TRANSPORTATION LAW Case Digests G.R. No. 146018. June 25, 2003] EDGAR COKALIONG SHIPPING LINES, INC.,, Petitioner, vs. UCPB GENERAL INSURANCE COMPANY, INC., respondent. The liability of a common carrier for the loss of goods may, by stipulation in the bill of lading, be limited to the value declared by the shipper. On the other hand, the liability of the insurer is determined by the actual value covered by the insurance policy and the insurance premiums paid therefor, and not necessarily by the value declared in the bill of lading. The Case Before the Court is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to set aside the August 31, 2000 Decision[2] and the November 17, 2000 Resolution[3] of the Court of Appeals[4] (CA) in CA-GR SP No. 62751. The dispositive part of the Decision reads: IN THE LIGHT OF THE FOREGOING, the appeal is GRANTED. The Decision appealed from is REVERSED. [Petitioner] is hereby condemned to pay to [respondent] the total amount of P148,500.00, with interest thereon, at the rate of 6% per annum, from date of this Decision of the Court. [Respondents] claim for attorneys fees [is] DISMISSED. [Petitioners] counterclaims are DISMISSED.[5] The assailed Resolution denied petitioners Motion for Reconsideration. On the other hand, the disposition of the Regional Trial Courts[6] Decision,[7] which was later reversed by the CA, states: WHEREFORE, premises considered, the case is hereby DISMISSED for lack of merit. No cost.[8] The Facts The facts of the case are summarized by the appellate court in this wise: Sometime on December 11, 1991, Nestor Angelia delivered to the Edgar Cokaliong Shipping Lines, Inc. (now Cokaliong Shipping Lines), [petitioner] for brevity, cargo consisting of one (1) carton of Christmas dcor and two (2) sacks of plastic toys, to be transported on board the M/V Tandag on its Voyage No. T-189 scheduled to depart from Cebu City, on December 12, 1991, for Tandag, Surigao del Sur. [Petitioner] issued Bill of Lading No. 58, freight prepaid, covering the cargo. Nestor Angelia was both the shipper and consignee of the cargo valued, on the face thereof, in the amount of P6,500.00. Zosimo Mercado likewise delivered cargo to [petitioner], consisting of two (2) cartons of plastic toys and Christmas decor, one (1) roll of floor mat and one (1) bundle of various or assorted goods for transportation thereof from Cebu City to Tandag, Surigao del Sur, on board the said vessel, and said voyage. [Petitioner] issued Bill of Lading No. 59 covering the cargo which, on the face thereof, was valued in the amount of P14,000.00. Under the Bill of Lading, Zosimo Mercado was both the shipper and consignee of the cargo. On December 12, 1991, Feliciana Legaspi insured the cargo, covered by Bill of Lading No. 59, with the UCPB General Insurance Co., Inc., [respondent] for brevity, for the amount of P100,000.00 against all risks under Open Policy No. 002/91/254 for which she was issued, by [respondent], Marine Risk Note No. 18409 on said date. She also insured the cargo covered by Bill of Lading No. 58, with [respondent], for the amount of P50,000.00, under Open Policy No. 002/91/254 on the basis of which [respondent] issued Marine Risk Note No. 18410 on said date. When the vessel left port, it had thirty-four (34) passengers and assorted cargo on board, including the goods of Legaspi. After the vessel had passed by the Mandaue-Mactan Bridge, fire ensued in the engine room, and, despite earnest efforts of the officers and crew of the vessel, the fire engulfed and destroyed the entire vessel resulting in the loss of the vessel and the cargoes therein. The Captain filed the required Marine Protest. Shortly thereafter, Feliciana Legaspi filed a claim, with [respondent], for the value of the cargo insured under Marine Risk Note No. 18409 and covered by Bill of Lading No. 59. She submitted, in support of her claim, a Receipt, dated December 11, 1991, purportedly signed by Zosimo Mercado, and Order Slips purportedly TRANSPORTATION LAW Case Digests signed by him for the goods he received from Feliciana Legaspi valued in the amount of P110,056.00. [Respondent] approved the claim of Feliciana Legaspi and drew and issued UCPB Check No. 612939, dated March 9, 1992, in the net amount of P99,000.00, in settlement of her claim after which she executed a Subrogation Receipt/Deed, for said amount, in favor of [respondent]. She also filed a claim for the value of the cargo covered by Bill of Lading No. 58. She submitted to [respondent] a Receipt, dated December 11, 1991 and Order Slips, purportedly signed by Nestor Angelia for the goods he received from Feliciana Legaspi valued at P60,338.00. [Respondent] approved her claim and remitted to Feliciana Legaspi the net amount of P49,500.00, after which she signed a Subrogation Receipt/Deed, dated March 9, 1992, in favor of [respondent]. On July 14, 1992, [respondent], as subrogee of Feliciana Legaspi, filed a complaint anchored on torts against [petitioner], with the Regional Trial Court of Makati City, for the collection of the total principal amount of P148,500.00, which it paid to Feliciana Legaspi for the loss of the cargo, praying that judgment be rendered in its favor and against the [petitioner] as follows: WHEREFORE, it is respectfully prayed of this Honorable Court that after due hearing, judgment be rendered ordering [petitioner] to pay [respondent] the following. 1. Actual damages in the amount of P148,500.00 plus interest thereon at the legal rate from the time of filing of this complaint until fully paid; 2. Attorneys fees in the amount of P10,000.00; and 3. Cost of suit. [Respondent] further prays for such other reliefs and remedies as this Honorable Court may deem just and equitable under the premises. [Respondent] alleged, inter alia, in its complaint, that the cargo subject of its complaint was delivered to, and received by, [petitioner] for transportation to Tandag, Surigao del Sur under Bill of Ladings, Annexes A and B of the complaint; that the loss of the cargo was due to the negligence of the [petitioner]; and that Feliciana Legaspi had executed Subrogation Receipts/Deeds in favor of [respondent] after paying to her the value of the cargo on account of the Marine Risk Notes it issued in her favor covering the cargo. In its Answer to the complaint, [petitioner] alleged that: (a) [petitioner] was cleared by the Board of Marine Inquiry of any negligence in the burning of the vessel; (b) the complaint stated no cause of action against [petitioner]; and (c) the shippers/consignee had already been paid the value