Limiting the Amount of Liability
Cokaliong Shipping vs. UCPB
December 11, 1991: Nestor Angelia (shipper and consignee)
delivered to the petitioner Edgar Cokaliong Shipping Lines,
Inc. (now Cokaliong Shipping Lines), a cargo consisting of
one (1) carton of Christmas decor and two (2) sacks of plastic
toys, to be transported on board the M/V Tandag from Cebu
City for Tandag, Surigao del Sur.  This cargo is under Bill of
Lading No. 58, in the amount of P6,500.00. 
Zosimo Mercado (another shipper and consignee) 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. This is under Bill
of Lading No. 59, valued in the amount of P14,000.00
Feliciana Legaspi (owner of the goods) insured the cargo,
covered by BOL Nos. 59 and No. 58, with the UCPB General
Insurance Co., Inc., [respondent]. No. 59 was insured for
P100,000 while No. 58 for P50,000. [*Note that both amounts
are far from the actual and declared value in the BOLs issued
by Cokaliong]
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.  acts it had undertaken to ensure the seaworthiness of the
Feliciana Legaspi filed a claim, with [respondent], for the
value of the cargos insured. The latter approved the claim. For
Bill of Lading No. 59, Legaspi received from UCPB
P99,000.00 while for No. 58, P60,338.00.
UCPB as subrogee of Legaspi, filed a complaint anchored on
torts against petitioner, with the RTC of Makati City, for the
collection of the total principal amount of P148,500.00.
Respondent alleged that the loss of the cargo was due to the
negligence of the petitioner
(2) Respondent’s contention: petitioner’s liability should
Petitioner alleged that: (a) It was cleared by the Board of
Marine Inquiry of any negligence in the burning of the vessel;
and (b) it cannot be held liable for the loss of the cargo beyond
the value thereof declared in the Bill of Lading.
ISSUES:
(1) Is petitioner liable for the loss of the goods? YES
(2) If it is liable, what is the extent of its liability?
According to what was reflected in the Bill of Lading
HELD:
(1) Petitioner’s argument: 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.
SC: 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. 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.
Hence, fire is not considered a natural disaster or
calamity.  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.
Peril of fire is not comprehended within the exceptions in
Article 1734; Article 1735 applies (please see provision)
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.
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
vessel. 
It failed to show when the last inspection and care of the
auxiliary engine fuel oil service tank was made, 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. 
be based on the actual insured value of the goods, subject
of this case. 
Petitioner’s: its liability should be limited to the value
declared by the shipper/consignee in the Bill of Lading.
SC: 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.
Ratio: The records 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 lading.
A stipulation that limits liability is valid as long as it is
not against public policy. Following provisions apply in
the present case:
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.

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.

In the present case, the stipulation limiting petitioner’s

liability is not contrary to public policy. 

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 (Legaspi, et.al) from placing the actual value of the
goods therein. 

In fact, they committed fraud against the common carrier

by deliberately undervaluing the goods in their Bill of
Lading, thus depriving the carrier of its proper and just
transport fare.

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.