TELENGTAN BROTHERS(LA SUERTE CIGAR) V.
COURT OF provided:
APPEALS
FACTS:
Private respondent K-Line is a foreign shipping company doing biz in PH,
its shipping agent is respondent Smith, Bell & Co., Inc. It is a member of
the Far East Conference, the body which fixes rates by agreement of its
member-shipowners. The conference is registered with the U.S. Federal
Maritime Commission.
Van Reekum Paper, Inc. entered into a contract of affreightment with the
K-Line for the shipment of 468 rolls of container board liners from
Georgia to Manila, consigned to herein petitioner La Suerte Cigar. The
contract of affreightment was embodied in Bill of Lading issued by the
carrier to the shipper. The expenses of loading and unloading were for the
account of the consignee (La Suerte). The shipment was packed in 12
container vans. At Tokyo, the cargo was transhipped on two vessels of the
K-Line. Ten (10) container vans were loaded on the 1st vessel, while two
(2) were loaded on another vessel.
On June 11, the first vessel arrived at the port of Manila. La Suerte was
notified in writing of the ship's arrival,and that there will be a container
demurrage charge unless the consignee took delivery of the cargo
within ten (10) days.
On June 21, the other vessel arrived and was discharged of its contents the
next day. On the same day the shipping agent Smith, Bell & Co. released
the Delivery Permit for twelve (12) containers to the broker upon
payment of freight charges on the bill of lading. On June 22, La Suerte’s
(consignee) broker presented the shipping documents to the Bureau of
Customs. But the latter refused to act on them because the manifest of
the 1st vessel covered only 10 containers, whereas the bill of lading
covered 12 containers.
The La Suerte broker sent back the manifest to Smith, Bell & Co with the
request that the manifest be amended however Smith refused on the
ground that an amendment would violate the Tariff and Customs Code
relating to unmanifested cargo.
Later however, it agreed to add a footnote reading "Two container vans
carried by other vessel to complete the shipment of twelve containers
under the bill of lading."
The manifest was approved for release only on July 3. On July 11, when
the broker tried to secure the release of the cargo, it was informed by
Smith, Belle, & Co. that the free time for removing the containers from the
container yard had expired on June 26 for the first vessel, and on July 9,
in the case of the 2nd vessel, and that demurrage charges had begun to
run a day after the free time, respectively.
On July 13, La Suerte paid P47,680 representing the total demurrage
charges on all the containers, but it was not able to obtain its goods. It was
able to obtain only a partial release of the cargo because of the breakdown
of the arrastre's equipment at the container yard. On July 16, La Suerte
sent a letter to Smith, Bell & Co. requesting reconsideration of the
demurrage charges, but was refused. Subsequently, La Suerte refused to
pay any more demurrage charges on the ground that the delay in the
release of the cargo was not due to its fault but to the breakdown of
the equipment at the container yard.
La Suerte filed this suit in the RTC for specific performance to compel
respondents to release 7 container vans consigned to it free of charge.
In their answer, private respondents claimed that they were not free to
waive these charges because under the United States Shipping Act of 1916
it was unlawful for any common carrier engaged in transportation
involving the foreign commerce to charge or collect a greater or lesser
compensation that the rates and charges specified in its tariffs on file with
the Federal Maritime Commission.
RTC dismissed petitioner's complaint. It cited the bill of lading which
Compiled by Kaye Hugo 1
23. The ocean carrier shall have a lien on the goods, which shall survive
delivery, for all freight, dead freight, demurrage, damages, loss, charges,
expenses and any other sums whatsoever payable or chargeable to or for
the account of the Merchant under this bill of lading . . . . RTC likewise
invoked clause 29 of the bill of lading which provided:
29. . . .The terms of the ocean carrier's applicable tariff, including tariffs
covering intermodal transportation on file with the Federal Maritime
Commission and the Interstate Commission or any other regulatory body
which governs a portion of the carriage of goods, are incorporated herein.
