, when
petitioner persisted to proceed with the voyage, it recklessly
exposed the cargo to further damage.
Petitioner still headed to the consignee's wharf despite
knowledge of an incoming typhoon. During the time that the
barge was heading towards the consignee's wharf on
September 5, 1990, typhoon "Loleng" has already entered
the Philippine area of responsibility.
Accordingly, the petitioner cannot invoke the occurrence of
the typhoon as force majeure to escape liability for the loss
sustained by the private respondent. Surely, meeting a
typhoon head-on falls short of due diligence required from a
common carrier. More importantly, the officers/employees
themselves of petitioner admitted that when the towing bits
of the vessel broke that caused its sinking and the total loss
of the cargo upon reaching the Pasig River, it was no longer
affected by the typhoon. The typhoon then is not the
proximate cause of the loss of the cargo; a human factor, i.e.,
negligence had intervened.
ESTRELLITA M. BASCOS, petitioners, vs. COURT OF APPEALS
and RODOLFO A. CIPRIANO, respondents. G.R. No. 101089.
April 7, 1993
The Civil Code defines "common carriers" in the following
terms:
"Article 1732. Common carriers are persons, corporations,
firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or
air for compensation, offering their services to the public."
The above article makes no distinction between one
whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as
an ancillary activity . . . Article 1732 also carefully avoids
making any distinction between a person or enterprise
offering transportation service on a regular or scheduled
basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the
"general public," i.e., the general community or population,
and one who offers services or solicits business only from a
narrow segment of the general population. We think that
Article 1732 deliberately refrained from making such
distinctions.
So understood, the concept of "common carrier" under
Article 1732 may be seen to coincide neatly with the notion
of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least
partially supplements the law on common carriers set forth in
the Civil Code. Under Section 13, paragraph (b) of the Public
Service Act, "public service" includes:
" x x x every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle, either for
freight or passenger, or both, with or without fixed route and
whatever may be its classification, freight or carrier service of
any class, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard,
marine repair shop, wharf or dock, ice plant, ice-refrigeration
plant, canal, irrigation system, gas, electric light, heat and
power, water supply and power petroleum, sewerage system,
wire or wireless communications systems, wire or wireless
broadcasting stations and other similar public services. x x
x" 8
There is greater reason for holding petitioner to be a
common carrier because the transportation of goods is an
integral part of her business. To uphold petitioner's
contention would be to deprive those with whom she
contracts the protection which the law affords them
notwithstanding the fact that the obligation to carry goods
for her customers, as already noted, is part and parcel of
petitioner's business.
Art. 1733 of the Civil Code provides:
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. . . .
In Compania Maritima v. Court of Appeals,9 the meaning of
"extraordinary diligence in the vigilance over goods" was
explained thus:
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
Page 6 of 47
the handling and stowage, including such methods as their
nature requires."
Anent petitioner's insistence that the cargo could not have
been damaged while in her custody as she immediately
delivered the containers to SMC's compound, suffice it to say
that to prove the exercise of extraordinary diligence,
petitioner must do more than merely show the possibility
that some other party could be responsible for the damage.
It must prove that it used "all reasonable means to ascertain
the nature and characteristic of goods tendered for
[transport] and that [it] exercise[d] due care in the handling
[thereof]." Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability under
Art. 1734(4), which provides --
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: xxxx
(4) The character of the goods or defects in the packing or in
the containers. xxxx
For this provision to apply, the rule is that if the improper
packing or, in this case, the defect/s in the container, is/are
known to the carrier or his employees or apparent upon
ordinary observation, but he nevertheless accepts the same
without protest or exception notwithstanding such condition,
he is not relieved of liability for damage resulting
therefrom.14 In this case, petitioner accepted the cargo
without exception despite the apparent defects in some of
the container vans. Hence, for failure of petitioner to prove
that she exercised extraordinary diligence in the carriage of
goods in this case or that she is exempt from liability, the
presumption of negligence as provided under Art.
173515 holds.
SCHMITZ TRANSPORT & BROKERAGE
CORPORATION, Petitioners,
vs. TRANSPORT VENTURE, INC., INDUSTRIAL INSURANCE
COMPANY, LTD., and BLACK SEA SHIPPING AND DODWELL
now INCHCAPE SHIPPING SERVICES, Respondents. G.R. No.
150255. April 22, 2005
ART. 1174. Except in cases expressly specified by the law, or
when it is otherwise declared by stipulation, or when the
nature of the obligation requires the assumption of risk, no
person shall be responsible for those events which could not
be foreseen, or which though foreseen, were inevitable.
In order, to be considered a fortuitous event, however, (1)
the cause of the unforeseen and unexpected occurrence, or
the failure of the debtor to comply with his obligation, must
be independent of human will; (2) it must be impossible to
foresee the event which constitute the caso fortuito, or if it
can be foreseen it must be impossible to avoid; (3) the
occurrence must be such as to render it impossible for the
debtor to fulfill his obligation in any manner; and (4) the
obligor must be free from any participation in the
aggravation of the injury resulting to the creditor.32
[T]he principle embodied in the act of God doctrine strictly
requires that the act must be occasioned solely by the
violence of nature. Human intervention is to be excluded
from creating or entering into the cause of the mischief.
When the effect is found to be in part the result of the
participation of man, whether due to his active intervention
or neglect or failure to act, the whole occurrence is then
humanized and removed from the rules applicable to the
acts of God.
That no tugboat towed back the barge to the pier after the
cargoes were completely loaded by 12:30 in the morning39 is,
however, a material fact which the appellate court failed to
properly consider and appreciate40 — the proximate cause of
the loss of the cargoes. Had the barge been towed back
promptly to the pier, the deteriorating sea conditions
notwithstanding, the loss could have been avoided. But the
barge was left floating in open sea until big waves set in at
5:30 a.m., causing it to sink along with the cargoes.41 The loss
thus falls outside the "act of God doctrine."
petitioner is a common carrier. For it undertook to transport
the cargoes from the shipside of "M/V Alexander Saveliev" to
the consignee’s warehouse at Cainta, Rizal. As the appellate
court put it, "as long as a person or corporation holds [itself]
to the public for the purpose of transporting goods as [a]
business, [it] is already considered a common carrier
regardless if [it] owns the vehicle to be used or has to hire
one."42 That petitioner is a common carrier, the testimony of
its own Vice-President and General Manager Noel Aro that
part of the services it offers to its clients as a brokerage firm
includes the transportation of cargoes reflects so.
It is settled that under a given set of facts, a customs broker
may be regarded as a common carrier. Thus, this Court,
in A.F. Sanchez Brokerage, Inc. v. The Honorable Court of
Appeals,44 held:
The appellate court did not err in finding petitioner, a
customs broker, to be also a common carrier, as defined
under Article 1732 of the Civil Code, to wit,
Art. 1732. Common carriers are persons, corporations, firms
or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or
air, for compensation, offering their services to the public.x x
x
Article 1732 does not distinguish between one whose
principal business activity is the carrying of goods and one
who does such carrying only as an ancillary activity. The
contention, therefore, of petitioner that it is not a common
carrier but a customs broker whose principal function is to
prepare the correct customs declaration and proper shipping
documents as required by law is bereft of merit. It suffices
that petitioner undertakes to deliver the goods for pecuniary
consideration.45
And in Calvo v. UCPB General Insurance Co. Inc.,46 this Court
held that as the transportation of goods is an integral part of
a customs broker, the customs broker is also a common
carrier. For to declare otherwise "would be to deprive those
with whom [it] contracts the protection which the law affords
them notwithstanding the fact that the obligation to carry
goods for [its] customers, is part and parcel of petitioner’s
business."47
As for petitioner, for it to be relieved of liability, it should,
following Article 173953 of the Civil Code, prove that it
exercised due diligence to prevent or minimize the loss,
before, during and after the occurrence of the storm in order
that it may be exempted from liability for the loss of the
goods.
While petitioner sent checkers54 and a supervisor55 on board
the vessel to counter-check the operations of TVI, it failed to
take all available and reasonable precautions to avoid the
loss. After noting that TVI failed to arrange for the prompt
towage of the barge despite the deteriorating sea conditions,
Page 7 of 47
it should have summoned the same or another tugboat to
extend help, but it did not.
A.F. SANCHEZ BROKERAGE INC., petitioners, vs. THE HON.
COURT OF APPEALS and FGU INSURANCE
CORPORATION, respondents. G.R. No. 147079 December 21,
2004
The appellate court did not err in finding petitioner, a
customs broker, to be also a common carrier, as defined
under Article 1732 of the Civil Code, to wit: Art. 1732.
Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or
air, for compensation, offering their services to the public.
Anacleto F. Sanchez, Jr., the Manager and Principal Broker of
Sanchez Brokerage, himself testified that the services the firm
offers include the delivery of goods to the warehouse of the
consignee or importer.
Article 1732 does not distinguish between one whose
principal business activity is the carrying of goods and one
who does such carrying only as an ancillary activity.44 The
contention, therefore, of petitioner that it is not a common
carrier but a customs broker whose principal function is to
prepare the correct customs declaration and proper shipping
documents as required by law is bereft of merit. It suffices
that petitioner undertakes to deliver the goods for pecuniary
consideration.
In this light, petitioner as a common carrier is mandated to
observe, under Article 173345 of the Civil Code, extraordinary
diligence in the vigilance over the goods it transports
according to all the circumstances of each case. In the event
that the goods are lost, destroyed or deteriorated, it is
presumed to have been at fault or to have acted
negligently, unless it proves that it observed extraordinary
diligence.46
The concept of "extra-ordinary diligence" was explained
in Compania Maritima v. Court of Appeals:47
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 characteristics
of goods tendered for shipment, and to exercise due care in
the handling and stowage, including such methods as their
nature requires."48
In the case at bar, it was established that petitioner received
the cargoes from the PSI warehouse in NAIA in good order
and condition;49 and that upon delivery by petitioner to
Hizon Laboratories Inc., some of the cargoes were found to
be in bad order, as noted in the Delivery Receipt50 issued by
petitioner, and as indicated in the Survey Report of Elite
Surveyors51 and the Destruction Report of Hizon
Laboratories, Inc.
While paragraph No. 4 of Article 173455 of the Civil Code
exempts a common carrier from liability if the loss or
damage is due to the character of the goods or defects in
the packing or in the containers, the rule is that if the
improper packing is known to the carrier or his employees or
is apparent upon ordinary observation, but he nevertheless
accepts the same without protest or exception
notwithstanding such condition, he is not relieved of liability
for the resulting damage.56
If the claim of petitioner that some of the cartons were
already damaged upon delivery to it were true, then it should
naturally have received the cargo under protest or with
reservations duly noted on the receipt issued by PSI. But it
made no such protest or reservation.57
Since petitioner received all the cargoes in good order and
condition at the time they were turned over by the PSI
warehouseman, and upon their delivery to Hizon
Laboratories, Inc. a portion thereof was found to be in bad
order, it was incumbent on petitioner to prove that it
exercised extraordinary diligence in the carriage of the
goods. It did not, however. Hence, its presumed negligence
under Article 1735 of the Civil Code remains unrebutted.
FGU INSURANCE CORPORATION, petitioner, vs. G.P.
SARMIENTO TRUCKING CORPORATION and LAMBERT M.
EROLES, respondents. G.R. No. 141910 August 6, 2002
GPS, being an exclusive contractor and hauler of Concepcion
Industries, Inc., rendering or offering its services to no other
individual or entity, cannot be considered a common carrier.
Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or
air, for hire or compensation, offering their services to
the public,8 whether to the public in general or to a limited
clientele in particular, but never on an exclusive basis.9 The
true test of a common carrier is the carriage of passengers or
goods, providing space for those who opt to avail
themselves of its transportation service for a fee.10Given
accepted standards, GPS scarcely falls within the term
"common carrier."
ESTELA L. CRISOSTOMO, Petitioner, vs. The Court of Appeals
and CARAVAN TRAVEL & TOURS INTERNATIONAL,
INC., Respondents. G.R. No. 138334 August 25, 2003
By definition, a contract of carriage or transportation is one
whereby a certain person or association of persons obligate
themselves to transport persons, things, or news from one
place to another for a fixed price.9 Such person or association
of persons are regarded as carriers and are classified as
private or special carriers and common or public carriers.10 A
common carrier is defined under Article 1732 of the Civil
Code as persons, corporations, firms or associations engaged
in the business of carrying or transporting passengers or
goods or both, by land, water or air, for compensation,
offering their services to the public.
Respondent did not undertake to transport petitioner from
one place to another since its covenant with its customers is
simply to make travel arrangements in their behalf.
Respondent’s services as a travel agency include procuring
tickets and facilitating travel permits or visas as well as
booking customers for tours.
While petitioner concededly bought her plane ticket through
the efforts of respondent company, this does not mean that
the latter ipso facto is a common carrier. At most,
respondent acted merely as an agent of the airline, with
whom petitioner ultimately contracted for her carriage to
Europe. Respondent’s obligation to petitioner in this regard
was simply to see to it that petitioner was properly booked
with the airline for the appointed date and time. Her
transport to the place of destination, meanwhile, pertained
directly to the airline.
Page 8 of 47
In contrast, the object of a contract of carriage is the
transportation of passengers or goods. It is in this sense that
the contract between the parties in this case was an ordinary
one for services and not one of carriage. For reasons of
public policy, a common carrier in a contract of carriage is
bound by law to carry passengers as far as human care and
foresight can provide using the utmost diligence of very
cautious persons and with due regard for all the
circumstances.11 As earlier stated, however, respondent is not
a common carrier but a travel agency. It is thus not bound
under the law to observe extraordinary diligence in the
performance of its obligation, as petitioner claims.
SPOUSES TEODORO1 and NANETTE PERENA, Petitioners, vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE,
NATIONAL RAILWAYS, and the COURT OF
APPEALS Respondents. G.R. No. 157917 August 29, 2012
We find no adequate cause to differ from the conclusions of
the lower courts that the Pereñas operated as a common
carrier; and that their standard of care was extraordinary
diligence, not the ordinary diligence of a good father of a
family. Although in this jurisdiction the operator of a school
bus service has been usually regarded as a private
carrier,9primarily because he only caters to some specific or
privileged individuals, and his operation is neither open to
the indefinite public nor for public use, the exact nature of
the operation of a school bus service has not been finally
settled. This is the occasion to lay the matter to rest.
A carrier is a person or corporation who undertakes to
transport or convey goods or persons from one place to
another, gratuitously or for hire. The carrier is classified either
as a private/special carrier or as a common/public carrier.10 A
private carrier is one who, without making the activity a
vocation, or without holding himself or itself out to the
public as ready to act for all who may desire his or its
services, undertakes, by special agreement in a particular
instance only, to transport goods or persons from one place
to another either gratuitously or for hire.11 The provisions on
ordinary contracts of the Civil Code govern the contract of
private carriage.The diligence required of a private carrier is
only ordinary, that is, the diligence of a good father of the
family. In contrast, a common carrier is a person, corporation,
firm or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or
air, for compensation, offering such services to the
public.12 Contracts of common carriage are governed by the
provisions on common carriers of the Civil Code, the Public
Service Act,13 and other special laws relating to
transportation. A common carrier is required to observe
extraordinary diligence, and is presumed to be at fault or to
have acted negligently in case of the loss of the effects of
passengers, or the death or injuries to passengers.14
In relation to common carriers, the Court defined public use
in the following terms in United States v. Tan Piaco,15viz:
"Public use" is the same as "use by the public". The essential
feature of the public use is not confined to privileged
individuals, but is open to the indefinite public. It is this
indefinite or unrestricted quality that gives it its public
character. In determining whether a use is public, we must
look not only to the character of the business to be done,
but also to the proposed mode of doing it. If the use is
merely optional with the owners, or the public benefit is
merely incidental, it is not a public use, authorizing the
exercise of the jurisdiction of the public utility commission.
There must be, in general, a right which the law compels the
owner to give to the general public. It is not enough that the
general prosperity of the public is promoted. Public use is
not synonymous with public interest. The true criterion by
which to judge the character of the use is whether the public
may enjoy it by right or only by permission.
In De Guzman v. Court of Appeals,16 the Court noted that
Article 1732 of the Civil Code avoided any distinction
between a person or an enterprise offering transportation on
a regular or an isolated basis; and has not distinguished a
carrier offering his services to the general public, that is, the
general community or population, from one offering his
services only to a narrow segment of the general population.
Nonetheless, the concept of a common carrier embodied in
Article 1732 of the Civil Code coincides neatly with the
notion of public service under the Public Service Act, which
supplements the law on common carriers found in the Civil
Code. Public service, according to Section 13, paragraph (b)
of the Public Service Act, includes: x x x every person that
now or hereafter may own, operate, manage, or control in
the Philippines, for hire or compensation, with general or
limited clientèle, whether permanent or occasional, and done
for the general business purposes, any common carrier,
railroad, street railway, traction railway, subway motor
vehicle, either for freight or passenger, or both, with or
without fixed route and whatever may be its classification,
freight or carrier service of any class, express service,
steamboat, or steamship line, pontines, ferries and water
craft, engaged in the transportation of passengers or freight
or both, shipyard, marine repair shop, ice-refrigeration plant,
canal, irrigation system, gas, electric light, heat and power,
water supply and power petroleum, sewerage system, wire or
wireless communications systems, wire or wireless
broadcasting stations and other similar public services. x x
x.17
Given the breadth of the aforequoted characterization of a
common carrier, the Court has considered as common
carriers pipeline operators,18 custom brokers and
warehousemen,19 and barge operators20 even if they had
limited clientèle.
As all the foregoing indicate, the true test for a common
carrier is not the quantity or extent of the business actually
transacted, or the number and character of the conveyances
used in the activity, but whether the undertaking is a part of
the activity engaged in by the carrier that he has held out to
the general public as his business or occupation. If the
undertaking is a single transaction, not a part of the general
business or occupation engaged in, as advertised and held
out to the general public, the individual or the entity
rendering such service is a private, not a common, carrier.
The question must be determined by the character of the
business actually carried on by the carrier, not by any secret
intention or mental reservation it may entertain or assert
when charged with the duties and obligations that the law
imposes.21
Applying these considerations to the case before us, there is
no question that the Pereñas as the operators of a school
bus service were: (a) engaged in transporting passengers
generally as a business, not just as a casual occupation; (b)
undertaking to carry passengers over established roads by
the method by which the business was conducted; and (c)
transporting students for a fee. Despite catering to a limited
clientèle, the Pereñas operated as a common carrier because
they held themselves out as a ready transportation
indiscriminately to the students of a particular school living
within or near where they operated the service and for a fee.
The common carrier’s standard of care and vigilance as to
the safety of the passengers is defined by law. Given the
nature of the business and for reasons of public policy, the
common carrier is bound "to observe extraordinary diligence
in the vigilance over the goods and for the safety of the
Page 9 of 47
passengers transported by them, according to all the
circumstances of each case."22 Article 1755 of the Civil Code
specifies that the common carrier should "carry the
passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons,
with a due regard for all the circumstances." To successfully
fend off liability in an action upon the death or injury to a
passenger, the common carrier must prove his or its
observance of that extraordinary diligence; otherwise, the
legal presumption that he or it was at fault or acted
negligently would stand.23 No device, whether by stipulation,
posting of notices, statements on tickets, or otherwise, may
dispense with or lessen the responsibility of the common
carrier as defined under Article 1755 of the Civil Code. 24
And, secondly, the Pereñas have not presented any
compelling defense or reason by which the Court might now
reverse the CA’s findings on their liability. On the contrary, an
examination of the records shows that the evidence fully
supported the findings of the CA.
As earlier stated, the Pereñas, acting as a common carrier,
were already presumed to be negligent at the time of the
accident because death had occurred to their
passenger.25 The presumption of negligence, being a
presumption of law, laid the burden of evidence on their
shoulders to establish that they had not been negligent.26 It
was the law no less that required them to prove their
observance of extraordinary diligence in seeing to the safe
and secure carriage of the passengers to their destination.
Until they did so in a credible manner, they stood to be held
legally responsible for the death of Aaron and thus to be
held liable for all the natural consequences of such death.
There is no question that the Pereñas did not overturn the
presumption of their negligence by credible evidence. Their
defense of having observed the diligence of a good father of
a family in the selection and supervision of their driver was
not legally sufficient. According to Article 1759 of the Civil
Code, their liability as a common carrier did not cease upon
proof that they exercised all the diligence of a good father of
a family in the selection and supervision of their employee.
This was the reason why the RTC treated this defense of the
Pereñas as inappropriate in this action for breach of contract
of carriage.
The Pereñas were liable for the death of Aaron despite the
fact that their driver might have acted beyond the scope of
his authority or even in violation of the orders of the
common carrier.27 In this connection, the records showed
their driver’s actual negligence. There was a showing, to
begin with, that their driver traversed the railroad tracks at a
point at which the PNR did not permit motorists going into
the Makati area to cross the railroad tracks. Although that
point had been used by motorists as a shortcut into the
Makati area, that fact alone did not excuse their driver into
taking that route. On the other hand, with his familiarity with
that shortcut, their driver was fully aware of the risks to his
passengers but he still disregarded the risks. Compounding
his lack of care was that loud music was playing inside the
air-conditioned van at the time of the accident. The loudness
most probably reduced his ability to hear the warning horns
of the oncoming train to allow him to correctly appreciate
the lurking dangers on the railroad tracks. Also, he sought to
overtake a passenger bus on the left side as both vehicles
traversed the railroad tracks. In so doing, he lost his view of
the train that was then coming from the opposite side of the
passenger bus, leading him to miscalculate his chances of
beating the bus in their race, and of getting clear of the train.
As a result, the bus avoided a collision with the train but the
van got slammed at its rear, causing the fatality. Lastly, he
did not slow down or go to a full stop before traversing the
railroad tracks despite knowing that his slackening of speed
and going to a full stop were in observance of the right of
way at railroad tracks as defined by the traffic laws and
regulations.28He thereby violated a specific traffic regulation
on right of way, by virtue of which he was immediately
presumed to be negligent.29
The omissions of care on the part of the van driver
constituted negligence,30 which, according to Layugan v.
Intermediate Appellate Court,31 is "the omission to do
something which a reasonable man, guided by those
considerations which ordinarily regulate the conduct of
human affairs, would do, or the doing of something which a
prudent and reasonable man would not do,32 or as Judge
Cooley defines it, ‘(t)he failure to observe for the protection
of the interests of another person, that degree of care,
precaution, and vigilance which the circumstances justly
demand, whereby such other person suffers injury.’"33
The test by which to determine the existence of negligence
in a particular case has been aptly stated in the leading case
of Picart v. Smith,34 thuswise:
The test by which to determine the existence of negligence
in a particular case may be stated as follows: Did the
defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinarily prudent
person would have used in the same situation? If not, then
he is guilty of negligence. The law here in effect adopts the
standard supposed to be supplied by the imaginary conduct
of the discreet paterfamilias of the Roman law. The existence
of negligence in a given case is not determined by reference
to the personal judgment of the actor in the situation before
him. The law considers what would be reckless, blameworthy,
or negligent in the man of ordinary intelligence and
prudence and determines liability by that.
The question as to what would constitute the conduct of a
prudent man in a given situation must of course be always
determined in the light of human experience and in view of
the facts involved in the particular case. Abstract speculation
cannot here be of much value but this much can be
profitably said: Reasonable men govern their conduct by the
circumstances which are before them or known to them.
They are not, and are not supposed to be, omniscient of the
future. Hence they can be expected to take care only when
there is something before them to suggest or warn of
danger. Could a prudent man, in the case under
consideration, foresee harm as a result of the course actually
pursued? If so, it was the duty of the actor to take
precautions to guard against that harm. Reasonable foresight
of harm, followed by the ignoring of the suggestion born of
this prevision, is always necessary before negligence can be
held to exist. Stated in these terms, the proper criterion for
determining the existence of negligence in a given case is
this: Conduct is said to be negligent when a prudent man in
the position of the tortfeasor would have foreseen that an
effect harmful to another was sufficiently probable to warrant
his foregoing the conduct or guarding against its
consequences. (Emphasis supplied)
Pursuant to the Picart v. Smith test of negligence, the
Pereñas’ driver was entirely negligent when he traversed the
railroad tracks at a point not allowed for a motorist’s crossing
despite being fully aware of the grave harm to be thereby
caused to his passengers; and when he disregarded the
foresight of harm to his passengers by overtaking the bus on
the left side as to leave himself blind to the approach of the
oncoming train that he knew was on the opposite side of the
bus.
Page 10 of 47
Unrelenting, the Pereñas cite Phil. National Railways v.
Intermediate Appellate Court,35 where the Court held the
PNR solely liable for the damages caused to a passenger bus
and its passengers when its train hit the rear end of the bus
that was then traversing the railroad crossing. But the
circumstances of that case and this one share no similarities.
In Philippine National Railways v. Intermediate Appellate
Court, no evidence of contributory negligence was adduced
against the owner of the bus. Instead, it was the owner of the
bus who proved the exercise of extraordinary diligence by
preponderant evidence. Also, the records are replete with the
showing of negligence on the part of both the Pereñas and
the PNR. Another distinction is that the passenger bus in
Philippine National Railways v. Intermediate Appellate Court
was traversing the dedicated railroad crossing when it was
hit by the train, but the Pereñas’ school van traversed the
railroad tracks at a point not intended for that purpose.
At any rate, the lower courts correctly held both the Pereñas
and the PNR "jointly and severally" liable for damages arising
from the death of Aaron. They had been impleaded in the
same complaint as defendants against whom the Zarates had
the right to relief, whether jointly, severally, or in the
alternative, in respect to or arising out of the accident, and
questions of fact and of law were common as to the
Zarates.36 Although the basis of the right to relief of the
Zarates (i.e., breach of contract of carriage) against the
Pereñas was distinct from the basis of the Zarates’ right to
relief against the PNR (i.e., quasi-delict under Article 2176,
Civil Code), they nonetheless could be held jointly and
severally liable by virtue of their respective negligence
combining to cause the death of Aaron. As to the PNR, the
RTC rightly found the PNR also guilty of negligence despite
the school van of the Pereñas traversing the railroad tracks at
a point not dedicated by the PNR as a railroad crossing for
pedestrians and motorists, because the PNR did not ensure
the safety of others through the placing of crossbars, signal
lights, warning signs, and other permanent safety barriers to
prevent vehicles or pedestrians from crossing there. The RTC
observed that the fact that a crossing guard had been
assigned to man that point from 7 a.m. to 5 p.m. was a good
indicium that the PNR was aware of the risks to others as well
as the need to control the vehicular and other traffic there.
Verily, the Pereñas and the PNR were joint tortfeasors.
VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY
INC., petitioner, vs. COURT OF APPEALS AND SEVEN
BROTHERS SHIPPING CORPORATION, respondents. G.R. No.