of the goods as stated in the Bill of Lading and, hence, [petitioner] cannot be held liable for the loss of the cargo beyond the value thereof declared in the Bill of Lading. After [respondent] rested its case, [petitioner] prayed for and was allowed, by the Court a quo, to take the depositions of Chester Cokaliong, the Vice-President and Chief Operating Officer of [petitioner], and a resident of Cebu City, and of Noel Tanyu, an officer of the Equitable Banking Corporation, in Cebu City, and a resident of Cebu City, to be given before the Presiding Judge of Branch 106 of the Regional Trial Court of Cebu City. Chester Cokaliong and Noel Tanyu did testify, by way of deposition, before the Court and declared inter alia, that: [petitioner] is a family corporation like the Chester Marketing, Inc.; Nestor Angelia had been doing business with [petitioner] and Chester Marketing, Inc., for years, and incurred an account with Chester Marketing, Inc. for his purchases from said corporation; [petitioner] did issue Bills of Lading Nos. 58 and 59 for the cargo described therein with Zosimo Mercado and Nestor Angelia as shippers/consignees, respectively; the engine room of the M/V Tandag caught fire after it passed the Mandaue/Mactan Bridge resulting in the total loss of the vessel and its cargo; an investigation was conducted by the Board of Marine Inquiry of the Philippine Coast Guard which rendered a Report, dated February 13, 1992 absolving [petitioner] of any responsibility on account of the fire, which Report of the Board was approved by the District Commander of the Philippine Coast Guard; a few days after the sinking of the vessel, a representative of the Legaspi Marketing filed claims for the values of the goods under Bills of Lading Nos. 58 and 59 in behalf of the shippers/consignees, Nestor Angelia and Zosimo Mercado; [petitioner] was able to ascertain, from the shippers/consignees and the representative of the Legaspi Marketing TRANSPORTATION LAW Case Digests that the cargo covered by Bill of Lading No. 59 was owned by Legaspi Marketing and consigned to Zosimo Mercado while that covered by Bill of Lading No. 58 was purchased by Nestor Angelia from the Legaspi Marketing; that [petitioner] approved the claim of Legaspi Marketing for the value of the cargo under Bill of Lading No. 59 and remitted to Legaspi Marketing the said amount under Equitable Banking Corporation Check No. 20230486 dated August 12, 1992, in the amount of P14,000.00 for which the representative of the Legaspi Marketing signed Voucher No. 4379, dated August 12, 1992, for the said amount of P14,000.00 in full payment of claims under Bill of Lading No. 59; that [petitioner] approved the claim of Nestor Angelia in the amount of P6,500.00 but that since the latter owed Chester Marketing, Inc., for some purchases, [petitioner] merely set off the amount due to Nestor Angelia under Bill of Lading No. 58 against his account with Chester Marketing, Inc.; [petitioner] lost/[misplaced] the original of the check after it was received by Legaspi Marketing, hence, the production of the microfilm copy by Noel Tanyu of the Equitable Banking Corporation; [petitioner] never knew, before settling with Legaspi Marketing and Nestor Angelia that the cargo under both Bills of Lading were insured with [respondent], or that Feliciana Legaspi filed claims for the value of the cargo with [respondent] and that the latter approved the claims of Feliciana Legaspi and paid the total amount of P148,500.00 to her; [petitioner] came to know, for the first time, of the payments by [respondent] of the claims of Feliciana Legaspi when it was served with the summons and complaint, on October 8, 1992; after settling his claim, Nestor Angelia x x x executed the Release and Quitclaim, dated July 2, 1993, and Affidavit, dated July 2, 1993 in favor of [respondent]; hence, [petitioner] was absolved of any liability for the loss of the cargo covered by Bills of Lading Nos. 58 and 59; and even if it was, its liability should not exceed the value of the cargo as stated in the Bills of Lading. [Petitioner] did not anymore present any other witnesses on its evidence-in-chief. x x x[9] (Citations omitted) Ruling of the Court of Appeals The CA held that petitioner had failed to prove that the fire which consumed the vessel and its cargo was caused by something other than its negligence in the upkeep, maintenance and operation of the vessel.[10] Petitioner had paid P14,000 to Legaspi Marketing for the cargo covered by Bill of Lading No. 59. The CA, however, held that the payment did not extinguish petitioners obligation to respondent, because there was no evidence that Feliciana Legaspi (the insured) was the owner/proprietor of Legaspi Marketing. The CA also pointed out the impropriety of treating the claim under Bill of Lading No. 58 -- covering cargo valued therein at P6,500 -- as a setoff against Nestor Angelias account with Chester Enterprises, Inc. Finally, it ruled that respondent is not bound by the valuation of the cargo under the Bills of Lading, x x x nor is the value of the cargo under said Bills of Lading conclusive on the [respondent]. This is so because, in the first place, the goods were insured with the [respondent] for the total amount of P150,000.00, which amount may be considered as the face value of the goods.[11] Hence this Petition.[12] Issues Petitioner raises for our consideration following alleged errors of the CA: I. the The Honorable Court of Appeals erred, granting arguendo that petitioner is liable, in holding that petitioners liability should be based on the actual insured value of the goods and not from actual valuation declared by the shipper/consignee in the bill of lading. II. The Court of Appeals erred in not affirming the findings of the Philippine Coast Guard, as sustained by the trial court a quo, holding that the cause of loss of the aforesaid cargoes under Bill of Lading Nos. 58 and 59 was due to force majeure and due diligence was [exercised] by petitioner prior to, during and immediately after the fire on [petitioners] vessel. III. The Court of Appeals erred in not holding that respondent UCPB General Insurance has no cause of action against the petitioner.[13] TRANSPORTATION LAW Case Digests In sum, the issues are: (1) Is petitioner liable for the loss of the goods? (2) If it is liable, what is the extent of its liability? This Courts Ruling The Petition is partly meritorious. First Issue: Liability for Loss Petitioner argues that the cause of the loss of the goods, subject of this case, was force majeure. It adds that its exercise of due diligence was adequately proven by the findings of the Philippine Coast Guard. We are not convinced. 