18. The RTC held that the bill of lading was the contract between the
parties and, therefore, petitioner was liable for demurrage charges. It
rejected petitioner's claim of force majeure in such a way that the delay in
the delivery of the containers was caused by the breaking down of the
equipment of the arrastre operator. The Court reasoned that still plaintiff
has to pay the corresponding demurrage charges. The possibility that the
equipment would break down was not only foreseeable, but actually,
foreseen, and was not caso fortuito. CA affirmed.
ISSUE: Whether or not La Suerte is liable for demurrage for delay in
removing its cargo from the containers – YE,S but only for the period
July 3 - 13, 1979 with respect to ten containers and from July 10 - July
13, 1979, in respect of two other containers. The
HELD:
Payment of demurrage
La Suerte's contention is that the bill of lading does not provide for the
payment of container demurrage, as Clause 23 of the bill of lading only
says "demurrage," i.e., damages for the detention of vessels. Here there is
no detention of vessels. It invokes a case where SC defined "demurrage" as
follows:
What is Demurrage?
Demurrage, is the compensation provided for in the contract of
affreightment for the detention of the vessel beyond the time agreed on for
loading and unloading. Essentially, demurrage is the claim for damages
for failure to accept delivery… Whatever may be the merit of petitioner's
contention, the fact is that clause 29(a) also of the bill of lading, in relation
to Rule 21 of the Far East Conference Tariff , specifically provides for the
payment by the consignee of demurrage for the detention of containers and
other equipment after the so-called "free time."
A bill of lading is both a receipt and a contract. As a contract, its terms
and conditions are conclusive on the parties, including the consignee. The
enforcement of the rules of the Far East Conference and the Federal
Maritime Commission is in accordance with R.A. 1407 which declares that
the Philippines, in common with other maritime nations, recognizes the
international character of shipping in foreign trade and existing
international practices in maritime transportation and that it is
part of the national policy to cooperate with other friendly nations in the
maintenance and improvement of such practices.
What is the period of Demurrage to be paid by La Cigar’s?
La Suerte cannot be held liable for demurrage starting June 27 on the 10
containers because the delay in obtaining release of the goods was not due
to its fault.
The evidence shows that the Bureau of Customs refused to give an entry
permit to petitioner because the manifest issued by K-Line stated only 10
containers whereas the bill of lading also issued by the K-Line showed
there were 12 containers. For this reason, petitioner's broker IBC had to
see Smith, Bell & Co. on June 22, but the latter did not immediately do
something to correct the manifest.
Smith, Bell & Co. was asked to "amend" the manifest, but it refused to do
so on the ground that this would violate the law. It was only on June 29
that it thought of adding instead a footnote, by which time the "free
time" had already expired. Now June 29 was a Friday. Again it is
probable the correct manifest was presented to the Bureau of Customs
only on Monday, July 2, and therefore it was only on July 3 that it was
approved.
It was therefore only from July 3 that La Suerte could have claimed its
cargo and charged for any delay With respect to the other two
containers, demurrage was properly considered to have accrued on July
10 since the "free time" expired on July 9.
The period of delay, however, for all the 12 containers must be deemed to
have stopped on July 13, because on this date petitioner paid P47,680.00.
If it was not able to get its cargo from the container vans, it was because of
the breakdown of the shifter or cranes of the arrastre service operation.
It would be unjust to charge demurrage after July 13, since the delay in
emptying the containers was not due to the fault of La suerte. In sum, we
hold that petitioner can be held liable for demurrage only for the period
July 3-13, 1979 and that in accordance with the stipulation in its bill of
lading.
Saludo, Jr. v. Court of Appeals
G.R. No. 95536, 23 March 1992, 207 SCRA 498
FACTS: Crispina Galdo Saludo, mother of the petitioners, died in
Chicago, Illinois. Pomierski and Son Funeral Home of Chicago, made the
necessary preparations and arrangements for the shipment of the remains
from Chicago to the Philippines. Pomierski brought the remains to
Continental Mortuary Air Services (CMAS) at the Chicago Airport which
made the necessary arrangements such as flights, transfers, etc. CMAS
booked the shipment with PAL thru the carrier’s agent Air Care
International. PAL Airway Bill Ordinary was issued wherein the requested
routing was from Chicago to San Francisco on board Trans World Airline
(TWA) and from San Francisco to Manila on board PAL.