102316 June 30, 1997
It should be noted at the outset that there is no dispute
between the parties that the proximate cause of the sinking
of M/V Seven Ambassadors resulting in the loss of its cargo
was the "snapping of the iron chains and the subsequent
rolling of the logs to the portside due to the negligence of
the captain in stowing and securing the logs on board the
vessel and not due to fortuitous event." 11 Likewise
undisputed is the status of Private Respondent Seven
Brothers as a private carrier when it contracted to transport
the cargo of Petitioner Valenzuela. Even the latter admits this
in its petition. 12
The trial court deemed the charter party stipulation void for
being contrary to public policy, 13 citing Article 1745 of the
Civil Code which provides: Art. 1745. Any of the following or
similar stipulations shall be considered unreasonable, unjust
and contrary to public policy:
(1) That the goods are transported at the risk of the owner or
shipper;
(2) That the common carrier will not be liable for any loss,
destruction, or deterioration of the goods;
(3) That the common carrier need not observe any diligence
in the custody of the goods;
(4) That the common carrier shall exercise a degree of
diligence less than that of a good father of a family, or of a
man of ordinary prudence in the vigilance over the movables
transported;
(5) That the common carrier shall not be responsible for the
acts or omissions of his or its employees;
(6) That the common carrier's liability for acts committed by
thieves, or of robbers who do not act with grave or
irresistible threat, violence or force, is dispensed with or
diminished;
(7) That the common carrier is not responsible for the loss,
destruction, or deterioration of goods on account of the
defective condition of the car, vehicle, ship, airplane or other
equipment used in the contract of carriage.
it is undisputed that private respondent had acted as
a private carrier in transporting petitioner's lauan logs. Thus,
Article 1745 and other Civil Code provisions on common
carriers which were cited by petitioner may not be applied
unless expressly stipulated by the parties in their charter
party. 16
In a contract of private carriage, the parties may validly
stipulate that responsibility for the cargo rests solely on the
charterer, exempting the shipowner from liability for loss of
or damage to the cargo caused even by the negligence of
the ship captain. Pursuant to Article 1306 17 of the Civil Code,
such stipulation is valid because it is freely entered into by
the parties and the same is not contrary to law, morals, good
customs, public order, or public policy. Indeed, their contract
of private carriage is not even a contract of adhesion. We
stress that in a contract of private carriage, the parties may
freely stipulate their duties and obligations which perforce
would be binding on them. Unlike in a contract involving a
common carrier, private carriage does not involve the
general public. Hence, the stringent provisions of the Civil
Code on common carriers protecting the general public
cannot justifiably be applied to a ship transporting
commercial goods as a private carrier. Consequently, the
public policy embodied therein is not contravened by
stipulations in a charter party that lessen or remove the
protection given by law in contracts involving common
carriers.
The issue posed in this case and the arguments raised by
petitioner are not novel; they were resolved long ago by this
Court in Home Insurance Co. vs. American Steamship
Agencies, Inc. 18 In that case, the trial court similarly nullified
a stipulation identical to that involved in the present case for
being contrary to public policy based on Article 1744 of the
Civil Code and Article 587 of the Code of Commerce.
Consequently, the trial court held the shipowner liable for
damages resulting for the partial loss of the cargo. This Court
reversed the trial court and laid down, through Mr. Justice
Jose P. Bengzon, the following well-settled observation and
doctrine:
The provisions of our Civil Code on common carriers were
taken from Anglo-American law. Under American
jurisprudence, a common carrier undertaking to carry a
Page 11 of 47
special cargo or chartered to a special person only, becomes
a private carrier. As a private carrier, a stipulation exempting
the owner from liability for the negligence of its agent is not
against public policy, and is deemed valid.
Such doctrine We find reasonable. The Civil Code provisions
on common carriers should not be applied where the carrier
is not acting as such but as a private carrier. The stipulation
in the charter party absolving the owner from liability for loss
due to the negligence of its agent would be void if the strict
public policy governing common carriers is applied. Such
policy has no force where the public at large is not involved,
as in this case of a ship totally chartered for the used of a
single party. 19(Emphasis supplied.)
Indeed, where the reason for the rule ceases, the rule itself
does not apply. The general public enters into a contract of
transportation with common carriers without a hand or a
voice in the preparation thereof. The riding public merely
adheres to the contract; even if the public wants to, it cannot
submit its own stipulations for the approval of the common
carrier. Thus, the law on common carriers extends its
protective mantle against one-sided stipulations inserted in
tickets, invoices or other documents over which the riding
public has no understanding or, worse, no choice. Compared
to the general public, a charterer in a contract of private
carriage is not similarly situated. It can — and in fact it
usually does — enter into a free and voluntary agreement. In
practice, the parties in a contract of private carriage can
stipulate the carrier's obligations and liabilities over the
shipment which, in turn, determine the price or consideration
of the charter. Thus, a charterer, in exchange for convenience
and economy, may opt to set aside the protection of the law
on common carriers. When the charterer decides to exercise
this option, he takes a normal business risk.
PHILIPPINE AIR LINES, petitioner, vs. HON. COURT OF
APPEALS and ISIDRO CO, respondents. G.R. No. 92501 March
6, 1992
In Alitalia vs. IAC (192 SCRA 9, 18, citing Pan American World
Airways, Inc. vs. IAC 164 SCRA 268), the Warsaw Convention
limiting the carrier's liability was applied because of a simple
loss of baggage without any improper conduct on the part of
the officials or employees of the airline, or other special
injury sustained by the passengers. The petitioner therein did
not declare a higher value for his luggage, much less did he
pay an additional transportation charge.
In Samar Mining Company, Inc. vs. Nordeutscher Lloyd (132
SCRA 529), this Court ruled: The liability of the common
carrier for the loss, destruction or deterioration of goods
transported from a foreign country to the Philippines is
governed primarily by the New Civil Code. In all matters not
regulated by said Code, the rights and obligations of
common carriers shall be governed by the Code of
Commerce and by Special Laws.
The provisions of the New Civil Code on common carriers are
Articles 1733, 1735 and 1753 which provide: 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.
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.
Art. 1753. The law of the country to which the goods are to
be transported shall govern the liability of the common
carrier for their loss, destruction or deterioration.
Since the passenger's destination in this case was the
Philippines, Philippine law governs the liability of the carrier
for the loss of the passenger's luggage.
In this case, the petitioner failed to overcome, not only the
presumption, but more importantly, the private respondent's
evidence, proving that the carrier's negligence was the
proximate cause of the loss of his baggage. Furthermore,
petitioner acted in bad faith in faking a retrieval receipt to
bail itself out of having to pay Co's claim. The Court of
Appeals therefore did not err in disregarding the limits of
liability under the Warsaw Convention.
Common Carriers – Vigilance over the Goods
NCC – Arts 1734 - 1754
1. What law governs disputes involving
transportation law?
a. SAUDI ARABIAN AIRLINES, petitioner, vs.
COURT OF APPEALS, MILAGROS P. MORADA
and HON. RODOLFO A. ORTIZ, in his capacity
as Presiding Judge of Branch 89, Regional
Trial Court of Quezon City, respondents.
G.R. No. 122191 October 8, 1998
Under the factual antecedents obtaining in this case, there is
no dispute that the interplay of events occurred in two states,
the Philippines and Saudi Arabia.
As to the choice of applicable law, we note that choice-of-
law problems seek to answer two important questions: (1)
What legal system should control a given situation where
some of the significant facts occurred in two or more states;
and (2) to what extent should the chosen legal system
regulate the situation. 53
Several theories have been propounded in order to identify
the legal system that should ultimately control. Although
ideally, all choice-of-law theories should intrinsically advance
both notions of justice and predictability, they do not always
do so. The forum is then faced with the problem of deciding
which of these two important values should be stressed. 54
Before a choice can be made, it is necessary for us to
determine under what category a certain set of facts or rules
fall. This process is known as "characterization", or the
"doctrine of qualification". It is the "process of deciding
whether or not the facts relate to the kind of question
specified in a conflicts rule." 55The purpose of
"characterization" is to enable the forum to select the proper
law. 56
Our starting point of analysis here is not a legal relation, but
a factual situation, event, or operative fact. 57An essential
element of conflict rules is the indication of a "test" or
"connecting factor" or "point of contact". Choice-of-law rules
invariably consist of a factual relationship (such as property
right, contract claim) and a connecting factor or point of
contact, such as the situs of the res, the place of celebration,
the place of performance, or the place of wrongdoing. 58
Note that one or more circumstances may be present to
serve as the possible test for the determination of the
Page 12 of 47
applicable law. 59 These "test factors" or "points of contact"
or "connecting factors" could be any of the following:
(1) The nationality of a person, his domicile, his residence, his
place of sojourn, or his origin;
(2) the seat of a legal or juridical person, such as a
corporation;
(3) the situs of a thing, that is, the place where a thing is, or is
deemed to be situated. In particular, the lex situs is decisive
when real rights are involved;
(4) the place where an act has been done, the locus actus,
such as the place where a contract has been made, a
marriage celebrated, a will signed or a tort committed. The
lex loci actus is particularly important in contracts and torts;
(5) the place where an act is intended to come into effect,
e.g., the place of performance of contractual duties, or the
place where a power of attorney is to be exercised;
(6) the intention of the contracting parties as to the law that
should govern their agreement, thelex loci intentionis;
(7) the place where judicial or administrative proceedings are
instituted or done. The lex fori — the law of the forum — is
particularly important because, as we have seen earlier,
matters of "procedure" not going to the substance of the
claim involved are governed by it; and because the lex
fori applies whenever the content of the otherwise applicable
foreign law is excluded from application in a given case for
the reason that it falls under one of the exceptions to the
applications of foreign law; and
(8) the flag of a ship, which in many cases is decisive of
practically all legal relationships of the ship and of its master
or owner as such. It also covers contractual relationships
particularly contracts of affreightment. 60 (Emphasis ours.)
After a careful study of the pleadings on record, including
allegations in the Amended Complaint deemed admitted for
purposes of the motion to dismiss, we are convinced that
there is reasonable basis for private respondent's assertion
that although she was already working in Manila, petitioner
brought her to Jeddah on the pretense that she would
merely testify in an investigation of the charges she made
against the two SAUDIA crew members for the attack on her
person while they were in Jakarta. As it turned out, she was
the one made to face trial for very serious charges, including
adultery and violation of Islamic laws and tradition.
There is likewise logical basis on record for the claim that the
"handing over" or "turning over" of the person of private
respondent to Jeddah officials, petitioner may have acted
beyond its duties as employer. Petitioner's purported act
contributed to and amplified or even proximately caused
additional humiliation, misery and suffering of private
respondent. Petitioner thereby allegedly facilitated the arrest,
detention and prosecution of private respondent under the
guise of petitioner's authority as employer, taking advantage
of the trust, confidence and faith she reposed upon it. As
purportedly found by the Prince of Makkah, the alleged
conviction and imprisonment of private respondent was
wrongful. But these capped the injury or harm allegedly
inflicted upon her person and reputation, for which
petitioner could be liable as claimed, to provide
compensation or redress for the wrongs done, once duly
proven.
Considering that the complaint in the court a quo is one
involving torts, the "connecting factor" or "point of contact"
could be the place or places where the tortious conduct
or lex loci actus occurred. And applying the torts principle in
a conflicts case, we find that the Philippines could be said as
a situs of the tort (the place where the alleged tortious
conduct took place). This is because it is in the Philippines
where petitioner allegedly deceived private respondent, a
Filipina residing and working here. According to her, she had
honestly believed that petitioner would, in the exercise of its
rights and in the performance of its duties, "act with justice,
give her due and observe honesty and good faith." Instead,
petitioner failed to protect her, she claimed. That certain acts
or parts of the injury allegedly occurred in another country is
of no moment. For in our view what is important here is the
place where the over-all harm or the totality of the alleged
injury to the person, reputation, social standing and human
rights of complainant, had lodged, according to the plaintiff
below (herein private respondent). All told, it is not without
basis to identify the Philippines as the situs of the alleged
tort.
Moreover, with the widespread criticism of the traditional
rule of lex loci delicti commissi, modern theories and rules on
tort liability 61 have been advanced to offer fresh judicial
approaches to arrive at just results. In keeping abreast with
the modern theories on tort liability, we find here an
occasion to apply the "State of the most significant
relationship" rule, which in our view should be appropriate to
apply now, given the factual context of this case.
In applying said principle to determine the State which has
the most significant relationship, the following contacts are
to be taken into account and evaluated according to their
relative importance with respect to the particular issue: (a)
the place where the injury occurred; (b) the place where the
conduct causing the injury occurred; (c) the domicile,
residence, nationality, place of incorporation and place of
business of the parties, and (d) the place where the
relationship, if any, between the parties is centered. 62
As already discussed, there is basis for the claim that over-all
injury occurred and lodged in the Philippines. There is
likewise no question that private respondent is a resident
Filipina national, working with petitioner, a resident foreign
corporation engaged here in the business of international air
carriage. Thus, the "relationship" between the parties was
centered here, although it should be stressed that this suit is
not based on mere labor law violations. From the record, the
claim that the Philippines has the most significant contact
with the matter in this dispute, 63 raised by private
respondent as plaintiff below against defendant (herein
petitioner), in our view, has been properly established.
Prescinding from this premise that the Philippines is the situs
of the tort complained of and the place "having the most
interest in the problem", we find, by way of recapitulation,
that the Philippine law on tort liability should have
paramount application to and control in the resolution of the
legal issues arising out of this case. Further, we hold that the
respondent Regional Trial Court has jurisdiction over the
parties and the subject matter of the complaint; the
appropriate venue is in Quezon City, which could properly
apply Philippine law. Moreover, we find untenable
petitioner's insistence that "[s]ince private respondent
instituted this suit, she has the burden of pleading and
proving the applicable Saudi law on the matter." 64As aptly
said by private respondent, she has "no obligation to plead
and prove the law of the Kingdom of Saudi Arabia since her
cause of action is based on Articles 19 and 21" of the Civil
Code of the Philippines. In her Amended Complaint and
subsequent pleadings, she never alleged that Saudi law
Page 13 of 47
should govern this case. 65 And as correctly held by the
respondent appellate court, "considering that it was the
petitioner who was invoking the applicability of the law of
Saudi Arabia, then the burden was on it [petitioner] to plead
and to establish what the law of Saudi Arabia is".
2. What is the test for determining whether a party is
a common carrier of goods?
-FPIC v. CA, GR No. 125948 Dec 29, 1998, supra
3. What is the nature and basis of liability for
common carrier?
-Article 1733, NCC
4. What is extraordinary diligence?
LEA MER INDUSTRIES, INC., Petitioners, vs. MALAYAN
INSURANCE CO., INC., Respondent. G.R. No. 161745
September 30, 2005
Extraordinary Diligence Required
Common carriers are bound to
observe extraordinary diligence in their vigilance over the
goods and the safety of the passengers they transport, as
required by the nature of their business and for reasons of
public policy.24Extraordinary diligence requires rendering
service with the greatest skill and foresight to avoid damage
and destruction to the goods entrusted for carriage and
delivery.25
Common carriers are presumed to have been at fault or to
have acted negligently for loss or damage to the goods that
they have transported.26 This presumption can be rebutted
only by proof that they observed extraordinary diligence, or
that the loss or damage was occasioned by any of the
following causes:27
"(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."28
Rule on Fortuitous Events
Article 1174 of the Civil Code provides that "no person shall
be responsible for a fortuitous event which could not be
foreseen, or which, though foreseen, was inevitable." Thus, if
the loss or damage was due to such an event, a common
carrier is exempted from liability.
Jurisprudence defines the elements of a "fortuitous event" as
follows: (a) the cause of the unforeseen and unexpected
occurrence, or the failure of the debtors to comply with their
obligations, must have been independent of human will; (b)
the event that constituted the caso fortuito must have been
impossible to foresee or, if foreseeable, impossible to avoid;
(c) the occurrence must have been such as to render it
impossible for the debtors to fulfill their obligation in a
normal manner; and (d) the obligor must have been free
from any participation in the aggravation of the resulting
injury to the creditor.29
To excuse the common carrier fully of any liability, the
fortuitous event must have been the proximate and only
cause of the loss.30 Moreover, it should have exercised due
diligence to prevent or minimize the loss before, during and
after the occurrence of the fortuitous event.31
Loss in the Instant Case
There is no controversy regarding the loss of the cargo in the
present case. As the common carrier, petitioner bore the
burden of proving that it had exercised extraordinary
diligence to avoid the loss, or that the loss had been
occasioned by a fortuitous event -- an exempting
circumstance.
It was precisely this circumstance that petitioner cited to
escape liability. Lea Mer claimed that the loss of the cargo
was due to the bad weather condition brought about by
Typhoon Trining.32 Evidence was presented to show that
petitioner had not been informed of the incoming typhoon,
and that the Philippine Coast Guard had given it clearance to
begin the voyage.33 On October 25, 1991, the date on which
the voyage commenced and the barge sank, Typhoon
Trining was allegedly far from Palawan, where the storm
warning was only "Signal No. 1."34
The evidence presented by petitioner in support of its
defense of fortuitous event was sorely insufficient. As
required by the pertinent law, it was not enough for the
common carrier to show that there was an unforeseen or
unexpected occurrence. It had to show that it was free from
any fault -- a fact it miserably failed to prove.
First, petitioner presented no evidence that it had attempted
to minimize or prevent the loss before, during or after the
alleged fortuitous event.35 Its witness, Joey A. Draper,
testified that he could no longer remember whether anything
had been done to minimize loss when water started entering
the barge.36
Second, the alleged fortuitous event was not the sole and
proximate cause of the loss. There is a preponderance of
evidence that the barge was not seaworthy when it sailed for
Manila.38 Respondent was able to prove that, in the hull of
the barge, there were holes that might have caused or
aggravated the sinking.39 Because the presumption of
negligence or fault applied to petitioner, it was incumbent
upon it to show that there were no holes; or, if there were,
that they did not aggravate the sinking.
Petitioner offered no evidence to rebut the existence of the
holes. Its witness, Domingo A. Luna, testified that the barge
was in "tip-top" or excellent condition,40 but that he had not
personally inspected it when it left Palawan.41
The submission of the Philippine Coast Guard’s Certificate of
Inspection of Judy VII, dated July 31, 1991, did not
conclusively prove that the barge was seaworthy.42 The
regularity of the issuance of the Certificate is disputably
presumed.43 It could be contradicted by competent evidence,
which respondent offered. Moreover, this evidence did not
necessarily take into account the actual condition of
the vessel at the time of the commencement of the voyage.44
Page 14 of 47
ABOITIZ SHIPPING CORPORATION, petitioner, vs.
INSURANCE COMPANY OF NORTH AMERICA, respondent.
G.R. No. 168402 August 6, 2008
We now discuss petitioner's liability for the damages
sustained by the shipment. The rule as stated in Article 1735
of the Civil Code is that in cases where 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 required by
law.38 Extraordinary diligence is that extreme measure of care
and caution which persons of unusual prudence and
circumspection use for securing and preserving their own
property rights.39 This standard is intended to grant favor to
the shipper who is at the mercy of the common carrier once
the goods have been entrusted to the latter for shipment.40
Here, the shipment delivered to the consignee sustained
water damage. We agree with the findings of the CA that
petitioner failed to overturn this presumption:
x x x upon delivery of the cargo to the consignee Don Bosco
Technical High School by a representative from Trabajo
Arrastre, and the crates opened, it was discovered that the
workbenches and work tools suffered damage due to
"wettage" although by then they were already physically
dry. Appellee carrier having failed to discharge the burden of
proving that it exercised extraordinary diligence in the
vigilance over such goods it contracted for carriage, the
presumption of fault or negligence on its part from the time
the goods were unconditionally placed in its possession (July
26, 1993) up to the time the same were delivered to the
consignee (August 11, 1993), therefore stands. The
presumption that the carrier was at fault or that it acted
negligently was not overcome by any countervailing
evidence. x x x41 (Emphasis added)
The shipment arrived in the port of Manila and was received
by petitioner for carriage on July 26, 1993. On the same day,
it was stripped from the container van. Five days later, on
July 31, 1993, it was re-stuffed inside another container van.
On August 1, 1993, it was loaded onto another vessel bound
for Cebu. During the period between July 26 to 31, 1993, the
shipment was outside a container van and kept in storage by
petitioner.
The bill of lading issued by petitioner on July 31, 1993
contains the notation "grounded outside warehouse,"
suggesting that from July 26 to 31, the goods were kept
outside the warehouse. And since evidence showed that rain
fell over Manila during the same period, We can conclude
that this was when the shipment sustained water damage.
To prove the exercise of extraordinary diligence, petitioner
must do more than merely show the possibility that some
other party could be responsible for the damage. It must
prove that it used "all reasonable means to ascertain the
nature and characteristic of the goods tendered for transport
and that it exercised due care in handling
them.42 Extraordinary diligence must include safeguarding
the shipment from damage coming from natural elements
such as rainfall.
Aside from denying that the "grounded outside warehouse"
notation referred not to the crate for shipment but only to
the carrier van, petitioner failed to mention where exactly the
goods were stored during the period in question. It failed to
show that the crate was properly stored indoors during the
time when it exercised custody before shipment to Cebu. As
amply explained by the CA:
On the other hand, the supplemental report submitted by
the surveyor has confirmed that it was rainwater that seeped
into the cargo based on official data from the PAGASA that
there was, indeed, rainfall in the Port Area of Manila from
July 26 to 31, 1993. The Surveyor specifically noted that the
subject cargo was under the custody of appellee carrier from
the time it was delivered by the shipper on July 26, 1993 until
it was stuffed inside Container No. ACCU-213798-4 on July
31, 1993. No other inevitable conclusion can be deduced
from the foregoing established facts that damage from
"wettage" suffered by the subject cargo was caused by the
negligence of appellee carrier in grounding the shipment
outside causing rainwater to seep into the cargoes.
Appellee's witness, Mr. Mayo tried to disavow any
responsibility for causing "wettage" to the subject goods by
claiming that the notation "GROUNDED OUTSIDE WHSE."
actually refers to the container and not the contents thereof
or the cargoes. And yet it presented no evidence to explain
where did they place or store the subject goods from the
time it accepted the same for shipment on July 26, 1993 up
to the time the goods were stripped or transferred from the
container van to another container and loaded into the
vessel M/V Supercon Carrier I on August 1, 1993 and left
Manila for Cebu City on August 2, 1993. x x x If the subject
cargo was not grounded outside prior to shipment to Cebu
City, appellee provided no explanation as to where said
cargo was stored from July 26, 1993 to July 31, 1993. What
the records showed is that the subject cargo was stripped
from the container van of the shipper and transferred to the
container on August 1, 1993 and finally loaded into the
appellee's vessel bound for Cebu City on August 2, 1993. The
Stuffing/Stripping Report (Exhibit "D") at the Manila port did
not indicate any such defect or damage, but when the
container was stripped upon arrival in Cebu City port after
being discharged from appellee's vessel, it was noted that
only one (1) slab was slightly broken at the bottom allegedly
hit by a forklift blade (Exhibit "F").43 (Emphasis added)
Petitioner is thus liable for the water damage sustained by
the goods due to its failure to satisfactorily prove that it
exercised the extraordinary diligence required of common
carriers.
5. What does the shipper or consignee have to show
in order to have a prima facie case against the
carrier?
-Article 1734
THE YNCHAUSTI STEAMSHIP COMPANY, petitioner, vs. I. B.
DEXTER, as Auditor of the Philippine Islands, and C. E.
UNSON, as Acting Purchasing Agent of the Philippine
Islands, respondents. G.R. No. L-15652 December 14, 1920
In section 646 of the Administrative Code it is provided that
when Government property is transmitted from one place to
another by carrier, it shall be upon proper bill of lading, or
receipt, from such carrier, and it shall be the duty of the
consignee, or his representative, to make full notation of any
evidence of loss, shortage, or damage, upon the bill of
lading, or receipt, before accomplishing it. It is admitted by
the petitioner in the agreed statement of facts that the
consignee, at the time the oil was delivered, noted the loss in
the present case upon the two respective bills of lading. The
notation of these losses by the consignee, in obedience to
the precept of section 646 of the Administrative Code, is
competent evidence to show that the shortage in fact
existed. As the petitioner admits that the oil was received by
it for carriage and inasmuch as the fact of loss is proved in
Page 15 of 47
the manner just stated, it results that there is a presumption
that the petitioner was to blame for the loss; and it was
incumbent upon the petitioner in order to entitle it to relief
in the case to rebut that presumption by proving, as is
alleged in the petition, that the loss was not due to any fault
or negligence of the petitioner.
The mere proof of delivery of goods in good order to a
carrier, and of their arrival at the place of destination in bad
order, makes out a prima facie case against the carrier, so
that if no explanation is given as to how the injury occurred,
the carrier must be held responsible. (4 R. C. L., p. 917.) It is
incumbent upon the carrier to prove that the loss was due to
accident or some other circumstance inconsistent with its
liability. (Articles
361-363, Code of Commerce.) Indeed, if the Government of
the Philippine Islands had instituted an action in a court of
law against the petitioner to recover the value of the oil lost
while these consignments were in the court of
transportation, it would, upon the facts appearing before us,
have been entitled to judgment.
From this it is apparent that the mandamus prayed for
cannot be granted. It is a rule of universal application that a
petition for extraordinary relief of the character here sought
must show merit. That is, the petitioner's right to relief must
be clear. Such cannot be said to be the case where, as here, a
presumption of responsibility on the part of the petitioner
stands unrefuted upon the record.
We are of the opinion that, in the absence of proof showing
that the carrier was not at fault in respect to the matter
under discussion, the Insular Auditor was entitled to
withhold, from the amount admittedly due to the petitioner
for the freight charges, a sum sufficient to cover the value of
the oil lost in transit.
DELSAN TRANSPORT LINES, INC., Petitioner, vs. AMERICAN
HOME ASSURANCE CORPORATION, Respondent. G.R. No.
149019 August 15, 2006
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. Article
1734 of the Civil Code enumerates the instances when the
presumption of negligence does not attach:
Art. 1734. Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the same is
due to any of the following causes only:
1) Flood storm, earthquake, lightning, or other natural
disaster or calamity;
2) Act of the public enemy in war, whether international or
civil;
3) Act or omission of the shipper or owner of the goods;
4) The character of the goods or defects in the packing or in
the containers;
5) Order or act of competent public authority.
Both the trial court and the CA uniformly ruled that Delsan
failed to prove its claim that there was a contributory
negligence on the part of the owner of the goods – Caltex.
We see no reason to depart therefrom. As aptly pointed out
by the CA, 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. To the two courts below,
the actuation of the gauger and the escort surveyor, both
personnel from the Caltex Bulk Depot, negates the allegation
that Caltex was remiss in its duties. As we see it, 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. As it is, Delsan’s personnel signaled a "red light"
which was not a sufficient warning because such signal only
meant that the pumping of diesel oil had been finished.
Neither did the blowing of whistle suffice considering the
distance of more than 2 kilometers between the vessel and
the Caltex Bulk Depot, aside from the fact that it was not the
agreed signal. Had the gauger and the escort surveyor from
Caltex Bulk Depot not gone aboard the vessel to make
inquiries, the shore tender would have not known what really
happened. 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.
To recapitulate, common carriers, from the nature of their
business and for reasons of public policy, are bound to
observe extraordinary diligence in vigilance over the goods
and for the safety of the passengers transported by them,
according to all the circumstances of each case. 9 The mere
proof of delivery of goods in good order to the carrier, and
their arrival in the place of destination in bad order, make
out a prima facie case against the carrier, so that if no
explanation is given as to how the injury occurred, the carrier
must be held responsible. It is incumbent upon the carrier to
prove that the loss was due to accident or some other
circumstances inconsistent with its liability.10
Page 16 of 47
All told, Delsan, being a common carrier, should have
exercised extraordinary diligence in the performance of its
duties. Consequently, it is obliged to prove that the damage
to its cargo was caused by one of the excepted causes if it
were to seek exemption from responsibility. 11 Having failed
to do so, Delsan must bear the consequences.
