1.Ace Navigation Co Inc v FGU Insurance Corporation. S.A.
/UNKNOWN CHARTERER OF THE VESSEL 'PAKARTI
GR 171591
June 25,2012
BELTRAN
Topic: Bill of Lading and Other Formalities - Concepts, Definition, Kinds of
Bill of Lading and Nature of Bill of Lading
Petitioner: Ace Navigation
Respondent: FGU Insurance Corp and Pioneer Insurance and Surety Corp
Ponente: Perlas-Bernabe
DOCTRINES:
FACTS:
● On July 19, 1990, Cardia Limited (CARDIA) shipped on board the
vessel M/V Pakarti Tigaat Shanghai Port China, 8,260 metric tons or
165,200 bags of Grey Portland Cement to be discharged at the Port of
Manila and delivered to its consignee, Heindrich Trading Corp.
(HEINDRICH).
● The subject shipment was insured with respondents, FGU Insurance
Corp. (FGU) and Pioneer Insurance and Surety Corp. (PIONEER),
against all risks under Marine Open Policy No. 062890275 for the
amount of P18,048,421.00.
● The subject vessel is owned by P.T. Pakarti Tata (PAKARTI) which it
chartered to Shinwa Kaiun Kaisha Ltd. (SHINWA).
● Representing itself as owner of the vessel, SHINWA entered into a
charter party contract with Sky International, Inc. (SKY), an agent of Kee
Yeh Maritime Co. (KEE YEH),
o Which further chartered it to Regency Express Lines S.A.
(REGENCY).
o Thus, it was REGENCY that directly dealt with consignee
HEINDRICH, and accordingly, issued Clean Bill of Lading No.
SM-1. S
● On July 23, 1990, the vessel arrived at the Port of Manila and the
shipment was discharged. However, upon inspection of HEINDRICH
and petitioner Ace Navigation Co., Inc. (ACENAV), agent of CARDIA, it
was found that out of the 165,200 bags of cement, 43,905 bags were in
bad order and condition.
● Unable to collect the sustained damages in the amount of
P1,423,454.60 from the shipper, CARDIA, and the charterer,
REGENCY, the respondents, as co-insurers of the cargo, each paid the
consignee, HEINDRICH, the amounts of P427,036.40 and P284,690.94,
respectively, and consequently became subrogated to all the rights and
causes of action accruing to HEINDRICH.
● Thus, on August 8, 1991, respondents filed a complaint for damages
against the following defendants: "REGENCY EXPRESS LINES,
TIGA'/UNKNOWN OWNER and/or DEMIFE (sic) CHARTERER OF THE
VESSEL 'PAKARTI TIGA', SKY INTERNATIONAL, INC. and/or ACE
NAVIGATION COMPANY, INC." which was docketed as Civil Case No.
90-2016.
● In their answer with counterclaim and cross-claim, PAKARTI and
SHINWA alleged that the suits against them cannot prosper because
they were not named as parties in the bill of lading.
● Similarly, ACENAV claimed that, not being privy to the bill of lading, it
was not a real party-in-interest from whom the respondents can demand
compensation.
● It further denied being the local ship agent of the vessel or REGENCY
and claimed to be the agent of the shipper, CARDIA.
● For its part, SKY denied having acted as agent of the charterer, KEE
YEH, which chartered the vessel from SHINWA, which originally
chartered the vessel from PAKARTI. SKY also averred that it cannot be
sued as an agent without impleading its alleged principal, KEE YEH.
● On September 30, 1991, HEINDRICH filed a similar complaint against
the same parties and Commercial Union Assurance Co.
(COMMERCIAL), docketed as Civil Case No. 91-2415, which was later
consolidated with Civil Case No. 91-2016.
o However, the suit against COMMERCIAL was subsequently
dismissed on joint motion by the respondents and
COMMERCIAL.
● The RTC dismissed the complain
● CA which, in its assailed found PAKARTI, SHINWA, KEE YEH and its
agent, SKY, solidarily liable for 70% of the respondents' claim, with the
remaining 30% to be shouldered
● Finding that the parties entered into a time charter party, not a demise
or bareboat charter where the owner completely and exclusively
relinquishes possession, command and navigation to the charterer,
● The CA held PAKARTI, SHINWA, KEE YEH and its agent, SKY,
solidarily liable for 70% of the damages sustained by the cargo.