Salvacion (one of the petitioners), upon arrival at San Francisco, went to
the TWA to inquire about her mother’s remains. But she was told they did
not know anything about it. She then called Pomierski that her mother’s
remains were not at the West Coast terminal. Pomierski immediately
called CMAS which informed that the remains were on a plane to Mexico
City, that there were two bodies at the terminal, and somehow they were
switched. CMAS called and told Pomierski that they were sending the
remains back to California via Texas.
Petitioners filed a complaint against TWA and PAL fir the misshipment
and delay in the delay of the cargo containing the remains of the late
Crispina Saludo. In a separate letter on June 10, 1977 addressed to co-
respondent Philippine Airlines (PAL),5 petitioners stated that they were
holding PAL liable for said delay in delivery and would commence
judicial action should no favorable explanation be given
Petitioners alleged that private respondents received the casketed remains
of Crispina on October 26, 1976, as evidenced by the issuance of PAL
Airway Bill by Air Care and from said date, private respondents were
charged with the responsibility to exercise extraordinary diligence so much
so that the alleged switching of the caskets on October 27, 1976, or one
day after the private respondents received the cargo, the latter must
necessarily be liable.
ISSUE: 1.Whether or not there was delivery of the cargo upon mere
Compiled by Kaye Hugo 2
issuance of the airway bill? - NO
2. Whether or not the delay in the delivery of the casketed remains of
petitioners’ mother was due to the fault of respondent airline companies-
NO
HELD:
What is a Bill of Lading?
A written acknowledgment of the receipt of the goods and an agreement to
transport and deliver them at a specified place to a person named or on his
order. Such instrument may be called a shipping receipt, forwarder's
receipt and receipt for transportation.  THE DESIGNATION, HOWEVER,
IS IMMATERIAL.
Logically, since a bill of lading acknowledges receipt of goods to be
transported, delivery of the goods to the carrier normally precedes the
issuance of the bill; or, to some extent, delivery of the goods and issuance
of the bill are regarded in commercial practice as simultaneous acts.
A receipt is not essential to a complete delivery of goods to the carrier for
transportation but, when issued, is competent and prima facie, but not
conclusive, evidence of delivery to the carrier. A bill of lading, when
properly executed and delivered to a shipper, is evidence that the carrier
has received the goods described therein for shipment. Except as modified
by statute, it is a general rule as to the parties to a contract of carriage of
goods in connection with which a bill of lading is issued reciting that
goods have been received for transportation, that the recital being in
essence a receipt alone, is not conclusive, but may be explained, varied or
contradicted by parol or other evidence.
1. NO to both, but TWA was held to pay petitioners nominal
damages of P40,000 for its violation of the degree of diligence
required by law to be exercised by every common carrier.
Ordinarily, a receipt is not essential to a complete delivery of
goods to the carrier for transportation but, when issued, is
competent and prima facie, but not conclusive, evidence of
delivery to the carrier. A bill of lading, when properly executed
and delivered to a shipper, is evidence that the carrier has
received the goods described therein for shipment. Except as
modified by statute, it is a general rule as to the parties to a
contract of carriage of goods in connection with which a bill of
lading is issued reciting that goods have been received for
transportation, that the recital being in essence a receipt alone,
is not conclusive, but may be explained, varied or contradicted
by parol or other evidence.
PAL Airway Bill secured on Oct. 26, 1976 was not an evidence of receipt
but a confirmation of the booking
In other words, on October 26, 1976 the cargo containing the casketed
remains of Crispina Saludo was booked for PAL Flight Number PR-107
leaving San Francisco for Manila on October 27, 1976, PAL Airway Bill
No. 079-01180454 was issued, not as evidence of receipt of delivery of
the cargo on October 26, 1976, but merely as a confirmation of the
booking thus made for the San Francisco-Manila flight scheduled on
October 27, 1976. Actually, it was not until October 28, 1976 that PAL
received physical delivery of the body at San Francisco, as duly
evidenced by the Interline Freight Transfer Manifest of the American
Airline Freight System and signed for by Virgilio Rosales at 1945H, or
7:45 P.M. on said date.