Exception: Article 1734
6. What are the effects when any of the five
exceptions in Art 1734 is present?
- Need not prove extraordinary diligence.
However, not autmomatically exempt---
comply Art 1739.
7. Is fire a natural disaster? No.
EDGAR COKALIONG SHIPPING LINES,
INC., Petitioner, vs.UCPB GENERAL INSURANCE COMPANY,
INC., Respondent. G.R. No. 146018 June 25, 2003
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. Broadly speaking, force majeure generally applies
to a natural accident, such as that caused by a lightning, an
earthquake, a tempest or a public enemy.14 Hence, fire is not
considered a natural disaster or calamity. In Eastern Shipping
Lines, Inc. v. Intermediate Appellate Court,15 we explained:
"x x x. This must be so as it arises almost invariably from
some act of man or by human means. It does not fall within
the category of an act of God unless caused by lighting or by
other natural disaster or calamity. It may even be caused by
the actual fault or privity of the carrier.
"Article 1680 of the Civil Code, which considers fire as an
extraordinary fortuitous event refers to leases or rural lands
where a reduction of the rent is allowed when more than
one-half of the fruits have been lost due to such event,
considering that the law adopts a protective policy towards
agriculture.
"As the peril of fire is not comprehended within the
exceptions in Article 1734, supra, Article 1735 of the Civil
Code provides that in all cases other than those mentioned
in Article 1734, the common carrier shall be presumed to
have been at fault or to have acted negligently, unless it
proves that it has observed the extraordinary diligence
required by law."
Where loss of cargo results from the failure of the officers of
a vessel to inspect their ship frequently so as to discover the
existence of cracked parts, that loss cannot be attributed to
force majeure, but to the negligence of those officials.16
The law provides that a common carrier is presumed to have
been negligent if it fails to prove that it exercised
extraordinary vigilance over the goods it transported.
Ensuring the seaworthiness of the vessel is the first step in
exercising the required vigilance. Petitioner did not present
sufficient evidence showing what measures or acts it had
undertaken to ensure the seaworthiness of the vessel. It
failed to show when the last inspection and care of the
auxiliary engine fuel oil service tank was made, what the
normal practice was for its maintenance, or some other
evidence to establish that it had exercised extraordinary
diligence. It merely stated that constant inspection and care
were not possible, and that the last time the vessel was dry-
docked was in November 1990. Necessarily, in accordance
with Article 173517 of the Civil Code, we hold petitioner
responsible for the loss of the goods covered by Bills of
Lading Nos. 58 and 59.
DSR-SENATOR LINES AND C.F. SHARP AND COMPANY,
INC., petitioners, vs. FEDERAL PHOENIX ASSURANCE CO.,
INC., respondent. G.R. No. 135377 October 7, 2003
Fire is not one of those enumerated under the above
provision which exempts a carrier from liability for loss or
destruction of the cargo.
In Eastern Shipping Lines, Inc. vs. Intermediate Appellate
Court,9 we ruled that since the peril of fire is not
comprehended within the exceptions in Article 1734, then
the common carrier shall be presumed to have been at fault
or to have acted negligently, unless it proves that it has
observed the extraordinary diligence required by law.
Even if fire were to be considered a natural disaster within
the purview of Article 1734, it is required under Article
173910 of the same Code that the natural disaster must have
been the proximate and only cause of the loss, and that the
carrier has exercised due diligence to prevent or minimize
the loss before, during or after the occurrence of the disaster.
We have held that a common carrier’s duty to observe the
requisite diligence in the shipment of goods lasts from the
time the articles are surrendered to or unconditionally placed
in the possession of, and received by, the carrier for
transportation until delivered to or until the lapse of a
reasonable time for their acceptance by the person entitled
to receive them. When the goods shipped either are lost or
arrive in damaged condition, a presumption arises against
the carrier of its failure to observe that diligence, and there
need not be an express finding of negligence to hold it
liable.11 1awphi1.néts
Common carriers are obliged to observe extraordinary
diligence in the vigilance over the goods transported by
them. Accordingly, they are presumed to have been at fault
or to have acted negligently if the goods are lost, destroyed
or deteriorated. There are very few instances when the
presumption of negligence does not attach and these
instances are enumerated in Article 1734. In those cases
where the presumption is applied, the common carrier must
prove that it exercised extraordinary diligence in order to
overcome the presumption.12
Respondent Federal Phoenix Assurance raised the
presumption of negligence against petitioners. However,
they failed to overcome it by sufficient proof of extraordinary
diligence.
EASTERN SHIPPING LINES, INC., petitioner, vs.
INTERMEDIATE APPELLATE COURT and DEVELOPMENT
INSURANCE & SURETY CORPORATION, respondents. G.R.
No. L-69044 May 29, 1987
we are of the opinion that fire may not be considered a
natural disaster or calamity. This must be so as it arises
almost invariably from some act of man or by human
means. 10 It does not fall within the category of an act of
Page 17 of 47
God unless caused by lightning 11 or by other natural
disaster or calamity. 12 It may even be caused by the actual
fault or privity of the carrier. 13
Article 1680 of the Civil Code, which considers fire as an
extraordinary fortuitous event refers to leases of rural lands
where a reduction of the rent is allowed when more than
one-half of the fruits have been lost due to such event,
considering that the law adopts a protection policy towards
agriculture. 14
As the peril of the fire is not comprehended within the
exception in Article 1734, supra, Article 1735 of the Civil
Code provides that all cases than those mention in Article
1734, the common carrier shall be presumed to have been at
fault or to have acted negligently, unless it proves that it has
observed the extraordinary deligence required by law.
In this case, the respective Insurers. as subrogees of the
cargo shippers, have proven that the transported goods have
been lost. Petitioner Carrier has also proved that the loss was
caused by fire. The burden then is upon Petitioner Carrier to
proved that it has exercised the extraordinary diligence
required by law. In this regard, the Trial Court, concurred in
by the Appellate Court, made the following Finding of fact:
The cargoes in question were, according to the witnesses
defendant placed in hatches No, 2 and 3 cf the vessel,
Boatswain Ernesto Pastrana noticed that smoke was coming
out from hatch No. 2 and hatch No. 3; that where the smoke
was noticed, the fire was already big; that the fire must have
started twenty-four 24) our the same was noticed; that
carbon dioxide was ordered released and the crew was
ordered to open the hatch covers of No, 2 tor
commencement of fire fighting by sea water: that all of these
effort were not enough to control the fire.
Pursuant to Article 1733, common carriers are bound to
extraordinary diligence in the vigilance over the goods. The
evidence of the defendant did not show that extraordinary
vigilance was observed by the vessel to prevent the
occurrence of fire at hatches numbers 2 and 3. Defendant's
evidence did not likewise show he amount of diligence made
by the crew, on orders, in the care of the cargoes. What
appears is that after the cargoes were stored in the hatches,
no regular inspection was made as to their condition during
the voyage. Consequently, the crew could not have even
explain what could have caused the fire. The defendant, in
the Court's mind, failed to satisfactorily show that
extraordinary vigilance and care had been made by the crew
to prevent the occurrence of the fire. The defendant, as a
common carrier, is liable to the consignees for said lack of
deligence required of it under Article 1733 of the Civil
Code. 15
Having failed to discharge the burden of proving that it had
exercised the extraordinary diligence required by law,
Petitioner Carrier cannot escape liability for the loss of the
cargo.
And even if fire were to be considered a "natural disaster"
within the meaning of Article 1734 of the Civil Code, it is
required under Article 1739 of the same Code that the
"natural disaster" must have been the "proximate and only
cause of the loss," and that the carrier has "exercised due
diligence to prevent or minimize the loss before, during or
after the occurrence of the disaster. " This Petitioner Carrier
has also failed to establish satisfactorily.
Nor may Petitioner Carrier seek refuge from liability under
the Carriage of Goods by Sea Act, It is provided therein that:
Sec. 4(2). Neither the carrier nor the ship shall be responsible
for loss or damage arising or resulting from
(b) Fire, unless caused by the actual fault or privity of the
carrier.
xxx xxx xxx
In this case, both the Trial Court and the Appellate Court, in
effect, found, as a fact, that there was "actual fault" of the
carrier shown by "lack of diligence" in that "when the smoke
was noticed, the fire was already big; that the fire must have
started twenty-four (24) hours before the same was noticed;
" and that "after the cargoes were stored in the hatches, no
regular inspection was made as to their condition during the
voyage." The foregoing suffices to show that the
circumstances under which the fire originated and spread are
such as to show that Petitioner Carrier or its servants were
negligent in connection therewith. Consequently, the
complete defense afforded by the COGSA when loss results
from fire is unavailing to Petitioner Carrier.
8. What if the loss, damage, or destruction is caused
by a typhoon?
-Asia Lighterage v. CA, supra
CENTRAL SHIPPING COMPANY, INC., petitioner, vs.
INSURANCE COMPANY OF NORTH AMERICA, respondent.
G.R. No. 150751 September 20, 2004
Liability for Lost Cargo
From the nature of their business and for reasons of public
policy, common carriers are bound to observe extraordinary
diligence over the goods they transport, according to all the
circumstances of each case.10 In the event of loss, destruction
or deterioration of the insured goods, common carriers are
responsible; that is, unless they can prove that such loss,
destruction or deterioration was brought about -- among
others -- by "flood, storm, earthquake, lightning or other
natural disaster or calamity."11 In all other cases not specified
under Article 1734 of the Civil Code, common carriers are
presumed to have been at fault or to have acted negligently,
unless they prove that they observed extraordinary
diligence.12
In the present case, petitioner disclaims responsibility for the
loss of the cargo by claiming the occurrence of a "storm"
under Article 1734(1). It attributes the sinking of its vessel
solely to the weather condition between 10:00 p.m. on July
25, 1990 and 1:25 a.m. on July 26, 1990.
At the outset, it must be stressed that only questions of
law13 may be raised in a petition for review on certiorari
under Rule 45 of the Rules of Court. Questions of fact are not
proper subjects in this mode of appeal,14 for "[t]he Supreme
Court is not a trier of facts."15 Factual findings of the CA may
be reviewed on appeal16 only under exceptional
circumstances such as, among others, when the inference is
manifestly mistaken,17 the judgment is based on a
misapprehension of facts,18 or the CA manifestly overlooked
certain relevant and undisputed facts that, if properly
considered, would justify a different conclusion.19
In the present case, petitioner has not given the Court
sufficient cogent reasons to disturb the conclusion of the CA
that the weather encountered by the vessel was not a
"storm" as contemplated by Article 1734(1). Established is the
Page 18 of 47
fact that between 10:00 p.m. on July 25, 1990 and 1:25 a.m.
on July 26, 1990, M/V Central Bohol encountered a
southwestern monsoon in the course of its voyage.
The Note of Marine Protest,20 which the captain of the vessel
issued under oath, stated that he and his crew encountered a
southwestern monsoon about 2200 hours on July 25, 1990,
and another monsoon about 2400 hours on July 26, 1990.
Even petitioner admitted in its Answer that the sinking of
M/V Central Bohol had been caused by the strong southwest
monsoon.21 Having made such factual representation, it
cannot now be allowed to retreat and claim that the
southwestern monsoon was a "storm."
The pieces of evidence with respect to the weather
conditions encountered by the vessel showed that there was
a southwestern monsoon at the time. Normally expected on
sea voyages, however, were such monsoons, during which
strong winds were not unusual. Rosa S. Barba, weather
specialist of the Philippine Atmospheric Geophysical and
Astronomical Services Administration (PAGASA), testified that
a thunderstorm might occur in the midst of a southwest
monsoon. According to her, one did occur between 8:00 p.m.
on July 25, 1990, and 2 a.m. on July 26, 1990, as recorded by
the PAGASA Weather Bureau.22
Nonetheless, to our mind it would not be sufficient to
categorize the weather condition at the time as a "storm"
within the absolutory causes enumerated in the law.
Significantly, no typhoon was observed within the Philippine
area of responsibility during that period.23
According to PAGASA, a storm has a wind force of 48 to 55
knots,24 equivalent to 55 to 63 miles per hour or 10 to 11 in
the Beaufort Scale. The second mate of the vessel stated that
the wind was blowing around force 7 to 8 on the Beaufort
Scale.25 Consequently, the strong winds accompanying the
southwestern monsoon could not be classified as a "storm."
Such winds are the ordinary vicissitudes of a sea voyage.26
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.27 The defense of fortuitous event or natural
disaster cannot be successfully made when the injury could
have been avoided by human precaution.28
Hence, if a common carrier fails to exercise due diligence --
or that ordinary care that the circumstances of the particular
case demand -- to prevent or minimize the loss before,
during and after the occurrence of the natural disaster, the
carrier shall be deemed to have been negligent. The loss or
injury is not, in a legal sense, due to a natural disaster under
Article 1734(1).29
We also find no reason to disturb the CA’s finding that the
loss of the vessel was caused not only by the southwestern
monsoon, but also by the shifting of the logs in the hold.
Such shifting could been due only to improper stowage. The
assailed Decision stated:
"Notably, in Master Cahatol’s account, the vessel
encountered the first southwestern monsoon at about
1[0]:00 in the evening. The monsoon was coupled with heavy
rains and rough seas yet the vessel withstood the onslaught.
The second monsoon attack occurred at about 12:00
midnight. During this occasion, the master ‘felt’ that the logs
in the hold shifted, prompting him to order second mate
Percival Dayanan to look at the bodega. Complying with the
captain’s order, 2nd mate Percival Dayanan found that there
was seawater in the bodega. 2nd mate Dayanan’s account
was:
‘14.T – Kung inyo pong natatandaan ang mga pangyayari,
maari mo bang isalaysay ang naganap na paglubog sa
barkong M/V Central Bohol?
‘S – Opo, noong ika-26 ng Julio 1990 humigit kumulang alas
1:20 ng umaga (dst) habang kami ay nagnanabegar
patungong Maynila sa tapat ng Cadlao Island at Cauayan
Island sakop ng El Nido, Palawan, inutusan ako ni Captain
Enriquito Cahatol na tingnan ko ang bodega; nang ako ay
nasa bodega, nakita ko ang loob nang bodega na maraming
tubig at naririnig ko ang malakas na agos ng tubig-dagat na
pumapasok sa loob ng bodega ng barko; agad bumalik ako
kay Captain Enriquito Cahatol at sinabi ko ang malakas na
pagpasok ng tubig-dagat sa loob nang bodega ng barko na
ito ay naka-tagilid humigit kumulang sa 020 degrees, nag-
order si Captain Cahatol na standby engine at tinawag ang
lahat ng mga officials at mga crew nang maipon kaming
lahat ang barko ay naka-tagilid at ito ay tuloy-tuloy ang
pagtatagilid na ang ilan sa mga officials ay naka-hawak na sa
barandilla ng barko at di-nagtagal sumigaw nang
ABANDO[N] SHIP si Captain Cahatol at kami ay nagkanya-
kanya nang talunan at languyan sa dagat na malakas ang
alon at nang ako ay lumingon sa barko ito ay di ko na
nakita.’
"Additionally, [petitioner’s] own witnesses, boatswain
Eduardo Viñas Castro and oiler Frederick Perena, are one in
saying that the vessel encountered two weather
disturbances, one at around 10 o’clock to 11 o’clock in the
evening and the other at around 12 o’clock midnight. Both
disturbances were coupled with waves and heavy rains, yet,
the vessel endured the first and not the second. Why? The
reason is plain. The vessel felt the strain during the second
onslaught because the logs in the bodega shifted and there
were already seawater that seeped inside."30
The above conclusion is supported by the fact that the vessel
proceeded through the first southwestern monsoon without
any mishap, and that it began to list only during the second
monsoon immediately after the logs had shifted and
seawater had entered the hold. In the hold, the sloshing of
tons of water back and forth had created pressures that
eventually caused the ship to sink. Had the logs not shifted,
the ship could have survived and reached at least the port of
El Nido. In fact, there was another motor launch that had
been buffeted by the same weather condition within the
same area, yet it was able to arrive safely at El Nido.31
In its Answer, petitioner categorically admitted the allegation
of respondent in paragraph 5 of the latter’s Complaint "[t]hat
at about 0125 hours on 26 July 1990, while enroute to
Manila, the M/V ‘Central Bohol’ listed about 10 degrees
starboardside, due to the shifting of logs in the hold."
Further, petitioner averred that "[t]he vessel, while navigating
through this second southwestern monsoon, was under
extreme stress. At about 0125 hours, 26 July 1990, a thud was
heard in the cargo hold and the logs therein were felt to
have shifted. The vessel thereafter immediately listed by ten
(10) degrees starboardside."32
Yet, petitioner now claims that the CA’s conclusion was
grounded on mere speculations and conjectures. It alleges
that it was impossible for the logs to have shifted, because
Page 19 of 47
they had fitted exactly in the hold from the port to the
starboard side.
After carefully studying the records, we are inclined to
believe that the logs did indeed shift, and that they had been
improperly loaded.
According to the boatswain’s testimony, the logs were piled
properly, and the entire shipment was lashed to the vessel by
cable wire.33 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.34
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.35 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 adjuster’s Report, which was heavily relied upon by
petitioner to strengthen its claim that the logs had not
shifted, stated that "the logs were still properly lashed by
steel chains on deck." Parenthetically, this statement referred
only to those loaded on deck and did not mention anything
about the condition of those placed in the lower hold. Thus,
the finding of the surveyor that the logs were still intact
clearly pertained only to those lashed on deck.
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.
Second Issue:
Doctrine of Limited Liability
The doctrine of limited liability under Article 587 of the Code
of Commerce36 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.37 It has already been established that the sinking of
M/V Central Bohol had been caused by the fault or
negligence of the ship captain and the crew, as shown by the
improper stowage of the cargo of logs. "Closer supervision
on the part of the shipowner could have prevented this fatal
miscalculation."38 As such, the shipowner was equally
negligent. It cannot escape liability by virtue of the limited
liability rule.
-Schmitz Transport v. TVI, supra
- Art 1174
9. Does an act of the public enemy in WAR relieve a
common carrier from liability?
a. International Harvester v. Hamburg American Line
GR No. L-11515 July 29, 1918
The two main questions raised by the appeal are, first
whether the cargo belonging to the plaintiff is liable to be
made to contribute, by way of general average, to the costs
and expenses incurred by reason of the internment of
the Suevia in the port of Manila, and, secondly, whether the
defendant is liable for the expenses of transferring the cargo
to another ship and transporting it to the port of destination.
Upon the first question it is clear that the cargo in question is
not liable to a general average. It is not claimed that this
agricultural machinery was contraband of war; and being
neutral goods, it was not liable to forfeiture in the event of
capture by the enemies of the ship's flag. It follows that when
the master of the Suevia decided to take refuge in the port
of Manila, he acted exclusively with a view to the protection
of his vessel. There was no common danger to the ship and
cargo; and therefore it was not a case for a general average.
The point here in dispute has already been determined by
this court unfavorably to the contention of the appellant.
(Compagnie de Commerce et de Navigation D'Extreme
Orient vs. Hamburg Amerika Packetfacht Actien Gesselschaft,
36 Phil., 590.) The following provision contained in the York-
Antwerp Rules, as we interpret it, is conclusive against the
appellant's contention:
When a ship shall have entered a port of refuge . . . in
consequence of accident, sacrifice, or other extraordinary
circumstance which renders that necessary for the common
safety, the expense of entering such port shall be admitted
as general average. (York-Antwerp Rules, section 10.)
Upon the question of the liability of the defendant company
for the expenses incident to the transhipment and
conveyance of the cargo to Vladivostock, it is noteworthy
that the original bill of lading issued to the shipper in
Baltimore contained the provision that the goods should be
forwarded from Hamburn to Vladivostock at the steamer's
expense and this term appeared not only in the paragraph
numbered 17 in the body of the bill of lading but also
conspicuously printed in the shipping direction on the face
of the instrument.
In the tenth paragraph of the General Rules contained in the
bill of lading which was issued at Hamburn upon account of
the Suevia, for the forwarding of the cargo to Vladivostock,
there is found the following provision:
X. If on account of quarantine, threatening quarantine, ice
blockade, war disturbances, strike, lockout, boycott, or
reason of a similar nature, the master is in doubt as to
whether he can safely reach the port of destination, there
discharge in the usual manner, or proceed thence on his
voyage unmolested he is at liberty to discharge the goods at
another place or harbour which he may consider safe,
whereby his obligations are fulfilled. . . . If the goods for any
reason whatsoever cannot be discharged . . . at the port of
destination, the ship is at liberty to . . . forward them by some
other means to the port of destination, for ship's account but
not at ship's risk.
Page 20 of 47
Further on in the same bill of lading under the head "Special
Clauses" is found an addendum to rule ten to the following
effect:
Special — Condition to rule X. — The forwarding of through
goods to be effected as soon a possible, but the shipowner
not to be responsible for delay in the conveyance. The
shipowner to have the liberty to store the goods at the
expense and risk of the owner, shipper or consignee. The
shipowner further to be entitled to forward the goods by rail
from the port of discharge to the final place of destination, at
his expense, but at the risk of the owner, shipper or
consignee.
It is now insisted for the appellant that inasmuch a war had
broken out between Germany and Russia and the mater had
brought the cargo into a neutral harbor, all the obligations of
the company have been fulfilled. We think that this
contention is untenable. The outbreak of the war between
Germany and Russia undoubtedly absolved the defendant
company from so much of the contract of affreightment as
required the defendant company to convey the goods to
Vladivostock upon the ship on which it was embarked; and
no damages could be recovered by the plaintiff of the
defendant for its failure to convey the goods to the port of
destination on that ship. But by the terms of the contract of
affreightment the defendant company was bound to forward
the cargo to Vladivostock at the steamer's expense, not
necessarily by a steamer belonging to the defendant
company; and it does not by any means follow that it is not
liable for the expense incurred by the owner in completing
the unfinished portion of the voyage in another ship.
It will be noted that under paragraph X of the bill of lading,
quoted above, the master is given the election to discharge
at another port, if war should interfere with the completion
of the voyage to the port of destination. No such election
has been made by the master. On the contrary, after arrival in
Manila, he refused to discharge the goods, and must be held
to have elected to retain them, leaving the obligations of the
contract intact, except in so far as they were modified, under
the general principle of international law, by the fact that war
existed. So far was the master from electing to discharge the
goods in the port of Manila even on the demand of the
owner, that he proposed to hold the cargo until such time as
the Suevia might continue her voyage without fear of
molestation from her enemies.
Furthermore, in the special condition to rule X, the defendant
company recognizes its responsibility with respect to the
forwarding of goods; and where it is said in paragraph X that
the master's obligation will be fulfilled by discharge in
another port, it must be understood that reference is had to
the obligations incident to the carriage of the goods on the
instant voyage.
It should be remembered that stipulations, in a bill of lading
exempting a shipowner from the liability which would
ordinarily attach to him under the law are to be strictly
construed against him. (Cia. de Navigacion La
Flecha vs.Brauer, 168 u. Ss., 104.) This rule should be
unhesitatingly applied in a case such as this where the bill of
lading under which the exemption is claimed was issued by
the defendant company to itself.
We find it stated in a well known treatise that where cargo
has been taken aboard a ship at a foreign port and war
breaks out between the country to which the vessel belongs
and the country of the port of discharge, the neutral owner
of the goods cannot complain of her not going to her
destination. (Carver, Carriage of Goods by Sea, sec: 239.) The
same learned author adds:
Where goods have been loaded and partly carried on the
agreed voyage, though the exact performance of the
contract may become legally impossible, it will not be
regarded as completely at an end, if it can by any reasonable
construction be treated as still capable of being performed in
substance. Thus, where a Prussian vessel, carrying goods
under charter, had been ordered to discharge at Dunkirk,
and it became impossible for her to do so, because war
broke out between France and Germany, it was held in the
Privy Council, that the contract was not dissolved, and that
the shipowner might till hold the goods at Dover, where he
had taken the ship, for the freight which would have been
payable under the charter-party had she been ordered to
that part. (The Teutonia (1872), L. R., 4 P. C., 171.)
In the case now before u we see no reason for holding that
the defendant company has been absolved by the outbreak
of war from its contractual obligation to bear the expenses of
forwarding the goods to Vladivostock, even thought it is
immediately absolved from the duty to convey them on its
own ship.
It must not be forgotten that the outbreak of the war
between Germany and Russia did not make the contract of
affreightment absolutely illegal ass between the German
company and the American shipper. If war had broken out
between Germany and the United States, and refuge had
been taken in some port in a neutral country, it might be said
that this contract was dissolved on both sides, and a different
question would thus have been presented; but even in that
case, it could not be successfully maintained that the German
company was wholly absolved from every duty to the
shipper.
There is another aspect of the case which is highly pertinent
to the matter now under consideration. The freight was
prepaid by the shipper from Baltimore to destination, but has
been only in part earned. The defendant company has
broken the voyage by stopping at the intermediate port of
Manila. Admitting that the defendant company is absolved
from the obligation to convey the cargo further on its course,
it is nevertheless clear that upon principles of equity the
company should be bound to restore so much of the freight
a represents the unaccomplished portion of the voyage. If
the freight had not been paid, the most that could be
claimed by the defendant would be an amount pro rata
itineris peracti, as was conceded in the case of the Teutonia,
to which reference has been already made; and now that the
freight has been prepaid, there is a clear obligation on the
part of the company to refund the excess, as money paid
upon a consideration that has partially failed.
But it will be said that the contract to convey the cargo to
Hamburg and to forward it from there to Vladivostock was
an entirety, and that inasmuch as the defendant company is
absolved from its obligation to proceed further with
performance, there can be no apportionment as between the
voyage which has been accomplished and that which was yet
to be performed. The reply to this is that the break in the
continuity of the voyage was a result of the voluntary act of
the master of the Suevia, adopted with a view to the
preservation of the ship; and it can not be permitted that the
defendant company should escape the consequences of that
act, so far as necessary to effect an equitable adjustment of
the rights of the owner of the cargo. There being no
evidence before us with respect to the amount of freight
which was prepaid, nor with respect to the proportion earned
and unearned, but only the fact that the owner paid out a
certain amount for transhipment to Vladivostock, it can be
Page 21 of 47
assumed that this amount approximately represents the
unearned portion of the freight.
We have not overlooked the provision in the original bill of
lading which provides that freight paid in advance will not be
returned, goods lost or not lost. There is also a somewhat
similar provision in the second bill of lading issued at
Hamburg. These provisions contemplate the special cae of
the loss of the goods and can not be extended to the
situation which arises when the ship for purposes of its own
protection abandons the enterprise.
From what has been said it is apparent that the Court of First
Instance was correct not only in adjudging possession of the
cargo to the plaintiff but also in imposing upon the
defendant company liability with respect to the amount
expended by the plaintiff in forwarding the goods to their
destination.
The only other point raised by the bill of exceptions, which
we deem it necessary to notice, is based on a provision in the
bill of lading to the effect that all disputes arising under the
contract are, at the option of the defendant company, to be
decided according to German law and exclusively by the
Hamburg courts. From this it is argued that the Court of First
Instance erred in assuming jurisdiction of the action and that
the case should have been decided in accordance with the
principles of German law.
It can not be admitted that a provision of this character has
the effect of ousting the jurisdiction of the court of the
Philippine Islands in the matter now before it. An express
agreement tending to deprive a court of jurisdiction
conferred on it by law is of no effect. (Molina vs. De la Riva, 6
Phil., 12.) Besides, whatever the effect of this provision, the
benefit of it was waived when the defendant company
appeared and answered generally without objecting to the
jurisdiction of the court.