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 1735[17] of the Civil Code, we hold petitioner responsible for the loss of the goods covered by Bills of Lading Nos. 58 and 59. Second Issue: Extent of Liability Respondent contends that petitioners liability should be based on the actual insured value of the goods, subject of this case. On the other hand, petitioner claims that its liability should be limited to the value declared by the shipper/consignee in the Bill of Lading. The records[18] show that the Bills of Lading covering the lost goods contain the stipulation that in case of claim for loss or for damage to the shipped merchandise or property, [t]he liability of the common carrier x x x shall not exceed the value of the goods as appearing in the bill of TRANSPORTATION LAW Case Digests lading.[19] The attempt by respondent to make light of this stipulation is unconvincing. As it had the consignees copies of the Bills of Lading,[20] it could have easily produced those copies, instead of relying on mere allegations and suppositions. However, it presented mere photocopies thereof to disprove petitioners evidence showing the existence of the above stipulation. A stipulation that limits liability is valid[21] as long as it is not against public policy. In Everett Steamship Corporation v. Court of Appeals,[22] the Court stated: A stipulation in the bill of lading limiting the common carriers liability for loss or destruction of a cargo to a certain sum, unless the shipper or owner declares a greater value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code which provides: Art. 1749. A stipulation that the common carriers liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding. Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been freely and fairly agreed upon. Such limited-liability clause has also been consistently upheld by this Court in a number of cases. Thus, in Sea-Land Service, Inc. vs. Intermediate Appellate Court, we ruled: 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 justness and fairness of the law itself, and this the private respondent does not pretend to do. But over and above that consideration, the just and reasonable character of such stipulation is implicit in it giving the shipper or owner the option of avoiding accrual of liability limitation by the simple and surely far from onerous expedient of declaring the nature and value of the shipment in the bill of lading. Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the common carriers liability for loss must be reasonable and just under the circumstances, and has been freely and fairly agreed upon. The bill of lading subject of the present controversy specifically provides, among others: 18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the shippers net invoice cost plus freight and insurance premiums, if paid, and in no event shall the carrier be liable for any loss of possible profits or any consequential loss. The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in an amount exceeding One Hundred Thousand Yen in Japanese Currency (100,000.00) or its equivalent in any other currency per package or customary freight unit (whichever is least) unless the value of the goods higher than this amount is declared in writing by the shipper before receipt of the goods by the carrier and inserted in the Bill of Lading and extra freight is paid as required. The above stipulations are, to our mind, reasonable and just. In the bill of lading, the carrier made it clear that its liability would only be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman Trading, had the option to declare a higher valuation if the value of its cargo was higher than the limited liability of the carrier. Considering that the shipper did not declare a higher valuation, it had itself to blame for not complying with the stipulations. (Italics supplied) In the present case, the stipulation limiting petitioners liability is not contrary to public policy. In fact, its just and reasonable character is evident. The shippers/consignees may recover the full value of the goods by the simple expedient of declaring the true value of the shipment in the Bill of Lading. Other than the payment of a higher freight, there was nothing to stop them from placing the actual value of the goods therein. In fact, they committed fraud TRANSPORTATION LAW Case Digests against the common carrier by deliberately undervaluing the goods in their Bill of Lading, thus depriving the carrier of its proper and just transport fare. Concededly, the purpose of the limiting stipulation in the Bill of Lading is to protect the common carrier. Such stipulation obliges the shipper/consignee to notify the common carrier of the amount that the latter may be liable for in case of loss of the goods. The common carrier can then take appropriate measures -- getting insurance, if needed, to cover or protect itself. This precaution on the part of the carrier is reasonable and prudent. Hence, a shipper/consignee that undervalues the real worth of the goods it seeks to transport does not only violate a valid contractual stipulation, but commits a fraudulent act when it seeks to make the common carrier liable for more than the amount it declared in the bill of lading. Indeed, Zosimo Mercado and Nestor Angelia misled petitioner by undervaluing the goods in their respective Bills of Lading. Hence, petitioner was exposed to a risk that was deliberately hidden from it, and from which it could not protect itself. It is well to point out that, for assuming a higher risk (the alleged actual value of the goods) the insurance company was paid the correct higher premium by Feliciana Legaspi; while petitioner was paid a fee lower than what it was entitled to for transporting the goods that had been deliberately undervalued by the shippers in the Bill of Lading. Between the two of them, the insurer should bear the loss in excess of the value declared in the Bills of Lading. This is the just and equitable solution. In Aboitiz Shipping Corporation v. Court of Appeals,[23] the description of the nature and the value of the goods shipped were declared and reflected in the bill of lading, like in the present case. The Court therein considered this declaration as the basis of the carriers liability and ordered payment based on such amount. Following this ruling, petitioner should not be held liable for more than what was declared by the