Explicit is the rule under Article 1736 of the Civil Code that the
extraordinary responsibility of the common carrier begins from the time
the goods are delivered to the carrier. This responsibility remains in full
force and effect even when they are temporarily unloaded or stored in
transit, unless the shipper or owner exercises the right of stoppage in
transitu, and terminates only after the lapse of a reasonable time for the
acceptance, of the goods by the consignee or such other person entitled to
receive them. And, there is delivery to the carrier when the goods are
ready for and have been placed in the exclusive possession, custody and
control of the carrier for the purpose of their immediate transportation and
the carrier has accepted them. Where such a delivery has thus been
accepted by the carrier, the liability of the common carrier commences eo
instanti.
Hence, while we agree with petitioners that the extraordinary diligence
statutorily required to be observed by the carrier instantaneously
commences upon delivery of the goods thereto, for such duty to
commence there must in fact have been delivery of the cargo subject
of the contract of carriage. Only when such fact of delivery has been
unequivocally established can the liability for loss, destruction or
deterioration of goods in the custody of the carrier, absent the excepting
causes under Article 1734, attach and the presumption of fault of the
carrier under Article 1735 be invoked.
There was no delivery of the goods to the carrier on Oct. 26,1976
As already demonstrated, the facts in the case at bar belie the averment
that there was delivery of the cargo to the carrier on October 26, 1976.
Rather, as earlier explained, the body intended to be shipped as agreed
upon was really placed in the possession and control of PAL on
October 28, 1976 and it was from that date that private respondents
became responsible for the agreed cargo under their undertakings in
PAL Airway Bill No. 079-01180454. Consequently, for the switching of
caskets prior thereto which was not caused by them, and subsequent events
caused thereby, private respondents cannot be held liable.
The oft-repeated rule regarding a carrier’s liability for delay is that in the
absence of a special contract, a carrier is not an insurer against delay in
transportation of goods.
When a common carrier undertakes to convey goods, the law implies a
contract that they shall be delivered at destination within a reasonable
time, in the absence, of any agreement as to the time of delivery. But
where a carrier has made an express contract to transport and deliver
property within a specified time, it is bound to fulfill its contract and
is liable for any delay, no matter from what cause it may have arisen.
This result logically follows from the well-settled rule that where the law
creates a duty or charge, and the party is disabled from performing it
without any default in himself, and has no remedy over, then the law will
excuse him, but where the party by his own contract creates a duty or
charge upon himself, he is bound to make it good notwithstanding any
accident or delay by inevitable necessity because he might have provided
against it by contract.
Whether or not there has been such an undertaking on the part of the
carrier to be determined from the circumstances surrounding the case and
by application of the ordinary rules for the interpretation of contracts.
Echoing the findings of the trial court, the respondent court correctly
declared that —
In a similar case of delayed delivery of air cargo under a very similar
stipulation contained in the airway bill which reads: “The carrier does not
obligate itself to carry the goods by any specified aircraft or on a specified
time. Said carrier being hereby authorized to deviate from the route of the
shipment without any liability therefor”, our Supreme Court ruled that
Compiled by Kaye Hugo 3
common carriers are not obligated by law to carry and to deliver
merchandise, and persons are not vested with the right to prompt
delivery, unless such common carriers previously assume the
obligation. Said rights and obligations are created by a specific
contract entered into by the parties (Mendoza vs. PAL, 90 Phil. 836).
There is no showing by plaintiffs that such a special or specific contract
had been entered into between them and the defendant airline companies.
And this special contract for prompt delivery should call the attention of
the carrier to the circumstances surrounding the case and the approximate
amount of damages to be suffered in case of delay (See Mendoza vs.
PAL, supra). There was no such contract entered into in the instant case.”