As regards the contention that the rights of the parties
should be determined in accordance with the law of
Germany, it is sufficient to say that when it is proposed to
invoke the law of a foreign country as supplying the proper
rules for the solution of a case, the existence of such law
must be pleaded and proved. Defendant has done neither. In
such a case it is to be presumed that the law prevailing in the
foreign country is the same as that which prevails in our own.
b. Campagnie de Commerce v. Hamburg American
Line GR No. L-10986 March 31 1917
it will readily be seen that the vital issue raised on this appeal
is whether or not the master of the Sambia, when he fled
from the port of Saigon and took refuge in the port of
Manila, had reasonable grounds to apprehend that his vessel
was in danger of seizure or capture by the public enemies of
the flag under which he sailed.
If it was his duty to remain in the port of Saigon under the
circumstances existing at the time when he completed the
loading of the vessel, in the hope that he would be granted
a laissez-passer or safe-conduct by the French authorities, it
is manifest that his flight subjected the ship and her owners
to liability for the resultant damages suffered by the cargo.
If, on the other hand, the master had reasonable ground to
believe that by remaining in the port of Saigon he would
expose the vessel to a real, and not a merely imaginary
danger of seizure by the French authorities from which he
could secure her by taking refuge in the port of Manila, his
flight must be held to have been justified by the necessity
under which he was placed to elect that course which would
secure the vessel from danger of seizure by a public enemy
of the country under whose flag she sailed; and the ship-
owner must be held to be relieved from liability for the
deviation from the route prescribed in the charter party and
the resultant damages to the cargo, under the general
provisions of maritime law (Carver's Carriage of Goods by
Sea, 5th Ed., sections 11 and 22), and the express provisions
of article 7 of the charter party which is as follows:
The act of God, the king's enemies, arrests and restraints of
princes, rulers and people, perils of the seas, barratry of the
master and crew, pirates, collisions, strandings, loss or
damage from fire on board, in hulk or craft, or on shore; and
act, neglect, default or error in judgment whatsoever of
pilots, master, crew or other servant of the shipowners in the
navigation of the steamer; and all and every the dangers and
accidents of the seas, canals and rivers, and of navigation of
whatever nature or kind always mutually excepted.
Counsel for the cargo owner insist that having in mind
accepted principles of public international law, the
established practice of nations, and the express terms of the
Sixth Hague Convention (1907), the master should have
confidently relied upon the French authorities at Saigon to
permit him to sail to his port of destination under alaissez-
passer or safe-conduct, which would have secured both the
vessel and her cargo from all danger of capture by any of the
belligerents. Counsel for the shipowner, on the contrary, urge
that in the light of the developments of the present war, the
master was fully justified in declining to leave his vessel in a
situation in which it would be exposed to danger of seizure
by the French authorities, should they refuse to be bound by
the alleged rule of international law laid down by opposing
counsel. When the case was submitted we did not have at
hand an authoritative report of the proceedings at the Hague
Conference touching the adoption of the sixth convention,
and we were not fully advised as to the final action taken by
the world powers by way of ratification of, or adherence to
its provisions. In the discussion of this branch of the case in
the consultation chamber, our lack of definite and
authoritative information as to these matters resulted in such
a division of opinion as to the respective rights of the parties,
that it was at first impossible to secure a majority vote for the
final disposition of this, as well as some other important
cases submitted at the same time, involving claims
amounting to nearly half a million pesos. Recently, however,
our library was furnished with a copy of Stockton's "Outlines
of International Law" which briefly and as we think
authoritatively sets forth what we now are all agreed would
appear to be the present status of public international law on
the subject of "days of grace" and "safe-conducts," which
may be granted merchant vessels of an enemy, lying in the
ports of a belligerent at the commencement of hostilities.
Admiral Stockton, a retired officer of the United States Navy,
was the first delegate from the United States to the London
Naval Conference in 1909, and his text-book, which went to
press soon after the outbreak of the war in Europe, contains
the most recent statement of the doctrine by a recognized
authority to which our attention has been invited.
In Chapter XXIX of the "Outlines of International Law," which
is devoted to the consideration of several "Open and
Unsettled Questions in Maritime Law," Admiral Stockton,
discussing the question of the allowance of days of grace at
the outbreak of war says:
The convention (VI) of the Hague conference of 1907
treating upon this subject was so unsatisfactory to the
American delegation that they declined to sign it, and
consequently it was not submitted to the United States
Senate for ratification. The reason given for this procedure
Page 22 of 47
was "based on the ground that the convention is an
unsatisfactory compromise between those who believe in the
existence of a right and those who refuse to recognize the
legal validity of the custom which has grown up in recent
years."
The first article of this convention provides that when a
merchant ship of one of the belligerent powers is at the
commencement of hostilities in an enemy port, it
is desirable that it should be allowed to depart freely, either
immediately or after a sufficient term of grace, and to
proceed direct, after being furnished with a passport, to its
port of destination or such other port as shall be named by
it.
"The same applies in the case of a ship which left its last port
of departure before the commencements of the war and
enters an enemy port in ignorance of hostilities."
As this is only a pious wish, it does not require any action of
favor or grace from any of the belligerents, and seizure in
port of any enemy vessel can be made immediately upon the
outbreak of war. The article is not as liberal as the practice
has been in the past.
The policy of the United States in such matters was shown in
the Spanish-American War in the rules laid down by the
President in his proclamation of April 26, 1898, the fourth
article of which reads as follows:
"ARTICLE 4. Spanish merchant vessels, in any ports or places
within the United States, shall be allowed till May 21, 1898
inclusive, for loading their cargoes and departing from such
ports or places; and such Spanish merchant vessels, if met at
sea, by any United States ship, shall be permitted to continue
their voyage, if, on examination of their papers, it shall
appear that their cargoes were taken on board before the
expiration of the above term: Provided, That nothing herein
contained shall apply to Spanish vessels having on board any
officer in the military or naval service of the enemy, or any
coal (except such as may be necessary for their voyage), or
any other article prohibited or contraband of war, or any
despatches of or to the Spanish Government."
This rule is an extremely liberal one and it is doubtful
whether it would be generally accepted, especially in the
case of states of Europe where quick mobilization maintains
as a rule.
In an interesting article in The American Journal of
International Law, Vol. II, 1908, p. 266, the writer, Professor
James Brown Scott, after reviewing at some length the
history of the practice of granting days of grace and safe-
conducts which, he contended, should form a part of the law
of nations, concluded his discussion of the subject with the
following observations:
It is therefore a source of regret that the Second Peace
Conference refused to recognize it as a right but simply as a
privilege, a delai de faveur, which may be accorded or
refused at the opinion of the belligerent, and that the
privilege was unaccompanied by any recommendation of a
period of time within which the privilege in question should
be accorded. . . . It may be said that the expression "it is
desirable" that the vessels should be allowed to depart freely
amounts in reality to a command, and that the practice of
the future will recognize the custom as freely as it has done
in the past, thus establishing as a right what the conference
modestly denominates a privilege. If such be the case the
opposition of Great Britain to the recognition of the right will
be as futile in practice as it was unreasonable at the
conference.
The order in council of the British Government of the 6th of
August, 1914, providing for the granting of "days of grace,"
which was substituted for a prior order in council of the 5th
of August, 1914, is as follows:
His Majesty being mindful, now that a state of war exists
between this country and Germany, of the recognition
accorded to the practice of granting "days of grace" to
enemy merchant ships by the convention relative to the
status of enemy merchant ship at the outbreak of hostilities,
signed at The Hague on the 18th of October, 1907, and
being desirous of lessening, so far as may be practicable, the
injury caused by war to peaceful and unsuspecting
commerce, is pleased, by and with the advice of His Privy
Council, to order, and it is hereby ordered as follows:
1. From and after the publication of this order no enemy
merchant ship shall be allowed to depart, except in
accordance with the provisions of this order, from any British
port or from any ports in any native state in India, or in any
of His Majesty's protectorates, or in any state under His
Majesty's protection or in Cyprus.
2. In the event of one of His Majesty's Principal Secretaries of
State being satisfied by information reaching him not later
than midnight on Friday, the 7th day of August, 1914, that
the treatment accorded to British merchant ships and their
cargoes which at the date of the outbreak of hostilities were
in the ports of the enemy or which subsequently entered
them is not less favorable than the treatment accorded to
enemy merchant ships by article 3 to 7 of this order, he shall
notify the Lords Commissioners of His Majesty's Treasury and
the Lords Commissioners of the Admiralty accordingly, and
public notice thereof shall forthwith be given in the London
Gazette, and article 3 to 8 of this order shall thereupon come
into full force and effect.
3. Subject to the provisions of this order enemy merchant
ships which
(i.) At the date of the outbreak of hostilities were in any port
in which this order applies; or
(ii.) Cleared from their last port before the declaration of war,
and after the outbreak of hostilities, enter a port to which
this order applies, with no knowledge of the war:
shall be allowed up till midnight (Greenwich mean time), on
Friday, the 14th day of August, 1914, for loading or
unloading their cargoes and for departing from such port.
Provided that such vessels shall not be allowed to ship any
contraband of war, and any contraband of war already
shipped on such vessels must be discharged.
4. Enemy merchant ships which cleared from their last port
before the declaration of war, and which with no knowledge
of the war arrive at a port to which this order applies after
the expiry of the time allowed by article 3 for loading or
unloading cargo and for departing, and are permitted to
enter, may be required to depart either immediately, or
within such time as may be considered necessary by the
customs officer of the port for the unloading of such cargo
as they may be required or specially permitted to discharge.
Page 23 of 47
Provided that such vessels may, as a condition of being
allowed to discharge cargo, be required to proceed to any
other specified British port, and shall there be allowed such
time for discharge as the customs officer of that port may
consider to be necessary.
Provided also that, if any cargo on board such vessel is
contraband of war or is requisitioned under article 5 of this
order, she may be required before departure to discharge
such cargo within such time as the customs officer of the
port may consider to be necessary; or she may be required to
proceed, if necessary under escort, to any other of the ports
specified in article 1 of this order, and shall there discharge
the contraband under the like conditions.
5. His Majesty reserves the right recognized by the said
convention to requisition at any time subject to payment of
compensation enemy cargo on board any vessel to which
articles 3 and 4 of this order apply.
6. The privileges accorded by articles 3 and 4 are not to
extend to cable ships, or to seagoing ships designed to carry
oil fuel, or to ships whose tonnage exceeds 5,000 tons gross,
or whose speed is 14 knots or over, regarding which the
entries in Lord's Register shall be conclusive for the purposes
of this article. Such vessels will remain liable on adjudication
by the prize court to detention during the period of the war,
or to requisition, in accordance, in either case, with the
convention aforesaid. The said privileges will also not extend
to merchant ships which show by their build that they are
intended for conversion into warships, as such vessels are
outside the scope of the said convention, and are liable on
adjudication by the prize court to condemnation as prize.
7. Enemy merchant ships allowed to depart under articles 3
and 4 will be provided with a pass indicating the port to
which they are to proceed, and the route they are to follow.
8. A merchant ship which, after receipt of such a pass, does
not follow the course indicated therein will be liable to
capture.
9. If no information reaches one of His Majesty's Principal
Secretaries of State by the day and hour aforementioned to
the effect that the treatment accorded to British merchant
ships and their cargoes which were in the ports of the enemy
at the date of the outbreak of hostilities, or which
subsequently entered them, is, in his opinion, not less
favorable than that accorded to enemy merchant ships by
articles 3 to 8 of this order, every enemy merchant ship
which, on the outbreak of hostilities, was in any port to which
this order applies, and also every enemy merchant ship
which cleared from its last port before the declaration of war,
but which, with no knowledge of the war, enters a port to
which this order applies, shall, together with the cargo on
board thereof, be liable to capture, and shall be brought
before the prize court forthwith for adjudication.
10. In the event of information reaching one of His Majesty's
Principal Secretaries of State that British merchant ships
which cleared from their last port before the declaration of
war, but are met with by the enemy at sea after the outbreak
of hostilities, are allowed to continue their voyage without
interference with either the ship or the cargo, or after capture
are released with or without proceedings for adjudication in
the prize court, or are to be detained during the war or
requisitioned in lieu of condemnation as prize, he shall notify
the Lords Commissioners of the Admiralty accordingly, and
shall publish a notification thereof in the London Gazette,
and in that event, but not otherwise, enemy merchant ships
which cleared from their last port before the declaration of
war, and are captured after the outbreak of hostilities and
brought before the prize courts for adjudication, shall be
released or detained or requisitioned in such cases and upon
such terms as may be directed in the said notification in
the London Gazette.
11. Neutral cargo, other than contraband of war, on board an
enemy merchant ship which is not allowed to depart from a
port to which this order applies, shall be released.
12. In accordance with the provisions of chapter III of the
convention relative to certain restrictions on the exercise of
the right of capture in maritime war, signed at the Hague on
the 18th day of October, 1907, an undertaking must, whether
the merchant ship is allowed to depart or not, be given in
writing by each of the officers and members of the crew of
such vessel, who is of enemy nationality, that he will not,
after the conclusion of the voyage for which the pass is
issued, engage while hostilities last in any service connected
with the operation of the war. If any such officer is of neutral
nationality, an undertaking must be given in writing that he
will not serve, after the conclusion of the voyage for which
the pass is issued, on any enemy ship while hostilities last.
No undertaking is to be required from members of the crew
who are of neutral nationality.
Officers or members of the crew declining to give the
undertaking required by this article will be detained as
prisoners of war.
And the Lords Commissioners of His Majesty's Treasury, the
Lords Commissioners of the Admiralty, and each of His
Majesty's Principal Secretaries of State, and all governors,
officers, and authorities whom it may concern are to give the
necessary directions herein as to them may respectfully
appertain.
NOTE. — The standard local time corresponding with the
Greenwich mean time mentioned in article 3 of the above
order in council as 8 a. m. on Saturday, the 15th day of
August, 1914.
The Decree of the President of France relating to German
vessels in French ports at the outbreak of war is as follows:
DECREE.
ARTICLE 1. German commercial vessels which are now or
have been in French ports since and including the 3d of
August, 1914, from 18.45 o'clock, or which enter the same
unaware of the outbreak of hostilities, shall be accorded,
from the date of the present decree, a delay of seven full
days within which to freely leave said ports and, after
providing themselves with a safe-conduct gain their port of
destination, or such other port as may be designated by the
naval authorities of the French port where they are, by some
direct route.
In consequence of the reservation made by the German
Government in articles 3 and 4, subarticle 2, of the Sixth
Hague Convention of 1907, the benefit of the foregoing
provisions does not apply to German vessels that left their
last port of departure prior to August 3d, at 18.45 o'clock,
and which, unaware of the outbreak of hostilities, are
encountered on the high seas.
ART. 2. All vessels of which the construction, armament, or
appearance indicate that they are susceptible of being
Page 24 of 47
transformed into vessels of war or of being utilized for some
public service, shall not benefit by the provisions of article 1.
In case such vessels are employed in the carriage of mails,
the Department of Posts shall see that all the mail bags and
parcels on board said boats shall be forwarded by the most
expeditious rout.
ART. 3. The Minister of Foreign Affairs, of the Navy, of Public
Works, of Commerce, of Posts and Telegraphs, and of the
Colonies, are hereby charged with the duty of carrying out
the provisions of the present decree.
Done in Paris, this 4th day of August, 1914.
(Sgd.) R. Poincare, President of the Republic. Gaston
Doumergue, Minister of Foreign Affairs. Victor Augagneur,
Minister of the Navy. Rene Renoult, Minister of Public Works.
Gaston Thomson, Minister of Commerce, Posts and
Telegraphs. Maurice Raynaud, Minister of the Colonies.
A critical examination of the terms of the convention itself,
having in mind the discussion which preceded its adoption,
satisfies us that at the outbreak of the present war, there was
no such general recognition of the duty of a belligerent to
grant "days of grace" and "safe-conducts" to enemy ships in
his harbors, as would sustain a ruling that such alleged duty
was prescribed by any imperative and well settled rule of
public international law, of such binding force that it was the
duty of the master of the Sambia to rely confidently upon a
compliance with its terms by the French authorities in
Saigon; and it seems clear from a reading of the British order
in council issued at the outbreak of the war, with its
limitations, restrictions, and conditions imposed upon the
exercise of the privileges secured therein, that while that
nation recognized the advantages to be anticipated from the
reciprocal adherence by all the belligerents to the practice in
that regard which had been developed in recent years, in a
more or less modified from, the order in council was not
published in response to any imperative rule of public
international law to which that nation felt itself bound to
subscribe.
We have not overlooked the fact that President McKinley's
proclamation of April 26, 1898, providing for the immunity of
Spanish vessels in American ports at the outbreak of the
Spanish-American War, recited in its preamble that it was
issued in "harmony with the present views of nations, and
sanctioned by their recent practice;" nor have we forgotten
that the Supreme Court of the United States in the case
of The Buena Ventura (175 U. S., 384; 44 Law. Ed., 206), which
was decided at the October term, 1899, indicated that this
proclamation was but a formal recognition of an established
practice of nations, which had been recognized as early as
the Crimean War by England, France and Russia. But the very
fact that there was so substantial a divergence of views
among the conferees representing their respective
governments at the second Hague Conference in 1907, with
regard to the existence and binding character of such a duty
under accepted rules of International Law, as to make it
impossible for the conferees to agree upon a convention
setting forth anything beyond "a pious wish" in the premises,
quite conclusively demonstrates that, thereafter, at least,
adherence to the practice by any belligerent could not be
demanded by virtue of any convention, tacit or express,
universally recognized by the members of the society of
nations; and that it may be expected only when the
belligerent is convinced that the demand for adherence to
the practice inspired by his own commercial and political
interests outweighs any advantage he can hope to gain by a
refusal to recognize the practice as binding upon him.
Professor Lawrence, an English authority, discussing the
practice in 1904 said:
"Certainly it will be wise for British shipowners to read the
signs of the times, and not calculate upon a continuance in
future of the indulgences which have been accorded in
recent years. . . ." And Professor Higgins, another English
authority, observed that "each state will determine for itself
whether the desire to injure its enemy . . . will prevail over the
fear of offending neutrals by causing a great dislocation in
trade, in which some of them are sure to be interested."
That the practice has been by no means uniform, and that
the tendency in recent years has been to limit, restrict and in
some cases, apparently, to disregard it altogether will appear
from a very summary review of its historical development. In
the Crimean War(1854), England and France gave Russian
vessels six weeks for loading and departure. In the Prussian-
Austrian War of 1866, six weeks were allowed. In the war of
1870 France granted a leave of thirty days. In the Spanish-
American War (1898), Spain allowed American ships five
days, and the United States allowed Spanish ships one
month. In the Russo-Japanese War (1904), the Japanese
allowed the Russians one week, but the Russians allowed the
Japanese only two days. As to the present European War our
sources of information are not absolutely authoritative, but it
would appear that the English and Germans detained and
seized each other's merchant vessels, and in some instances
confiscated their cargoes, under circumstances which would
seem to indicate that one belligerent or the other, or both,
had wholly disregarded the pious wish of the sixth Hague
convention. With reference to the other belligerents it is said
that England and Austria-Hungary mutually granted ten days
of grace; Germany and France, seven days; France and
Austria, seven days; but that Great Britain and Turkey, and
Great Britain and Bulgaria made no mutual allowance of
time, and that Italy without granting days of
grace captured all enemy vessels apparently intended for
conversion into vessels of war, and sequestered the rest — a
distinction without any very substantial difference.
We conclude that under the circumstances surrounding the
flight of the Sambia from the port of Saigon, her master had
no such assurances, under any well-settled and universally
accepted rule of public international law, as to the immunity
of his vessel from seizure by the French authorities, as would
justify us in holding that it was his duty to remain in the port
of Saigon in the hope that he would be allowed to sail for
the port of destination designated in the contract of
affreightment with a laissez-passer or safe-conduct which
would secure the safety of his vessel and cargo en route.
It is true that soon after the outbreak of the war, the Republic
of France authorized and directed the grant of safe-conducts
to enemy merchant vessels in its harbors, under certain
reasonable regulations and restrictions; so that it would
appear that had the master of the Sambia awaited the
issuance of such a safe-conduct, he might have been
enabled to comply with the terms of his contract of
affreightment. But until such action had been taken,
the Sambiawas exposed to the risk of seizure in the event
that the French government should decline to conform to
the practice; and in the absence of any assurance in that
regard upon which the master could confidently rely, his duty
to his owner and to his vessel's flag justified him in fleeing
from the danger of seizure in the port of an enemy to the
absolute security of a neutral port.
Discussing the exception of "King's enemies," Carver says:
Page 25 of 47
The next exception, that of "King's enemies," relates to acts
done by states or peoples with which the sovereign may be
at war, at any time during the carriage of the goods. It does
not include robbers on land; but has been said to include
pirates, or robbers on the high seas, as being enemies of all
nations.
The shipowners is bound to be careful to avoid the acts of
such enemies; but where he has been so, he is not liable for
losses occasioned by them. For example, for the destruction
or capture of the goods by enemies' cruisers; or for a delay
where the master has properly put into a neutral port for
safety. The master is justified in putting in, and delaying,
where he has a reasonable apprehension of danger from
capture.
xxx xxx xxx
An express exception of "King's enemies" relates, at least, to
the enemies of the state to which the carrier belongs. (Ang.
Carr. s., 200; Story, Bail. s., 526. But see per Byles, J., in
Russell vs. Niemann, (1864) 34 L. J., C. P. 10, at p. 14; Cf.
Morse vs. Slue [1671] 83 E. R., 453; Sir T. Ray. 220; 1 Vent.
238. The exception "King's enemies," appears to have been
made, originally, because the bailee who had lost the goods
by their acts was without a remedy against them. Southcote's
Case, 4 Co. Rep., 83 b; The Teutonia [1872] 42 L. J. Adm. 57; L.
R., 4 P. C., 171; The San Roman [1872] 42 L. J. Adm. 46; L. R. 5
P. C., 301; Russell vs. Niemann, [1864] 34 L. J., C. P., 10.)
The danger from which the master of the Sambia fled was a
real and not merely an imaginary one as counsel for the
shipper contends. Seizure at the hands of an "enemy of the
King," though not inevitable, was a possible outcome of a
failure to leave the port of Saigon; and we cannot say that
under the conditions existing at the time when the master
elected to flee from that port, there were no grounds for a
"reasonable apprehension of danger" from seizure by the
French authorities, and therefore no necessity for flight. As
was said in the case of Australian Steam Nav. Co. vs. Morse
(L. R., 4 P. C., 222):
The word "necessity," when applied to mercantile affairs,
where the judgment must in the nature of things be
exercised, cannot, of course, mean an irresistible compelling
power. What is meant by it in such cases is the force of
circumstances which determine the course a man ought to
take, Thus, where by the force of circumstances, a man has
the duty cast upon him of taking some action for another,
and under that obligation adopts a course which, to the
judgment of a wise and prudent man, is apparently the best
for the interest of the persons for whom he acts in a given
emergency, it may properly be said of the course so taken
that it was in a mercantile sense necessary to take it.
There can be and there is no question as to the necessity,
arising out of the presence of enemy cruisers on the high
seas which compelled the Sambia, once she had left the port
of Saigon, to take refuge in the port of Manila and to stay
there indefinitely pending the outcome of the war. We
conclude, therefore, that the deviation of the Sambia from
the route prescribed in her charter party, and the subsequent
abandonment by the master of the voyage contemplated in
the contract of affreightment, must be held to have been
justified by the necessity under which he was placed to elect
that course which would remove and preserve the vessel
from danger of seizure by the public enemies of the flag
under which she sailed; and that neither the vessel nor her
owners are liable for the resultant damages suffered by the
owner of the cargo.
Counsel for the cargo owner further contend that even if it
be held that the action of the master of the Sambia in fleeing
to a port of refuge and abandoning the prosecution of the
voyage contemplated in the contract of affreightment, was
justified or excused by the exigencies of war, it was his
imperative duty, nevertheless, to tranship the cargo on a
neutral vessel to one of the ports of destination designated
in the contract.
We do not think that this contention is sustained by the
evidence of record.
Under ordinary circumstances, it may fairly be presumed in
the absence of instructions from a shipper whose goods are
found aboard a vessel lying in a port of refuge, whose master
has been compelled top abandon the attempt to transport
the cargo in his own vessel, that the shipper's interests will
be consulted by forwarding his property to the port
designated by him in the contract of affreightment; it would
appear therefore that, when practicable, the master is bound
to act for the cargo owner in that way; but when the
condition of the cargo is such as to render it inadvisable to
attempt to tranship, or if there is ground to believe that such
will be the case before suitable means of transhipment can
be secured, the duty clearly rests upon the master to make
such other advantageous disposition of the property of the
shippers as circumstances will permit. (The
Niagara vs. Cordes, 62 U. S., 7; Carver's Carriage of Goods by
Sea, 5th ed., pars. 294, 302, 305; Abbott (13th), p. 412;
Shipton vs. Thornton, 9 A. & E., 314, 337; Matthews vs. Gibbs,
30 L. J., Q. B., 55; Cf. Gibbs vs. Grey, 26 L. J., Ex., 286;
Shipton vs. Thornton, 9 A. & E., 314; Cannan vs. Meaburn, 1
Bing., 243; Ang. Carr. s., 187; Cf. The Gratitudine, 3 C. Rob.,
240; The Hamburg, 32 L. J., Ad., 161; 33 L. J., Ad., 116;
Atwood vs. Selar, 3 Q. B. D., 342.)
The cargo of the Sambia being a perishable one, and it
having proved impracticable to secure prompt instructions
from the shipper, the master was confronted with the
necessity of electing the course he should pursue, to protect
the interests of the shipper whose property has been
intrusted to him under a contract of affreightment which he
found himself unable to execute upon his own vessel. He
elected, after taking the advice of a competent marine
surveyor, to sell the entire cargo under judicial authority, and
to that end followed substantially the proceedings prescribe
in such cases in section II, chapter III of the Commercial
Code; and we are of opinion that not only is there nothing in
the record which would sustain a finding that in so doing he
failed to exercise a sound discretion in the performance of
the duty resting upon him to protect the interests of the
cargo owner, but that on the whole record it affirmatively
appears that this was the only course open to him under all
the circumstances existing at the time when he adopted it.
No direct evidence appears to have been submitted by either
party as to whether it would have been practicable to secure
a suitable vessel upon which to tranship the cargo. This may
have been, and doubtless was, because the impracticability
of an attempt to tranship was tacitly conceded in the court
below. But however this may be, it is clear that the record will
not sustain an affirmative finding that it was the duty of the
master of the Sambia to tranship his cargo rather than to sell
it in the port of Manila. On the contrary, we think it
sufficiently appears that in adopting the latter course he
acted discreetly, prudently and with due regard for the
interests of the cargo owner.
Our conclusions in this regard are deprived from
considerations based upon the evidence of record, the
admissions of counsel in argument, and matters of general
knowledge of which we are authorized to take judicial notice.
Page 26 of 47
On account of the unavoidable lack of ventilation while
the Sambia lay at anchor beneath the rays of a tropical sun,
her perishable cargo of rice and ricemeal began to heat soon
after she put into Manila Bay, a part of the cargo being
rendered absolutely worthless by heating and through the
inroads of weevils so that it had to be thrown overboard.