shippers/consignees as the value of the goods in the bills of lading. We find no cogent reason to disturb the CAs finding that Feliciana Legaspi was the owner of the goods covered by Bills of Lading Nos. 58 and 59. Undoubtedly, the goods were merely consigned to Nestor Angelia and Zosimo Mercado, respectively; thus, Feliciana Legaspi or her subrogee (respondent) was entitled to the goods or, in case of loss, to compensation therefor. There is no evidence showing that petitioner paid her for the loss of those goods. It does not even claim to have paid her. On the other hand, Legaspi Marketing filed with petitioner a claim for the lost goods under Bill of Lading No. 59, for which the latter subsequently paid P14,000. But nothing in the records convincingly shows that the former was the owner of the goods. Respondent was, however, able to prove that it was Feliciana Legaspi who owned those goods, and who was thus entitled to payment for their loss. Hence, the claim for the goods under Bill of Lading No. 59 cannot be deemed to have been extinguished, because payment was made to a person who was not entitled thereto. With regard to the claim for the goods that were covered by Bill of Lading No. 58 and valued at P6,500, the parties have not convinced us to disturb the findings of the CA that compensation could not validly take place. Thus, we uphold the appellate courts ruling on this point. WHEREFORE, the Petition is hereby PARTIALLY GRANTED. The assailed Decision is MODIFIED in the sense that petitioner is ORDERED to pay respondent the sums of P14,000 and P6,500, which represent the value of the goods stated in Bills of Lading Nos. 59 and 58, respectively. No costs. SO ORDERED. TRANSPORTATION LAW Case Digests G.R. No. 75118 August 31, 1987 SEA-LAND SERVICE, INC., Petitioner, vs. INTERMEDIATE APPELLATE COURT and PAULINO CUE, doing business under the name and style of "SEN HIAP HING," Respondents.chanrobles virtual law library The main issue here is whether or not the consignee of seaborne freight is bound by stipulations in the covering bill of lading limiting to a fixed amount the liability of the carrier for loss or damage to the cargo where its value is not declared in the bill.chanroblesvirtualawlibrary chanrobles virtual law library The factual antecedents, for the most part, are not in dispute.chanroblesvirtualawlibrary chanrobles virtual law library On or about January 8, 1981, Sea-Land Service, Inc. (Sea-Land for brevity), a foreign shipping and forwarding company licensed to do business in the Philippines, received from Seaborne Trading Company in Oakland, California a shipment consigned to Sen Hiap Hing the business name used by Paulino Cue in the wholesale and retail trade which he operated out of an establishment TRANSPORTATION LAW Case Digests located on Borromeo and Plaridel Streets, Cebu City.chanroblesvirtualawlibrary chanrobles virtual law library The shipper not having declared the value of the shipment, no value was indicated in the bill of lading. The bill described the shipment only as "8 CTNS on 2 SKIDS-FILES. 1Based on volume measurements Sea-land charged the shipper the total amount of US$209.28 2 for freight age and other charges. The shipment was loaded on board the MS Patriot, a vessel owned and operated by Sea-Land, for discharge at the Port Of Cebu.chanroblesvirtualawlibrary chanrobles virtual law library The shipment arrived in Manila on February 12, 1981, and there discharged in Container No. 310996 into the custody of the arrastre contractor and the customs and port authorities. 3 Sometime between February 13 and 16, 1981, after the shipment had been transferred, along with other cargoes to Container No. 40158 near Warehouse 3 at Pier 3 in South Harbor, Manila, awaiting trans-shipment to Cebu, it was stolen by pilferers and has never been recovered. 4 chanrobles virtual law library On March 10, 1981, Paulino Cue, the consignee, made formal claim upon Sea-Land for the value of the lost shipment allegedly amounting to P179,643.48. 5 Sea-Land offered to settle for US$4,000.00, or its then Philippine peso equivalent of P30,600.00. asserting that said amount represented its maximum liability for the loss of the shipment under the package limitation clause in the covering bill of lading. 6 Cue rejected the offer and thereafter brought suit for damages against Sea-Land in the then Court of First Instance of Cebu, Branch X. 7 Said Court, after trial, rendered judgment in favor of Cue, sentencing Sea-Land to pay him P186,048.00 representing the Philippine currency value of the lost cargo, P55,814.00 for unrealized profit with one (1%) percent monthly interest from the filing of the complaint until fully paid, P25,000.00 for attorney's fees and P2,000.00 as litigation expenses. 8 chanrobles virtual law library Sea-Land appealed to the Intermediate Appellate Court. 9 That Court however affirmed the decision of the Trial Court xxx in all its parts ... . 10 SeaLand thereupon filed the present petition for review which, as already stated, poses the question of whether, upon the facts above set forth, it can be held liable for the loss of the shipment in any amount beyond the limit of US$600.00 per package stipulated in the bill of lading.chanroblesvirtualawlibrary chanrobles virtual law library 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 TRANSPORTATION LAW Case Digests 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.chanroblesvirtualawlibrary chanrobles virtual law library 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 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.chanroblesvirtualawlibrary chanrobles virtual law library 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 TRANSPORTATION LAW Case Digests sustained.chanroblesvirtualawlibrary virtual law library chanrobles 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.chanroblesvirtualawlibrary chanrobles virtual law library 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. 