● This solidarity liability was borne by their failure to prove that they
exercised extraordinary diligence in the vigilance over the bags of
cement entrusted to them for transport.
● On the other hand, the CA passed on the remaining 30% of the amount
claimed to the shipper, CARDIA, and its agent, ACENAV, upon a
􏰄nding that the damage was partly due to the cargo's inferior packing.
● With respect to REGENCY, the CA affirmed the findings of the RTC that
it did not acquire jurisdiction over its person for defective service of
summons.
● PAKARTI, SHINWA, SKY and ACENAV filed separate petitions for
review on certiorari before the Court,
● On April 21, 2006, SKY manifested that it will no longer pursue its
petition in G.R. No. 171614 and has preferred to await the resolution in
G.R. No. 171663 filed by PAKARTI and SHINWA. Accordingly, an entry
of judgment
● Then PAKARTI and SHINWA moved for the withdrawal of their petitions
for lack of interest, which the Court granted in its January 21, 2008
Resolution. The corresponding entry of judgment against them was
made on March 17, 2008.
ISSUE:
● W/N the respondents may be liable to the 30% of their claim?
RULING:
● Maintaining that it was not a party to the bill of lading,
ACENAV asserts that it cannot be held liable for the damages
sought to be collected by the respondents.
● It also alleged that since its principal, CARDIA, was not impleaded
as a party- defendant/respondent in the instant suit, no liability can
therefore attach to it as a mere agent.
● Moreover, there is dearth of evidence showing that it was
responsible for the supposed defective packing of the goods upon
which the award was based.
SC
● A bill of lading is defined as "an instrument in writing, signed by a carrier
or his agent, describing the freight so as to identify it, stating the name
of the consignor, the terms of the contract for carriage, and agreeing or
directing that the freight to be delivered to the order or assigns of a
speci􏰄ed person at a specified place."
o It operates both as a receipt and as a contract. As a receipt, it
recites the date and place of shipment, describes the goods as
to quantity, weight, dimensions, identification marks and
condition, quality, and value.
o As a contract, it names the contracting parties, which include
the consignee, 􏰄fixes the route, destination, and freight rates
or charges, and stipulates the rights and obligations assumed
by the parties.
o As such, it shall only be binding upon the parties who
make them, their assigns and heirs.
● In this case, the original parties to the bill of lading are:
o (a) the shipper CARDIA;
o (b) the carrier PAKARTI; and
o (c) the consignee HEINDRICH.
● However, by virtue of their relationship with PAKARTI under separate
charter arrangements, SHINWA, KEE YEH and its agent SKY likewise
became parties to the bill of lading.
● In the same vein, ACENAV, as admitted agent of CARDIA, also became
a party to the said contract of carriage.
● The respondents, however, maintain that ACENAV is a ship agent and
not a mere agent of CARDIA, as found by both the CA and the RTC.
● The Court disagrees.Article 586 of the Code of Commerce provides:
o ART. 586. The shipowner and the ship agent shall be civilly
liable for the acts of the captain and for the obligations
contracted by the latter to repair, equip, and provision the
vessel, provided the creditor proves that the amount claimed
was invested therein.
o By ship agent is understood the person entrusted with the
provisioning of a vessel, or who represents her in the port in
which she may be found.
● Records show that the obligation of ACENAV was limited to informing
the consignee HEINDRICH of the arrival of the vessel in order for the
latter to immediately take possession of the goods.
● No evidence was offered to establish that ACENAV had a hand in the
provisioning of the vessel or that it represented the carrier, its
charterers, or the vessel at any time during the unloading of the goods.
● Clearly, ACENAV's participation was simply to assume responsibility
over the cargo when they were unloaded from the vessel.
o Hence, no reversible error was committed by the courts a quo
in holding that ACENAV was not a ship agent within the
meaning and context of Article 586 of the Code of Commerce,
but a mere agent of CARDIA, the shipper.
o On this score, Article 1868 of the Civil Code states:
▪ ART. 1868. By the contract of agency, a person binds
himself to render some service or to do something in
representation or on behalf of another, with the
consent or authority of the latter.