Exhibit B which set out in full in the plaintiff's brief is a
certificate dated the 7th of September, 1914, prepared by a
marine surveyor, who having been called upon to examine
the cargo aboard the Sambia, reported that it "showed signs
of heating and of being infested with weevils" and
recommended, "in the interests of all concerned, that it be
discharged and disposed of as soon as possible" and that it
"be sold by 'private treaty' in preference to 'sale by auction,'
owing to conditions in the local market."
The risks of heavy and perhaps total loss, incident to an
attempt to tranship this perishable cargo, were greatly
augmented by the possibility, and indeed the probability that
any vessel used for this purpose would be exposed to
unusual and protracted delays, as a result of the abnormal
conditions prevailing in the shipping trade after the outbreak
of the war, of which we think we may properly take judicial
notice.
And finally, it is a matter of common knowledge in this
jurisdiction that rice is not exported to Europe from the
Philippine Islands, and that freight vessels suitable for the
transportation of rice to Europe in bulk do not make a
practice of lying in Manila Bay, unless previous arrangements
have been made for their coming here under charter; so that
in the absence of any evidence to the contrary, we are
satisfied that if the master of a German vessel, lying in Manila
Bay soon after the outbreak of the war, could, by any
possibility, have secured the services of such a vessel, he
could not reasonably have hoped to do so without the
expenditure of considerable time in the effort.
It has been suggested that the danger of loss and damage to
this perishable cargo might have been averted had it been
transhipped immediately upon the arrival of the Sambia in
Manila Bay and before it began to heat at deteriorate in the
hold of that vessel.
But aside from any question as to the impracticability of
securing a suitable vessel for that purpose immediately after
the arrival of the Sambia in Manila Bay, it must not be
forgotten that the act of the "King's enemy" which justified
and excused her flight from Saigon, necessitated, and
therefore justified and excused the retention of the cargo
aboard the vessel by the master for such time as might be
reasonably necessary to ascertain the facts upon which he
could intelligently decide upon the proper course to be
pursued thereafter; and that the deterioration of the cargo
set in as soon as the vessel came to anchor and adequate
ventilation could not longer be provided. It follows that the
question which confronted him when the time had arrived
for the making of his decision as to the disposition which
should be made of the cargo aboard his vessel was whether
the interests of the shipper would be consulted by the
transhipment of a perishable cargo of ricemeal that had
already begun to heat and to deteriorate, or by its sale on
the local market for the best price he could get — and we
are of opinion that it sufficiently appears that under all the
circumstances his duty was to sell rather than to tranship.
Counsel for the cargo owners further contend that the
shipowner should be held responsible, at all events, for the
deterioration in the value of the cargo, incident to its
detention on board the vessel from the date of its arrival in
Manila until it was sold.
But it is clear that the master could not be required to act on
the very day of his arrival; or before he had a reasonable
opportunity to ascertain whether he could hope to carry out
his contract and earn his freight; and that he should not be
held responsible for a reasonable delay incident to an effort
to ascertain the wishes of the freighter, and upon failure to
secure prompt advices, to decide for himself as to the course
which he should adopt to secure the interests of the absent
owner of the property aboard his vessel.
The master is entitled to delay for such a period as may, be
reasonable under the circumstance, before deciding on the
course he will adopt. He may claim a fair opportunity of
carrying out the contract, and earning the freight, whether by
repairing or transhipping. Should the repair of the ship be
undertaken, it must be proceeded with diligently; and if so
done, the freighter will have not ground of complaint,
although the consequent delay be a long one, unless,
indeed, the cargo is perishable, and likely to be injured by
the delay. Where that is the case, it ought to be forwarded,
or sold, or given up, as the case may be, without waiting for
repairs. (See Carver's Carriage by Sea, 5th ed., sec. 309.)
A shipowner, or shipmaster (if communication with the
shipowner is impossible), will be allowed a reasonable time in
which to decide what course he will adopt in such cases as
those under discussion; time must be allowed to him to
ascertain the facts, and to balance the conflicting interests
involved, of shipowner, cargo owner, underwriters on ship,
cargo and freight. But once that time has elapsed, he is
bound to act prompty according as he has elected either to
repair, or abandon the voyage, or tranship. If he delays, and
owing to that delay a perishable cargo suffers damage, the
shipowners will be liable for that damage; he cannot escape
that obligation by pleading the absence of definite
instructions from the owners of the cargo or their
underwriters, since he has control of the cargo and is entitled
to elect. (Idem, sec. 304.a)
The other condition of the master's authority to sell is that
the owners of the cargo must have been communicated with
and their instructions taken before selling, if practicable.
Whether that was so must be judged having regard to all the
circumstances of the particular case. The master is not to
delay for instructions where delay would be clearly
imprudent. But if there is a fair expectation of obtaining
directions, either from the owners of the goods, or from
agents known by the master to have authority to deal with
the goods, within such a time as would not be imprudent,
the master must make ever reasonable endeavor to get
those directions; and his authority to sell does not arise until
he has failed to get them.
Should the master fail to seek for instructions when he might
get them, or should he act against the instructions he
receives, any sale or hypothecation of the cargo he may
make under those circumstances is wrongful and void. (Idem,
sec. 299.)
It appears that two cablegrams were dispatched by the local
agent of the shipowner and of the master, to the duly
authorized representative of the cargo owners in Saigon, one
on the very day of the arrival of the Sambia in Manila Bay.
(August 8, 1914) and other a week later, advising him of the
situation; that these cables were not delivered presumably
because of the interruption of cable communications
following the outbreak of war; that later, two letters were
forwarded but remained unanswered until after the master
had sought and secured judicial authority to sell the cargo —
the answer when it was received being a flat refusal on the
part of the Saigon representative of the cargo owners to give
Page 27 of 47
any instructions or assume any responsibility; that on
September 4, 1914, the master of the Sambiahad a survey
made of the cargo, by a qualified marine surveyor, who
reported that it "showed signs of heating and being infested
with weevils," and recommended that it be sold "in the
interests of all concerned;" that a copy of the marine
surveyor's report was immediately mailed to the Saigon
representative of the cargo owners; that on September 10,
1914, the master, not having been able to get into
communication with the cargo owners or their representative
in Saigon, sought and secured judicial authority to sell the
cargo; and that it was sold under judicial authority granted in
accordance with the provisions of local law made and
provided in such cases.
It will be seen that thirty-three days elapsed from the date of
the arrival of the Sambia in Manila Bay, to the date of the
master's application for judicial authority to sell the cargo.
But having in mind the extraordinary and exceptional
conditions existing at that time as a result of the war, with its
interruptions of mail and cable communications, its
disruption of the markets throughout the world, its
development of questions as to whether food supplies
should or should not be declared contraband, and its
threatening aspects with relation to shipping and commercial
enterprises of all kinds throughout the world, we are unable
to say that the master devoted an unreasonable length of
time to the determination of the problem of the disposition
of the cargo with which he was confronted after his arrival in
Manila Bay. On the contrary, we are of opinion that he
proceeded with all reasonably dispatch, and did all that could
be required of a prudent man to protect the interests of the
owner of the cargo aboard his vessel; so that any losses
which resulted from the detention of the cargo aboard
the Sambia must be attributed to the act of the "enemies of
the king," which compelled the Sambia to flee to a port of
refuge, and made necessary the retention of the cargo
aboard the vessel at anchor under a tropical sun, and without
proper ventilation, until it could be ascertained that the
interests of the absent owner would be consulted by the sale
of this perishable cargo in the local market.
We come now to consider the various contentions of counsel
for the shipowner denying the right of the owners of the
cargo to a judgment for al, or some specified part, of the
proceeds of the sale of the rice.
The contention that the court below was without jurisdiction
of the subject-matter by reason of the provision in the
charter party for the settlement of disputes by a reference to
arbitration in London, may be disposed of without extended
discussion. This objection to the jurisdiction of the court
appears for the first time in defendant's brief on appeal. In
the court below defendant not only appeared and answered
without objecting to the court's jurisdiction, but sought
affirmative relief; and it is very clear that defendant cannot
be permitted to submit the issues raised by the pleadings for
adjudication, without objection, and then, when unsuccessful,
assail the court's jurisdiction in reliance upon a stipulation in
the charter party which the parties were at entire liberty to
waive if they so desired. We do not stop therefore to rule
upon the contention of opposing counsel, that a contractual
stipulation, for a general arbitration cannot be invoked to
oust our courts of their jurisdiction, under the doctrine
announced in the cases of Wahl and Wahl vs. Donaldson,
Sims & Co. (2 Phil. Rep., 301, 303), and Cordoba vs. Conde (2
Phil. Rep., 445, 447); and that this doctrine should be applied
in the case at bar, notwithstanding the fact that the contract
was executed in England, in the absence of averment and
proof that under the law of England compliance with, or an
offer to comply with such a stipulation constitutes a
condition precedent to the institution of judicial proceeding
for the enforcement of the contract.
The claim advanced on behalf of the shipowner for freights is
wholly without merit. Under the terms of the contract of
affreightment, the amount of the freight was made payable
on delivery of the cargo at the designated port of
destination. It is clear then, that under the terms of that
instrument freight never became payable. Carrying the cargo
from Saigon to Manila was not even a partial performance of
a contract to carry it from Saigon to Europe; and even it if
could be treated as such, the shipowner would have no claim
for freight, in the absence of any agreement, express or
implied, to make payment for a partial performance of the
contract.
The citation from Carver (section 307) referred to in the
decision of the trial court is as follows:
Should the master relinquish the attempt either to carry on
the goods in his own ship or to send them to their
destination in another ship, he will thereby wholly abandon
any claim for freight in respect to them, unless it has been
made payable in advance, or irrespective of delivery. Where
freight is only payable on delivery, no part is earned until it is
earned completely. So that whether the abandonment of the
voyage be due to inability, or prevention of the ship, or to
the necessity of selling the goods, either to raise funds for
the ship's repairs or their owner's interest, the shipowner
loses the whole freight.
On the other hand, if the cargo be accepted at the port of
refuge under an agreement that delivery there shall be
treated as a performance by the shipowner of his contract; or
if the owner of the goods, by any act or default, prevents the
shipowner from carrying them on to their destination, the
whole of the freight becomes at once payable.
Also sometimes the shipowner becomes entitled, by
agreement, on delivery at a port of refuge, to freight in
proportion to the part of the voyage which has been
accomplished. This subject will be discussed more fully
hereafter. Here it is enough to say that no agreement of this
kind can arise, by implication, unless the cargo owner has
consented to accept the goods under circumstances which
left him an option to have them carried on to their
destination by the shipowner, in his own or some other
vessel.
Where the vessel has been abandoned at sea by the master
and crew, without any intention of returning to her, the
freighter is entitled to treat the contract as abandoned; so
that if she be brought into port by salvors, he may claim the
goods without becoming liable to pay freight.
In The Cito, the Court of Appeal decided that the ship owner
had no claim for freight after the abandonment; but declined
to say that that put an end to the contract of affreightment.
By the abandonment the shipowners gave the cargo owners
a right to elect to treat the contract as at and end. "We do
not decided what would have been the result if, after the
ship had been brought in as it was by the salvors, and before
the cargo owners had come ion and excercised their right to
the cargo, the shipowners had given bail for the ship and
cargo, and had carried the cargo on."
The claim of the shipowner for general average cannot be
sustained under the provisions of the York-Antwerp Rules of
1890, by reference to which, it was expressly stipulated in the
charter party, all such questions should be settled, Rules X
and XI, which treat of "Expenses at Port of Refuge, etc.," and
Page 28 of 47
"Wages and Maintenance of Crew in Port of Refuge, etc.,"
provide for general average "When a ship shall have entered
a port or place of refuge, or shall have returned to her port
or place of loading, in consequence of accident, sacrifice, or
other extraordinary circumstances which render that
necessary for the common safety . . .;" and an examination of
the entire body of these rules discloses that general average
is never allowed thereunder unless the loss or damage
sought to be made good as general average has been
incurred for the "common safety." It is very clear that in
fleeing from the port of Saigon and taking refuge in Manila
Bay the master of the Sambia was not acting for the common
safety of the vessel and her cargo. The French cargo was
absolutely secure from danger of seizure or confiscation so
long as it remained in the port of Saigon, and there can be
no question that the flight of the Sambia was a measure of
precaution adopted solely and exclusively for the
preservation of the vessel from danger of seizure or capture.
Rule 18 of the York-Antwerp Rules is as follows:
Except as provided in the foregoing rules, the adjustment
shall be drawn up in accordance with the law and practice
that would have governed the adjustment had the contract
of affreightment not contained the clause to pay general
average according to these rules.
If then, any doubt could properly arise as to the meaning and
effect of the words "common safety" as used in this body of
rules, we would be justified in resolving it in accordance with
settled principles of maritime law; and an examination of the
authorities discloses a substantial unanimity of opinion as to
the general doctrine which provides that claims for
contribution in general average must be supported by proof
that sacrifices on account of which such claims are submitted
were made to avert a common imminent peril, and that
extraordinary expenses for which reimbursement is sought,
were incurred for the joint benefit of ship and cargo.
The doctrine is discussed at length in numerous decisions of
the Supreme Court of the United States, a number of which
are cited in the court below, but for our purposes it will be
sufficient to insert here a few extracts from two of the
leading cases.
In the cases of The Star of Hope vs. Annan (76 U. S., 203),
Justice Clifford, speaking for the court said:
Such claims have their foundation in equity, and rest upon
the doctrine that whatever is sacrificed for the common
benefit of the associated interests shall be made good by all
the interests which are exposed to the common peril and
which were saved from the common danger by the sacrifice.
Much is deferred in such an emergency to the judgment and
decision of the master; but the authorities, everywhere, agree
that three things must concur in order to constitute a valid
claim for general average contribution: First, there must be a
common danger to which the ship, cargo and crew were all
exposed, and that danger must be imminent and apparently
inevitable, except by incurring a loss of a portion of the
associated interests to save the remainder. Second, there
must be the voluntary sacrifice of a part for the benefit of the
whole, as, for example, a voluntary jettison or casting away of
some portion of the associated interests for the purpose of
avoiding the common peril, or a voluntary transfer of the
common peril from the whole to a particular portion of those
interests. Third, the attempt so made to avoid the common
peril to which all those interests were exposed must be to
some practical extent successful, for if nothing is saved there
cannot be any such contribution in any case.
(Barnard vs. Adams, 10 How., 303; Patten vs. Darling, 1 Cliff.,
262; Pars. Ins., 278.)
In the case of Ralli vs. Troop (157 U. S., 418), Justice Gray,
delivering the opinion for the court said:
The result of the principles above stated, confirmed by the
authorities above referred to, may be summed up as follows:
The law of general average is part of the maritime law, and
not of the municipal law, and applies to maritime adventures
only.
To constitute a general average loss, there must be a
voluntary sacrifice of part of the maritime adventure, for the
purpose, and with the effect of saving the other parts of the
adventure from an imminent peril impending over the whole.
The interests so saved must be the sole object of the
sacrifice, and those interests only can be required to
contribute to the loss. The safety of property not included in
the common adventure can neither be an object of the
sacrifice, nor a ground of contribution.
In the opinion just cited there will be found a general
historical review of the authorities upon which the foregoing
conclusions were avowedly based, and we think we may
properly close our discussion of this branch of the case at
bar, with the following extracts therefrom:
In the earliest case in this court, Mr. Justice Story, delivering
judgment, stated the leading limitations and contributions,
and recognized by all maritime nations, to justify a general
contribution, as follows: "First, that the ship and cargo should
be placed in a common imminent peril; secondly, that there
should be a voluntary sacrifice of property to avert that peril;
and, thirdly, that by the sacrifice the safety of the other
property should be presently and successfully attained."
Columbian Ins. Co. of Alexandria vs. Ashby and Stribling, 38
U. S., 330; 13 Pet., 331, 338 (10: 186, 190).
In the next case which came before this court, Mr. Justice
Grier, in delivering judgment defined these requisites,
somewhat more fully, as follows: "In order to constitute a
case of general average, three things must occur: 1st. a
common danger, a danger in which ship, cargo and crew all
participate; a danger imminent and apparently inevitable,
except by voluntary incurring the loss of a portion of the
whole to save the remainder. 2. There must be a voluntary
jettison, jactus, or casting away of some portion of the joint
concern for the purpose of avoiding this imminent
peril, periculi imminentis evitandi causa, or, in other words, a
transfer of the peril from the whole to a particular portion of
the whole. 3. This attempt to avoid the imminent peril must
be successful."
xxx xxx xxx
Mr. Justice Shee, in a note to Abbott on Shipping, after
reviewing the statements of many continental writers upon
the subject, concludes: "Upon the whole, it is impossible,
consistently with the opinion of Lord Tenterden, and with the
doctrine of all the writers on maritime law, whose opinions
have not been warped by the exceptional legislation or
practice of the countries in which they have written, to
recognize a rule respecting ship's expenses more
comprehensive than the following one: Expenses voluntarily
and successfully incurred, or the necessary consequences of
resolutions voluntarily and successfully taken, by a person in
charge of a sea adventure, for the safety of life, ship and
cargo, under the pressure of a danger of total loss or
destruction imminent and common to them, give, the ship
Page 29 of 47
being saved, a claim to general average contribution."
(Abbott on Shipping 11th ed., 537, note.) In Harrison vs. Bank
of Australasia, L. R. 7 Exch., 39, 48, that statement was quoted
as laying down the true rule, although there was a difference
of opinion as to whether the facts of the case came within it.
(See also Robinson vs. Price, L. R. 2, Q. B. Div., 91, 04, 295.)
10. What if there is contributory negligence on the
part of the shipper/owner/plaintiff?
-Art 1741, 1742
IRON BULK SHIPPING PHILIPPINES, CO., LTD., petitioner, vs.
REMINGTON INDUSTRIAL SALES
CORPORATION, respondent. G.R. No. 136960 December 8,
2003
Even granting, for the sake of argument, that the subject
cargo was already in a damaged condition at the time it was
accepted for transportation, the carrier is not relieved from
its responsibility to exercise due care in handling the
merchandise and in employing the necessary precautions to
prevent the cargo from further deteriorating. It is settled that
the extraordinary diligence in the vigilance over the goods
tendered for shipment requires the common carrier to know
and to follow the required precaution for avoiding damage
to, or destruction of the goods entrusted to it for safe
carriage and delivery.15 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.16 Under Article 1742 of the Civil Code, even if
the loss, destruction, or deterioration of the goods should be
caused, among others, by the character of the goods, the
common carrier must exercise due diligence to forestall or
lessen the loss. This extraordinary responsibility lasts from
the time the goods are unconditionally placed in the
possession of, and received by the carrier for transportation
until the same are delivered, actually or constructively, by the
carrier to the consignee, or to the person who has a right to
receive them.17 In the instant case, if the carrier indeed found
the steel sheets to have been covered by rust at the time that
it accepted the same for transportation, such finding should
have prompted it to apply additional safety measures to
make sure that the cargo is protected from corrosion. This,
the carrier failed to do.
Article 1734 of the Civil Code states that:
Common carriers are responsible for the loss, destruction or
deterioration of the goods, unless the same is due to any of
the following causes only:
(1) Flood, storm, earthquake, lightning, or other
natural disaster or calamity;
(2) Act of the public enemy in war, whether
international or civil;
(3) Act or omission of the shipper or owner of the
goods;
(4) The character of the goods or defects in the
packing or in the containers;
(5) Order or act of competent public authority.
Except in the cases mentioned under Article 1734, if the
goods are lost, destroyed or deteriorated, common carriers
are presumed to have been at fault or to have acted
negligently, unless they prove that they observed
extraordinary diligence as required under the law.18 The Court
of Appeals did not err in finding that no competent evidence
was presented to prove that the deterioration of the subject
cargo was brought about by any of the causes enumerated
under the aforequoted Article 1734 of the said Code. We
likewise agree with appellate court’s finding that the carrier
failed to present proof that it exercised extraordinary
diligence in its vigilance over the goods. The presumption
that the carrier was at fault or that it acted negligently was
not overcome by any countervailing evidence.
-AF Sanchez v. CA, supra
11. Requisites to relieve a common carrier from
liability from an Order or act of competent
authority.
MAURO GANZON, petitioner, vs. COURT OF APPEALS and
GELACIO E. TUMAMBING, respondents. G.R. No. L-48757
May 30, 1988
The petitioner, in his first assignment of error, insists that the
scrap iron had not been unconditionally placed under his
custody and control to make him liable. However, he
completely agrees with the respondent Court's finding that
on December 1, 1956, the private respondent delivered the
scraps to Captain Filomeno Niza for loading in the lighter
"Batman," That the petitioner, thru his employees, actually
received the scraps is freely admitted. Significantly, there is
not the slightest allegation or showing of any condition,
qualification, or restriction accompanying the delivery by the
private respondent-shipper of the scraps, or the receipt of
the same by the petitioner. On the contrary, soon after the
scraps were delivered to, and received by the petitioner-
common carrier, loading was commenced.
By the said act of delivery, the scraps were unconditionally
placed in the possession and control of the common carrier,
and upon their receipt by the carrier for transportation, the
contract of carriage was deemed perfected. Consequently,
the petitioner-carrier's extraordinary responsibility for the
loss, destruction or deterioration of the goods commenced.
Pursuant to Art. 1736, such extraordinary responsibility
would cease only upon the delivery, actual or constructive,
by the carrier to the consignee, or to the person who has a
right to receive them. 5 The fact that part of the shipment
had not been loaded on board the lighter did not impair the
said contract of transportation as the goods remained in the
custody and control of the carrier, albeit still unloaded.
The petitioner has failed to show that the loss of the scraps
was due to any of the following causes enumerated in Article
1734 of the Civil Code, namely:
(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.
Hence, the petitioner is presumed to have been at fault or to
have acted negligently. 6 By reason of this presumption, the
court is not even required to make an express finding of fault
Page 30 of 47
or negligence before it could hold the petitioner answerable
for the breach of the contract of carriage. Still, the petitioner
could have been exempted from any liability had he been
able to prove that he observed extraordinary diligence in the
vigilance over the goods in his custody, according to all the
circumstances of the case, or that the loss was due to an
unforeseen event or to force majeure. As it was, there was
hardly any attempt on the part of the petitioner to prove that
he exercised such extraordinary diligence.
It is in the second and third assignments of error where the
petitioner maintains that he is exempt from any liability
because the loss of the scraps was due mainly to the
intervention of the municipal officials of Mariveles which
constitutes a caso fortuito as defined in Article 1174 of the
Civil Code. 7
We cannot sustain the theory of caso fortuito. In the courts
below, the petitioner's defense was that the loss of the
scraps was due to an "order or act of competent public
authority," and this contention was correctly passed upon by
the Court of Appeals which ruled that:
... In the second place, before the appellee Ganzon could be
absolved from responsibility on the ground that he was
ordered by competent public authority to unload the scrap
iron, it must be shown that Acting Mayor Basilio Rub had the
power to issue the disputed order, or that it was lawful, or
that it was issued under legal process of authority. The
appellee failed to establish this. Indeed, no authority or
power of the acting mayor to issue such an order was given
in evidence. Neither has it been shown that the cargo of
scrap iron belonged to the Municipality of Mariveles. What
we have in the record is the stipulation of the parties that the
cargo of scrap iron was accilmillated by the appellant
through separate purchases here and there from private
individuals (Record on Appeal, pp. 38-39). The fact remains
that the order given by the acting mayor to dump the scrap
iron into the sea was part of the pressure applied by Mayor
Jose Advincula to shakedown the appellant for P5,000.00.
The order of the acting mayor did not constitute valid
authority for appellee Mauro Ganzon and his representatives
to carry out.
Now the petitioner is changing his theory to caso fortuito.
Such a change of theory on appeal we cannot, however,
allow. In any case, the intervention of the municipal officials
was not In any case, of a character that would render
impossible the fulfillment by the carrier of its obligation. The
petitioner was not duty bound to obey the illegal order to
dump into the sea the scrap iron. Moreover, there is absence
of sufficient proof that the issuance of the same order was
attended with such force or intimidation as to completely
overpower the will of the petitioner's employees. The mere
difficulty in the fullfilment of the obligation is not
considered force majeure. We agree with the private
respondent that the scraps could have been properly
unloaded at the shore or at the NASSCO compound, so that
after the dispute with the local officials concerned was
settled, the scraps could then be delivered in accordance
with the contract of carriage.
There is no incompatibility between the Civil Code provisions
on common carriers and Articles 361 8 and 362 9 of the Code
of Commerce which were the basis for this Court's ruling in
Government of the Philippine Islands vs. Ynchausti & Co.10
and which the petitioner invokes in tills petition. For Art.
1735 of the Civil Code, conversely stated, means that the
shipper will suffer the losses and deterioration arising from
the causes enumerated in Art. 1734; and in these instances,
the burden of proving that damages were caused by the
fault or negligence of the carrier rests upon him. However,
the carrier must first establish that the loss or deterioration
was occasioned by one of the excepted causes or was due to
an unforeseen event or to force majeure. Be that as it may,
insofar as Art. 362 appears to require of the carrier only
ordinary diligence, the same is .deemed to have been
modified by Art. 1733 of the Civil Code.
12. Duration of Liability
a. PHILIPPINES FIRST INSURANCE CO.,
INC., Petitioner, vs. WALLEM PHILS. SHIPPING,
INC., UNKNOWN OWNER AND/OR UNKNOWN
CHARTERER OF THE VESSEL M/S "OFFSHORE
MASTER" AND "SHANGHAI FAREAST SHIP
BUSINESS COMPANY," Respondents. G.R. No.
165647 March 26, 2009
It is undisputed that the shipment was damaged prior to its
receipt by the insured consignee. The damage to the
shipment was documented by the turn-over survey23 and
Request for Bad Order Survey.24 The turn-over survey, in
particular, expressly stipulates that 2,426 bags of the
shipment were received by the arrastre operator in damaged
condition. With these documents, petitioner insists that the
shipment incurred damage or losses while still in the care
and responsibility of Wallem and before it was turned over
and delivered to the arrastre operator.
The trial court, however, found through the testimony of Mr.
Maximino Velasquez Talens, a cargo surveyor of Oceanica
Cargo Marine Surveyors Corporation, that the losses and
damage to the cargo were caused by the mishandling of the
arrastre operator. Specifically, that the torn cargo bags
resulted from the use of steel hooks/spikes in piling the
cargo bags to the pallet board and in pushing the bags by
the stevedores of the arrastre operator to the tug boats then
to the ports.25 The appellate court affirmed the finding of
mishandling in the discharge of cargo and it served as its
basis for exculpating respondents from liability, rationalizing
that with the fault of the arrastre operator in the unloading
of the cargo established it should bear sole liability for the
cost of the damaged/lost cargo.
While it is established that damage or losses were incurred
by the shipment during the unloading, it is disputed who
should be liable for the damage incurred at that point of
transport. To address this issue, the pertinent laws and
jurisprudence are examined.
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 transported by
them.26 Subject to certain exceptions enumerated under
Article 173427 of the Civil Code, common carriers are
responsible for the loss, destruction, or deterioration of the
goods. 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.28
For marine vessels, Article 619 of the Code of Commerce
provides that the ship captain is liable for the cargo from the
time it is turned over to him at the dock or afloat alongside
the vessel at the port of loading, until he delivers it on the
shore or on the discharging wharf at the port of unloading,
unless agreed otherwise. In Standard Oil Co. of New York v.