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 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: TRANSPORTATION LAW Case Digests and given.chanroblesvirtualawlibrary chanrobles virtual law library 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 16 where 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.chanroblesvirtualawlibrary chanrobles virtual law library There can, therefore, be no doubt or equivocation about the validity and enforceability of freelyagreed-upon stipulations 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 chanrobles virtual law library 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.chanroblesvirtualawlibrary chanrobles virtual law library 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 long form of that document which, he claims. SeaLand offered (as its Exhibit 2) as an unused blank form with no 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 TRANSPORTATION LAW Case Digests petitioner.chanroblesvirtualawlibrary virtual law library chanrobles WHEREFORE, the Decision of the Intermediate Appellate Court complained of is reversed and set aside. The stipulation in the questioned bill of lading limiting Sea-Land's liability for loss of or damage to the shipment covered by said bill to US$500.00 per package is held valid and binding on private respondent. There being no question of the fact that said shipment consisted of eight (8) cartons or packages, for the loss of which SeaLand is therefore liable in the aggregate amount of US$4,000.00, it is the judgment of the Court that said petitioner discharge that obligation by paying private respondent the sum of P32,000.00, the equivalent in Philippine currency of US$4,000.00 at the conversion rate of P8.00 to $1.00. Costs against private respondent.chanroblesvirtualawlibrary chanrobles virtual law library SO ORDERED. 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 chanrobles virtual law library 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 $23,256.00 for said shipment. 24 All circumstances considered, it is just and fair that Sea-Land's dollar obligation be convertible at the same rate.chanroblesvirtualawlibrary chanrobles virtual law library Case Digest: Sea-Land Service, Inc. v. Intermediate Appellate Court153 SCRA 552 Facts: Sea-Land, a foreign shipping and forwarding company licensed to do business in the Philippines,received from Sea-borne Trading Company in California, a shipment consigned to Sen Hiap Hing, thebusiness name used by Cue. The shipper not having declared the value of the shipment , no value wasindicated in the bill of lading. The shipment was discharged in Manila, and while awaiting transshipmentto Cebu, the cargo was stolen and never recovered.The trial court sentenced Sea-Land to pay Cue P186,048 representing the Philippine currencyvalue of the lost cargo, P55, 814 for unrealized profit and P25,000 for attorney’s fees. CA affirmed thetrial court’s decision. Issue: Cue. Held: There is no question of the right 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 mayhave been drawn up only by the consignor and the carrier without the intervention of the consignee.Since the liability Whether or not Sea-Land is liable to pay TRANSPORTATION LAW Case Digests of a common carrier for loss of or damage to goods transported by it under acontract of carriage os governed by the laws of the country of destination and the goods in question wereshipped from the United States to the Philippines, the liability of Sea-Land has Cue is governed primarilyby the Civil Code, and as ordained by the said Code, supplementary, in all matters not cluttered thereby,by the Code of Commerce and special laws. One of these supplementary special laws is the Carriage of goods by Sea Act (COGSA), made applicable to all contracts for the carriage by sea to and from thePhilippines Ports in Foreign Trade by Comm. Act. 65.Even if Section 4(5) of COGSA did not list the validity and binding effect of the liability limitationclause in the bill of lading here are fully substantial on the basis alone of Article 1749 and 1750 of theCivil Code. The justices of such stipulation is implicit in its giving the owner or shipper the option of avoiding accrual of liability limitation by the simple expedient of declaring the value of the shipment in thebill of lading.The stipulation in the bill of lading limiting the liability of Sea-Land for loss or damages to theshipment covered by said rule to US$500 per package unless the shipper declares the value of theshipment and pays additional charges is valid and binding on Cue. G.R. No. 143133 June 5, 2002 BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES TRANSPORT SERVICES, INC., petitioners, vs. PHILIPPINE FIRST INSURANCE CO., INC., respondents. PANGANIBAN, J.: Proof of the delivery of goods in good order to a common carrier and of their arrival in bad order at their destination constitutes prima facie fault or negligence on the part of the carrier. If no adequate explanation is given as to how the loss, the destruction or the deterioration of the goods happened, the carrier shall be held liable therefor. Statement of the Case Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the July 15, 1998 Decision1 and the May 2, 2000 Resolution2 of the Court of Appeals3 (CA) in CA-GR CV No. 53571. The decretal portion of the Decision reads as follows: "WHEREFORE, in the light of the foregoing disquisition, the decision appealed from is hereby REVERSED and SET ASIDE. Defendants-appellees are ORDERED to jointly and severally pay plaintiffs-appellants the following: '1) FOUR Hundred Fifty One Thousand TwentySeven Pesos and 32/100 (P451,027.32) as actual damages, representing the value of the damaged cargo, plus interest at the legal rate from the time of filing of the complaint on July 25, 1991, until fully paid; '2) Attorney's fees amounting to 20% of the claim; and '3) Costs of suit.'"4 The assailed Resolution Motion for Reconsideration. denied petitioner's The CA reversed the Decision of the Regional Trial Court (RTC) of Makati City (Branch 134), which had disposed as follows: TRANSPORTATION LAW Case Digests "WHEREFORE, in view of the foregoing, judgment is hereby rendered, dismissing the complaint, as well as defendant's counterclaim."5 The RTC dismissed the Complaint because respondent had failed to prove its claims with the quantum of proof required by law.7 It likewise debunked petitioners' counterclaim, because respondent's suit was not manifestly frivolous or primarily intended to harass them.8 Ruling of the Court of Appeals In reversing the trial court, the CA ruled that petitioners were liable for the loss or the damage of the goods shipped, because they had failed to overcome the presumption of negligence imposed on common carriers. The CA further held as inadequately proven petitioners' claim that the loss or the deterioration of the goods was due to preshipment damage.9 It likewise opined that the notation "metal envelopes rust stained and slightly dented" placed on the Bill of Lading had not been the proximate cause of the damage to the four (4) coils.10 As to the extent of petitioners' liability, the CA held that