▪ Corollarily, Article 1897 of the same Code provides
that an agent is not personally liable to the party with
whom he contracts, unless he expressly binds himself
or exceeds the limits of his authority without giving
such party su􏰅cient notice of his powers.
● Both exceptions do not obtain in this case.
● Records are bereft of any showing that ACENAV exceeded its authority
in the discharge of its duties as a mere agent of CARDIA.
● Neither was it alleged, much less proved, that ACENAV's limited
obligation as agent of the shipper, CARDIA, was not known to
HEINDRICH.
● Furthermore, since CARDIA was not impleaded as a party in the instant
 suit, the liability attributed upon it by the CA on the basis of its finding
that the damage sustained by the cargo was due to improper packing
cannot be borne by ACENAV.
● As mere agent, ACENAV cannot be made responsible or held
accountable for the damage supposedly caused by its principal.
● Accordingly, the Court finds that the CA erred in ordering ACENAV
jointly and severally liable with CARDIA to pay 30% of the respondents'
claim.
● WHEREFORE, the assailed Decision and Resolution of the Court of
Appeals are hereby REVERSED. The complaint against petitioner Ace
Navigation Co., Inc. is hereby DISMISSED.
2. G.R. No. 116863. February 12, 1998 KENG HUA PAPER
PRODUCTS CO. INC., Petitioner, v. COURT OF APPEALS; REGIONAL
TRIAL COURT OF MANILA, BR. 21; and SEA-LAND SERVICE, INC.,
Respondents.
Topic: Bill of Lading as Contract > Parties
Petitioner: Keng Hua Paper Products Co. Inc.
Respondent: Sea-Land Service Inc.
Doctrine:
● A Bill of Lading serves as a contract by which three parties, namely,
the shipper, the carrier, and the consignee undertake specific
responsibilities and assume stipulated obligations
Facts:
● Sea-Land Service received at its Hong Kong terminal a
sealed container containing seventy-six bales of unsorted
waste paper for shipment to Keng Hua Paper Products, Co.
in Manila.
● A bill of lading to cover the shipment was issued by the
Sea-Land Service
● On July 9, 1982, the shipment was discharged at the
Manila International Container Port. Notices of arrival were
transmitted to Keng Hua but the latter failed to discharge
the shipment from the container during the free time
period or grace period.
● Shipment was only unloaded after 481 days
● During the 481-day period, demurrage charges accrued.
● Keng Hua refused to pay the demurrage even after
demands from Sea-Land Service, hence Sea-Land filed a
complaint to recover
● Keng Hua asserts:
○ Under the letter of credit, the remaining balance of
the shipment was only ten (10) metric tons
however, the shipment plaintiff was asking
defendant to accept was twenty (20) metric tons
which is ten (10) metric tons more than the
remaining balance
○ that if defendant were to accept the shipment, it
would be violating Central Bank rules and
regulations and custom and tariff laws
○ that plaintiff had no cause of action against the
defendant because the latter did not hire the
former to carry the merchandise
○ that the cause of action should be against the
shipper which contracted the plaintiffs services and
not against defendant
● RTC found Keng Hua liable for demurrage, attorneys fees
and expenses of litigation.
● Court of Appeals denied the appeal and affirmed the lower
courts decision in toto.
Issue: WON Kend Hua was bound by the Bill of Lading. Yes.
Ruling:
● A bill of lading serves two functions.
○ First, it is a receipt for the goods shipped.
○ Second, it is a contract by which three parties,
namely, the shipper, the carrier, and the consignee
undertake specific responsibilities and assume
stipulated obligations
● In the case at bar, both lower courts held that the bill of lading was
a valid and perfected contract between the shipper (Ho Kee), the
consignee (Petitioner Keng Hua), and the carrier (Private
Respondent Sea-Land).
● Section 17 of the bill of lading provided that the shipper and the
consignee were liable for the payment of demurrage charges for
the failure to discharge the containerized shipment beyond the
grace period allowed by tariff rules.