Lopez Castelo,29 the Court interpreted the ship captain’s
liability as ultimately that of the shipowner by regarding the
captain as the representative of the ship owner.
Page 31 of 47
Lastly, Section 2 of the COGSA provides that under every
contract of carriage of goods by sea, the carrier in relation to
the loading, handling, stowage, carriage, custody, care, and
discharge of such goods, shall be subject to the
responsibilities and liabilities and entitled to the rights and
immunities set forth in the Act.30 Section 3 (2) thereof then
states that among the carriers’ responsibilities are to properly
and carefully load, handle, stow, carry, keep, care for, and
discharge the goods carried.
The above doctrines are in fact expressly incorporated in the
bill of lading between the shipper Shanghai Fareast Business
Co., and the consignee, to wit:
4. PERIOD OF RESPONSIBILITY. The responsibility of the
carrier shall commence from the time when the goods are
loaded on board the vessel and shall cease when they are
discharged from the vessel.
The Carrier shall not be liable of loss of or damage to the
goods before loading and after discharging from the vessel,
howsoever such loss or damage arises.31
On the other hand, the functions of an arrastre operator
involve the handling of cargo deposited on the wharf or
between the establishment of the consignee or shipper and
the ship's tackle.32 Being the custodian of the goods
discharged from a vessel, an arrastre operator's duty is to
take good care of the goods and to turn them over to the
party entitled to their possession.33
Handling cargo is mainly the arrastre operator's principal
work so its drivers/operators or employees should observe
the standards and measures necessary to prevent losses and
damage to shipments under its custody.34
In Fireman’s Fund Insurance Co. v. Metro Port Service,
Inc.35 the Court explained the relationship and responsibility
of an arrastre operator to a consignee of a cargo, to quote:
The legal relationship between the consignee and the
arrastre operator is akin to that of a depositor and
warehouseman. The relationship between the consignee and
the common carrier is similar to that of the consignee and
the arrastre operator. Since it is the duty of the ARRASTRE to
take good care of the goods that are in its custody and to
deliver them in good condition to the consignee, such
responsibility also devolves upon the CARRIER. Both the
ARRASTRE and the CARRIER are therefore charged with and
obligated to deliver the goods in good condition to the
consignee.(Emphasis supplied) (Citations omitted)
The liability of the arrastre operator was reiterated in Eastern
Shipping Lines, Inc. v. Court of Appeals36 with the clarification
that the arrastre operator and the carrier are not always and
necessarily solidarily liable as the facts of a case may vary the
rule.
Thus, in this case the appellate court is correct insofar as it
ruled that an arrastre operator and a carrier may not be held
solidarily liable at all times. But the precise question is which
entity had custody of the shipment during its unloading from
the vessel?
The aforementioned Section 3(2) of the COGSA states that
among the carriers’ responsibilities are to properly and
carefully load, care for and discharge the goods carried. The
bill of lading covering the subject shipment likewise
stipulates that the carrier’s liability for loss or damage to the
goods ceases after its discharge from the vessel. Article 619
of the Code of Commerce holds a ship captain liable for the
cargo from the time it is turned over to him until its delivery
at the port of unloading.
In a case decided by a U.S. Circuit Court, Nichimen Company
v. M./V. Farland,37 it was ruled that like the duty of
seaworthiness, the duty of care of the cargo is non-
delegable,38 and the carrier is accordingly responsible for the
acts of the master, the crew, the stevedore, and his other
agents. It has also been held that it is ordinarily the duty of
the master of a vessel to unload the cargo and place it in
readiness for delivery to the consignee, and there is an
implied obligation that this shall be accomplished with sound
machinery, competent hands, and in such manner that no
unnecessary injury shall be done thereto.39 And the fact that
a consignee is required to furnish persons to assist in
unloading a shipment may not relieve the carrier of its duty
as to such unloading.40
The exercise of the carrier’s custody and responsibility over
the subject shipment during the unloading actually
transpired in the instant case during the unloading of the
shipment as testified by Mr. Talens, the cargo surveyor.
Moreover, the liability of Wallem is highlighted by Mr. Talen’s
notes in the Bad Order Inspection, to wit:
"The bad order torn bags, was due to stevedores[‘] utilizing
steel hooks/spikes in piling the cargo to [the] pallet board at
the vessel’s cargo holds and at the pier designated area
before and after discharged that cause the bags to torn
[sic]."44 (Emphasis supplied)
The records are replete with evidence which show that the
damage to the bags happened before and after their
discharge45 and it was caused by the stevedores of the
arrastre operator who were then under the supervision of
Wallem.1awphi1.net
It is settled in maritime law jurisprudence that cargoes while
being unloaded generally remain under the custody of the
carrier. In the instant case, the damage or losses were
incurred during the discharge of the shipment while under
the supervision of the carrier. Consequently, the carrier is
liable for the damage or losses caused to the shipment. As
the cost of the actual damage to the subject shipment has
long been settled, the trial court’s finding of actual damages
in the amount of ₱397,879.69 has to be sustained.
b. Article 1736, 1737, 1738
c. Eastern Shipping Lines v. CA GR No. 94712 July 12,
1994
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 (Arts. 1736-1738, Civil Code;
Ganzon vs. Court of Appeals, 161 SCRA 646; Kui Bai vs.
Dollar Steamship Lines, 52 Phil. 863). When the goods
shipped either are lost or arrive in damaged condition, a
presumption arises against the carrier of its failure to
observe that diligence, and there need not be an
express finding of negligence to hold it liable (Art. 1735,
Civil Code; Philippine National Railways vs. Court of
Appeals, 139 SCRA 87; Metro Port Service vs. Court of
Appeals, 131 SCRA 365). There are, of course,
exceptional cases when such presumption of fault is not
observed but these cases, enumerated in Article
Page 32 of 47
 17341 of the Civil Code, are exclusive, not one of which
can be applied to this case.
The question of charging both the carrier and the arrastre
operator with the obligation of properly delivering the goods
to the consignee has, too, been passed upon by the Court.
In Fireman's Fund Insurance vs. Metro Port Services (182
SCRA 455), we have explained, in holding the carrier and the
arrastre operator liable in solidum, thus:
The legal relationship between the consignee and the
arrastre operator is akin to that of a depositor and
warehouseman (Lua Kian v. Manila Railroad Co., 19 SCRA 5
[1967]. The relationship between the consignee and the
common carrier is similar to that of the consignee and the
arrastre operator (Northern Motors, Inc. v. Prince Line, et al.,
107 Phil. 253 [1960]). Since it is the duty of the ARRASTRE to
take good care of the goods that are in its custody and to
deliver them in good condition to the consignee, such
responsibility also devolves upon the CARRIER. Both the
ARRASTRE and the CARRIER are therefore charged with the
obligation to deliver the goods in good condition to the
consignee.
We do not, of course, imply by the above pronouncement
that the arrastre operator and the customs broker are
themselves always and necessarily liable solidarily with the
carrier, or vice-versa, nor that attendant facts in a given case
may not vary the rule. The instant petition has been brought
solely by Eastern Shipping Lines, which, being the carrier and
not having been able to rebut the presumption of fault, is, in
any event, to be held liable in this particular case. A factual
finding of both the court a quo and the appellate court, we
take note, is that "there is sufficient evidence that the
shipment sustained damage while in the successive
possession of appellants" (the herein petitioner among
them). Accordingly, the liability imposed on Eastern Shipping
Lines, Inc., the sole petitioner in this case, is inevitable
regardless of whether there are others solidarily liable with it.
d. Compania Maritima v. Insurance Company of
North America GR No. L-18965 Oct 30, 1964
As found by the Court of Appeals, Macleod and Company
contracted by telephone the services of petitioner to ship the
hemp in question from the former's private pier at Sasa,
Davao City, to Manila, to be subsequently transhipped to
Boston, Massachusetts, U.S.A., which oral contract was later
confirmed by a formal and written booking issued by the
shipper's branch office, Davao City, in virtue of which the
carrier sent two of its lighters to undertake the service. It also
appears that the patrons of said lighters were employees of
the carrier with due authority to undertake the transportation
and to sign the documents that may be necessary therefor so
much so that the patron of LCT No. 1025 signed the receipt
covering the cargo of hemp loaded therein as follows: .
Received in behalf of S.S. Bowline Knot in good order and
condition from MACLEOD AND COMPANY OF PHILIPPINES,
Sasa Davao, for transhipment at Manila onto S.S. Steel
Navigator.
FINAL DESTINATION: Boston.
The fact that the carrier sent its lighters free of charge to take
the hemp from Macleod's wharf at Sasa preparatory to its
loading onto the ship Bowline Knot does not in any way
impair the contract of carriage already entered into between
the carrier and the shipper, for that preparatory step is but
part and parcel of said contract of carriage. The lighters were
merely employed as the first step of the voyage, but once
that step was taken and the hemp delivered to the carrier's
employees, the rights and obligations of the parties attached
thereby subjecting them to the principles and usages of the
maritime law. In other words, here we have a complete
contract of carriage the consummation of which has already
begun: the shipper delivering the cargo to the carrier, and
the latter taking possession thereof by placing it on a lighter
manned by its authorized employees, under which Macleod
became entitled to the privilege secured to him by law for its
safe transportation and delivery, and the carrier to the full
payment of its freight upon completion of the voyage.
The receipt of goods by the carrier has been said to lie at the
foundation of the contract to carry and deliver, and if actually
no goods are received there can be no such contract. The
liability and responsibility of the carrier under a contract for
the carriage of goods commence on their actual delivery to,
or receipt by, the carrier or an authorized agent. ... and
delivery to a lighter in charge of a vessel for shipment on the
vessel, where it is the custom to deliver in that way, is a good
delivery and binds the vessel receiving the freight, the
liability commencing at the time of delivery to the lighter. ...
and, similarly, where there is a contract to carry goods from
one port to another, and they cannot be loaded directly on
the vessel and lighters are sent by the vessel to bring the
goods to it, the lighters are for the time its substitutes, so
that the bill of landing is applicable to the goods as soon as
they are placed on the lighters. (80 C.J.S., p. 901, emphasis
supplied)
... The test as to whether the relation of shipper and carrier
had been established is, Had the control and possession of
the cotton been completely surrendered by the shipper to
the railroad company? Whenever the control and possession
of goods passes to the carrier and nothing remains to be
done by the shipper, then it can be said with certainty that
the relation of shipper and carrier has been established.
Railroad Co. v. Murphy, 60 Ark. 333, 30 S.W. 419, 46 A. St.
Rep. 202; Pine Bluff & Arkansas River Ry. v. MaKenzie, 74 Ark.
100, 86 S.W. 834; Matthews & Hood v. St. L., I.M. & S.R. Co.,
123 Ark. 365, 185 S.W. 461, L.R.A. 1916E, 1194. (W.F. Bogart &
Co., et al. v. Wade, et al., 200 S.W. 148).
The claim that there can be no contract of affreightment
because the hemp was not actually loaded on the ship that
was to take it from Davao City to Manila is of no moment,
for, as already stated, the delivery of the hemp to the
carrier's lighter is in line with the contract. In fact, the receipt
signed by the patron of the lighter that carried the hemp
stated that he was receiving the cargo "in behalf of S.S.
Bowline Knot in good order and condition." On the other
hand, the authorities are to the effect that a bill of lading is
not indispensable for the creation of a contract of carriage.
Bill of lading not indispensable to contract of carriage. — As
to the issuance of a bill of lading, although article 350 of the
Code of Commerce provides that "the shipper as well as the
carrier of merchandise or goods may mutua-lly demand that
a bill of lading is not indispensable. As regards the form of
the contract of carriage it can be said that provided that
there is a meeting of the minds and from such meeting arise
rights and obligations, there should be no limitations as to
form." The bill of lading is not essential to the contract,
although it may become obligatory by reason of the
regulations of railroad companies, or as a condition imposed
in the contract by the agreement of the parties themselves.
The bill of lading is juridically a documentary proof of the
stipulations and conditions agreed upon by both parties. (Del
Viso, pp. 314-315; Robles vs. Santos, 44 O.G. 2268). In other
words, the Code does not demand, as necessary requisite in
the contract of transportation, the delivery of the bill of
lading to the shipper, but gives right to both the carrier and
Page 33 of 47
the shipper to mutually demand of each other the delivery of
said bill. (Sp. Sup. Ct. Decision, May 6, 1895). (Martin,
Philippine Commercial Laws, Vol. II, Revised Edition, pp. 12-
13)
The liability of the carrier as common carrier begins with the
actual delivery of the goods for transportation, and not
merely with the formal execution of a receipt or bill of lading;
the issuance of a bill of lading is not necessary to complete
delivery and acceptance. Even where it is provided by statute
that liability commences with the issuance of the bill of
lading, actual delivery and acceptance are sufficient to bind
the carrier. (13 C.J.S., p. 288)
2. Petitioner disclaims responsibility for the damage of the
cargo in question shielding itself behind the claim of force
majeure or storm which occurred on the night of October 29,
1952. But the evidence fails to bear this out.
Rather, it shows that the mishap that caused the damage or
loss was due, not to force majeure, but to lack of adequate
precautions or measures taken by the carrier to prevent the
loss as may be inferred from the following findings of the
Court of Appeals:
Aside from the fact that, as admitted by appellant's own
witness, the ill-fated barge had cracks on its bottom (pp. 18-
19, t.s.n., Sept. 13, 1959) which admitted sea water in the
same manner as rain entered "thru tank man-holes",
according to the patron of LCT No. 1023 (exh. JJJ-4) —
conclusively showing that the barge was not seaworthy — it
should be noted that on the night of the nautical accident
there was no storm, flood, or other natural disaster or
calamity. Certainly, winds of 11 miles per hour, although
stronger than the average 4.6 miles per hour then prevailing
in Davao on October 29, 1952 (exh. 5), cannot be classified as
storm. For according to Beaufort's wind scale, a storm has
wind velocities of from 64 to 75 miles per hour; and by
Philippine Weather Bureau standards winds should have a
velocity of from 55 to 74 miles per hour in order to be
classified as storm (Northern Assurance Co., Ltd. vs. Visayan
Stevedore Transportation Co., CA-G.R. No. 23167-R, March
12, 1959).
The Court of Appeals further added: "the report of R. J. del
Pan & Co., Inc., marine surveyors, attributes the sinking of
LCT No. 1025 to the 'non-water-tight conditions of various
buoyancy compartments' (exh. JJJ); and this report finds
confirmation on the above-mentioned admission of two
witnesses for appellant concerning the cracks of the lighter's
bottom and the entrance of the rain water 'thru manholes'."
We are not prepared to dispute this finding of the Court of
Appeals.
3. There can also be no doubt that the insurance company
can recover from the carrier as assignee of the owner of the
cargo for the insurance amount it paid to the latter under the
insurance contract. And this is so because since the cargo
that was damaged was insured with respondent company
and the latter paid the amount represented by the loss, it is
but fair that it be given the right to recover from the party
responsible for the loss. The instant case, therefore, is not
one between the insured and the insurer, but one between
the shipper and the carrier, because the insurance company
merely stepped into the shoes of the shipper. And since the
shipper has a direct cause of action against the carrier on
account of the damage of the cargo, no valid reason is seen
why such action cannot be asserted or availed of by the
insurance company as a subrogee of the shipper. Nor can
the carrier set up as a defense any defect in the insurance
policy not only because it is not a privy to it but also because
it cannot avoid its liability to the shipper under the contract
of carriage which binds it to pay any loss that may be caused
to the cargo involved therein. Thus, we find fitting the
following comments of the Court of Appeals:
It was not imperative and necessary for the trial court to pass
upon the question of whether or not the disputed abaca
cargo was covered by Marine Open Cargo Policy No. MK-134
isued by appellee. Appellant was neither a party nor privy to
this insurance contract, and therefore cannot avail itself of
any defect in the policy which may constitute a valid reason
for appellee, as the insurer, to reject the claim of Macleod, as
the insured. Anyway, whatever defect the policy contained, if
any, is deemed to have been waived by the subsequent
payment of Macleod's claim by appellee. Besides, appellant
is herein sued in its capacity as a common carrier, and
appellee is suing as the assignee of the shipper pursuant to
exhibit MM. Since, as above demonstrated, appellant is liable
to Macleod and Company of the Philippines for the los or
damage to the 1,162 bales of hemp after these were received
in good order and condition by the patron of appellant's LCT
No. 1025, it necessarily follows that appellant is likewise
liable to appellee who, as assignee of Macleod, merely
stepped into the shoes of and substi-tuted the latter in
demanding from appellant the payment for the loss and
damage aforecited.
e. Lu Do v. Binamira GR No. L-9840 Apr 22, 1957
It is true that, as a rule, a common carrier is responsible for
the loss, destruction or deterioration of the goods it assumes
to carry from one place to another unless the same is due to
any to any of the causes mentioned in Article 1734 on the
new Civil Code, and that, if the goods are lost, destroyed or
deteriorated, for causes other that those mentioned, the
common carrier is presumed to have been at fault or to have
acted negligently, unless it proves that it has observed
extraordinary diligence in their care (Article 1735, Idem.), and
that this extraordinary liability lasts from the time the goods
are placed in the possession of the carrier until they are
delivered to the consignee, or "to the person who has the
right to receive them" (Article 1736, Idem.), but these
provisions only apply when the loss, destruction or
deterioration takes place while the goods are in the
possession of the carrier, and not after it has lost control of
them. The reason is obvious. While the goods are in its
possession, it is but fair that it exercise extraordinary
diligence in protecting them from damage, and if loss occurs,
the law presumes that it was due to its fault or negligence.
This is necessary to protect the interest the interest of the
owner who is at its mercy. The situation changes after the
goods are delivered to the consignee.
While we agree with the Court of Appeals that while delivery
of the cargo to the consignee, or to the person who has a
right to receive them", contemplated in Article 1736, because
in such case the goods are still in the hands of the
Government and the owner cannot exercise dominion over
them, we believe however that the parties may agree to limit
the liability of the carrier considering that the goods have
still to through the inspection of the customs authorities
before they are actually turned over to the consignee. This is
a situation where we may say that the carrier losses control
of the goods because of a custom regulation and it is unfair
that it be made responsible for what may happen during the
interregnum. And this is precisely what was done by the
parties herein. In the bill of lading that was issued covering
the shipment in question, both the carrier and the consignee
have stipulated to limit the responsibility of the carrier for
the loss or damage that may because to the goods before
they are actually delivered by insert in therein the following
provisions:
Page 34 of 47
1. . . . The Carrier shall not be liable in any capacity
whatsoever for any delay, nondelivery or misdelivery, or loss
of or damage to the goods occurring while the goods are
not in the actual custody of the Carrier. . . . (Emphasis ours.)
(Paragraph 1, Exhibit "1")
2. . . . The responsibility of the Carrier in any capacity shall
altogether cease and the goods shall be considered to be
delivered and at their own risk and expense in every
respect when taken into the custody of customs or other
authorities. The Carrier shall not be required to give any
notification of disposition of the goods. . . . (Emphasis ours.)
(Paragraph 12, Exhibit "1")
3. Any provisions herein to the contrary notwithstanding,
goods may be . . . by Carrier at ship's tackle . . . and delivery
beyond ship's tackle shall been tirely at the option of the
Carrier and solely at the expense of the shipper or consignee.
(Paragraph 22, Exhibit "1")
It therefore appears clear that the carrier does not assume
liability for any loss or damage to the goods once they have
been "taken into the custody of customs or other
authorities", or when they have been delivered at ship's
tackle. These stipulations are clear. They have been adopted
precisely to mitigate the responsibility of the carrier
considering the present law on the matter, and we find
nothing therein that is contrary to morals or public policy
that may justify their nullification. We are therefore
persuaded to conclude that the carrier is not responsible for
the loss in question, it appearing that the same happened
after the shipment had been delivered to the customs
authorities.
f. Servando v. Phil Steam Navigation Co. GR No. L-
36481-2 Oct 23, 1982
Article 1736 of the Civil Code imposes upon common carriers
the duty to observe extraordinary diligence from the
moment the goods are unconditionally placed in their
possession "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. "
The court a quo held that the delivery of the shipment in
question to the warehouse of the Bureau of Customs is not
the delivery contemplated by Article 1736; and since the
burning of the warehouse occurred before actual or
constructive delivery of the goods to the appellees, the loss
is chargeable against the appellant.
It should be pointed out, however, that in the bills of lading
issued for the cargoes in question, the parties agreed to limit
the responsibility of the carrier for the loss or damage that
may be caused to the shipment by inserting therein the
following stipulation:
Clause 14. Carrier shall not be responsible for loss or damage
to shipments billed 'owner's risk' unless such loss or damage
is due to negligence of carrier. Nor shall carrier be
responsible for loss or damage caused by force majeure,
dangers or accidents of the sea or other waters; war; public
enemies; . . . fire . ...
We sustain the validity of the above stipulation; there is
nothing therein that is contrary to law, morals or public
policy.
Appellees would contend that the above stipulation does not
bind them because it was printed in fine letters on the back-
of the bills of lading; and that they did not sign the same.
This argument overlooks the pronouncement of this Court in
Ong Yiu vs. Court of Appeals, promulgated June 29,
1979, 3 where the same issue was resolved in this wise:
While it may be true that petitioner had not signed the plane
ticket (Exh. '12'), he is nevertheless bound by the provisions
thereof. 'Such provisions have been held to be a 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 a contract of
'adhesion', in regards which it has been 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. The one who adheres to
the contract is in reality free to reject it entirely; if he adheres,
he gives his consent." (Tolentino, Civil Code, Vol. IV, 1962 Ed.,
p. 462, citing Mr. Justice J.B.L. Reyes, Lawyer's Journal, Jan.
31, 1951, p. 49).
Besides, the agreement contained in the above quoted
Clause 14 is a mere iteration of the basic principle of law
written in Article 1 1 7 4 of the Civil Code:
Article 1174. Except in cases expressly specified by the law, or
when it is otherwise declared by stipulation, or when the
nature of the obligation requires the assumption of risk, no
person shall be responsible for those events which could not
be foreseen, or which, though foreseen, were inevitable.
Thus, where fortuitous event or force majeure is the
immediate and proximate cause of the loss, the obligor is
exempt from liability for non-performance. The Partidas, 4 the
antecedent of Article 1174 of the Civil Code, defines 'caso
fortuito' as 'an event that takes place by accident and could
not have been foreseen. Examples of this are destruction of
houses, unexpected fire, shipwreck, violence of robbers.'
In its dissertation of the phrase 'caso fortuito' the
Enciclopedia Juridicada Espanola 5 says: "In a legal sense and,
consequently, also in relation to contracts, a 'caso fortuito'
presents the following essential characteristics: (1) the cause
of the unforeseen and unexpected occurrence, or of the
failure of the debtor to comply with his obligation, must be
independent of the human will; (2) it must be impossible to
foresee the event which constitutes the 'caso fortuito', or if it
can be foreseen, it must be impossible to avoid; (3) the
occurrence must be such as to render it impossible for the
debtor to fulfill his obligation in a normal manner; and (4) the
obligor must be free from any participation in the
aggravation of the injury resulting to the creditor." In the
case at bar, the burning of the customs warehouse was an
extraordinary event which happened independently of the
will of the appellant. The latter could not have foreseen the
event.
There is nothing in the record to show that appellant carrier
,incurred in delay in the performance of its obligation. It
appears that appellant had not only notified appellees of the
arrival of their shipment, but had demanded that the same
be withdrawn. In fact, pursuant to such demand, appellee Uy
Bico had taken delivery of 907 cavans of rice before the
burning of the warehouse.
Page 35 of 47
Nor can the appellant or its employees be charged with
negligence. The storage of the goods in the Customs
warehouse pending withdrawal thereof by the appellees was
undoubtedly made with their knowledge and consent. Since
the warehouse belonged to and was maintained by the
government, it would be unfair to impute negligence to the
appellant, the latter having no control whatsoever over the
same.
The lower court in its decision relied on the ruling laid down
in Yu Biao Sontua vs. Ossorio 6, where this Court held the
defendant liable for damages arising from a fire caused by
the negligence of the defendant's employees while loading
cases of gasoline and petroleon products. But unlike in the
said case, there is not a shred of proof in the present case
that the cause of the fire that broke out in the Custom's
warehouse was in any way attributable to the negligence of
the appellant or its employees. Under the circumstances, the
appellant is plainly not responsible.
g. Samar Mining v. Nordeutscher Lloyd GR No. L-
28673 Oct 23, 1984
The issue at hand demands a close scrutiny of Bill of Lading
No. 18 and its various clauses and stipulations which should
be examined in the light of pertinent legal provisions and
settled jurisprudence. This undertaking is not only proper but
necessary as well because of the nature of the bill of lading
which operates both as a receipt for the goods; and more
importantly, as a contract to transport and deliver the same
as stipulated therein. 2 Being a contract, it is the law between
the parties thereto 3 who are bound by its terms and
conditions 4 provided that these are not contrary to law,
morals, good customs, public order and public policy. 5
Bill of Lading No. 18 sets forth in page 2 thereof 6 that one
(1) crate of Optima welded wedge wire sieves was received
by the carrier NORDEUTSCHER LLOYD at the "port of
loading" which is Bremen, Germany, while the freight had
been prepaid up to the port of destination or the "port of
discharge of goods in this case, Davao, the carrier undertook
to transport the goods in its vessel, M/S SCHWABENSTEIN
only up to the "port of discharge from ship-Manila.
Thereafter, the goods were to be transshipped by the carrier
to the port of destination or "port of discharge of goods The
stipulation is plainly indicated on the face of the bill which
contains the following phrase printed below the space
provided for the port of discharge from ship",
thus: têñ.£îhqwâ£
if goods are to be transshipped at port of discharge, show
destination under the column for "description of contents" 7
As instructed above, the following words appeared
typewritten under the column for "description of
contents": têñ.£îhqwâ£
PORT OF DISCHARGE OF GOODS: DAVAO
FREIGHT PREPAID 8
It is clear, then, 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 the
goods from Manila to their port of destination-Davao. The
word "transship" means: têñ.£îhqwâ£
to transfer for further transportation from one ship or
conveyance to another 9
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: têñ.£îhqwâ£
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 ...
(Emphasis supplied)
and in Section 11 of the same Bill, which
provides: têñ.£îhqwâ£
Whenever the carrier or m aster may deem it advisable or in
any case where the goods are placed at carrier's disposal at
or consigned to a point where the ship does not expect to
load or discharge, the carrier or master may, without notice,
forward the whole or any part of the goods before or after
loading at the original port of shipment, ... 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 and at risk and expense
of the goods and the carrier shall not be liable for detention
nor responsible for the acts, neglect, delay or failure to act of
anyone to whom the goods are entrusted or delivered for
storage, handling or any service incidental thereto (Emphasis
supplied) 10
Defendants-appellants now shirk liability 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. 11
We find merit in appellants' stand. 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). Said
case matches the present controversy not only as to the
material facts but more importantly, as to the stipulations
contained in the bill of lading concerned. As if to underline
their awesome likeness, the goods in question in both cases
were destined for Davao, but were discharged from ship in
Manila, in accordance with their respective bills of lading.