the package limitation under COGSA was not applicable, because the words "L/C No. 90/02447" indicated that a higher valuation of the cargo had been declared by the shipper. The CA, however, affirmed the award of attorney's fees. Hence, this Petition.11 Issues In their Memorandum, petitioners raise the following issues for the Court's consideration: The Facts The factual antecedents of the case are summarized by the Court of Appeals in this wise: "On June 13, 1990, CMC Trading A.G. shipped on board the M/V 'Anangel Sky' at Hamburg, Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine Steel Trading Corporation. On July 28, 1990, M/V Anangel Sky arrived at the port of Manila and, within the subsequent days, discharged the subject cargo. Four (4) coils were found to be in bad order B.O. Tally sheet No. 154974. Finding the four (4) coils in their damaged state to be unfit for the intended purpose, the consignee Philippine Steel Trading Corporation declared the same as total loss.1âwphi1.nêt "Despite receipt of a formal demand, defendantsappellees refused to submit to the consignee's claim. Consequently, plaintiff-appellant paid the consignee five hundred six thousand eighty six & 50/100 pesos (P506,086.50), and was subrogated to the latter's rights and causes of action against defendants-appellees. Subsequently, plaintiffappellant instituted this complaint for recovery of the amount paid by them, to the consignee as insured. "Impugning the propriety of the suit against them, defendants-appellees imputed that the damage and/or loss was due to pre-shipment damage, to the inherent nature, vice or defect of the goods, or to perils, danger and accidents of the sea, or to insufficiency of packing thereof, or to the act or omission of the shipper of the goods or their representatives. In addition thereto, defendants-appellees argued that their liability, if there be any, should not exceed the limitations of liability provided for in the bill of lading and other pertinent laws. Finally, defendants-appellees averred that, in any event, they exercised due diligence and foresight required by law to prevent any damage/loss to said shipment."6 Ruling of the Trial Court I. II. III. "Whether or not plaintiff by presenting only one witness who has never seen the subject shipment and whose testimony is purely hearsay is sufficient to pave the way for the applicability of Article 1735 of the Civil Code; "Whether or not the consignee/plaintiff filed the required notice of loss within the time required by law; "Whether or not a notation in the bill of lading at the time of loading is sufficient to show pre-shipment TRANSPORTATION LAW Case Digests damage and to exempt herein defendants from liability; "Whether or not the "PACKAGE LIMITATION" of liability under Section 4 (5) of COGSA is applicable to the case at bar."12 contract of transportation with common carriers.16 Even if it wants to, it cannot submit its own stipulations for their approval.17 Hence, it merely adheres to the agreement prepared by them. Owing to this high degree of diligence required of them, 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.18 That is, unless they prove that they exercised extraordinary diligence in transporting the goods.19 In order to avoid responsibility for any loss or damage, therefore, they have the burden of proving that they observed such diligence.20 However, the presumption of fault or negligence will not arise21 if the loss is due to any of the following causes: (1) flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) an act of the public enemy in war, whether international or civil; (3) an act or omission of the shipper or owner of the goods; (4) the character of the goods or defects in the packing or the container; or (5) an order or act of competent public authority.22 This is a closed list. If the cause of destruction, loss or deterioration is other than the enumerated circumstances, then the carrier is liable therefor.23 Corollary to the foregoing, 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, the loss or the destruction of the goods happened, the transporter shall be held responsible.24 That petitioners failed to rebut the prima facie presumption of negligence is revealed in the case at bar by a review of the records and more so by the evidence adduced by respondent.25 First, as stated in the Bill of Lading, petitioners received the subject shipment in good order and condition in Hamburg, Germany.26 Second, prior to the unloading of the cargo, an Inspection Report27 prepared and signed by representatives of both parties showed the steel bands broken, the metal envelopes rust-stained IV. In sum, the issues boil down to three: 1. Whether petitioners have overcome the presumption of negligence of a common carrier 2. Whether the notice of loss was timely filed 3. Whether the package limitation of liability is applicable This Court's Ruling The Petition is partly meritorious. First Issue: Proof of Negligence Petitioners contend that the presumption of fault imposed on common carriers should not be applied on the basis of the lone testimony offered by private respondent. The contention is untenable. Well-settled is the rule that common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence and vigilance with respect to the safety of the goods and the passengers they transport.13 Thus, common carriers are required to render service with the greatest skill and foresight and "to use all reason[a]ble means to ascertain the nature and characteristics of the goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires."14 The extraordinary responsibility lasts from the time the goods are unconditionally placed in the possession of and received for transportation by the carrier until they are delivered, actually or constructively, to the consignee or to the person who has a right to receive them.15 This strict requirement is justified by the fact that, without a hand or a voice in the preparation of such contract, the riding public enters into a TRANSPORTATION LAW Case Digests and heavily buckled, and the contents thereof exposed and rusty. Third, Bad Order Tally Sheet No. 15497928 issued by Jardine Davies Transport Services, Inc., stated that the four coils were in bad order and condition. Normally, a request for a bad order survey is made in case there is an apparent or a presumed loss or damage.29 Fourth, the Certificate of Analysis30 stated that, based on the sample submitted and tested, the steel sheets found in bad order were wet with fresh water. Fifth, petitioners -- in