● Petitioner is bound by the Bill of Lading:
○ Petitioner admits that it received the bill of lading
immediately after the arrival of the shipment16 on July 8,
1982.
○ Having been afforded an opportunity to examine the said
document, petitioner did not immediately object to or
dissent from any term or stipulation therein.
○ It was only six months later, on January 24, 1983, that
petitioner sent a letter to private respondent saying that it
could not accept the shipment. Petitioners inaction for
such a long period conveys the clear inference that it
accepted the terms and conditions of the bill of lading.
 ○ The letter merely proved petitioners refusal to pick up the
cargo, not its rejection of the bill of lading.
○ Petitioners reliance on the Notice of Refused or On Hand
Freight, as proof of its nonacceptance of the bill of lading,
is of no consequence. Said notice was not written by
petitioner; it was sent by private respondent to petitioner in
November 1982, or four months after petitioner received
the bill of lading.
○ The notice and the letter support not belie the findings of
the two lower courts that the bill of lading was impliedly
accepted by petitioner.
○ Petitioners attempt to evade its obligation to receive the
shipment on the pretext that this may cause it to violate
customs, tariff and central bank laws must likewise fail.
○ Mere apprehension of violating said laws, without a clear
demonstration that taking delivery of the shipment has
become legally impossible, cannot defeat the petitioners
contractual obligation and liability under the bill of lading.
● Amount of Demurrage:
○ Petitioner argues that it is not obligated to pay any
demurrage charges because, prior to the filing of the
complaint, private respondent made no demand for the
sum of P67,340. Moreover, private respondents loss and
prevention manager, Loi Gillera, demanded P50,260, but
its counsel, Sofronio Larcia, subsequently asked for a
different amount of P37,800.
○ Petitioners position is puerile. The amount of demurrage
charges in the sum of P67,340 is a factual conclusion of
the trial court that was affirmed by the Court of Appeals
and, thus, binding on this Court.
○ while in his letter dated April 24, 1983,26 private
respondents counsel demanded payment of only P37,800,
the additional demurrage incurred by petitioner due to its
continued refusal to receive delivery of the cargo
ballooned to P67,340 by November 22, 1983.
● On Payment of Interest:
○ Petitioner posits that it first knew of the demurrage claim of
P67,340 only when it received, by summons, private
respondents complaint. Hence, interest may not be
allowed to run from the date of private respondents
extrajudicial demands on March 8, 1983 for P50,260 or on
April 24, 1983 for P37,800, considering that, in both cases,
there was no demand for interest.
○ When an obligation, not constituting a loan or forbearance
of money, is breached, an interest on the amount of
damages awarded may be imposed at the discretion of the
court at the rate of 6% per annum.
○ Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run from
the time the claim is made judicially or extrajudicially
○ When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest,
whether the case falls under paragraph 1 or paragraph 2,
above, shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by
then an equivalent to a forbearance of credit.
○ The case before us involves an obligation not arising from
a loan or forbearance of money; thus, pursuant to Article
2209 of the Civil Code, the applicable interest rate is six
percent per annum.
○ Legal interest rate is six percent, to be computed from
September 28, 1990, the date of the trial courts decision.
WHEREFORE, the assailed Decision is hereby AFFIRMED with the
MODIFICATION that the legal interest of six percent per annum shall be
computed from September 28, 1990 until its full payment before finality of
judgment. The rate of interest shall be adjusted to twelve percent per
annum, computed from the time said judgment became final and executory
until full satisfaction. The award of attorneys fees is DELETED.
 3 Held:
SWEET LINES, INC., petitioner,
vs. No. Actions arising out of the contract of carriage should be filed not only in
HON. BERNARDO TEVES, Presiding Judge, CFI of Misamis Oriental a particular province or city. Contract of adhesions are not the kind of
Branch VII, LEOVIGILDO TANDOG, JR., and ROGELIO TIRO, contract where the parties sit down to deliberate, discuss and agree
respondents. specifically on all its terms, but rather, one which respondents took no
G.R. No. L-37750 May 19, 1978 part at all in preparing. It is only imposed upon them when they paid
Santos, J. for the fare for the freight they wanted to ship.