The stipulations in the bill of lading in the PHOENIX case
which are substantially the same as the subject stipulations
before Us, provides: têñ.£îhqwâ£
The carrier shall not be liable in any capacity whatsoever for
any loss or damage to the goods while the goods are not in
its actual custody. (Par. 2, last subpar.)
xxx xxx xxx
The carrier or master, in making arrangements with any
person for or in connection with all transshipping or
forwarding of the goods or the use of any means of
transportation or forwarding of goods not used or operated
by the carrier, shall be considered solely the agent of the
Page 36 of 47
shipper and consignee and without any other responsibility
whatsoever or for the cost thereof ... (Par. 16). 12
Finding the above stipulations not contrary to law, morals,
good customs, public order or public policy, We sustained
their validity 13 Applying said stipulations as the law
between the parties in the aforecited case, the Court
concluded that: têñ.£îhqwâ£
... The short form Bill of Lading ( ) states in no uncertain
terms that the port of discharge of the cargo is Manila, but
that the same was to be transshipped beyond the port of
discharge to Davao City. Pursuant to the terms of the long
form 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. ...
(Emphasis supplied) 14
Coming now to the case before Us, We hold, that by the
authority of the above pronouncements, and in conformity
with the pertinent provisions of the New 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.
The liability of the common carrier for the loss, destruction or
deterioration of goods transported from a foreign country to
the Philippines is governed primarily by the New Civil
Code. 15 In all matters not regulated by said Code, the rights
and obligations of common carriers shall be governed by the
Code of Commerce and by special laws. 16 A careful perusal
of the provisions of the New Civil Code on common carriers
(Section 4, Title VIII, Book IV) directs our attention to Article
1736 thereof, which reads: têñ.£îhqwâ£
Article 1736. 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.
Article 1738 referred to in the foregoing provision runs
thus: têñ.£îhqwâ£
Article 1738. 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.
There is no doubt that 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. In sales, actual delivery has been defined as the ceding
of corporeal possession by the seller, and the actual
apprehension of corporeal possession by the buyer or by
some person authorized by him to receive the goods as his
representative for the purpose of custody or disposal. 17 By
the same token, 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. 18 The
court a quo found that there was actual delivery to the
consignee through its duly authorized agent, the carrier.
It becomes necessary at this point to dissect the complex
relationship that had developed between appellant and
appellee in the course of the transactions that gave birth to
the present suit. Two undertakings appeared embodied
and/or provided for in the Bill of Lading 19 in question. The
first is FOR THE TRANSPORT OF GOODS from Bremen,
Germany to Manila. The second, THE TRANSSHIPMENT OF
THE SAME GOODS from Manila to Davao, with appellant
acting as agent of the consignee. 20 At the hiatus between
these two undertakings of appellant which is the moment
when the subject goods are discharged in Manila, its
personality changes from that of carrier to that of agent of
the consignee. Thus, the character of appellant's possession
also changes, from possession in its own name as carrier,
into possession in the name of consignee as the latter's
agent. 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, as
applied to the case before Us.
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, 21This can be gleaned
from the following provisions of the New Civil Code on the
obligations of the agent: têñ.£îhqwâ£
Article 1884. The agent is bound by his acceptance to carry
out the agency, and is liable for the damages which, through
his non-performance, the principal may suffer.
xxx xxx xxx
Article 1889. The agent shall be liable for damages if, there
being a conflict between his interests and those of the
principal, he should prefer his own.
Article 1892. The agent may appoint a substitute if the
principal has not prohibited him from doing so; but he shall
be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power but without designating
the person and the person appointed was notoriously
incompetent or insolvent.
xxx xxx xxx
Article 1909. The agent is responsible not only for fraud, but
also for negligence which shall be judged with more or less
Page 37 of 47
rigor by the courts, according to whether the agency was or
was not for a compensation.
The records fail to reveal proof of negligence, deceit or fraud
committed by appellant or by its representative in the
Philippines. Neither is there any showing of notorious
incompetence or insolvency on the part of AMCYT, which
acted as appellant's substitute in storing the goods awaiting
transshipment.
The actions of appellant carrier and of its representative in
the Philippines being in full faith with the lawful stipulations
of Bill of Lading No. 18 and in conformity with the provisions
of the New Civil Code on common carriers, agency and
contracts, they incur no liability for the loss of the goods in
question.
h. Ganzon v. CA, supra
i. Schmitz Transport v. TVI, supra
j. Macam v. CA GR No. 125524 Aug 25, 1999
Petitioner submits that the fact that the shipment was not
delivered to the consignee as stated in the bill of lading or to
a party designated or named by the consignee constitutes a
misdelivery thereof. Moreover, petitioner argues that from
the text of the telex, assuming there was such an instruction,
the delivery of the shipment without the required bill of
lading or bank guarantee should be made only to the
designated consignee, referring to PAKISTAN BANK.
We are not persuaded. The submission of petitioner that "the
fact that the shipment was not delivered to the consignee as
stated in the Bill of Lading or to a party designated or named
by the consignee constitutes a misdelivery thereof" is a
deviation from his cause of action before the trial court. It is
clear from the allegation in his complaint that it does not
deal with misdelivery of the cargoes but of delivery to GPC
without the required bills of lading and bank guarantee —
6. The goods arrived in Hongkong and were released by the
defendant Wallem directly to the buyer/notify party, Great
Prospect Company and not to the consignee, the National
Bank of Pakistan, Hongkong, without the required bills of
lading and bank guarantee for the release of the shipment
issued by the consignee of the goods . . . .10
Even going back to an event that transpired prior to the filing
of the present case or when petitioner wrote respondent
WALLEM demanding payment of the value of the cargoes,
misdelivery of the cargoes did not come into the picture —
We are writing you on behalf of our client, Ben-Mac
Enterprises who informed us that Bills of Lading No. 99012
and 99013 with a total value of US$20,223.46 were released
to Great Prospect, Hongkong without the necessary bank
guarantee. We were further informed that the consignee of
the goods, National Bank of Pakistan, Hongkong, did not
release or endorse the original bills of lading. As a result
thereof, neither the consignee, National Bank of Pakistan,
Hongkong, nor the importer, Great Prospect Company,
Hongkong, paid our client for the goods . . . .11
At any rate, we shall dwell on petitioner's submission only as
a prelude to our discussion on the imputed liability of
respondents concerning the shipped goods. Article 1736 of
the Civil Code provides —
Art. 1736. The extraordinary responsibility of the common
carriers 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 1738.12
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 them14 was proper.
The real issue is whether respondents are liable to petitioner
for releasing the goods to GPC without the bills of lading or
bank guarantee.
Respondents 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." Petitioner was
named therein as shipper and GPC as consignee with respect
to Bill of Lading Nos. HKG 99012 and HKG 99013. Petitioner
disputes the existence of such instruction and claims that this
evidence is self-serving.
From the testimony of petitioner, we gather that he has been
transacting with GPC as buyer/importer for around two (2) or
three (3) years already. When mangoes and watermelons are
in season, his shipment to GPC using the facilities of
respondents is twice or thrice a week. The goods are released
to GPC. It has been the practice of petitioner to request the
shipping lines to immediately release perishable cargoes
such as watermelons and fresh mangoes through telephone
calls by himself or his "people." In transactions covered by a
letter of credit, bank guarantee is normally required by the
shipping lines prior to releasing the goods. But for buyers
using telegraphic transfers, petitioner dispenses with the
bank guarantee because the goods are already fully paid. In
his several years of business relationship with GPC and
respondents, there was not a single instance when the bill of
lading was first presented before the release of the cargoes.
He admitted the existence of the telex of 3 July 1989
containing his request to deliver the shipment to the
consignee without presentation of the bill of lading15 but not
the telex of 5 April 1989 because he could not remember
having made such request.
Against petitioner's claim of "not remembering" having
made a request for delivery of subject cargoes to GPC
without presentation of the bills of lading and bank
guarantee as reflected in the telex of 5 April 1989 are
damaging disclosures in his testimony. He declared that it
was his practice to ask the shipping lines to immediately
release shipment of perishable goods through telephone
calls by himself or his "people." He no longer required
presentation of a bill of lading nor of a bank guarantee as a
condition to releasing the goods in case he was already fully
paid. Thus, taking into account that subject shipment
consisted of perishable goods and SOLIDBANK pre-paid the
full amount of the value thereof, it is not hard to believe the
claim of respondent WALLEM that petitioner indeed
Page 38 of 47
requested the release of the goods to GPC without
presentation of the bills of lading and bank guarantee.
The instruction in the telex of 5 April 1989 was "to deliver the
shipment to respective consignees." And so petitioner argues
that, assuming there was such an instruction, the consignee
referred to was PAKISTAN BANK. We find the argument too
simplistic. Respondent court analyzed the telex in its entirety
and correctly arrived at the conclusion that the consignee
referred to was not PAKISTAN BANK but GPC —
There is no mistake that the originals of the two (2) subject
Bills of Lading are still in the possession of the Pakistani
Bank. The appealed decision affirms this fact. Conformably,
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 to the buyer/importer is essentially a factor
to reckon with. Besides, GPC is listed as one among the
several consignees in the telex (Exhibit 5-B) and the
instruction in the telex was to arrange delivery of A/M
shipment (not any party) to respective consignees without
presentation of OB/L and bank guarantee . . . .20
Apart from the foregoing obstacles to the success of
petitioner's cause, petitioner failed to substantiate his claim
that he returned to SOLIDBANK the full amount of the value
of the cargoes. It is not far-fetched to entertain the notion, as
did respondent court, that he merely accommodated
SOLIDBANK in order to recover the cost of the shipped
cargoes from respondents. We note that it was SOLIDBANK
which initially demanded payment from respondents
through five (5) letters. SOLIDBANK must have realized the
absence of privity of contract between itself and
respondents. That is why petitioner conveniently took the
cudgels for the bank.
In view of petitioner's utter failure to establish the liability of
respondents over the cargoes, no reversible error was
committed by respondent court in ruling against him.
13. Validity of Stipulations
a. Articles 1744, 1745
b. De Guzman v. CA, supra
c. Art 1748
14. Can the common carrier and the shipper/owner
enter into a stipulation to limit liability in case of
LDD? Yes. Possible.
a. Arts 1749, 1750
b. Shewaram v. PAL GR No. L-20099 July 7, 1966
It is clear from the above-quoted portions of the decision of
the trial court that 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. The evidence shows that the transistor radio
cost P197.00 and the camera cost P176.00, so the total value
of the two articles was P373.00.
There is no question that the appellant is a common
carrier.1 As such common carrier the appellant, from the
nature of its business and for reasons of public policy, is
bound to observe extraordinary diligence in the vigilance
over the goods and for the safety of the passengers
transported by it according to the circumstances of each
case. 2 It having been shown that the loss of the transistor
radio and the camera of the appellee, costing P373.00, was
due to the negligence of the employees of the appellant, it is
clear that the appellant should be held liable for the payment
of said loss.3
It is, however, contended by the appellant that its liability
should be limited to the amount stated in the conditions of
carriage printed at the back of the plane ticket stub which
was issued to the appellee, which conditions are embodied in
Domestic Tariff Regulations No. 2 which was filed with the
Civil Aeronautics Board. One of those conditions, which is
pertinent to the issue raised by the appellant in this case
provides as follows:
The liability, if any, for loss or damage to checked baggage
or for delay in the delivery thereof is limited to its value and,
unless the passenger declares in advance a higher valuation
and pay an additional charge therefor, the value shall be
conclusively deemed not to exceed P100.00 for each ticket.
The appellant maintains that in view of the failure of the
appellee to declare a higher value for his luggage, and pay
the freight on the basis of said declared value when he
checked such luggage at the Zamboanga City airport,
pursuant to the abovequoted condition, appellee can not
demand payment from the appellant of an amount in excess
of P100.00.
The law that may be invoked, in this connection is Article
1750 of the New Civil Code which provides as follows:
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.
In accordance with the above-quoted provision of Article
1750 of the New Civil Code, 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 and freely agreed upon."
The requirements provided in Article 1750 of the New Civil
Code must be complied with before a common carrier can
claim a limitation of its pecuniary liability in case of loss,
destruction or deterioration of the goods it has undertaken
to transport. In the case before us We believe that the
requirements of said article have not been met. It can not 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 ticket 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 trial court
has categorically stated in its decision that the "Defendant
admits that passengers do not sign the ticket, much less did
plaintiff herein sign his ticket when he made the flight on
November 23, 1959." We hold, therefore, that the appellee is
not, and can not be, bound by the conditions of carriage
found at the back of the ticket stub issued to him when he
made the flight on appellant's plane on November 23, 1959.
Page 39 of 47
The liability of the appellant in the present case should be
governed by the provisions of Articles 1734 and 1735 of the
New Civil Code, which We quote as follows:
ART. 1734. Common carries 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, 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.1äwphï1.ñët
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.
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 two articles.
In the case of Ysmael and Co. vs. Barreto, 51 Phil. 90, cited by
the trial court in support of its decision, this Court had laid
down the rule that the carrier can not limit its liability for
injury to or loss of goods shipped where such injury or loss
was caused by its own negligence.
Corpus Juris, volume 10, p. 154, says:
"Par. 194, 6. Reasonableness of Limitations. — The validity of
stipulations limiting the carrier's liability is to be determined
by their reasonableness and their conformity to the sound
public policy, in accordance with which the obligations of the
carrier to the public are settled. It cannot lawfully stipulate
for exemption from liability, unless such exemption is just
and reasonable, and unless the contract is freely and fairly
made. No contractual limitation is reasonable which is
subversive of public policy.
"Par. 195. 7. What Limitations of Liability Permissible. — a.
Negligence — (1) Rule in America — (a) In Absence of
Organic or Statutory Provisions Regulating Subject — aa.
Majority Rule. — In the absence of statute, it is settled by the
weight of authority in the United States, that whatever
limitations against its common-law liability are permissible to
a carrier, it cannot limit its liability for injury to or loss of
goods shipped, where such injury or loss is caused by its own
negligence. This is the common law doctrine and it makes no
difference that there is no statutory prohibition against
contracts of this character.
"Par. 196. bb. Considerations on which Rule Based. — The
rule, it is said, rests on considerations of public policy. The
undertaking is to carry the goods, and to relieve the shipper
from all liability for loss or damage arising from negligence
in performing its contract is to ignore the contract itself. The
natural effect of a limitation of liability against negligence is
to induce want of care on the part of the carrier in the
performance of its duty. The shipper and the common carrier
are not on equal terms; the shipper must send his freight by
the common carrier, or not at all; he is therefore entirely at
the mercy of the carrier unless protected by the higher
power of the law against being forced into contracts limiting
the carrier's liability. Such contracts are wanting in the
element of voluntary assent.
"Par. 197. cc. Application and Extent of Rule —
(aa) Negligence of Servants. — The rule prohibiting limitation
of liability for negligence is often stated as a prohibition of
any contract relieving the carrier from loss or damage caused
by its own negligence or misfeasance, or that of its servants;
and it has been specifically decided in many cases that no
contract limitation will relieve the carrier from responsibility
for the negligence, unskillfulness, or carelessness of its
employer." (Cited in Ysmael and Co. vs. Barreto, 51 Phil. 90,
98, 99).
c. Ong Yiu v. CA GR No. L-40597, June 29, 1979
There is no dispute that PAL incurred in delay in the delivery
of petitioner's luggage. The question is the correctness of
respondent Court's conclusion that there was no gross
negligence on the part of PAL and that it had not acted
fraudulently or in bad faith as to entitle petitioner to an
award of moral and exemplary damages.
From the facts of the case, we agree with respondent Court
that PAL had not acted in bad faith. Bad faith means a breach
of a known duty through some motive of interest or ill
will. 2 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.
As aptly stated by the appellate Court:
We do not find any evidence of bad faith in this. On the
contrary, We find that the defendant had exerted diligent
effort to locate plaintiff's baggage. The trial court saw
evidence of bad faith because PAL sent the telegraphic
message to Mactan only at 3:00 o'clock that same afternoon,
despite plaintiff's indignation for the non-arrival of his
baggage. The message was sent within less than one hour
after plaintiff's luggage could not be located. Efforts had to
be exerted to locate plaintiff's maleta. Then the Bancasi
airport had to attend to other incoming passengers and to
the outgoing passengers. Certainly, no evidence of bad faith
can be inferred from these facts. Cebu office immediately
wired Manila inquiring about the missing baggage of the
plaintiff. At 3:59 P.M., Manila station agent at the domestic
airport wired Cebu that the baggage was over carried to
Manila. And this message was received in Cebu one minute
thereafter, or at 4:00 P.M. The baggage was in fact sent back
to Cebu City that same afternoon. His Honor stated that the
fact that the message was sent at 3:59 P.M. from Manila and
completely relayed to Mactan at 4:00 P.M., or within one
minute, made the message appear spurious. This is a forced
reasoning. A radio message of about 50 words can be
completely transmitted in even less than one minute
depending upon atmospheric conditions. Even if the
message was sent from Manila or other distant places, the
message can be received within a minute. that is a scientific
fact which cannot be questioned. 3
Neither was the failure of PAL Cebu to reply to petitioner's
rush telegram indicative of bad faith, The telegram (Exh. B)
was dispatched by petitioner at around 10:00 P.M. of August
26, 1967. The PAL supervisor at Mactan Airport was notified
Page 40 of 47
of it only in the morning of the following day. At that time
the luggage was already to be forwarded to Butuan City.
There was no bad faith, therefore, in the assumption made
by said supervisor that the plane carrying the bag would
arrive at Butuan earlier than a reply telegram. Had petitioner
waited or caused someone to wait at the Bancasi airport for
the arrival of the morning flight, he would have been able to
retrieve his luggage sooner.
In the absence of a wrongful act or omission or of fraud or
bad faith, petitioner is not entitled to moral damages.
Art. 2217. Moral damages include physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and
similar injury. Though incapable of pecuniary computation,
moral damages may be recovered if they are the proximate
result of the defendant's wrongful act of omission.
Art. 2220. Willful injury to property may be a legal ground for
awarding moral damages if the court should find that, under
the circumstances, such damages are justly due. The same
rule applies to breaches of contract where the defendant
acted fraudulently or in bad faith.
Petitioner is neither entitled to exemplary damages. In
contracts, as provided for in Article 2232 of the Civil Code,
exemplary damages 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 P100.00 as stipulated at the back of the ticket. In
this connection, respondent Court opined:
As a general proposition, the plaintiff's maleta having been
pilfered while in the custody of the defendant, it is presumed
that the defendant had been negligent. The liability,
however, of PAL for the loss, in accordance with the
stipulation written on the back of the ticket, Exhibit 12, is
limited to P100.00 per baggage, plaintiff not having declared
a greater value, and not having called the attention of the
defendant on its true value and paid the tariff therefor. The
validity of this stipulation is not questioned by the plaintiff.
They are printed in reasonably and fairly big letters, and are
easily readable. Moreover, plaintiff had been a frequent
passenger of PAL from Cebu to Butuan City and back, and
he, being a lawyer and businessman, must be fully aware of
these conditions. 4
We agree with the foregoing finding. The pertinent
Condition of Carriage printed at the back of the plane ticket
reads:
8. BAGGAGE LIABILITY ... The total liability of the Carrier for
lost or damaged baggage of the passenger is LIMITED TO
P100.00 for each ticket unless a passenger declares a higher
valuation in excess of P100.00, but not in excess, however, of
a total valuation of P1,000.00 and additional charges are paid
pursuant to Carrier's tariffs.
There is no dispute that petitioner did not declare any higher
value for his luggage, much less did he pay any additional
transportation charge.
But petitioner argues that there is nothing in the evidence to
show that he had actually entered into a contract with PAL
limiting the latter's liability for loss or delay of the baggage
of its passengers, and that Article 1750* of the Civil Code has
not been complied with.
While it may be true that petitioner had not signed the plane
ticket (Exh. "12"), he is nevertheless bound by the provisions
thereof. "Such provisions have been held to be a 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". 5 It is what is known as a contract
of "adhesion", in regards which it has been 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. The one
who adheres to the contract is in reality free to reject it
entirely; if he adheres, he gives his consent. 6 And as held in
Randolph v. American Airlines, 103 Ohio App. 172, 144 N.E.
2d 878; Rosenchein vs. Trans World Airlines, Inc., 349 S.W. 2d
483, "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.
Considering, therefore, that petitioner had failed to declare a
higher value for his baggage, he cannot be permitted a
recovery in excess of P100.00.Besides, passengers are advised
not to place valuable items inside their baggage but "to avail
of our V-cargo service " (Exh. "1"). I t is likewise to be noted
that there is nothing in the evidence to show the actual value
of the goods allegedly lost by petitioner.
There is another matter involved, raised as an error by PAL —
the fact that on October 24, 1974 or two months after the
promulgation of the Decision of the appellate Court,
petitioner's widow filed a Motion for Substitution claiming
that petitioner died on January 6, 1974 and that she only
came to know of the adverse Decision on October 23, 1974
when petitioner's law partner informed her that he received
copy of the Decision on August 28, 1974. Attached to her
Motion was an Affidavit of petitioner's law partner reciting
facts constitutive of excusable negligence. The appellate
Court noting that all pleadings had been signed by petitioner
himself allowed the widow "to take such steps as she or
counsel may deem necessary." She then filed a Motion for
Reconsideration over the opposition of PAL which alleged
that the Court of Appeals Decision, promulgated on August
22, 1974, had already become final and executory since no
appeal had been interposed therefrom within the
reglementary period.
Under the circumstances, considering the demise of
petitioner himself, who acted as his own counsel, it is best
that technicality yields to the interests of substantial justice.
Besides, in the 'last analysis, no serious prejudice has been
caused respondent PAL.
d. Pan Am v. IAC GR No. 70462 Aug 11, 1988
1. The respondent court erred as a matter of law in affirming
the trial court's award of actual damages beyond the
limitation of liability set forth in the Warsaw Convention and
the contract of carriage.
2. The respondent court erred as a matter of law in affirming
the trial court's award of actual damages consisting of
alleged lost profits in the face of this Court's ruling
concerning special or consequential damages as set forth
in Mendoza v. Philippine Airlines [90 Phil. 836 (1952).]
The assigned errors shall be discussed seriatim
1. The airline ticket (Exh. "G') contains the following
conditions:
Page 41 of 47
NOTICE
If the passenger's journey involves an ultimate destination or
stop in a country other than the country of departure the
Warsaw Convention may be applicable and the Convention
governs and in most cases limits the liability of carriers for
death or personal injury and in respect of loss of or damage
to baggage. See also notice headed "Advice to International
Passengers on Limitation of Liability.
CONDITIONS OF CONTRACT
1. As used in this contract "ticket" means this passenger
ticket and baggage check of which these conditions and the
notices form part, "carriage" is equivalent to "transportation,"
"carrier" means all air carriers that carry or undertake to carry
the passenger or his baggage hereunder or perform any
other service incidental to such air carriage. "WARSAW
CONVENTION" means the convention for the Unification of
Certain Rules Relating to International Carriage by Air signed
at Warsaw, 12th October 1929, or that Convention as
amended at The Hague, 28th September 1955, whichever
may be applicable.
2. Carriage hereunder is subject to the rules and limitations
relating to liability established by the Warsaw Convention
unless such carriage is not "international carriage" as defined
by that Convention.
3. To the extent not in conflict with the foregoing carriage
and other services performed by each carrier are subject to:
(i) provisions contained in this ticket, (ii) applicable tariffs, (iii)
carrier's conditions of carriage and related regulations which
are made part hereof (and are available on application at the
offices of carrier), except in transportation between a place in
the United States or Canada and any place outside thereof to
which tariffs in force in those countries apply.
xxx xxx xxx
NOTICE OF BAGGAGE LIABILITY LIMITATIONS
Liability for loss, delay, or damage to baggage is limited as
follows unless a higher value is declared in advance and
additional charges are paid: (1)for most international travel
(including domestic portions of international journeys) to
approximately $9.07 per pound ($20.00 per kilo) for checked
baggage and $400 per passenger for unchecked baggage:
(2) for travel wholly between U.S. points, to $750 per
passenger on most carriers (a few have lower limits). Excess
valuation may not be declared on certain types of valuable
articles. Carriers assume no liability for fragile or perishable
articles. Further information may be obtained from the
carrier. [Emphasis supplied.].
On the basis of the foregoing stipulations printed at the back
of the ticket, petitioner contends that its liability for the lost
baggage of private respondent Pangan is limited to $600.00
($20.00 x 30 kilos) as the latter did not declare a higher value
for his baggage and pay the corresponding additional
charges.
To support this contention, petitioner cites the case of Ong
Yiu v. Court of Appeals [G.R. No. L-40597, June 29, 1979, 91
SCRA 223], where the Court sustained the validity of a
printed stipulation at the back of an airline ticket limiting the
liability of the carrier for lost baggage to a specified amount
and ruled that the carrier's liability was limited to said
amount since the passenger did not declare a higher value,
much less pay additional charges.
We find the ruling in Ong Yiu squarely applicable to the
instant case. In said case, the Court, through Justice Melencio
Herrera, stated:
Petitioner further contends that respondent Court committed
grave error when it limited PAL's carriage liability to the
amount of P100.00 as stipulated at the back of the ticket....
We agree with the foregoing finding. The pertinent
Condition of Carriage printed at the back of the plane ticket
reads:
8. BAGGAGE LIABILITY ... The total liability of the Carrier for
lost or damage baggage of the passenger is LIMITED TO
P100.00 for each ticket unless a passenger declares a higher
valuation in excess of P100.00, but not in excess, however, of
a total valuation of Pl,000.00 and additional charges are paid
pursuant to Carrier's tariffs.
There is no dispute that petitioner did not declare any higher
value for his luggage, much less (lid he pay any additional
transportation charge.
But petitioner argues that there is nothing in the evidence to
show that he had actually entered into a contract with PAL
limiting the latter's liability for loss or delay of the baggage
of its passengers, and that Article 1750 * of the Civil Code
has not been complied with.
While it may be true that petitioner had not signed the plane
ticket (Exh. "12"), he is nevertheless bound by the provisions
thereof. "Such provisions have been held to be a 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." [Tannebaum v. National Airline,
Inc., 13 Misc. 2d 450,176 N.Y.S. 2d 400; Lichten v. Eastern
Airlines, 87 Fed. Supp. 691; Migoski v. Eastern Air Lines, Inc.,
Fla., 63 So. 2d 634.] It is what is known as a contract of
"adhesion," in regards which it has been 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. The one who
adheres to the contract is in reality free to reject it entirely; if
he adheres, he gives his consent,[Tolentino, Civil Code, Vol.
IV, 1962 ed., p. 462, citing Mr. Justice J.B.L. Reyes, Lawyer's
Journal, Jan. 31, 1951, p. 49]. And as held in Randolph v.
American Airlines, 103 Ohio App. 172,144 N.E. 2d 878;
Rosenchein v. Trans World Airlines, Inc., 349 S.W. 2d 483.] "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."
Considering, therefore, that petitioner had failed to declare a
higher value for his baggage, he cannot be permitted a
recovery in excess of P100.00....
On the other hand, the ruling in Shewaram v. Philippine Air
Lines, Inc. [G.R. No. L-20099, July 2, 1966, 17 SCRA 606],
where the Court held that the stipulation limiting the carrier's
liability to a specified amount was invalid, finds no
application in the instant case, as the ruling in said case was
premised on the finding that the conditions printed at the
back of the ticket were so small and hard to read that they
would not warrant the presumption that the passenger was
aware of the conditions and that he had freely and fairly
agreed thereto. In the instant case, similar facts that would
make the case fall under the exception have not been
alleged, much less shown to exist.
Page 42 of 47
In view thereof petitioner's liability for the lost baggage is
limited to $20.00 per kilo or $600.00, as stipulated at the
back of the ticket.