A common carrier undertaking to transport property has the implicit duty
to carry and deliver it within reasonable time, absent any particular
stipulation regarding time of delivery, and to guard against delay. In case
of any unreasonable delay, the carrier shall be liable for damages
immediately and proximately resulting from such neglect of duty. As
found by the trial court, the delay in the delivery of the remains of Crispina
Saludo, undeniable and regrettable as it was, cannot be attributed to the
fault, negligence or malice of private respondents,a conclusion
concurred in by respondent court and which we are not inclined to
disturb.
Unsworth Transport International (Phils.), Inc. vs. Court of Appeals
and Pioneer Insurance and Surety Corporation
Facts: Sylvex Purchasing Corp. delivered to UTI a shipment of 27 drums
of various raw materials for pharmaceutical manufacturing on Aug. 31,
1992. UTI issued a Bill of Lading covering the said shipment. The
shipment was insured with private respondent Pioneer Insurance and
Surety Corp. in favor of Unilab against all risk of P1,779,664.77.
The shipment arrived at the port of Manila on Sept. 30, 1992
and on Oct. 6, 1992, UTI received the shipment in its warehouse. On Oct.
9, 1992, Oceanica Cargo Marine Surveyors Corp. (OCMSC) conducted a
stripping survey of the shipment located in the petitioner’s warehouse.
The results shows that everything is in good order condition and properly
sealed except on the 1-steel drum STC Vitamin B Complex Extract which
has a cut/hole on side, with approximate spilling of 1%.
On Oct. 15, 1992, arrastre Jardine Davies issued a gate pass
which stated the “22 drums” raw materials were noted to be complete and
in good order. The shipment arrived at the Unilab’s warehouse and was
immediately surveyed by J.G Bernas Adjusters & Surveyors.
The result shows that; (1) 1-p/bag torn on side contents partly
spilled, (2) 1-s/drum #7 punctured and retaped on bottom side lacking and
(3) 5-drims shortship/short delivery. The same independent surveyor
conducted final inspection surveys which yielded the same results.
Unilab filed a formal claim for the damage against the private
respondent and UTI. UTI denied liability on the basis of the gate pass
issued by Jardine that the goods were complete and in good condition.
Private Repondent paid the claim and by virtue of the Loss and
Subrogation Receipt, filed a complaint for damages against APL, UTI and
petitioner with the RTC.
RTC rendered a decision in favor of private respondent. On
appeal, the CA affirned the decision of the RTC.
Issue:
1. Whether or not petitioner UTI is a common carrier
2. Whether or not private respondent sufficiently established the alleged
damage to its cargo
Held: UTI is a common carrier.
Admittedly, UTI is a freight forwarder. The term freight forwarder" refers
to a firm holding itself out to the general public (other than as a pipeline,
rail, motor, or water carrier) to provide transportation of property for
compensation and, in the ordinary course of its business, (1) to assemble
and consolidate, or to provide for assembling and consolidating,
shipments, and to perform or provide for break-bulk and distribution
operations of the shipments; (2) to assume responsibility for the
transportation of goods from the place of receipt to the place of
destination; and (3) to use for any part of the transportation a carrier
subject to the federal law pertaining to common carriers.
A freight forwarders liability is limited to damages arising from its own
negligence, including negligence in choosing the carrier; however, where
the forwarder contracts to deliver goods to their destination instead of
merely arranging for their transportation, it becomes liable as a
common carrier for loss or damage to goods. A freight forwarder
assumes the responsibility of a carrier, which actually executes the
transport, even though the forwarder does not carry the merchandise itself.
It is undisputed that UTI issued a bill of lading in favor of Unilab.
Pursuant thereto, UTI undertook to transport, ship, and deliver the 27
drums of raw materials for pharmaceutical manufacturing to the
consignee.
A bill of lading is a written acknowledgement of the receipt of goods and
an agreement to transport and to deliver them at a specified place to a
person named or on his or her order. It operates both as a receipt and as a
contract. It is a receipt for the goods shipped and a contract to transport
and deliver the same as therein stipulated.
Undoubtedly, UTI is liable as a common carrier. Common carriers, as a
general rule, are presumed to have been at fault or negligent if the goods
they transported deteriorated or got lost or destroyed. That is, unless they
prove that they exercised extraordinary diligence in transporting the goods.