By: Lacbayo
_____________________________________________________________
Petitioner: SWEET LINES, INC
Respondents: HON. BERNARDO TEVES, Presiding Judge, CFI of Misamis
Oriental Branch VII, LEOVIGILDO TANDOG, JR., and ROGELIO TIRO
Topic: Bill of Lading as Contract - Contract of Adhesion
Doctrine: Please see statements in bold under Held.
_____________________________________________________________
Facts:
Court finds and holds that Condition No. 14 printed at the back of the
passage tickets should be held as void and unenforceable for the following
reasons:
1. Circumstances obligation in the inter-island ship will prejudice rights and
interests of innumerable passengers in different parts of the country who,
under Condition No. 14, will have to file suits against petitioner only in the
City of Cebu;
2. Subversive of public policy on transfers of venue of actions; and
3. Philosophy underlying the provisions of transfers of venue of actions is the
convenience of the plaintiffs as well as his witnesses and to promote the
ends of justice.

● Atty. Leovigildo Tandog and Rogelio Tiro bought tickets for Hence, petition for prohibition is hereby dismissed. The restraining order is
Tagbiliran City via the port of Cebu. Since many passengers were LIFTED and SET ASIDE.
bound for Surigao, “M/S Sweet Hope” would not be proceeding to
Bohol. Dispositive: WHEREFORE, the petition for prohibition is DISMISS. ED. The
● They went to the proper branch office and were relocated to “M/S restraining order issued on November 20, 1973, is hereby LIFTED and SET
Sweet Town” where they were forced to agree “to hide at the cargo ASIDE. Costs against petitioner.
section to avoid inspection of the officers of the Philippines
Coastguard.”
● They were exposed to the scorching heat of the sun and the dust
coming from the ship’s cargo of corn grits and their tickets were not
honored so they had to purchase a new one.
● Because of the terrible experience they had, they sued Sweet Lines
for damages and for breach of contract of carriage.
● CFI: Dismissed the complaint for improper venue. A motion was
premised on the condition printed at the back of the tickets and was
later dismissed.
● Hence this instant petition for prohibition for preliminary injunction.

Issue: WON, a common carrier engaged in inter-island shipping stipulate

thru condition printed at the back of passage tickets to its vessels that any
and all actions arising out of the contract of carriage should be filed only in a
particular province or city.
 4. Shewaram v. Philippine Air Lines, Inc.
G.R. No. L-20099, 7 July 1966, 17 SCRA 606
Zaldivar, J.
By: Yana Mendoza
_____________________________________________________________
TOPIC: Prohibited and Limiting Stipulations
PARMANAND SHEWARAM, plaintiff and appellee, vs.
PHILIPPINE AIR LINES, INC., defendant and appellant.
Doctrine:
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.
_____________________________________________________________
Facts:
● Parmanand Shewaram, from Davao, boarded a PAL plane bound
for Manila from Zamboanga. He checked in 3 baggages: a suitcase
and 2 other bags. PAL’s personnel mistagged his baggage to
“Iligan” instead of “Manila.”
● When Shewaram arrived in Manila, his suitcase did not arrive with
his flight because it was sent to Iligan. So, he made a claim with
defendant's personnel in Manila airport and another suitcase similar
to his own which was the only baggage left for that flight, the rest
having been claimed and released to the other passengers of said
flight.
● It was found out that the suitcase shown to and given to the plaintiff
for delivery which he refused to take delivery belonged to a certain
Del Rosario who was bound for Iligan in the same flight with Mr.
Shewaram.
● Among his baggage are transistor radio which costs P197.00 and a
camera costs P176.00, so the total value of the two articles was
P373.00.
● Shewaram then instituted an action to recover damages suffered by
him due to the alleged failure of defendant-appellant Philippines Air
Lines, Inc. to observe extraordinary diligence in the vigilance and
carriage of his luggage.
● The municipal court of Zamboanga City rendered judgment
ordering the appellant to pay appellee
○ P373.00 as actual damages,
○ P100.00 as exemplary damages,
○ P150.00 as attorney's fees,
○ and the costs of the action.