a letter31 addressed to the Philippine Steel Coating Corporation and dated October 12, 1990 -- admitted that they were aware of the condition of the four coils found in bad order and condition. These facts were confirmed by Ruperto Esmerio, head checker of BM Santos Checkers Agency. Pertinent portions of his testimony are reproduce hereunder: "Q. Mr. Esmerio, you mentioned that you are a Head Checker. Will you inform the Honorable Court with what company you are connected? A. BM Santos Checkers Agency, sir. Q. And, on or about that date, do you recall having attended the discharging and inspection of cold steel sheets in coil on board the MV/AN ANGEL SKY? A. Yes, sir, I was there. Q. Based on your inspection since you were also present at that time, will you inform this Honorable Court the condition or the appearance of the bad order cargoes that were unloaded from the MV/ANANGEL SKY? ATTY. MACAMAY: Objection, Your Honor, I think the document itself reflects the condition of the cold steel sheets and the best evidence is the document itself, Your Honor that shows the condition of the steel sheets. COURT: Let the witness answer. A. The scrap of the cargoes is broken already and the rope is loosen and the cargoes are dent on the sides."32 All these conclusively prove the fact of shipment in good order and condition and the consequent damage to the four coils while in the possession of petitioner,33 who notably failed to explain why.34 Further, petitioners failed to prove that they observed the extraordinary diligence and precaution which the law requires a common carrier to know and to follow to avoid damage to or destruction of the goods entrusted to it for safe carriage and delivery.35 True, the words "metal envelopes rust stained and slightly dented" were noted on the Bill of Lading; however, there is no showing that petitioners exercised due diligence to forestall or lessen the loss.36 Having been in the service for several years, the master of the vessel should have known at the outset that metal envelopes in the said state would eventually deteriorate when not properly stored while in transit.37 Equipped with the proper knowledge of the nature of steel sheets in coils and of the proper way of Q. How is BM Santos checkers Agency related or connected with defendant Jardine Davies Transport Services? A. It is the company who contracts the checkers, sir. Q. You mentioned that you are a Head Checker, will you inform this Honorable Court your duties and responsibilities? A. I am the representative of BM Santos on board the vessel, sir, to supervise the discharge of cargoes. Q. On or about August 1, 1990, were you still connected or employed with BM Santos as a Head Checker? A. Yes, sir. TRANSPORTATION LAW Case Digests transporting them, the master of the vessel and his crew should have undertaken precautionary measures to avoid possible deterioration of the cargo. But none of these measures was taken. 38 Having failed to discharge the burden of proving that they have exercised the extraordinary diligence required by law, petitioners cannot escape liability for the damage to the four coils.39 In their attempt to escape liability, petitioners further contend that they are exempted from liability under Article 1734(4) of the Civil Code. They cite the notation "metal envelopes rust stained and slightly dented" printed on the Bill of Lading as evidence that the character of the goods or defect in the packing or the containers was the proximate cause of the damage. We are not convinced. From the evidence on record, it cannot be reasonably concluded that the damage to the four coils was due to the condition noted on the Bill of Lading.40 The aforecited exception refers to cases when goods are lost or damaged while in transit as a result of the natural decay of perishable goods or the fermentation or evaporation of substances liable therefor, the necessary and natural wear of goods in transport, defects in packages in which they are shipped, or the natural propensities of animals.41 None of these is present in the instant case. Further, even if the fact of improper packing was known to the carrier or its crew or was apparent upon ordinary observation, it is not relieved of liability for loss or injury resulting therefrom, once it accepts the goods notwithstanding such condition.42 Thus, petitioners have not successfully proven the application of any of the aforecited exceptions in the present case.43 Second Issue: Notice of Loss Petitioners claim that pursuant to Section 3, paragraph 6 of the Carriage of Goods by Sea Act44 (COGSA), respondent should have filed its Notice of Loss within three days from delivery. They assert that the cargo was discharged on July 31, 1990, but that respondent filed its Notice of Claim only on September 18, 1990.45 We are not persuaded. First, the above-cited provision of COGSA provides that the notice of claim need not be given if the state of the goods, at the time of their receipt, has been the subject of a joint inspection or survey. As stated earlier, prior to unloading the cargo, an Inspection Report46 as to the condition of the goods was prepared and signed by representatives of both parties.47 Second, as stated in the same provision, a failure to file a notice of claim within three days will not bar recovery if it is nonetheless filed within one year.48 This one-year prescriptive period also applies to the shipper, the consignee, the insurer of the goods or any legal holder of the bill of lading.49 In Loadstar Shipping Co., Inc, v. Court of Appeals,50 we ruled that a claim is not barred by prescription as long as the one-year period has not lapsed. Thus, in the words of the ponente, Chief Justice Hilario G. Davide Jr.: "Inasmuch as the neither the Civil Code nor the Code of Commerce states a specific prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA)--which provides for a one-year period of limitation on claims for loss of, or damage to, cargoes sustained during transit--may be applied suppletorily to the case at bar." In the present case, the cargo was discharged on July 31, 1990, while the Complaint51 was filed by respondent on July 25, 1991, within the one-year prescriptive period. Third Issue: Package Limitation Assuming arguendo they are liable for respondent's claims, petitioners contend that their liability should be limited to US$500 per package as provided in the Bill of Lading and by Section 4(5)52 of COGSA.53 On the other hand, respondent argues that Section 4(5) of COGSA is inapplicable, because the value of the subject