In order to avoid responsibility for any loss or damage, therefore, they
have the burden of proving that they observed such diligence.[27] Mere
proof of delivery of the goods in good order to a common carrier and of
their arrival in bad order at their destination constitutes a prima facie case
of fault or negligence against the carrier. If no adequate explanation is
given as to how the deterioration, loss, or destruction of the goods
happened, the transporter shall be held responsible.
Held: No
It is to be noted that the Civil Code does not limit the liability of the
common carrier to a fixed amount per package. In all matters not regulated
by the Civil Code, the rights and obligations of common carriers are
governed by the Code of Commerce and special laws.
Section 4(5) of the COGSA provides: (5) Neither the carrier nor the ship
shall in any event be or become liable for any loss or damage to or in
connection with the transportation of goods in an amount exceeding $500
per package of lawful money of the United States, or in case of goods not
shipped in packages, per customary freight unit, or the equivalent of that
sum in other currency, unless the nature and value of such goods have
been declared by the shipper before shipment and inserted in the bill of
lading. This declaration, if embodied in the bill of lading, shall be
prima facie evidence, but shall not be conclusive on the carrier.
In the present case, the shipper did not declare a higher valuation of the
goods to be shipped. Petitioners liability should be limited to $500 per
steel drum. In this case, as there was only one drum lost, private
respondent is entitled to receive only $500 as damages for the loss.
Compiled by Kaye Hugo 4
MOF Company v. Shin Yang
Facts:
 Halla shipped to Manila secondhand cars and other articles on
board the vessel Hanjin Busan.
 The bill of lading was prepared by the carrier Hanjin where
Shin Yang was named as the consignee and indicated that
payment was on a "Freight Collect" basis (meaning the
consignee/receiver of the goods would be the one to pay for the
freight and other charges).
 When the shipment arrived in Manila MOF, Hanjin’s exclusive
general agent in the Philippines, demanded the payment from
Shin Yang.
 Shin Yang refused to pay the freight and other charges. Shin
Yang is saying that it is not the ultimate consignee but merely
the consolidator/forwarder.
 Shin Yang contends that the fact that its name was mentioned
as the consignee of the cargoes did not make it automatically
liable for the freightage because it never benefited from the
shipment.
 It never claimed or accepted the goods, it was not the shipper’s
agent, it was not aware of its designation as consignee and the
original bill of lading was never endorsed to it.
Issue:
Whether a consignee, who is not a signatory to the bill of lading, is
bound by the stipulations thereof? - Yes
Whether Shin Yang, who was not an agent of the shipper and who did
not make any demand for the fulfillment of the stipulations of the bill
of lading drawn in its favor, is liable to pay the corresponding freight
and handling charges? - No
Held: While it is true that a bill of lading serves two (2) 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 who undertake
specific responsibilities and assume stipulated obligations.
The Consignee can be bound by the stipulations of the Bill of Lading
The bill of lading is oftentimes drawn up by the shipper/consignor and
the carrier without the intervention of the consignee. However, the
latter can be bound by the stipulations of the bill of lading when:
a) there is a relation of agency between the shipper or consignor and the
consignee or
b) when the consignee demands fulfillment of the stipulation of the bill of
lading which was drawn up in its favor.
In sum, a consignee, although not a signatory to the contract of carriage
between the shipper and the carrier, becomes a party to the contract by
reason of either a) the relationship of agency between the consignee and
the shipper/ consignor; b) the unequivocal acceptance of the bill of lading

delivered to the consignee, with full knowledge of its contents or c)
availment of the stipulation pour autrui, i.e., when the consignee, a third
person, demands before the carrier the fulfillment of the stipulation made
by the consignor/shipper in the consignee’s favor, specifically the delivery
of the goods/cargoes shipped.