● CFI modified the judgment of the inferior court by ordering the
appellant to pay the appellee only the sum of
○ P373.00 as actual damages, with legal interest from May
6, 1960 and
○ the sum of P150.00 as attorney's fees, eliminating the
award of exemplary damages.
● Hence, this present petition. PAL contention: The lower court erred
in not holding that plaintiff-appellee was bound by the provisions of
the tariff regulations filed by defendant-appellant with the civil
aeronautics board and the conditions of carriage printed at the back
of the plane ticket stub, stated in fine print: “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.”
● PAL maintains that in view of the failure of the Shewaram 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 above quoted condition,
appellee can not demand payment from the appellant of an amount
in excess of P100.00.
Issue: Whether the limited liability rule shall apply in the case at bar?
Held: NO. The limited liability rule shall not apply.
Since this is a stipulation on qualified liability, which operates to reduce the
liability of the carrier, the carrier and the shipper must agree thereupon.
Otherwise, the carrier will be liable for full. PAL is fully liable (for full)
because Shewaran did not agree to the stipulation on the ticket, as
manifested by the fact that Shewaram did not sign the ticket. Ticket
should have been signed.
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.

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."

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 view of the foregoing, the decision appealed from is affirmed, with costs
against the appellant. (PAL IS ORDERED TO PAY P373.00 as actual
damages, with legal interest from May 6, 1960 and the sum of P150.00 as
attorney's fees).

5. Wallem Philippines Shipping, Inc. v. Prudential Guarantee &
Assurance, Inc.
G.R. No. 152158
February 07,2003
By: OSORIO
Topic: Bill of Lading and Other Formalities - Concepts, Definition, Kinds of
Bill of Lading and Nature of Bill of Lading
DOCTRINES:
FACTS :
● Prudential Guarantee & Assurance Inc. (Prudential) brought an
action for damages and attorney's fees against Wallem Philippines
Shipping, Inc. (Wallem) and Seacoast Maritime Corporation
(Seacoast).
● Private respondent Prudential sought the recovery of the sum of
P995,677.00, representing the amount it had paid to its insured,
General Milling Corporation. GMC), for alleged shortage incurred in
the shipment of "Indian Toasted Soyabean Extraction Meal,
Yellow,"
○ Wallem denied liability for damage or loss to the shipment.
● The cargo discharged from the vessel by the use of a suction
device, wherein the cargo passed into a conveyor and weighed
unto GMC's automatic scale. The quantity recorded on GMC's
scale was thereafter compared with that indicated in the bill of
lading. At that point a shortage was discovered.
● Reloading on the trucks was also made through the use of a
suction tube. An alleged shortage of 164.4 metric tons was found,
which was significantly lower than the shortage stated in the
recapitulation above.
● After weighing in Batangas, the bagged shipment was delivered to
GMC's warehouse in Bo. Ugong, Pasig, Metro Manila, and to
Filstream and Universal Robina Corp., as direct receivers of GMC.
● The unloading of the cargo was undertaken by GMC per the "free
out" notation on the bill of lading.
○ Mendoza stated that "free out" means that the vessel is
free from any expenses and discharging operations for the
cargo. It is the cargo receiver who has the responsibility to
get their cargo, after its discharge.
TRIAL COURT
● The trial court ruled that private respondent Prudential failed to
prove by clear, convincing, and competent evidence that there was
a shortage in the shipment.
● Prudential failed to establish by competent evidence the
genuineness and due execution of the bill of lading and, therefore,
the true and exact weight of the shipment when it was loaded unto
the vessel.
● Hence, there was no way by which a shortage could be
determined. The trial court ruled that the shortage, if any, could only
have been incurred either before the loading of the shipment, as
stated in the final report, or after the unloading of the shipment from
the vessel, the latter instance being admitted by Prudential's own
witness, Mr. Alfredo Cunanan.
COURT OF APPEALS
● The Court of Appeals ruled that the bill of lading was prima facie
evidence of the goods therein described, both notations "said to
contain" and "weight unknown" on the bill of lading being
inapplicable to shipments in bulk. Contrary to the opinion of the trial
court, it was ruled by the appeals court that losses were incurred
during the loading operations, and that these losses were the
liability of the carrier.