At this juncture, in order to rectify certain misconceptions the
Court finds it necessary to state that the Court of Appeal's
reliance on a quotation from Northwest Airlines, Inc. v.
Cuenca [G.R. No. L-22425, August 31, 1965, 14 SCRA 1063] to
sustain the view that "to apply the Warsaw Convention which
limits a carrier's liability to US$9.07 per pound or US$20.00
per kilo in cases of contractual breach of carriage ** is
against public policy" is utterly misplaced, to say the least. In
said case, while the Court, as quoted in the Intermediate
Appellate Court's decision, said:
Petitioner argues that pursuant to those provisions, an air
"carrier is liable only" in the event of death of a passenger or
injury suffered by him, or of destruction or loss of, or
damages to any checked baggage or any goods, or of delay
in the transportation by air of passengers, baggage or goods.
This pretense is not borne out by the language of said
Articles. The same merely declare the carrier liable for
damages in enumerated cases, if the conditions therein
specified are present. Neither said provisions nor others in
the aforementioned Convention regulate or exclude liability
for other breaches of contract by the carrier. Under
petitioner's theory, an air carrier would be exempt from any
liability for damages in the event of its absolute refusal, in
bad faith, to comply with a contract of carriage, which is
absurd.
it prefaced this statement by explaining that:
...The case is now before us on petition for review by
certiorari, upon the ground that the lower court has erred: (1)
in holding that the Warsaw Convention of October 12, 1929,
relative to transportation by air is not in force in the
Philippines: (2) in not holding that respondent has no cause
of action; and (3) in awarding P20,000 as nominal damages.
We deem it unnecessary to pass upon the First assignment
of error because the same is the basis of the second
assignment of error, and the latter is devoid of merit, even if
we assumed the former to be well taken. (Emphasis
supplied.)
Thus, it is quite clear that the Court never intended to, and in
fact never did, rule against the validity of provisions of the
Warsaw Convention. Consequently, by no stretch of the
imagination may said quotation from Northwest be
considered as supportive of the appellate court's statement
that the provisions of the Warsaw Convention limited a
carrier's liability are against public policy.
2. The Court finds itself unable to agree with the decision of
the trial court, and affirmed by the Court of Appeals,
awarding private respondents damages as and for lost profits
when their contracts to show the films in Guam and San
Francisco, California were cancelled.
The rule laid down in Mendoza v. Philippine Air Lines, Inc. [90
Phil. 836 (1952)] cannot be any clearer:
...Under Art.1107 of the Civil Code, a debtor in good faith like
the defendant herein, may be held liable only for damages
that were foreseen or might have been foreseen at the time
the contract of transportation was entered into. The trial
court correctly found that the defendant company could not
have foreseen the damages that would be suffered by
Mendoza upon failure to deliver the can of film on the 17th
of September, 1948 for the reason that the plans of Mendoza
to exhibit that film during the town fiesta and his
preparations, specially the announcement of said exhibition
by posters and advertisement in the newspaper, were not
called to the defendant's attention.
In our research for authorities we have found a case very
similar to the one under consideration. In the case of
Chapman vs. Fargo, L.R.A. (1918 F) p. 1049, the plaintiff in
Troy, New York, delivered motion picture films to the
defendant Fargo, an express company, consigned and to be
delivered to him in Utica. At the time of shipment the
attention of the express company was called to the fact that
the shipment involved motion picture films to be exhibited in
Utica, and that they should be sent to their destination, rush.
There was delay in their delivery and it was found that the
plaintiff because of his failure to exhibit the film in Utica due
to the delay suffered damages or loss of profits. But the
highest court in the State of New York refused to award him
special damages. Said appellate court observed:
But before defendant could be held to special damages, such
as the present alleged loss of profits on account of delay or
failure of delivery, it must have appeared that he had notice
at the time of delivery to him of the particular circumstances
attending the shipment, and which probably would lead to
such special loss if he defaulted. Or, as the rule has been
stated in another form, in order to purpose on the defaulting
party further liability than for damages naturally and directly,
i.e., in the ordinary course of things, arising from a breach of
contract, such unusual or extraordinary damages must have
been brought within the contemplation of the parties as the
probable result of breach at the time of or prior to
contracting. Generally, notice then of any special
circumstances which will show that the damages to be
anticipated from a breach would be enhanced has been held
sufficient for this effect.
As may be seen, that New York case is a stronger one than
the present case for the reason that the attention of the
common carrier in said case was called to the nature of the
articles shipped, the purpose of shipment, and the desire to
rush the shipment, circumstances and facts absent in the
present case. [Emphasis supplied.]
Thus, applying the foregoing ruling to the facts of the instant
case, in the absence of a showing that petitioner's attention
was called to the special circumstances requiring prompt
delivery of private respondent Pangan's luggages, petitioner
cannot be held liable for the cancellation of private
respondents' contracts as it could not have foreseen such an
eventuality when it accepted the luggages for transit.
The Court is unable to uphold the Intermediate Appellate
Court's disregard of the rule laid down in Mendoza and
affirmance of the trial court's conclusion that petitioner is
liable for damages based on the finding that "[tlhe
undisputed fact is that the contracts of the plaintiffs for the
exhibition of the films in Guam and California were cancelled
because of the loss of the two luggages in question." [Rollo,
p. 36] The evidence reveals that the proximate cause of the
cancellation of the contracts was private respondent
Pangan's failure to deliver the promotional and advertising
materials on the dates agreed upon. For this petitioner
cannot be held liable. Private respondent Pangan had not
declared the value of the two luggages he had checked in
and paid additional charges. Neither was petitioner privy to
respondents' contracts nor was its attention called to the
condition therein requiring delivery of the promotional and
advertising materials on or before a certain date.
Page 43 of 47
3. With the Court's holding that petitioner's liability is limited
to the amount stated in the ticket, the award of attorney's
fees, which is grounded on the alleged unjustified refusal of
petitioner to satisfy private respondent's just and valid claim,
loses support and must be set aside.
e. Arts 1747, 1752, 1751
f. Check-in Baggage [not in the personal custody of
passenger] – Civil Code provisions on common carrier of
goods. – Arts 1733-1753
g. Hand Carried – baggage [in the personal custody of
passenger or his employee] – Civil Code provisions
concerning responsibility of hotel-keepers [Arts 1998 and
2000-2003]
H. E. HEACOCK COMPANY, plaintiff-appellant, vs.
MACONDRAY & COMPANY, INC., defendant-appellant. G.R.
No. L-16598 October 3, 1921
May a common carrier, by stipulations inserted in the bill of
lading, limit its liability for the loss of or damage to the cargo
to an agreed valuation of the latter? 1awph!l.net
Three kinds of stipulations have often been made in a bill of
lading. The first is one exempting the carrier from any and all
liability for loss or damage occasioned by its own negligence.
The second is one providing for an unqualified limitation of
such liability to an agreed valuation. And the third is one
limiting the liability of the carrier to an agreed valuation
unless the shipper declares a higher value and pays a higher
rate of freight. According to an almost uniform weight of
authority, the first and second kinds of stipulations are
invalid as being contrary to public policy, but the third is
valid and enforceable.
The authorities relied upon by the plaintiff-appellant (the
Harter Act [Act of Congress of February 13, 1893]: Louisville
Ry. Co. vs. Wynn, 88 Tenn., 320; and Galt vs. Adams Express
Co., 4 McAr., 124; 48 Am. Rep., 742) support the proposition
that the first and second stipulations in a bill of lading are
invalid which either exempt the carrier from liability for loss
or damage occasioned by its negligence, or provide for an
unqualified limitation of such liability to an agreed valuation.
A reading of clauses 1 and 9 of the bill of lading here in
question, however, clearly shows that the present case falls
within the third stipulation, to wit: That a clause in a bill of
lading limiting the liability of the carrier to a certain amount
unless the shipper declares a higher value and pays a higher
rate of freight, is valid and enforceable. This proposition is
supported by a uniform lien of decisions of the Supreme
Court of the United States rendered both prior and
subsequent to the passage of the Harter Act, from the case
of Hart vs. Pennsylvania R. R. Co. (decided Nov. 24, 1884; 112
U. S., 331), to the case of the Union Pacific Ry. Co. vs. Burke
(decided Feb. 28, 1921, Advance Opinions, 1920-1921, p.
318).
In the case of Hart vs. Pennsylvania R. R. Co., supra, it was
held that "where a contract of carriage, signed by the
shipper, is fairly made with a railroad company, agreeing on
a valuation of the property carried, with the rate of freight
based on the condition that the carrier assumes liability only
to the extent of the agreed valuation, even in case of loss or
damage by the negligence of the carrier, the contract will be
upheld as proper and lawful mode of securing a due
proportion between the amount for which the carrier may be
responsible and the freight he receives, and protecting
himself against extravagant and fanciful valuations."
In the case of Union Pacific Railway Co. vs. Burke, supra, the
court said: "In many cases, from the decision in
Hart vs. Pennsylvania R. R. Co. (112 U. S. 331; 28 L. ed., 717; 5
Sup. Ct. Rep., 151, decided in 1884), to Boston and M. R.
Co. vs. Piper (246 U. S., 439; 62 L. ed., 820; 38 Sup. Ct. Rep.,
354; Ann. Cas. 1918 E, 469, decided in 1918), it has been
declared to be the settled Federal law that if a common
carrier gives to a shipper the choice of two rates, the lower of
the conditioned upon his agreeing to a stipulated valuation
of his property in case of loss, even by the carrier's
negligence, if the shipper makes such a choice,
understandingly and freely, and names his valuation, he
cannot thereafter recover more than the value which he thus
places upon his property. As a matter of legal distinction,
estoppel is made the basis of this ruling, — that, having
accepted the benefit of the lower rate, in common honesty
the shipper may not repudiate the conditions on which it was
obtained, — but the rule and the effect of it are clearly
established."
The syllabus of the same case reads as follows: "A carrier may
not, by a valuation agreement with a shipper, limit its liability
in case of the loss by negligence of an interstate shipment to
less than the real value thereof, unless the shipper is given a
choice of rates, based on valuation."
A limitation of liability based upon an agreed value to obtain
a lower rate does not conflict with any sound principle of
public policy; and it is not conformable to plain principles of
justice that a shipper may understate value in order to
reduce the rate and then recover a larger value in case of
loss. (Adams Express Co. vs.Croninger 226 U. S. 491, 492.) See
also Reid vs. Farbo (130 C. C. A., 285); Jennings vs. Smith (45
C. C. A., 249); George N. Pierce Co. vs. Wells, Fargo and Co.
(227 U. S., 278); Wells, Fargo & Co. vs. Neiman-Marcus Co.
(227 U. S., 469).
It seems clear from the foregoing authorities that the clauses
(1 and 9) of the bill of lading here in question are not
contrary to public order. Article 1255 of the Civil Code
provides that "the contracting parties may establish any
agreements, terms and conditions they may deem advisable,
provided they are not contrary to law, morals or public
order." Said clauses of the bill of lading are, therefore, valid
and binding upon the parties thereto.
II. The question presented by the appeal of the defendant is
whether clause 1 or clause 9 of the bill of lading here in
question is to be adopted as the measure of defendant's
liability. Clause 1 provides as follows:
1. It is mutually agreed that the value of the goods receipted
for above does not exceed $500 per freight ton, or, in
proportion for any part of a ton, unless the value be
expressly stated herein and ad valorem freight paid thereon.
Clause 9 provides:
9. Also, that in the even of claims for short delivery of, or
damage to, cargo being made, the carrier shall not be liable
for more than the net invoice price plus freight and insurance
less all charges saved, and any loss or damage for which the
carrier may be liable shall be adjusted pro rata on the said
basis.
The defendant-appellant contends that these two clauses, if
construed together, mean that the shipper and the carrier
stipulate and agree that the value of the goods receipted for
does not exceed $500 per freight ton, but should the invoice
value of the goods be less than $500 per freight ton, then
Page 44 of 47
the invoice value governs; that since in this case the invoice
value is more than $500 per freight ton, the latter valuation
should be adopted and that according to that valuation, the
proportionate value of the clocks in question is only P76.36
which the defendant is ready and willing to pay to the
plaintiff.
It will be noted, however, that whereas clause 1 contains only
an implied undertaking to settle in case of loss on the basis
of not exceeding $500 per freight ton, clause 9 contains
an express undertaking to settle on the basis of the net
invoice price plus freight and insurance less all charges
saved. "Any loss or damage for which the carrier may be
liable shall be adjusted pro rata on the said basis," clause 9
expressly provides. It seems to us that there is an
irreconcilable conflict between the two clauses with regard to
the measure of defendant's liability. It is difficult to reconcile
them without doing violence to the language used and
reading exceptions and conditions into the undertaking
contained in clause 9 that are not there. This being the case,
the bill of lading in question should be interpreted against
the defendant carrier, which drew said contract. "A written
contract should, in case of doubt, be interpreted against the
party who has drawn the contract." (6 R. C. L. 854.) It is a
well-known principle of construction that ambiguity or
uncertainty in an agreement must be construed most
strongly against the party causing it. (6 R. C. L., 855.) These
rules as applicable to contracts contained in bills of lading.
"In construing a bill of lading given by the carrier for the safe
transportation and delivery of goods shipped by a consignor,
the contract will be construed most strongly against the
carrier, and favorably to the consignor, in case of doubt in
any matter of construction." (Alabama, etc. R. R.
Co. vs. Thomas, 89 Ala., 294; 18 Am. St. Rep., 119.)
SEA-LAND SERVICE, INC., petitioner, vs. INTERMEDIATE
APPELLATE COURT and PAULINO CUE, doing business under
the name and style of "SEN HIAP HING," respondents. G.R.
No. 75118 August 31, 1987
To begin with, there is no question of the right, in principle,
of a consignee in a bill of lading to recover from the carrier
or shipper for loss of, or damage to, goods being
transported under said bill ,although that document may
have been — as in practice it oftentimes is — drawn up only
by the consignor and the carrier without the intervention of
the consignee. In Mendoza vs. Philippine Air Lines, Inc. 11 the
Court delved at some length into the reasons behind this
when, upon a claim made by the consignee of a motion
picture film shipped by air that he was never a party to the
contract of transportation and was a complete stranger
thereto, it said:
But appellant now contends that he is not suing on a breach
of contract but on a tort as provided for in Art. 1902 of the
Civil Code. We are a little perplexed as to this new theory of
the appellant. First, he insists that the articles of the Code of
Commerce should be applied: that he invokes the provisions
of aid Code governing the obligations of a common carrier
to make prompt delivery of goods given to it under a
contract of transportation. Later, as already said, he says that
he was never a party to the contract of transportation and
was a complete stranger to it, and that he is now suing on a
tort or a violation of his rights as a stranger (culpa aquiliana)
If he does not invoke the contract of carriage entered into
with the defendant company, then he would hardly have any
leg to stand on. His right to prompt delivery of the can of
film at the Phil. Air Port stems and is derived from the
contract of carriage under which contract, the PAL undertook
to carry the can of film safely and to deliver it to him
promptly. Take away or ignore that contract and the
obligation to carry and to deliver and right to prompt
delivery disappear. 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. In the present case, the findings
of the trial court which as already stated, are accepted by the
parties and which we must accept are to the effect that the
LVN Pictures Inc. and Jose Mendoza on one side, and the
defendant company on the other, entered into a contract of
transportation (p. 29, Rec. on Appeal). One interpretation of
said finding is that the LVN Pictures Inc. through previous
agreement with Mendoza acted as the latter's agent. When
he negotiated with the LVN Pictures Inc. to rent the film
"Himala ng Birhen" and show it during the Naga town fiesta,
he most probably authorized and enjoined the Picture
Company to ship the film for him on the PAL on September
17th. Another interpretation is that even if the LVN Pictures
Inc. as consignor of its own initiative, and acting
independently of Mendoza for the time being, made
Mendoza as consignee, a stranger to the contract if that is
possible, nevertheless when he, Mendoza appeared at the
Phil Air Port armed with the copy of the Air Way Bill (Exh. 1)
demanding the delivery of the shipment to him, he thereby
made himself a party to the contract of transportation. The
very citation made by appellant in his memorandum
supports this view. Speaking of the possibility of a conflict
between the order of the shipper on the one hand and the
order of the consignee on the other, as when the shipper
orders the shipping company to return or retain the goods
shipped while the consignee demands their delivery,
Malagarriga in his book Codigo de Comercio Comentado,
Vol. 1, p. 400, citing a decision of the Argentina Court of
Appeals on commercial matters, cited by Tolentino in Vol. II
of his book entitled "Commentaries and Jurisprudence on
the Commercial Laws of the Philippines" p. 209, says that the
right of the shipper to countermand the shipment terminates
when the consignee or legitimate holder of the bill of lading
appears with such big of lading before the carrier and makes
himself a party to the contract. Prior to that time he is a
stranger to the contract.
Still another view of this phase of the case is that
contemplated in Art. 1257, paragraph 2, of the old Civil Code
(now Art, 1311, second paragraph) which reads thus:
Should the contract contain any stipulation in favor of a third
person, he may demand its fulfillment provided he has given
notice of his acceptance to the person bound before the
stipulation has been revoked.
Here, the contract of carriage between the LVN Pictures Inc.
and the defendant carrier contains the stipulations of
delivery to Mendoza as consignee. His demand for the
delivery of the can of film to him at the Phil Air Port may be
regarded as a notice of his acceptance of the stipulation of
the delivery in his favor contained in the contract of carriage
and delivery. In this case he also made himself a party to the
contract, or at least has come to court to enforce it. His cause
of action must necessarily be founded on its breach.
Since the liability of a common carrier for loss of or damage
to goods transported by it under a contract of carriage is
governed by the laws of the country of destination 12 and
the goods in question were shipped from the United States
to the Philippines, the liability of petitioner Sea-Land to the
respondent consignee is governed primarily by the Civil
Code, and as ordained by the said Code, suppletorily, in all
matters not determined thereby, by the Code of Commerce
and special laws. 13 One of these suppletory special laws is
the Carriage of Goods by Sea Act, U.S. Public Act No. 521
which was made applicable to all contracts for the carriage of
Page 45 of 47
goods by sea to and from Philippine ports in foreign trade by
Commonwealth Act No. 65, approved on October 22, 1936.
Sec. 4(5) of said Act in part reads:
(5) Neither the carrier nor the ship shall in any event be or
become liable for any loss or damage to or in connection
with the transportation of goods in an amount exceeding
$500 per package lawful money of the United States, or in
case of goods not shipped in packages, per customary
freight unit, or the equivalent of that sum in other currency,
unless the nature and value of such goods have been
declared by the shipper before shipment and inserted in the
bill of lading. This declaration, if embodied in the bill of
lading, shall be prima facie evidence, but shall not be
conclusive on the carrier.
By agreement between the carrier, master, or agent of the
carrier, and the shipper another maximum amount than that
mentioned in this paragraph may be fixed: Provided, That
such maximum shall not be less than the figure above
named. In no event shall the carrier be liable for more than
the amount of damage actually sustained.
xxx xxx xxx
Clause 22, first paragraph, of the long form bill of lading
customarily issued by Sea-Land to its shipping clients 14 is a
virtual copy of the first paragraph of the foregoing provision.
It says:
22. VALUATION. In the event of any loss, damage or delay to
or in connection with goods exceeding in actual value $500
per package, lawful money of the United States, or in case of
goods not shipped in packages, per customary freight unit,
the value of the goods shall be deemed to be $500 per
package or per customary freight unit, as the case may be,
and the carrier's liability, if any, shall be determined on the
basis of a value of $500 per package or customary freight
unit, unless the nature and a higher value shall be declared
by the shipper in writing before shipment and inserted in this
Bill of Lading.
And in its second paragraph, the bill states:
If a value higher than $500 shag have been declared in
writing by the shipper upon delivery to the carrier and
inserted in this bill of lading and extra freight paid, if
required and in such case if the actual value of the goods per
package or per customary freight unit shall exceed such
declared value, the value shall nevertheless be deemed to be
declared value and the carrier's liability, if any, shall not
exceed the declared value and any partial loss or damage
shall be adjusted pro rata on the basis of such declared
value.
Since, as already pointed out, Article 1766 of the Civil Code
expressly subjects the rights and obligations of common
carriers to the provisions of the Code of Commerce and of
special laws in matters not regulated by said (Civil) Code, the
Court fails to fathom the reason or justification for the
Appellate Court's pronouncement in its appealed Decision
that the Carriage of Goods by Sea Act " ... has no application
whatsoever in this case. 15 Not only is there nothing in the
Civil Code which absolutely prohibits agreements between
shipper and carrier limiting the latter's liability for loss of or
damage to cargo shipped under contracts of carriage; it is
also quite clear that said Code in fact has agreements of such
character in contemplation in providing, in its Articles 1749
and 1750, that:
ART. 1749 A stipulation that the common carrier's liability is
limited to the value of the goods appearing in the bill of
lading, unless the shipper or owner declares a greater value,
is binding.
ART. 1750. A contract fixing the sum that may be recovered
by the owner or shipper for the loss, destruction, or
deterioration of the goods is valid, if it is reasonable and just
under the circumstances, and has been fairly and freely
agreed upon.
Nothing contained in section 4(5) of the Carriage of Goods
by Sea Act already quoted is repugnant to or inconsistent
with any of the just-cited provisions of the Civil Code. Said
section merely gives more flesh and greater specificity to the
rather general terms of Article 1749 (without doing any
violence to the plain intent thereof) and of Article 1750, to
give effect to just agreements limiting carriers' liability for
loss or damage which are freely and fairly entered into.
It seems clear that even if said section 4(5) of the Carriage of
Goods by Sea Act did not exist, the validity and binding
effect of the liability limitation clause in the bill of lading here
are nevertheless fully sustainable on the basis alone of the
cited Civil Code provisions. 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 justice and
fairness of that law itself, and this the private respondent
does not pretend to do. But over and above that
consideration, the lust and reasonable character of such
stipulation is implicit in it giving the shipper or owner the
option of avoiding acrrual 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. And
since the shipper here has not been heard to complaint of
having been "rushed," imposed upon or deceived in any
significant way into agreeing to ship the cargo under a bill of
lading carrying such a stipulation — in fact, it does not
appear that said party has been heard from at all insofar as
this dispute is concerned — there is simply no ground for
assuming that its agreement thereto was not as the law
would require, freely and fairly sought and given.
The private respondent had no direct part or intervention in
the execution of the contract of carriage between the shipper
and the carrier as set forth in the bill of lading in question. As
pointed out in Mendoza vs. PAL, supra, the right of a party in
the same situation as respondent here, to recover for loss of
a shipment consigned to him under a bill of lading drawn up
only by and 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 thereto when he demands fulfillment
of that stipulation, in this case the delivery of the goods or
cargo shipped. In neither capacity can he assert personally, in
bar to any provision of the bill of lading, the alleged
circumstance that fair and free agreement to such provision
was vitiated by its being in such fine print as to be hardly
readable. Parenthetically, it may be observed that in one
comparatively recent case 16where this Court found that a
similar package limitation clause was "(printed in the smallest
type on the back of the bill of lading, it nonetheless ruled
that the consignee was bound thereby on the strength of
authority holding that such provisions on liability limitation
are as much a part of a bill of lading as though physically in it
and as though placed therein by agreement of the parties.
There can, therefore, be no doubt or equivocation about the
validity and enforceability of freely-agreed-upon stipulations
Page 46 of 47
in a contract of carriage or bill of lading limiting the liability
of the carrier to an agreed valuation unless the shipper
declares a higher value and inserts it into said contract or bill.
This pro position, moreover, rests upon an almost uniform
weight of authority. 17
The issue of alleged deviation is also settled by Clause 13 of
the bill of lading which expressly authorizes trans-shipment
of the goods at any point in the voyage in these terms:
13. THROUGH CARGO AND TRANSSHIPMENT. The carrier or
master, in the exercise of its or his discretion and although
transshipment or forwarding of the goods may not have
been contemplated or provided for herein, may at port of
discharge or any other place whatsoever transship or forward
the goods or any part thereof by any means at the risk and
expense of the goods and at any time, whether before or
after loading on the ship named herein and by any route,
whether within or outside the scope of the voyage or beyond
the port of discharge or destination of the goods and
without notice to the shipper or consignee. The carrier or
master may delay such transshipping or forwarding for any
reason, including but not limited to awaiting a vessel or
other means of transportation whether by the carrier or
others.
Said provision obviates the necessity to offer any other
justification for offloading the shipment in question in Manila
for transshipment to Cebu City, the port of destination
stipulated in the bill of lading. Nonetheless, the Court takes
note of Sea-Land's explanation that it only directly serves the
Port of Manila from abroad in the usual course of voyage of
its carriers, hence its maintenance of arrangements with a
local forwarder. Aboitiz and Company, for delivery of its
imported cargo to the agreed final point of destination
within the Philippines, such arrangements not being
prohibited, but in fact recognized, by law. 18
Furthermore, this Court has also ruled 19 that the Carriage of
Goods by Sea Act is applicable up to the final port of
destination and that the fact that transshipment was made
on an interisland vessel did not remove the contract of
carriage of goods from the operation of said Act.
Private respondent also contends that the aforecited Clauses
22 and 13 of the bill of lading relied upon by petitioner Sea
Land form no part of the short-form bill of lading attached to
his complaint before the Trial Court and appear only in the $23,256.00 for said shipment.24 All circumstances considered,
long form of that document which, he claims. SeaLand it is just and fair that Sea-Land's dollar obligation be
offered (as its Exhibit 2) as an unused blank form with no convertible at the same rate.
entries or signatures therein. He, however, admitted in the
Trial Court that several times in the past shipments had been
delivered to him through Sea-Land, 20 from which the
assumption may fairly follow that by the time of the
consignment now in question, he was already reasonably
apprised of the usual terms covering contracts of carriage
with said petitioner.
At any rate, as observed earlier, it has already been held that
the provisions of the Carriage of Goods by Sea Act on
package limitation [sec 4(5) of the Act hereinabove referred
to] are as much a part of a bill of lading as though actually
placed therein by agreement of the parties. 21
Private respondent, by making claim for loss on the basis of
the bill of lading, to all intents and purposes accepted said
bill. Having done so, he —
... becomes bound by all stipulations contained therein
whether on the front or the back thereof. Respondent cannot
elude its provisions simply because they prejudice him and
take advantage of those that are beneficial. Secondly, the
fact that respondent shipped his goods on board the ship of
petitioner and paid the corresponding freight thereon shows
that he impliedly accepted the bill of lading which was issued
in connection with the shipment in question, and so it may
be said that the same is finding upon him as if it had been
actually signed by him or by any other person in his behalf.
... 22.
There is one final consideration. The private respondent
admits 23 that as early as on April 22, 1981, Sea-Land had
offered to settle his claim for US$4,000.00, the limit of said
carrier's liability for loss of the shipment under the bill of
lading. This Court having reached the conclusion that said
sum is all that is justly due said respondent, it does not
appear just or equitable that Sea-Land, which offered that
amount in good faith as early as six years ago, should, by
being made to pay at the current conversion rate of the
dollar to the peso, bear for its own account all of the increase
in said rate since the time of the offer of settlement. The
decision of the Regional Trial Court awarding the private
respondent P186,048.00 as the peso value of the lost
shipment is clearly based on a conversion rate of P8.00 to
US$1.00, said respondent having claimed a dollar value of
Page 47 of 47