In the instant case, Shin Yang consistently denied in all of its pleadings
that it authorized Halla Trading, Co. to ship the goods on its behalf; or that
it got hold of the bill of lading covering the shipment or that it demanded
the release of the cargo. Basic is the rule in evidence that the burden of
proof lies upon him who asserts it, not upon him who denies, since, by the
nature of things, he who denies a fact cannot produce any proof of it. Thus,
MOF has the burden to controvert all these denials, it being insistent that
Shin Yang asserted itself as the consignee and the one that caused the
shipment of the goods to the Philippines.
In civil cases, the party having the burden of proof must establish his case
by preponderance of evidence, which means evidence which is of greater
weight, or more convincing than that which is offered in opposition to it.
Here, MOF failed to meet the required quantum of proof. Other than
presenting the bill of lading, which, at most, proves that the carrier
acknowledged receipt of the subject cargo from the shipper and that the
consignee named is to shoulder the freightage, MOF has not adduced any
other credible evidence to strengthen its cause of action. It did not even
present any witness in support of its allegation that it was Shin Yang
which furnished all the details indicated in the bill of lading and that
Shin Yang consented to shoulder the shipment costs.
There is also nothing in the records which would indicate that Shin Yang
was an agent of Halla Trading Co. or that it exercised any act that would
bind it as a named consignee. Thus, the CA correctly dismissed the suit for
failure of petitioner to establish its cause against respondent
PHILIPPINE CHARTER INSURANCE CORPORATION vs.
UNKNOWN OWNER OF THE VESSEL M/V “NATIONAL
HONOR,” NATIONAL SHIPPING CORPORATION OF THE
PHILIPPINES and INTERNATIONAL CONTAINER SERVICES,
INC.
FACTS:
Petitioner Philippine Charter Insurance Corporation (PCIC) is the insurer
of a shipment on board the vessel M/V “National Honor,” who has an
agent National Shipping Corporation of the Philippines (NSCP).
The M/V “National Honor” arrived at the Manila International Container
Terminal (MICT). The International Container Terminal Services,
Incorporated (ICTSI) was furnished with a copy of the crate cargo list and
bill of lading, and it knew the contents of the crate. The following day, the
vessel started discharging its cargoes using its winch crane. The crane was
operated by Olegario Balsa, a winchman from the ICTSI, exclusive
arrastre operator of MICT.
Denasto Dauz, Jr., the checker-inspector of the National Shipping
Corporation, along with the crew and the surveyor of the ICTSI, conducted
an inspection of the cargo. They inspected the hatches, checked the cargo
and found it in apparent good condition.
Claudio Cansino, the stevedore of the ICTSI, placed two sling cables
on each end of Crate No. 1. No sling cable was fastened on the mid-
portion of the crate. In Dauz’s experience, this was a normal procedure.
As the crate was being hoisted from the vessel’s hatch, the mid-portion of
the wooden flooring suddenly snapped in the air, about five feet high from
the vessel’s twin deck, sending all its contents crashing down hard,
resulting in extensive damage to the shipment.
PCIC paid the damage, and as subrogee, filed a case against M/V National
Honor, NSCP and ICTSI. Both RTC and CA dismissed the complaint.
Compiled by Kaye Hugo 5
ISSUE:
Whether or not the presumption of negligence is applicable in the instant
case.
HELD: No.
We agree with the contention of the petitioner that common carriers, from
the nature of their business and for reasons of public policy, are mandated
to observe extraordinary diligence in the vigilance over the goods and for
the safety of the passengers transported by them, according to all the
circumstances of each case. The Court has defined extraordinary diligence
in the vigilance over the goods as follows:
The extraordinary diligence in the vigilance over the goods tendered for
shipment requires the common carrier to know and to follow the required
precaution for avoiding damage to, or destruction of the goods entrusted to
it for sale, carriage and delivery. It requires common carriers to render
service with the greatest skill and foresight and “to use all reasonable
means to ascertain the nature and characteristic of goods tendered for
shipment, and to exercise due care in the handling and stowage, including
such methods as their nature requires.”