shipment was declared by petitioners beforehand, as evidenced by the reference to and the insertion of the Letter of Credit or "L/C No. 90/02447" in the said Bill of Lading.54 TRANSPORTATION LAW Case Digests A bill of lading serves two functions. First, it is a receipt for the goods shipped.53 Second, it is a contract by which three parties -- namely, the shipper, the carrier, and the consignee -undertake specific responsibilities and assume stipulated obligations.56 In a nutshell, the acceptance of the bill of lading by the shipper and the consignee, with full knowledge of its contents, gives rise to the presumption that it constituted a perfected and binding contract.57 Further, a stipulation in the bill of lading limiting to a certain sum the common carrier's liability for loss or destruction of a cargo -- unless the shipper or owner declares a greater value58 -- is sanctioned by law.59 There are, however, two conditions to be satisfied: (1) the contract is reasonable and just under the circumstances, and (2) it has been fairly and freely agreed upon by the parties.60 The rationale for this rule is to bind the shippers by their agreement to the value (maximum valuation) of their goods.61 It is to be noted, however, that the Civil Code does not limit the liability of the common carrier to a fixed amount per package.62 In all matters not regulated by the Civil Code, the right and the obligations of common carriers shall be governed by the Code of Commerce and special laws.63 Thus, the COGSA, which is suppletory to the provisions of the Civil Code, supplements the latter by establishing a statutory provision limiting the carrier's liability in the absence of a shipper's declaration of a higher value in the bill of lading.64 The provisions on limited liability are as much a part of the bill of lading as though physically in it and as though placed there by agreement of the parties.65 In the case before us, there was no stipulation in the Bill of Lading66 limiting the carrier's liability. Neither did the shipper declare a higher valuation of the goods to be shipped. This fact notwithstanding, the insertion of the words "L/C No. 90/02447 cannot be the basis for petitioners' liability. First, a notation in the Bill of Lading which indicated the amount of the Letter of Credit obtained by the shipper for the importation of steel sheets did not effect a declaration of the value of the goods as required by the bill. 67 That notation was made only for the convenience of the shipper and the bank processing the Letter of Credit.68 Second, in Keng Hua Paper Products v. Court of Appeals,69 we held that a bill of lading was separate from the Other Letter of Credit arrangements. We ruled thus: "(T)he contract of carriage, as stipulated in the bill of lading in the present case, must be treated independently of the contract of sale between the seller and the buyer, and the contract of issuance of a letter of credit between the amount of goods described in the commercial invoice in the contract of sale and the amount allowed in the letter of credit will not affect the validity and enforceability of the contract of carriage as embodied in the bill of lading. As the bank cannot be expected to look beyond the documents presented to it by the seller pursuant to the letter of credit, neither can the carrier be expected to go beyond the representations of the shipper in the bill of lading and to verify their accuracy visà-vis the commercial invoice and the letter of credit. Thus, the discrepancy between the amount of goods indicated in the invoice and the amount in the bill of lading cannot negate petitioner's obligation to private respondent arising from the contract of transportation."70 In the light of the foregoing, petitioners' liability should be computed based on US$500 per package and not on the per metric ton price declared in the Letter of Credit.71 In Eastern Shipping Lines, Inc. v. Intermediate Appellate Court,72 we explained the meaning of packages: "When what would ordinarily be considered packages are shipped in a container supplied by the carrier and the number of such units is disclosed in the shipping documents, each of those units and not the container constitutes the 'package' referred to in the liability limitation provision of Carriage of Goods by Sea Act." Considering, therefore, the ruling in Eastern Shipping Lines and the fact that the Bill of Lading clearly disclosed the contents of the containers, the number of units, as well as the nature of the steel sheets, the four damaged coils should be considered as the shipping unit subject to the US$500 limitation.1âwphi1.nêt WHEREFORE, the Petition is partly granted and the assailed Decision MODIFIED. Petitioners' liability is reduced to US$2,000 plus interest at the legal rate of six percent from the time of the TRANSPORTATION LAW Case Digests filing of the Complaint on July 25, 1991 until the finality of this Decision, and 12 percent thereafter until fully paid. No pronouncement as to costs. SO ORDERED. the trial court. This premise draws us to conclude that the delivery of the cargoes to GPC as buyer/importer which, conformably with Art. 1736 had, other than the consignee, the right to receive them was proper. The real issue is whether respondents are liable to petitioner for releasing the goods to GPC without the bills of lading or bank guarantee. 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. Facts: Macam vs. CA Petitioner Macam exported watermelons and mangoes to Hong Kong, Great Prospect Companyis the consignee. The bill of lading stated that one of the bill must be presented by the Pakistan Bank asconsignee and GPC as the notify party. Upon arrival in Hong Kong, the shipment was delivered by thecarrier directly to GPC and not to Pakistan Bank and without surrendering the bill of lading. Issue: Held: The extraordinary responsibility of common carriers last until actual or constructive delivery of thecargo to the consignee or his agent. Pakistan was indicted as consignee and GPC was the notify party.However, in the export invoice, GPC was clearly named as buyer or importer. Petitioner referred to GPCas such in his demand letter to respondent and his complaint before the court. This premise brings intoconclusion that the deliveries of the cargo to GPC as buyer or importer is in conformity with Art. 1736 of the Civil Code. Therefore, there was a valid delivery. 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 Whether or not there was a valid delivery.
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