ISSUE: Whether the bill of lading shall be deemed prima facie evidence
against the shipper? // NO
RULING:
● The Supreme Court reversed the decision and resolution of the
Court of Appeals and reinstated the decision of the trial court.
● The appellate court erred in finding that a shortage had taken
place.
○ Josephine Suarez, Prudential’s claims processor, merely
identified the papers submitted to her in connection with
GMC’s claim.
○ Yang. Ms. Suarez had no personal knowledge of the
contents of the said documents and could only surmise as
to the actual weight of the cargo loaded on M/V Gao
 ○ She admitted that she had no participation in the insurance contract. The contract of insurance must be presented in evidence
preparation of the papers upon which Prudential based its to indicate the extent of its coverage. As there was no determination of rights
cause of action against Wallem. under the insurance contract.
○ Ms. Suarez’s testimony regarding the contents of the
documents is thus hearsay, based as it is on the
knowledge of another person not presented on the witness
stand.
○ Nor has the genuineness and due execution of the said
documents been established. In the absence of clear,
convincing, and competent evidence to prove that the
shipment indeed weighed 4,415.35 metric tons at the port
of origin when it was loaded on the M/V Gao Yang, it
cannot be determined whether there was a shortage of the
shipment upon its arrival in Batangas.
● The Court also ruled that even if the shortage can be definitively
determined, Wallem still cannot be held liable because of the failure
of Prudential to present the contract of insurance or a copy thereof.
● Prudential claimed that it is subrogated to the rights of GMC
pursuant to their insurance contract. For the said purpose, it
submitted a subrogation receipt and a marine cargo risk note.
However, as the trial court pointed out, it is not sufficient.
● As GMC’s subrogee, Prudential can exercise only those rights
granted to GMC under the insurance contract and, therefore, the
contract of insurance must be presented in evidence to indicate the
extent of its coverage.
● When under the custom of any trade the weight of any bulk cargo
inserted in the bill of lading is a weight ascertained or accepted by a
third party other than the carrier or the shipper and the fact that the
weight as ascertained or accepted is stated in the bill of lading, then
notwithstanding anything in this Act, the bill of lading shall not be
deemed prima facie evidence against the carrier of the receipt of
goods of the weight so inserted in the bill of lading, and the
accuracy thereof at the time of shipment shall not be deemed to
have been guaranteed by the shipper.

Other Issues:

Even if the shortage can be definitively determined, Wallem still cannot be

held liable because of the failure of Prudential to present the contract of
insurance or a copy thereof. Prudential claims that it is subrogated to the
rights of GMC pursuant to their insurance contract. For this purpose, it
submitted a subrogation receipt and a marine cargo risk note. However, as
the trial court pointed out, this is not sufficient. As GMC's subrogee,
Prudential can exercise only those rights granted to GMC under the

6 EXPERTRAVEL & TOURS, INC. v. COURT OF APPEALS
G.R. No. 130030; June 25, 1999
VITUG, J.
By: Ericka Agustin
________________________________________________________________________
Topic: Moral Damages
Petitioner: Expertravel & Tours, Inc.
Respondent: The Hon. Court of Appeals and Ricardo Lo
Doctrine:
An award of moral damages would require certain conditions to be met; to
wit: (1) First, there must be an injury, whether physical, mental or
psychological, clearly sustained by the claimant; (2) second, there must be a
culpable act or omission factually established; (3) third, the wrongful act or
omission of the defendant is the proximate cause of the injury sustained by
the claimant; and (4) fourth, the award of damages is predicated on any of
the cases stated in Article 2219.
________________________________________________________________________
FACTS:
● Expertravel and Tours, Inc., a domestic corporation engaged in the
travel agency business, issued to Ricardo Lo 4 round-trip plane
tickets for HongKong, together with hotel accommodations and
transfers, for a total cost of P39,677.20.
○ Lo failed to pay the amount due, Expertravel made several
demands but was ignored. Hence, Expertravel filed a
complaint for recovery of the amount plus damages.