The common carrier’s duty to observe the requisite diligence in the
shipment of goods lasts from the time the articles are surrendered to or
unconditionally placed in the possession of, and received by, the carrier for
transportation until delivered to, or until the lapse of a reasonable time for
their acceptance, by the person entitled to receive them.] >When the goods
shipped are either lost or arrive in damaged condition, a presumption
arises against the carrier of its failure to observe that diligence, and there
need not be an express finding of negligence to hold it liable. To overcome
the presumption of negligence in the case of loss, destruction or
deterioration of the goods, the common carrier must prove that it exercised
extraordinary diligence.
However, under Article 1734 of the New Civil Code, the presumption of
negligence does not apply to any of the following causes:
1. Flood, storm, earthquake, lightning or other natural disaster or calamity;
2. Act of the public enemy in war, whether international or civil;
3. Act or omission of the shipper or owner of the goods;
4. The character of the goods or defects in the packing or in the containers;
5. Order or act of competent public authority.
It bears stressing that the enumeration in Article 1734 of the New Civil
Code which exempts the common carrier for the loss or damage to the
cargo is a closed list. To exculpate itself from liability for the loss/damage
to the cargo under any of the causes, the common carrier is burdened to
prove any of the aforecited causes claimed by it by a preponderance of
evidence. If the carrier succeeds, the burden of evidence is shifted to the
shipper to prove that the carrier is negligent.
“Defect” is the want or absence of something necessary for completeness
or perfection; a lack or absence of something essential to completeness; a
deficiency in something essential to the proper use for the purpose for
which a thing is to be used. On the other hand, inferior means of poor
quality, mediocre, or second rate. A thing may be of inferior quality but
not necessarily defective. In other words, “defectiveness” is not
synonymous with “inferiority.”
xxx
In the present case, the trial court declared that based on the record, the
loss of the shipment was caused by the negligence of the petitioner as the
shipper:
The same may be said with respect to defendant ICTSI. The breakage and
collapse of Crate No. 1 and the total destruction of its contents were not
imputable to any fault or negligence on the part of said defendant in
handling the unloading of the cargoes from the carrying vessel, but was
due solely to the inherent defect and weakness of the materials used in the
fabrication of said crate.
The crate should have three solid and strong wooden batten placed side by
side underneath or on the flooring of the crate to support the weight of its
contents. However, in the case of the crate in dispute, although there were
three wooden battens placed side by side on its flooring, the middle
wooden batten, which carried substantial volume of the weight of the
crate’s contents, had a knot hole or "bukong-bukong," which considerably
affected, reduced and weakened its strength.

Because of the enormous weight of the machineries inside this crate, the
middle wooden batten gave way and collapsed. As the combined strength
of the other two wooden battens were not sufficient to hold and carry the
load, they too simultaneously with the middle wooden battens gave way
and collapsed (TSN, Sept. 26, 1996, pp. 20-24).

Crate No. 1 was provided by the shipper of the machineries in Seoul,

Korea. There is nothing in the record which would indicate that defendant
ICTSI had any role in the choice of the materials used in fabricating this
crate. Said defendant, therefore, cannot be held as blame worthy for the
loss of the machineries contained in Crate No. 1.50

The CA affirmed the ruling of the RTC, thus:

The case at bar falls under one of the exceptions mentioned in Article 1734
of the Civil Code, particularly number (4) thereof, i.e., the character of the
goods or defects in the packing or in the containers. The trial court found
that the breakage of the crate was not due to the fault or negligence of
ICTSI, but to the inherent defect and weakness of the materials used in the
fabrication of the said crate.

It appears that the wooden batten used as support for the flooring was not
made of good materials, which caused the middle portion thereof to give
way when it was lifted. The shipper also failed to indicate signs to notify
the stevedores that extra care should be employed in handling the
shipment.

The arrastre operator cannot be held liable

The cargo fell while it was being carried only at about five (5) feet high
above the ground. It would not have so easily collapsed had the cargo been
properly packed. The shipper should have used materials of stronger
quality to support the heavy machines. Shipper also failed to indicate an
arrow in the middle portion of the cargo where additional slings should be
attached. At any rate, the issue of negligence is factual in nature

Compiled by Kaye Hugo 6