● Lo explained that his account with Expertravel had already been
fully paid. The outstanding account was remitted to Expertravel
through its Chairperson, Ms. Ma. Rocio de Vega, who was
theretofore authorized to deal with the clients of Expertravel.
○ The payment was evidenced by a Monte de Piedad Check
for P42,175.20 for which Ms. De Vega in turn issued City
Trust Check in favor of Expertravel for the amount of
P50,000.00, with the notation “placement advance for
Ricardo Lo, etc.” Per its own invoice, Expertravel received
the sum on 10 October 1987.
● TRIAL COURT: dismissed the complaint and ordered Expertravel to
pay Lo moral damages of P30,000.00, attorney’s fees of P10,000.00
and to pay the costs of suit.
● CA: affirmed in toto the trial court’s decision and held that the
payment made by Lo was valid and binding on Expertravel. Even on
the assumption that Ms. De Vega had not been specifically
authorized by Expertravel, both court said, the fact that the amount
“delivered to the latter remained in its possession up to the present,
meant that the amount redounded to the benefit of Expertravel in
view of Art. 1241 (2) of the Civil Code to the effect that payment
made to a third person shall also be valid in so far as it has
redounded to the benefit of the creditor.
ISSUE:
● W/N Moral Damages can be recovered in a clearly unfounded suit.
● W/N Moral Damages can be awarded for negligence or quasi-delict
that did not result to physical injury to the offended party.
RULING:
● Moral damages are not punitive in nature but are designed to
compensate and alleviate in some way the physical suffering,
mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar
injury unjustly caused to a person. Although incapable of pecuniary
computation, moral damages, nevertheless, must somehow be
proportional to and in approximation of the suffering inflicted. Such
damages, to be recoverable must be the proximate result of a
 wrongful act or omission the factual basis for which is the law could not have meant to impose a penalty on the right to
satisfactorily established by the aggrieved party. litigate. The anguish suffered by a person for having been made a
● An award of moral damages would require certain conditions to be defendant in a civil suit would be no different from the usual worry
met; to wit: (1) First, there must be an injury, whether physical, and anxiety suffered by anyone who is haled to court, a situation
mental or psychological, clearly sustained by the claimant; (2) that cannot by itself be a cogent reason for the award of moral
second, there must be a culpable act or omission factually damages. If the rule were otherwise, then moral damages must
established; (3) third, the wrongful act or omission of the defendant every time be awarded in favor of the prevailing defendant against
is the proximate cause of the injury sustained by the claimant; and an unsuccessful plaintiff.
(4) fourth, the award of damages is predicated on any of the cases ● The Court confirms, once again, the foregoing rules.
stated in Article 2219. Under the provisions of this law, in culpa WHEREFORE, the petition is GRANTED and the award of moral damages to
contractual or breach of contract, moral damages may be respondent Ricardo Lo under the assailed decision is DELETED. In its other
recovered when the defendant acted in bad faith or was guilty of aspects, the appealed decision shall remain undisturbed. No costs.
gross negligence (amounting to bad faith) or in wanton disregard of
his contractual obligation and, exceptionally, when the act of
breach of contract itself is constitutive of tort resulting in physical
injuries.
● By special rule in Article 1764, in relation to Article 2206, of the Civil
Code, moral damages may also be awarded in case the death of a
passenger results from a breach of carriage. In culpa aquiliana, or
quasi-delict, (a) when an act or omission causes physical injuries,
or (b) where the defendant is guilty of intentional tort, moral
damages may aptly be recovered. This rule also applies, as
aforestated, to contracts when breached by tort. In culpa criminal,
moral damages could be lawfully due when the accused is found
guilty of physical injuries, lascivious acts, adultery or concubinage,
illegal or arbitrary detention, illegal arrest, illegal search, or
defamation. Malicious prosecution can also give rise to a claim for
moral damages. The term "analogous cases," referred to in Article
2219, following the ejusdem generis rule, must be held similar to
those expressly enumerated by the law.
● Although the institution of a clearly unfounded civil suit can at
times be a legal justification for an award of attorney's fees, such
filing, however, has almost invariably been held not to be a ground
for an award of moral damages. The rationale for the rule is that